Forward Funds N-CSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-06722

FORWARD FUNDS

(Exact name of registrant as specified in charter)

433 California Street, 11th Floor

San Francisco, CA 94104

(Address of principal executive offices) (Zip code)

J. Alan Reid, Jr., President

Forward Funds

433 California Street, 11^th Floor

San Francisco, CA 94104

(Name and address of agent for service)

Registrant’s Telephone Number, including Area Code: (800) 999-6809

Date of fiscal year end: December 31

Date of reporting period: January 1, 2006 – June 30, 2006

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

Item 1 - Reports to Stockholders

The following is a copy of the report transmitted to shareholders of the Forward Legato Fund, the Forward Emerald Growth Fund, the Forward Emerald Banking and Finance Fund, the Forward Emerald Opportunities Fund, the Forward Uniplan Real Estate Investment Fund, the Forward Hoover Small Cap Equity Fund, the Forward Hoover Mini-Cap Fund, the Forward International Equity Fund, the Forward Global Emerging Markets Fund, the Forward International Small Companies Fund, the Sierra Club Equity Income Fund and the Sierra Club Stock Fund, each a series of the registrant, pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1).

FORWARD FUNDS.

Semi-Annual Report

June 30, 2006

Semi-Annual Report | June 30, 2006

FORWARD THINKING: Paying Attention to Correlation

Many have observed a trend that we feel deserves our investors’ attention: high correlation among major global markets. Traditionally, U.S. and overseas markets often moved in separate directions. Adding one or more international funds to a portfolio centered on U.S. equities provided a meaningful measure of diversification. In recent years, however, U.S. and international markets have increasingly moved in lockstep as performance of large-cap stocks around the world has converged.

Markets have become globalized—companies now offer the same goods and services almost everywhere. For example, technology stocks have become major players in markets worldwide as technology is a critical component of economic growth. Investors who believe that their portfolios are reasonably diversified because they hold both domestic and international funds may need to look further to manage risk, especially during periods of volatility.

New Opportunities for Risk Reduction

We have long been committed to meeting investor needs as market conditions change. That’s why we offer a family of products in a range of asset classes, including long/short strategies, like the Forward Emerald Opportunities Fund. The Fund integrates a traditional long portfolio with the ability to short or hedge within the fund, investing in undervalued stocks and selling short over-valued issues. These strategies typically result in a low correlation to major markets, offering investors another risk management tool.

We encourage you to review your portfolio and its level of diversification and to speak with your financial advisor about strategies to manage high correlation and reduce risk. And we will continue to develop innovative products that can help our investors diversify with funds that provide investment exposure via a wide range of asset classes.

This table illustrates the increasing correlation during the last 15 years of the international and U.S. markets:

MSCI EAFE Index vs. S&P 500 Index

5 year:

0.856

10 year:

0.789

15 year:

0.685

Source: Informa Investment Solutions (PSN).

15- year period ended 6/30/2006. Calculated monthly.

The correlation coefficient is a number between 0 and 1. If there is no relationship between the predicted values and the actual values, the correlation coefficient is 0 or very low (the predicted values are no better than random numbers). As the strength of the relationship between the predicted values and the actual values increases, so does the correlation coefficient. A perfect fit gives a coefficient of 1.0. Thus the higher the correlation coefficient, the better.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the U.S. and Canada.The index figures do not reflect any deduction for fees, expenses or taxes. The S&P 500 Index consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value-weighted index and one of the most widely used benchmarks of U.S. stock performance.The index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an index.

This material must be accompanied or preceded by a prospectus. Please read it carefully before investing or sending money.

A MESSAGE FROM: J. Alan Reid Jr., President

Dear Shareholder:

Following several highly bullish years, the markets experienced considerable volatility during the first half of 2006. I am pleased to report that throughout this extraordinary period, Forward Funds has produced solid results for shareholders.

Our record reflects our agile, forward-thinking investment philosophy. We seek out and offer our investors innovative investment products. We identify portfolio managers who focus on delivering alpha.1 And we maintain our pro-shareholder position, which has created transparent, clear and ethical investment practices. This forward thinking permeates everything we do. Here are some examples:

Strong Results from Small Caps. Forward Funds has five small-cap funds—four domestic and one international. Our small-cap managers have done a great job of uncovering opportunities in this segment of the market. While conventional wisdom has it that large caps may return to favor and outperform small caps, our managers feel otherwise. Irene Hoover of the Forward Hoover Small Cap Equity Fund and the Forward Hoover Mini-Cap Fund states, “From the thousands of small-cap companies, there are always companies to discover for new investment—like emerging companies, smaller companies with accelerated growth, turnarounds or out-of-favor industries with niche-leading companies.”

International Opportunities Continue. Despite the dramatic volatility of international and emerging markets in the first half of the year, Forward’s international funds delivered solid results. Forward Funds works with Pictet Asset Management, a leader in international investing in both emerging and mature markets worldwide. During the spring volatility returned to international markets due to central banks’ more restrictive monetary policies, a halt in the uptrend of bond yields and the stalling of Asian currencies’ reevaluation processes. Pictet continues to identify opportunities thanks to attractive price/earnings ratios and continuing progress in many emerging markets.

Cutting Costs with ReFlow. Forward Funds’ portfolio managers now reduce costs by utilizing ReFlow, a service that purchases and sells shares of mutual funds to counterbalance daily shareholder flow. ReFlow benefits shareholders by reducing fund trading and transaction costs, stabilizing a fund’s cash position and improving tax efficiency and shareholder performance. ReFlow enabled the portfolio management teams at Pictet to keep from selling under pressure or holding cash, resulting in cost savings for the three Forward international funds during the first half of 2006.

New Large-Cap Fund. Forward Funds is adding a new U.S. large-cap equity fund to our family of funds in the fall of 2006. The Forward Large Cap Equity Fund will be sub-advised by Affinity Investment Advisors. A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.

Forward Funds remains deeply committed to helping our shareholders attain true portfolio diversification and achieve their long-term goals. We also believe that open, transparent practices give our investors access to the information they need to make important investment choices. I invite you to review the information in this report and the performance of the Forward Funds year to date.

Best regards,

J. Alan Reid Jr.

President

Forward Management, LLC

1 Alpha is a coefficient measuring the portion of an investment’s risk arising for specific (non-market) risk.

Small company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Investing in foreign securities may involve certain additional risks, including exchange rate fluctuation, less liquidity, greater volatility and less regulation. Real estate funds may be subject to a higher degree of market risk due to concentration in a specific industry or in geographic regions. Investments in real estate and REITS have various risks including vacancies and devaluation based upon adverse economic or regulatory changes.

There are risks involved with investing, including loss of principal. Past performance does not guarantee future results.

A Carefully Selected Team of

FORWARD FUNDS: Portfolio Managers Around the Globe

Forward Funds has assembled a team of investment managers who meet our demanding standards for discipline, performance and the ability to find opportunities others overlook.

San Francisco, California

1. Forward Management, LLC

Funds co-managed: Sierra Club Stock Fund

Firm’s assets under management: $1.2 billion (12/31/05)

Overview: Established in 1998, Forward Management is the investment advisor to the Forward Funds. Since 2005, Forward Management has been co–portfolio manager with New York Life Investment Management of the Sierra Club Stock Fund. Forward employs an index-like approach to investing in the top 100 stocks (by market cap) that meet both Forward Management’s and the Sierra Club’s stringent criteria for investing.

San Francisco, California

2. Hoover Investment Management Co., LLC

Funds managed: Forward Hoover Small Cap Equity Fund

Forward Hoover Mini-Cap Fund

Firm’s assets under management: $1.348 billion (12/31/05)

Overview: Hoover is a registered investment advisor founded in 1997 by Irene G. Hoover, CFA.1 The firm focuses on the small-capitalization sector using a combination of macro/top-down as well as company-specific/bottom-up investment research.

Irvine, California

3. Affinity Investment Advisors, LLC

Fund managed (as of Q3 2006): Forward Large Cap Equity Fund2

Firm’s assets under management: $281 million (3/31/06)

Overview: An independent equity management firm, Affinity was founded in 1992. The firm uses both quantitative and qualitative analysis to identify undervalued stocks with strong earnings momentum, earnings estimate revisions and relative strength.

Union Grove (Milwaukee), Wisconsin

4. Forward Uniplan Advisors, Inc.

Funds managed: Forward Uniplan Real Estate Investment Fund Sierra Club Equity Income Fund (co-manage)

Firm’s assets under management: $302.5 million (12/31/05)

Overview: President Richard Imperiale founded the firm in 1984. Uniplan uses a value-oriented quantitative approach to investing in equities, fixed-income and REIT securities. Forward Management owns 20% of the company.

Mequon (Milwaukee), Wisconsin

5. Netols Asset Management, Inc.

Fund co-managed: Forward Legato Fund

Firm’s assets under management: $221 million (12/31/05)

Overview: Founded in 2000, Netols specializes in small-cap value stock portfolio management utilizing a value approach to investing with a bottom-up process and a focus on the inefficient and under-followed areas of the stock market.

1 Irene Hoover has earned the right to use the Chartered Financial Analyst designation.

2 A registration statement relating to these securities has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.

Minneapolis, Minnesota

6. Riverbridge Partners, LLC

Fund co-managed: Forward Legato Fund

Firm’s assets under management: $823 million (12/31/05)

Overview: Founded in 1987, Riverbridge Partners specializes in small-cap growth stock portfolio management. Riverbridge believes that earnings power determines the value of a franchise. They focus on companies that are building earnings power and the intrinsic value of the company over the long term.

Lancaster, Pennsylvania

7. Emerald Mutual Fund Advisers Trust

Funds managed: Forward Emerald Banking and Finance Fund

Forward Emerald Growth Fund

Forward Emerald Opportunities Fund

Firm’s assets under management: $2.36 billion (12/31/05)

Overview: The four principal officers of the parent company, Emerald Advisers, Inc., combine more than 70 years of experience in the mutual fund, investment advisory, pension funds management and securities brokerage industries. Emerald’s research staff conducts extensive fundamental research to identify companies whose earnings growth exceeds that of their peer group.

Radnor (Philadelphia), Pennsylvania

8. Conestoga Capital Advisors, LLC

Fund co-managed: Forward Legato Fund

Firm’s assets under management: $212 million (12/31/05)

Overview: Founded in 2001, Conestoga specializes in small-cap core stock portfolio management. Conestoga uses a core investment strategy based on investing in well-managed companies that are growing at reasonable valuations and are poised to deliver superior long-term performance.

Parsippany, New Jersey (New York City)

9. New York Life Investment Management LLC (NYLIM)

Funds co-managed: Sierra Club Equity Income Fund

Sierra Club Stock Fund

Firm’s assets under management (including affiliates):

more than $200 billion (12/31/05)

Overview: Founded in 2000, NYLIM is an independently managed, wholly-owned subsidiary of New York Life Insurance Company. NYLIM uses a quantitative approach, typically investing in value stocks.

London, England; Geneva, Switzerland

10. Pictet Asset Management Limited

Funds managed: Forward International Equity Fund

Forward Global Emerging Markets Fund

Forward International Small Companies Fund

Firm’s assets under management: $25.2 billion (12/31/05)

Overview: Pictet Asset Management is the institutional business division of Pictet & Cie, a Swiss private bank that was founded in 1805, which manages a range of products, including a variety of equity portfolios for U.S. and international institutional clients. The firm has offices in Geneva, Zurich, Singapore and Tokyo in addition to London, investing in emerging and developing markets worldwide.

FORWARD FUNDS: Table of Contents

Fund Performance	2
Disclosure of Fund Expenses	6
Summary of Portfolio Holdings	10
Portfolio of Investments	14
Statement of Assets and Liabilities	47
Statement of Operations	53
Statement of Changes in Net Assets	59
Financial Highlights	71
Notes to Financial Statements	93
Subsequent Events	121

Forward Funds are distributed by ALPS Distributors, Inc., P.O. Box 1345, Denver, CO 80201

The report has been prepared for the general information of Forward Funds’ shareholders. It is not authorized for distribution to prospective investors unless accompanied or proceeded by a current Forward Funds Prospectus, which contains more complete information about Forward Funds’ investment policies, management fees and expenses. Investors are reminded to read the prospectus before investing or sending money.

June 30, 2006

1

Fund Performance

Performance Results for Periods Ended June 30, 2006

The performance quoted represents past performance. Past performance is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Performance quoted does not reflect the non-recurring redemption fee of 2% that may be charged if shares are sold or exchanged within 180 days (60 days for the Sierra Club Equity Income Fund and the Sierra Club Stock Fund) of purchase. If these fees were reflected, the performance quoted would be lower. Investment performance reflects fee waivers in effect. In the absence of fee waivers, total return would be lower. Total return is based on NAV, assuming reinvestment of all distributions. Performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance data current to the most recent month end, please visit our web site at www.forwardfunds.com.

Real Estate Funds may be subject to a higher degree of market risk because of concentration in a specific industry or geographic sector. Risks include declines in value of real estate, general and economic conditions, changes in the value of the underlying property and defaults by borrowers.

Investing in foreign securities may involve certain additional risks, including exchange rate fluctuations, less liquidity, greater volatility and less regulation.

Small company stocks are generally riskier than large company stocks due to greater volatility and less liquidity.

Forward International Equity Fund^(a)

	1 YEAR	5 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	31.46%	9.65%	7.15%	10/01/98

Forward International Small Companies Fund^(b)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	33.46%	N/A	N/A	23.97%	03/05/02
Institutional Class	33.91%	17.52%	13.01%	13.19%	02/07/96
Class A (load adjusted)(c)	26.99%	N/A	N/A	26.05%	05/02/05
Class A (without load)(d)	33.28%	N/A	N/A	31.40%	05/02/05

Forward Global Emerging Markets Fund^(e)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	30.96%	N/A	N/A	39.12%	04/09/03
Institutional Class	31.25%	24.37%	7.10%	7.32%	10/04/95

June 30, 2006 2

Fund Performance

Performance Results for Periods Ended June 30, 2006

See page 2 for important performance disclosure information about the Forward Funds.

Sierra Club Equity Income Fund^(f)

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	6.44%	8.13%	01/02/03

Sierra Club Stock Fund^(g)

	1 YEAR	5 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	5.62%	2.18%	4.48%	10/01/98
Class A (load adjusted)(c)	0.57%	N/A	5.13%	05/02/05
Class A (without load)(d)	5.62%	N/A	9.65%	05/02/05

Forward Emerald Banking and Finance Fund^(h)

	1 YEAR	5 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Class A (load adjusted)(c)	4.29%	15.32%	13.81%	02/18/97
Class A (without load)(d)	9.50%	16.46%	14.41%	02/18/97
Class C (with CDSC)(i)	7.82%	15.70%	19.43%	07/01/00
Class C (without CDSC)(j)	8.82%	15.70%	19.43%	07/01/00

Forward Emerald Opportunities Fund^(k)

	1 YEAR	5 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Class A (load adjusted)(c)	20.46%	-6.16%	0.70%	10/31/97
Class A (without load)(d)	26.46%	-5.24%	1.27%	10/31/97
Class C (with CDSC)(i)	24.62%	-5.72%	-15.74%	07/01/00
Class C (without CDSC)(j)	25.62%	-5.72%	-15.74%	07/01/00

Forward Uniplan Real Estate Investment Fund

	1 YEAR	5 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	17.92%	17.07%	15.34%	05/10/99

3 June 30, 2006

Fund Performance

Performance Results for Periods Ended June 30, 2006

See page 2 for important performance disclosure information about the Forward Funds.

Forward Emerald Growth Fund^(l)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Class A (load adjusted)(c)	16.78%	4.52%	8.85%	12.83%	10/01/92
Class A (without load)(d)	22.63%	5.53%	9.38%	13.23%	10/01/92
Class C (with CDSC)(i)	20.85%	4.84%	N/A	2.19%	07/01/00
Class C (without CDSC)(j)	21.85%	4.84%	N/A	2.19%	07/01/00

Forward Hoover Small Cap Equity Fund

	1 YEAR	5 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	11.97%	9.78%	11.68%	10/01/98
Institutional Class	12.36%	N/A	13.49%	06/06/02
Class A (load adjusted)(c)	6.72%	N/A	15.22%	05/02/05
Class A (without load)(d)	12.03%	N/A	20.12%	05/02/05

Forward Hoover Mini-Cap Fund

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	18.78%	21.65%	01/02/03
Institutional Class	19.44%	16.40%	08/15/03

Forward Legato Fund

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Class A (load adjusted)(c)	4.80%	8.88%	04/01/05
Class A (without load)(d)	10.04%	13.23%	04/01/05

(a) Pictet Asset Management Limited has been the Fund’s sub-advisor since September 1, 2005. From March 6, 2000 through August 31, 2005, Hansberger Global Investors, Inc. was the Fund’s sub-advisor and the Fund’s investment strategy was different. Prior to March 6, 2000, the Fund was managed by a different sub-advisor. Accordingly, performance figures for periods before September 1, 2005 do not reflect the current strategy or the current sub-advisor’s performance.

(b) The Retail Class and Institutional Class of the Pictet International Small Companies Fund were reorganized into the Investor and Institutional classes, respectively, of the Forward International Small Companies Fund on December 23, 2003. Performance figures for periods prior to December 23, 2003 represent performance of the respective class of shares of the Pictet International Small Companies Fund.

(c) Includes the effect of the maximum 4.75% sales charge.

(d) Excludes sales charge.

(e) The Retail Class and Institutional Class of the Pictet Global Emerging Markets Fund were reorganized into the Investor and Institutional Class, respectively, of the Forward Global Emerging Markets Fund on September 16, 2004. Performance figures shown for periods prior to September 16, 2004 represent performance of the Retail Class and Institutional Class of the Pictet Global Emerging Markets Fund.

June 30, 2006 4

Fund Performance

Performance Results for Periods Ended June 30, 2006

See page 2 for important performance disclosure information about the Forward Funds.

(f) On April 1, 2005, the Fund changed its name, certain investment policies and restrictions, and one of its sub-advisors. Prior to that time, the Fund operated as the Sierra Club Balanced Fund and the portion of the Fund that is currently managed by Forward Uniplan Advisors, Inc. was managed by a different sub-advisor. Performance figures for periods prior to that date do not reflect the current strategy or allocation of the Fund’s assets among different investment advisors.

(g) Forward Management, LLC (Forward Management or the Advisor) and New York Life Investment Management, LLC (NYLIM) have been managing the Fund’s portfolio since January 1, 2006. Between January 1, 2003 and December 31, 2005, NYLIM and MDTA LLC (formerly known as Harris Bretall Sullivan & Smith L.L.C.) were the Fund’s sub-advisors and the strategy for the portion of the Fund that Forward Management manages was different. Prior to January 1, 2003, the Fund was managed by a different sub-advisor and was not subject to the Sierra Club’s environmental and social evaluation process. Accordingly, performance figures for periods prior to January 1, 2006 do not reflect current management or strategy.

(h) As of May 1, 2005, Forward Management became the investment advisor and Emerald Mutual Fund Advisers Trust (Emerald) became the sub-advisor to the Fund. Prior to May 1, 2005, Emerald was the investment advisor. Prior to October 20, 1998, the Fund was named the HomeState Select Opportunities Fund and pursued a different objective.

(i) Includes the 1.00% contingent deferred sales charge.

(j) Excludes the 1.00% contingent deferred sales charge.

(k) As of May 1, 2005, Forward Management became the investment advisor and Emerald became the sub-advisor to the Fund. Prior to May 1, 2005, Emerald was the investment advisor. Prior to September 29, 2005, the Fund was named the Forward Emerald Technology Fund and invested a minimum 80% of its net assets, plus borrowing for investment purposes, if any, in a non-diversified portfolio of equity securities of public companies in the technology sector. Accordingly, performance figures for periods prior to September 29, 2005 do not reflect the current strategy. Prior to February 29, 2000, the Fund was named the HomeState Year 2000 Fund and its investment objective focused on a specific industry within the technology sector. The Fund has invested in a variety of initial public offerings (IPOs). The performance of the IPOs may have greater impact on the performance results of a small fund and may lessen as the Fund’s assets grow.

(l) As of May 1, 2005, Forward Management became the investment advisor and Emerald became the sub-advisor to the Fund. Prior to May 1, 2005, Emerald was the investment advisor. Prior to July 1, 2001, the Fund was named the HomeState Pennsylvania Growth Fund and focused on a specific geographic region within the U.S.

5 June 30, 2006

Disclosure of Fund Expenses

For the Six Months Ended June 30, 2006 (Unaudited)

As a shareholder of the Forward Funds, you incur two types of costs: (1) transaction costs, including applicable sales charges (loads) on purchase payments, reinvested dividends or other distributions, and redemption fees; and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, shareholder services fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the (six-month) period and held for the entire period January 1, 2006 through June 30, 2006.

Actual Expenses

The first line for each share class of each Fund in the table provides information about actual account values and actual expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the applicable line under the heading entitled “Expenses Paid During the

Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example For Comparison Purposes

The second line for each share class of each Fund in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees or exchange fees. Therefore, the second line for each share class of each Fund in the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.

	BEGINNING ACCOUNT VALUE 01/01/06		ENDING ACCOUNT VALUE 06/30/06		EXPENSE RATIO(a)		EXPENSES PAID DURING PERIOD(b) 01/01/06–06/30/06
FORWARD INTERNATIONAL EQUITY FUND
Investor Class
Actual	$	1,000.00	$	1,117.90	1.54	%	$	8.07
Hypothetical	$	1,000.00	$	1,017.17	1.54	%	$	7.69
FORWARD INTERNATIONAL SMALL COMPANIES FUND
Investor Class
Actual	$	1,000.00	$	1,108.50	1.53	%	$	7.98
Hypothetical	$	1,000.00	$	1,017.22	1.53	%	$	7.64

June 30, 2006 6

Disclosure of Fund Expenses

For the Six Months Ended June 30, 2006 (Unaudited)

	BEGINNING ACCOUNT VALUE 01/01/06		ENDING ACCOUNT VALUE 06/30/06		EXPENSE RATIO(a)		EXPENSES PAID DURING PERIOD(b) 01/01/06–06/30/06
FORWARD INTERNATIONAL SMALL COMPANIES FUND
Institutional Class
Actual	$	1,000.00	$	1,110.20	1.18	%	$	6.18
Hypothetical	$	1,000.00	$	1,018.94	1.18	%	$	5.91
Class A
Actual	$	1,000.00	$	1,110.20	1.43	%	$	7.50
Hypothetical	$	1,000.00	$	1,017.69	1.43	%	$	7.17
FORWARD GLOBAL EMERGING MARKETS FUND
Investor Class
Actual	$	1,000.00	$	1,035.10	1.83	%	$	9.25
Hypothetical	$	1,000.00	$	1,015.70	1.83	%	$	9.17
Institutional Class
Actual	$	1,000.00	$	1,036.00	1.54	%	$	7.76
Hypothetical	$	1,000.00	$	1,017.17	1.54	%	$	7.69
SIERRA CLUB EQUITY INCOME FUND
Investor Class
Actual	$	1,000.00	$	1,009.50	1.57	%	$	7.83
Hypothetical	$	1,000.00	$	1,017.00	1.57	%	$	7.86
SIERRA CLUB STOCK FUND
Investor Class
Actual	$	1,000.00	$	981.50	1.48	%	$	7.29
Hypothetical	$	1,000.00	$	1,017.44	1.48	%	$	7.42
Class A
Actual	$	1,000.00	$	981.50	1.48	%	$	7.29
Hypothetical	$	1,000.00	$	1,017.44	1.48	%	$	7.42
FORWARD EMERALD BANKING AND FINANCE FUND
Class A
Actual	$	1,000.00	$	1,039.80	1.62	%	$	8.20
Hypothetical	$	1,000.00	$	1,016.76	1.62	%	$	8.10
Class C
Actual	$	1,000.00	$	1,036.30	2.27	%	$	11.48
Hypothetical	$	1,000.00	$	1,013.52	2.27	%	$	11.35
FORWARD EMERALD OPPORTUNITIES FUND
Class A
Actual	$	1,000.00	$	1,112.70	2.51	%	$	13.17
Hypothetical	$	1,000.00	$	1,012.33	2.51	%	$	12.54

7 June 30, 2006

Disclosure of Fund Expenses

For the Six Months Ended June 30, 2006 (Unaudited)

	BEGINNING ACCOUNT VALUE 01/01/06		ENDING ACCOUNT VALUE 06/30/06		EXPENSE RATIO(a)		EXPENSES PAID DURING PERIOD(b) 01/01/06–06/30/06
FORWARD EMERALD OPPORTUNITIES FUND
Class C
Actual	$	1,000.00	$	1,109.50	3.18	%	$	16.64
Hypothetical	$	1,000.00	$	1,009.01	3.18	%	$	15.85
FORWARD UNIPLAN REAL ESTATE INVESTMENT FUND
Investor Class
Actual	$	1,000.00	$	1,116.20	1.46	%	$	7.64
Hypothetical	$	1,000.00	$	1,017.57	1.46	%	$	7.29
FORWARD EMERALD GROWTH FUND
Class A
Actual	$	1,000.00	$	1,059.60	1.41	%	$	7.21
Hypothetical	$	1,000.00	$	1,017.79	1.41	%	$	7.06
Class C
Actual	$	1,000.00	$	1,055.00	2.07	%	$	10.52
Hypothetical	$	1,000.00	$	1,014.55	2.07	%	$	10.32
FORWARD HOOVER SMALL CAP EQUITY FUND
Investor Class
Actual	$	1,000.00	$	1,047.40	1.65	%	$	8.38
Hypothetical	$	1,000.00	$	1,016.55	1.65	%	$	8.25
Institutional Class
Actual	$	1,000.00	$	1,049.10	1.29	%	$	6.55
Hypothetical	$	1,000.00	$	1,018.82	1.29	%	$	6.46
Class A
Actual	$	1,000.00	$	1,047.50	1.56	%	$	7.94
Hypothetical	$	1,000.00	$	1,017.04	1.56	%	$	7.82
FORWARD HOOVER MINI-CAP FUND
Investor Class
Actual	$	1,000.00	$	1,061.80	1.79	%	$	9.15
Hypothetical	$	1,000.00	$	1,016.57	1.79	%	$	8.95
Institutional Class
Actual	$	1,000.00	$	1,064.80	1.23	%	$	6.30
Hypothetical	$	1,000.00	$	1,018.46	1.23	%	$	6.16
FORWARD LEGATO FUND
Class A
Actual	$	1,000.00	$	1,030.10	1.63	%	$	8.22
Hypothetical	$	1,000.00	$	1,016.69	1.63	%	$	8.17

June 30, 2006 8

Disclosure of Fund Expenses

For the Six Months Ended June 30, 2006 (Unaudited)

(a) Annualized, based on the Portfolio’s most recent fiscal half-year expenses.

(b) Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (181), then divided by 365.

9 June 30, 2006

Summary of Portfolio Holdings (Note 10) (Unaudited)

Under SEC rules, all funds are required to include in their annual and semi-annual shareholder reports a presentation of portfolio holdings in a table, chart or graph by reasonably identifiable categories. The following tables, which present portfolio holdings as a percent of total net assets, are provided in compliance with such requirements.

FORWARD INTERNATIONAL EQUITY FUND
Financials	34.64%	(a)
Industrials	13.16%
Consumer Discretionary	12.63%
Energy	10.23%
Materials	7.33%
Consumer Staples	6.25%
Information Technology	5.32%
Telecommunication Services	4.72%
Health Care	4.14%
Utilities	1.19%
Net Other Assets and Liabilities	0.39%
	100.00%
FORWARD INTERNATIONAL SMALL COMPANIES FUND
Industrials	25.57%	(a)
Consumer Discretionary	16.96%
Financials	15.14%
Information Technology	12.68%
Health Care	6.11%
Consumer Staples	5.86%
Materials	5.11%
Utilities	4.28%
Energy	3.68%
Short-Term Bank Debt Instruments	4.33%
Net Other Assets and Liabilities	0.28%
	100.00%
FORWARD GLOBAL EMERGING MARKETS FUND
Financials	27.29%	(a)
Energy	14.74%
Information Technology	14.10%
Telecommunication Services	11.62%
Materials	7.38%
Consumer Discretionary	5.73%
Industrials	4.39%

Consumer Staples	3.82%
Industrials	2.32%
Health Care	2.30%
Utilities	2.22%
Short-Term Bank Debt Instruments	2.89%
Net Other Assets and Liabilities	1.20%
	100.00%
SIERRA CLUB EQUITY INCOME FUND
Commercial Services & Supplies	11.00%
Corporate Notes & Bonds	8.28%
Banks	8.21%
U.S. Government & Agency Obligations	6.91%
Software	6.65%
Hotels, Restaurants & Leisure	6.51%
Diversified Financials	5.89%
Real Estate	4.77%
Media	4.32%
Biotechnology	4.07%
Health Care Providers & Services	3.83%
Health Care Equipment & Supplies	2.70%
Pharmaceuticals	2.66%
Computers & Peripherals	2.39%
Insurance	2.39%
Semiconductors & Semiconductor Equipment	2.37%
Food & Drug Retailing	1.89%
Specialty Retail	1.67%
Mutual Funds	1.64%
Diversified Telecommunication Services	1.49%
Communications Equipment	1.33%
Cosmetics/Personal Care	1.07%
Food	0.89%
Semiconductors	0.74%
Office Furnishings	0.62%
Air Freight & Logistics	0.56%

June 30, 2006 10

Summary of Portfolio Holdings (Note 10) (Unaudited)

SIERRA CLUB EQUITY INCOME FUND
Internet Software & Services	0.40%
Internet	0.26%
Household Durables	0.16%
Short-Term Bank Debt Instruments	4.07%
Net Other Assets and Liabilities	0.26%
	100.00%
SIERRA CLUB STOCK FUND
Banks	14.08%
Commercial Services & Supplies	10.45%
Diversified Financials	10.16%
Hotels, Restaurants & Leisure	8.15%
Software	8.02%
Health Care Providers & Services	7.08%
Health Care Equipment & Supplies	5.41%
Computers & Peripherals	4.76%
Media	4.45%
Biotechnology	3.51%
Semiconductors & Semiconductor Equipment	2.66%
Diversified Telecommunication Services	2.50%
Communications Equipment	2.27%
Insurance	2.25%
Food & Drug Retailing	1.95%
Internet Software & Services	1.55%
Property & Casualty Insurance	1.42%
Multi-Line Insurance	0.96%
Specialty Retail	0.96%
Food Products	0.94%
Real Estate	0.78%
Pharmaceuticals	0.53%
Internet & Catalog Retail	0.49%
Leisure Equipment & Products	0.48%
Airlines	0.47%
IT Consulting Services	0.47%
Multi-Line Retail	0.47%
Telecommunications	0.47%
Mutual Funds	0.47%
Household Durables	0.19%

Short-Term Bank Debt instruments	1.30%
Net Other Assets and Liabilities	0.35%
	100.00%
FORWARD EMERALD BANKING AND FINANCE FUND
Financial Services	96.43%
Banks Regional	68.94%
Insurance Carriers: Property & Casualty	8.27%
Investment Management Companies	4.60%
Diversified Financial Services	3.79%
Financial Miscellaneous	3.13%
Financial Data Processing Services	2.89%
Savings & Loans	1.79%
Financial Information Services	0.98%
Real Estate Investment Trusts	0.73%
Insurance: Multi-Line	0.62%
Securities Brokerage & Service	0.44%
Property Casualty	0.25%
Short-Term Bank Debt Instruments	4.43%
Net Other Assets and Liabilities	-0.86%
	100.00%
FORWARD EMERALD OPPORTUNITIES FUND
Technology	18.67%
Consumer Discretionary	15.03%
Health Care	12.39%
Biotechnology	7.61%
Medical & Dental Instruments	3.01%
Drugs & Pharmaceuticals	1.48%
Miscellaneous Health Care	0.29%
Consumer Staples	6.75%
Financial Services	6.67%
Energy	4.47%
Producer Durables	3.74%
Materials & Processing	3.17%
Utilities	2.10%
Auto & Transportation	0.46%
Options Purchased	2.98%
Short-Term Bank Debt Instruments	38.90%
Net Other Assets and Liabilities	-15.33%
	100.00%

11 June 30, 2006

Summary of Portfolio Holdings (Note 10) (Unaudited)

FORWARD UNIPLAN REAL ESTATE INVESTMENT FUND
Retail	34.99%
Residential	13.98%
Office	13.52%
Industrial	12.49%
Specialty	9.12%
Hotels	7.03%
Health Care	6.28%
Preferred Stocks	1.49%
Short-Term Bank Debt Instruments	0.00%	(b)
Net Other Assets and Liabilities	1.10%
	100.00%
FORWARD EMERALD GROWTH FUND
Technology	22.74%
Consumer Discretionary	20.05%
Health Care	16.35%
Producer Durables	15.30%
Financial Services	6.07%
Energy	5.92%
Materials & Processing	4.76%
Auto & Transportation	4.39%
Consumer Staples	0.74%
Utilities	0.18%
Warrants	0.00%	(a)
Short-Term Bank Debt Instruments	3.86%
Net Other Assets and Liabilities	-0.36%
	100.00%
FORWARD HOOVER SMALL CAP EQUITY FUND
Consumer Discretionary	27.06%	(a)
Financial Services	23.61%
Producer Durables	10.10%
Health Care	7.95%
Technology	6.85%
Energy	6.63%
Materials & Processing	6.22%
Consumer Staples	4.20%
Auto & Transportation	3.68%
Utilities	1.04%

Short-Term Bank Debt Instruments	3.93%
Net Other Assets and Liabilities	-1.27%
	100.00%
FORWARD HOOVER MINI-CAP FUND
Consumer Discretionary	23.89%
Financial Services	15.30%
Health Care	15.15%
Materials & Processing	11.99%
Auto & Transportation	10.58%
Consumer Staples	5.49%
Producer Durables	4.78%
Technology	4.18%
Energy	3.29%
Utilities	1.09%
Short-Term Bank Debt Instruments	6.30%
Net Other Assets and Liabilities	-2.04%
	100.00%
FORWARD LEGATO FUND
Health Care	19.04%
Information Technology	18.52%
Consumer Discretionary	14.62%
Financial Services	10.41%
Producer Durables	8.01%
Materials Processing	6.70%
Energy	6.03%
Auto & Transportation	4.88%
Industrials	4.82%
Consumer Staples	3.58%
Other	1.05%
Utilities	0.60%
Short-Term Bank Debt Instruments	2.08%
Net Other Assets and Liabilities	-0.34%
	100.00%

(a) When sector categorization is broken down by industry, no industry exceeds the 25% maximum specified in the Statement of Additional Information.

(b) Amount represents less than 0.01%.

June 30, 2006 12

The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ form N-Q was filed for the quarter ended March 31, 2006. The Funds’ Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

A description of the Funds’ proxy voting policies and procedures and how the Funds’ voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2006 are available (i) without charge, upon request, by calling 1-800-999-6809 and (ii) on the Securities and Exchange Commission’s website at www.sec.gov.

13 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward International Equity Fund

SHARES		VALUE (NOTE 3)
COMMON STOCKS: 99.45%
Australia: 3.36%
33,500	AMP, Ltd.	$	227,234
49,200	AWB Ltd.		158,274
102,300	Pacific Brands, Ltd.		163,408
82,100	Telestra Corp., Ltd.		224,465
7,400	Wesfarmers Ltd.		194,238
			967,619
Austria: 1.54%
5,100	Raiffeisen International Bank-Holding AG		442,786
Belgium: 1.89%
11,000	Agfa-Gevaert NV		266,396
4,000	Delhaize Group		277,213
			543,609
Brazil: 1.93%
5,300	Banco Nossa Caixa SA		110,934
4,627	Companhia de Bebidas das Americas, ADR(b)		190,864
2,500	Petroleo Brasileiro SA, ADR(b)		199,600
21,700	Vivo Participacoes SA, ADR(b)(d)		53,382
			554,780
Canada: 3.90%
32,100	iShares MSCI Canada Index Fund		762,375
4,454	Suncor Energy, Inc.		360,819
			1,123,194
China: 0.51%
138,000	PetroChina Co., Ltd.		147,470
Czechoslovakia: 1.19%
10,200	CEZ AS		343,634
Egypt: 0.41%
2,900	Orascom Telecom Holding SAE, GDR(c)		118,320
France: 6.40%
10,900	Air France-KLM		256,169
19,780	Bull SA(a)		132,276
5,740	Gemalto NV(a)		154,350
2,160	Pernod Recard SA		428,095

SHARES		VALUE (NOTE 3)
4,500	Total SA, ADR(b)	$	294,840
8,800	Total SA		578,925
			1,844,655
Germany: 8.19%
2,440	Allianz AG		385,155
8,800	Bayer AG		404,854
11,300	Deutsche Post AG		303,570
1,500	Fresenius Medical Care AG & Co. KGaA		171,468
27,500	GEA Group AG		469,076
10,300	Hypo Real Estate Holding AG		624,266
			2,358,389
Greece: 6.39%
39,600	Chipita International SA		181,273
34,900	Hellenic Exchanges SA		561,384
17,700	National Bank of Greece SA		698,884
11,000	Opap SA		398,046
			1,839,587
Hong Kong: 0.98%
26,000	Cheung Kong (Holdings), Ltd.		281,692
Hungary: 1.14%
3,200	MOL Magyar Olaj-es Gazipari Rt., GDR(c)		328,000
Italy: 6.78%
58,400	Danieli SpA		415,186
19,700	Fondiaria-Sai SpA		588,176
38,700	Mediaset SpA		456,243
63,100	UniCredito Italiano SpA		493,782
			1,953,387
Japan: 17.30%
6,300	Aeon Credit Service Co., Ltd.		153,208
4,000	Aoyama Trading Co., Ltd.		125,268
5,600	Arnest One Corp.		158,719
16,000	Asahi Glass Co., Ltd.		203,088
81	Astellas Pharma, Inc.		2,976
21,000	Bank of Fukuoka, Ltd.		159,822
8,400	Century Leasing System, Inc.		132,560

June 30, 2006 14 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Equity Fund

SHARES		VALUE (NOTE 3)
Japan: 17.30%
13,000	Daiwa Securities Group, Inc.	$	155,115
22,000	The Eighteenth Bank, Ltd.		124,708
24,000	Fujitsu, Ltd.		186,222
9,100	GLORY, Ltd.		175,130
7,200	Hitachi Chemical Co., Ltd.		188,952
21,000	ITOCHU Corp.		184,622
13,000	JGC Corp.		223,916
18,000	Kyowa Exeo Corp.		232,725
26,000	Mitsubishi Electric Corp.		208,564
22	Mitsubishi UFJ Financial Group, Inc.		307,921
34,000	Mitsui Mining & Smelting Co., Ltd.		200,761
2,400	Nidec Corp.		172,156
8,000	Ricoh Co., Ltd.		157,110
19,000	Sekisui Chemical Co., Ltd.		164,213
1,000	SMC Corp.		141,626
13,000	Sompo Japan Insurance, Inc.		181,953
19,000	Sumitomo Heavy Industries, Ltd.		175,848
18	Sumitomo Mitsui Financial Group, Inc.		190,526
10,000	Sumitomo Realty & Development Co., Ltd.		246,687
5,600	Toyota Motor Corp.		293,435
33	West Japan Railway Co.		137,121
			4,984,952
Luxembourg: 2.21%
13,200	Arcelor		636,986
Mexico 0.64%
3,100	Coca-Cola Femsa, SA de CV, ADR(b)		91,512
4,800	Grupo Televisa SA, ADR(b)		92,688
			184,200
Netherlands: 2.80%
24,000	Royal Dutch Shell Plc, Class A		807,089
Norway: 4.16%
435,700	Pan Fish ASA(a)		471,928
29,900	Tandberg ASA		247,461
39,700	Telenor ASA		480,092
			1,199,481

SHARES		VALUE (NOTE 3)
Philippines: 0.57%
753,200	Ayala Land, Inc.	$	163,038
Russia: 0.80%
5,500	OAO Gazprom, GDR(c)		231,275
South Korea: 1.89%
2,900	Kookmin Bank, ADR(b)		240,874
480	Samsung Electronics Co., Ltd.		305,091
			545,965
Spain: 6.29%
19,900	Banco Bilbao Vizcaya Argentaria SA		409,160
20,900	Corporacion Dermoestetica(a)		179,852
6,100	Fadesa Inmobiliaria SA		209,191
4,200	Fomento de Construcciones y Contratas SA		319,268
9,280	Tecnicas Reunidas SA(a)		210,621
29,000	Telefonica SA		482,796
			1,810,888
Sweden: 2.54%
7,400	Modern Times Group AB, Class B(a)		388,827
13,300	Svenska Handelsbanken AB		342,496
			731,323
Switzerland: 4.37%
5,590	Julius Baer Holding, Ltd.		484,619
9,100	Novartis AG		491,771
1,300	Valora Holding AG		281,225
			1,257,615
Taiwan: 1.85%
84,000	Cathay Financial Holding Co., Ltd.		183,686
18,200	Hon Hai Precision Industry Co., Ltd.(c)		220,220
14,214	Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR(b)		130,483
			534,389
Thailand: 0.63%
65,400	Bangkok Bank Public Co., Ltd.		181,690
Turkey: 1.12%
117,600	Aksigorta AS		324,261

See Notes to Financial Statements 15 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward International Equity Fund

SHARES		VALUE (NOTE 3)
United Kingdom: 7.67%
7,200	Carnival Plc	$	293,369
12,400	GlaxoSmithKline Plc		346,540
83,800	IG Group Holdings Plc		329,360
139,100	Old Mutual Plc		419,999
8,500	Standard Chartered Plc		207,520
28,500	William Hill Plc		330,243
29,800	Yell Group Plc		281,923
			2,208,954
	Total Common Stocks (Cost $25,151,131)		28,649,228
RIGHTS: 0.16%
Greece: 0.16%
14,400	National Bank of Greece SA, Rights(a)		45,479
	Total Rights (Cost $0)		45,479
	Total Investments: 99.61% (Cost $25,151,131)		28,694,707
	Net Other Assets and Liabilities: 0.39%		111,175
	Net Assets: 100.00%	$	28,805,882

(a) Non-income producing security.

(b) ADR — American Depositary Receipt

(c) GDR — Global Depositary Receipt

(d) Security, or portion of security, is currently on loan.

Percentages are stated as a percent of net assets.

June 30, 2006 16 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Small Companies Fund

Shares		Value (Note 3)
COMMON STOCKS: 95.39%
Australia: 4.32%
720,000	A.B.C. Learning Centres, Ltd.(c)	$	3,423,502
528,000	ABB Grain, Ltd., Class B(d)		2,667,479
1,300,000	Bendigo Mining, Ltd.(a)		1,661,231
375,000	McGuigan Simeon Wines, Ltd.		696,513
2,192,276	Sigma Pharmaceuticals, Ltd.(c)		4,234,740
1,400,000	Timbercorp, Ltd.(c)		4,181,309
193,000	Toll Holdings, Ltd.		2,014,614
			18,879,388
Austria: 4.22%
24,500	Andritz AG		4,048,717
29,749	austriamicrosystems AG(a)		1,536,020
49,480	Boehler-Uddeholm AG		2,704,707
203,750	Century Casinos, Inc., ADC(a)(b)(d)		2,292,634
138,460	Conwert Immobilien Invest AG(a)		2,637,940
35,500	EVN AG		3,613,685
395,046	SkyEurope Holding AG(a)(d)		1,601,258
			18,434,961
Belgium: 2.39%
45,000	Bekaert NV		4,321,224
70,644	ICOS Vision Systems NV(a)(c)(d)		3,233,797
120,000	Option NV(a)(c)		2,876,980
			10,432,001
Denmark: 0.56%
22,000	Bang & Olufsen AS, Class B(c)		2,432,398
Finland: 0.84%
100,800	Metso Corp.		3,656,573
France: 6.94%
49,070	April Group		2,633,355
88,170	Archos(a)(c)(d)		3,117,241
95,772	bioMerieux(d)		5,657,635
26,160	Cegedim SA(a)(d)		2,231,094
74,240	CS Communication & Systemes(a)(d)		2,671,262
55,000	Groupe Steria SCA		2,900,955
57,280	Ipsen, Ltd.		2,314,432

Shares		Value (Note 3)
29,000	Seche Environnement(d)	$	3,986,216
120,000	SR Teleperformance(a)		4,799,570
			30,311,760
Germany: 5.54%
11,630	Bijou Brigitte Modische Accessoires AG(c)(d)		3,109,482
135,000	Gerry Weber International AG(c)(d)		2,965,591
125,000	IVG Immobilien AG		3,835,974
152,500	Pfleiderer AG		4,274,298
19,500	Rational AG		3,155,875
46,000	Rheinmetall AG		3,200,890
29,000	Wincor Nixdorf AG		3,680,297
			24,222,407
Greece: 0.68%
125,000	Piraeus Bank SA		2,972,880
Hong Kong: 3.73%
2,000,000	China Shineway Pharmaceuticals Group, Ltd.(e)		1,519,248
1,500,000	Hysan Development Co., Ltd.		4,229,432
2,182,000	Kowloon Development Co., Ltd.		3,652,118
1,000,000	Moulin Global Eyecare Holdings, Ltd.(a)		0
6,200,000	Pacific Basin Shipping, Ltd.		2,813,828
6,500,000	Prime Success International Group, Ltd.		4,079,760
			16,294,386
Indonesia: 0.12%
80,000,000	PT Bank Century Tbk(a)(d)		518,191
Ireland: 2.11%
105,000	FBD Holdings Plc		4,954,160
245,000	Kingspan Group Plc		4,276,152
			9,230,312
Italy: 4.98%
380,809	Astaldi SpA		2,282,458
320,304	Biesse SpA		4,595,255
350,900	Credito Emiliano SpA		4,332,016
701,140	Hera SpA		2,330,947

See Notes to Financial Statements 17 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward International Small Companies Fund

Shares		Value (Note 3)
Italy: 4.98%
200,900	Recordati SpA	$	1,466,798
28,000	Tod’s SpA		2,098,738
160,000	Valentino Fashion Group SpA		4,656,361
			21,762,573
Japan: 20.57%
175,000	CKD Corp.(c)		2,718,803
230,000	Daimei Telecom Engineering Corp.		3,199,055
679,000	DAISO Co., Ltd.(c)(d)		2,179,880
196,700	Espec Corp.		2,821,922
140,100	Fujimi, Inc.(c)(d)		3,284,503
120,000	Hamamatsu Photonics K.K.(c)		4,146,438
600,000	Haseko Corp.(a)(c)		2,041,727
268,100	Heiwa Corp.(c)		3,724,295
280,000	Hitachi Koki Co., Ltd.		4,274,155
125,000	Izumi Co., Ltd.(c)		4,559,769
210,800	Japan General Estate Co., Ltd.		4,342,685
660,000	Keiyo Bank, Ltd.		3,741,241
420,000	Kitz Corp.		3,189,083
390,000	Nabtesco Corp.		4,370,293
358,000	Nippon Koei Co., Ltd.		1,030,328
210,600	Nippon Seiki Co., Ltd.		4,172,760
287,000	Nittetsu Mining Corp. Co., Ltd.		2,046,144
55,000	Okinawa Electric Power Co., Inc.		3,290,907
1,140	Pasona, Inc.(c)		2,183,965
630,000	Ryobi, Ltd.(c)		4,138,827
166,000	Ryowa Life Create Co., Ltd.(c)		842,234
104,400	Seijo Corp.(d)		2,931,584
384,000	Shizuoka Gas Co., Ltd.		3,120,640
260,000	SMBC Friend Securities Co., Ltd.		2,183,441
73,000	Sysmex Corp.		3,371,736
375,000	The Tokushima Bank, Ltd.(d)		2,791,628
410,000	Tokyo Tatemono Co., Ltd.(c)		4,397,148
195,000	Toyo Suisan Kaisha, Ltd.		3,056,817
220	Village Vanguard Co., Ltd.(a)		1,693,566
			89,845,574

Shares		Value (Note 3)
Netherlands: 3.10%
45,000	Fugro NV	$	1,940,235
200,300	Koninklijke BAM Groep NV		3,980,030
53,000	Koninklijke Boskalis Westminster NV		3,595,139
62,960	Nutreco Holding NV(c)		4,033,266
			13,548,670
Norway: 3.61%
666,740	Acta Holding ASA		2,121,533
65,000	Aker Yards AS		4,575,258
508,820	Bergesen Worldwide Gas ASA(a)		1,798,933
3,179,320	Pan Fish ASA(a)		3,443,676
240,000	Subsea 7, Inc.(a)(c)		3,818,339
			15,757,739
Singapore: 3.75%
6,000,000	Gallant Venture Ltd.(a)		2,010,940
10,500,000	Global Testing Corp., Ltd.(a)		1,892,370
2,500,000	KS Energy Services, Ltd.		3,225,093
2,500,000	Parkway Holdings, Ltd.(d)		3,904,891
3,400,000	Petra Foods, Ltd.(e)		2,988,586
4,600,000	United Test and Assembly Center, Ltd.(a)		2,341,670
			16,363,550
Spain: 1.48%
160,000	Banco Pastor SA		2,096,999
272,000	Sol Melia SA(a)		4,385,694
			6,482,693
Sweden: 4.05%
200,000	Bergman & Beving AB, Class B(d)		4,123,024
83,670	Brostrom AB, Class B(c)		1,649,368
125,000	Hexagon AB, Class B		4,546,433
230,000	Kungsleden AB		2,698,013
140,000	Oriflame Cosmetics SA		4,654,714
			17,671,552
Switzerland: 4.54%
8,600	Advanced Digital Broadcast Holdings SA(a)		308,898
2,710	Barry Callebaut AG(a)		1,141,518

June 30, 2006 18 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Small Companies Fund

Shares		Value (Note 3)
Switzerland: 4.54%
29,500	BKW FMB Energie AG	$	2,571,918
40,000	Dufry Group(a)(d)		3,213,061
4,400	Geberit AG		5,078,857
64,400	Logitech International SA, Registered Shares(a)		2,481,372
14,000	SIG Holding AG(a)		3,074,286
16,330	Ypsomed Holding AG(a)		1,972,931
			19,842,841
United Kingdom: 17.86%
470,000	Amlin Plc		2,051,529
720,890	Avocet Mining Plc(a)(d)		2,226,656
170,000	AWG Plc		3,766,808
452,600	Balfour Beatty Plc		2,875,471
640,000	Bodycote International Plc		2,997,762
175,000	BowLeven Plc(a)(d)		734,736
266,180	Charter Plc(a)		3,970,521
3,613,000	European Nickel Plc(a)(d)		2,305,445
1,100,000	FKI Plc		2,176,929
146,000	Forth Ports Plc		4,952,448
300,000	Hunting Plc		2,157,046
420,000	Inchcape Plc		3,670,446
1,281,660	Indago Petroleum, Ltd.(a)(d)		1,230,291
533,400	Informa Plc		4,254,513
307,690	Inspired Gaming Group Plc(a)		1,072,735
520,000	Laird Group Plc		3,750,902
400,000	Lancashire Holdings, Ltd.-W/I(a)		2,258,309
14,590	Lonmin Plc		759,089
210,000	Premier Oil Plc(a)		3,738,417
2,100,000	Regus Group Plc(a)		4,253,056
619,980	SCI Entertainment Group Plc(a)		5,928,379
400,000	Shaftesbury Plc		3,802,689
670,000	St. James's Place Capital Plc		4,067,685
323,000	Stanley Leisure Plc		3,847,301
400,000	Tullow Oil Plc		2,826,123
283,670	Wolfson Microelectronics Plc(a)		2,347,871
			78,023,157

Shares		Value (Note 3)
	Total Common Stocks (Cost $378,869,275)	$	416,683,606
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 4.33%
$18,903,000	Wells Fargo & Co. — Grand Cayman 4.350%, 07/03/06		18,903,000
	Total Short-Term Bank Debt Instruments (Cost $18,903,000)		18,903,000
	Total Investments: 99.72% (Cost $397,772,275)		435,586,606
	Net Other Assets and Liabilities: 0.28%		1,210,762
	Net Assets: 100.00%	$	436,797,368

(a) Non-income producing security.

(b) ADC— Austrian Depositary Certificates

(c) Security, or portion of security, is currently on loan.

(d) Securities determined to be illiquid under procedures approved by the Fund's Board of Trustees.

(e) Fair Valued security.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 19 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward International Small Companies Fund

Information related to these illiquid securities is as follows:

Date(s) of Purchase	Security		Cost		Market Value	% of Net Assets
12/14/04 - 06/09/06	bioMerieux	$	4,995,940	$	5,657,635	1.30%
01/11/06 - 02/10/06	Bergman & Beving AB, Class B	$	2,889,036	$	4,123,024	0.94%
06/17/05 - 05/26/06	Seche Environnement	$	2,969,764	$	3,986,216	0.91%
03/23/05 - 06/06/06	Parkway Holdings, Ltd.	$	3,190,283	$	3,904,891	0.89%
11/25/05 - 06/30/06	Fujimi, Inc.	$	2,829,671	$	3,284,503	0.75%
12/10/04 - 04/27/06	ICOS Vision Systems NV	$	2,466,027	$	3,233,797	0.74%
12/06/05 - 03/31/06	Dufry Group	$	2,577,041	$	3,213,061	0.74%
05/24/06 - 06/14/06	Archos	$	4,024,226	$	3,117,241	0.71%
12/20/04 - 03/31/06	Bijou Brigitte Modische Accessoires AG	$	2,169,407	$	3,109,482	0.71%
04/29/05 - 05/22/06	Petra Foods, Ltd.	$	2,486,973	$	2,988,586	0.68%
03/23/06 - 03/28/06	Gerry Weber International AG	$	2,693,742	$	2,965,591	0.68%
01/11/06 - 06/30/06	Seijo Corp.	$	2,827,197	$	2,931,584	0.67%
01/12/06 - 06/30/06	The Tokushima Bank, Ltd.	$	3,250,158	$	2,791,628	0.64%
03/29/06	CS Communication & Systemes	$	3,329,362	$	2,671,262	0.61%
02/23/06 - 05/25/06	ABB Grain, Ltd., Class B	$	3,043,523	$	2,667,479	0.61%
05/12/06 - 06/22/06	European Nickel Plc	$	2,324,488	$	2,305,445	0.53%
10/11/05 - 02/02/06	Century Casinos, Inc., ADC	$	1,475,034	$	2,292,634	0.52%
07/06/04 - 03/28/06	Cegedim SA	$	2,252,053	$	2,231,094	0.51%
05/04/06 - 06/30/06	Avocet Mining Plc	$	2,689,174	$	2,226,656	0.51%
01/30/06 - 06/30/06	DAISO Co., Ltd.	$	2,992,392	$	2,179,880	0.50%
09/22/05 - 04/20/06	SkyEurope Holding AG	$	2,690,185	$	1,601,258	0.37%
03/31/06 - 05/02/06	China Shineway Pharmaceuticals Group, Ltd.	$	1,699,420	$	1,519,248	0.35%
12/12/05 - 02/09/06	Indago Petroleum, Ltd.	$	1,609,974	$	1,230,291	0.28%
09/16/05 - 02/16/06	BowLeven Plc	$	1,605,751	$	734,736	0.17%
02/25/05	PT Bank Century Tbk	$	907,358	$	518,191	0.12%

June 30, 2006 20 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Global Emerging Markets Fund

Shares		Value (Note 3)
COMMON STOCKS: 93.59%
Brazil: 9.20%
15,200	Bradespar SA	$	516,756
5,800	Cia Brasileira de Distribuicao Grupo Pao de Acucar, ADR(c)(f)		180,612
19,974	Cia Vale do Rio Doce		477,778
5,000	Lojas Renner SA		265,675
22,484	Petroleo Brasileiro SA, ADR(c)		1,795,123
11,170	Tim Participacoes SA, ADR(c)		307,733
11,618	Unibanco-Uniao de Bancos Brasileiros SA, ADR(c)		771,319
			4,314,996
China: 8.31%
924,000	Air China, Ltd.		386,636
385,000	China Life Insurance Co., Class H		607,216
152,000	China Mobile (Hong Kong), Ltd.		868,907
513,579	China Unicom, Ltd.		459,556
640,000	CNOOC, Ltd.		510,879
586,000	PetroChina Co., Ltd.		626,214
16,900	Sohu.com, Inc.(a)		435,851
			3,895,259
Egypt: 0.50%
5,700	Orascom Telecom Holding SAE		236,389
Hong Kong: 4.69%
170,000	China Overseas Land & Investment, Ltd.		103,418
108,000	China Resources Enterprise, Ltd.		220,394
45,800	Esprit Holdings, Ltd.		373,854
48,000	Hutchison Whampoa, Ltd.		438,161
225,000	Kowloon Development Co., Ltd.		376,593
184,000	Shangri-LA Asia, Ltd.		354,165
94,000	Wharf (Holdings), Ltd.		334,029
			2,200,614
India: 3.91%
11,400	Dr. Reddy’s Laboratories, Ltd., ADR(c)(f)		315,780
12,300	ICICI Bank, Ltd.(c)		290,895
17,000	Patni Computer Systems, Ltd.(c)		242,760
8,177	Satyam Computer Services, Ltd., ADR(c)(f)		270,986

Shares		Value (Note 3)
11,376	State Bank of India, GDR(d)	$	455,040
14,953	Tata Motors, Ltd., Sponsored ADR(c)(f)		257,939
			1,833,400
Indonesia: 1.70%
1,013,915	PT Bank Mandiri		188,269
313,313	PT Bank Rakyat Indonesia		138,679
14,613	PT Telekomunikasi Indonsia, Sponsored ADR		469,077
			796,025
Israel: 3.96%
103,531	Bank Hapoalim B.M.		440,562
130,800	Bank Leumi Le-Israel		464,032
110,000	Israel Discount Bank(a)		187,509
24,200	Teva Pharmaceutical Industries, Ltd., Sponsored ADR(c)(f)		764,478
			1,856,581
Malaysia: 3.02%
221,400	Bumiputra-Commerce Holding Berhad		358,506
29,000	Genting Berhad		187,046
270,100	RHB Capital Berhad		202,143
159,100	Telekom Malaysia Berhad		391,850
110,675	Tenaga Nasional Berhad		277,102
			1,416,647
Mexico: 5.84%
21,403	America Movil SA de CV, ADR, Series L(c)		711,864
77,600	Empresas ICA SA de CV(a)		219,993
6,300	Fomento Economico Mexicano SA de CV, Sponsored ADR(c)		527,436
166,900	Grupo Financiero Banorte SA de CV		388,874
166,500	Grupo Mexico SA de CV		477,920
21,332	Grupo Televisa SA, Sponsored ADR(c)		411,921
			2,738,008
Netherlands: 0.46%
6,600	Efes Breweries International, GDR(a)(d)		217,800

See Notes to Financial Statements 21 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Global Emerging Markets Fund

Shares		Value (Note 3)
Philippines: 2.59%
88,612	ABS-CBN Broadcasting Corp., PDR(a)(e)	$	24,602
1,785,963	Ayala Land, Inc.		386,590
262,507	Bank of the Philippine Islands		247,054
8,019	Philippine Long Distance Telephone Co.		276,218
821,000	Universal Robina Corp.		278,161
			1,212,625
Russia: 8.18%
9,596	LUKOIL, Sponsored ADR(c)		798,387
11,000	Mechel OAO(c)(f)		246,290
12,400	Mobile TeleSystems(a)(c)		365,056
36,803	OAO Gazprom, Sponsored ADR, Registered Shares(c)		1,547,545
7,430	OAO Vimpel-Communications, Sponsored ADR(a)(c)		340,443
3,700	RAO Unified Energy System, GDR(d)		255,670
3,800	Surgutneftegaz OJSC(c)(f)		281,200
			3,834,591
Singapore: 0.96%
141,700	Singapore Petroleum Co., Ltd.		452,515
Slovakia: 0.00%(b)
525	Chirana Prema AS(a)		0
South Africa: 6.54%
1,900	Anglo Platinum, Ltd.		201,143
20,060	Barloworld, Ltd.		340,346
13,900	Gold Fields, Ltd.		315,743
20,600	Harmony Gold Mining Co., Ltd.(a)		329,577
1,805	Impala Platinum Holdings, Ltd.		334,038
19,196	Nedbank Group, Ltd.		304,154
65,475	Sanlam, Ltd.		133,121
23,160	Sappi, Ltd.		286,425
16,500	Sasol, Ltd.		636,239
17,324	Standard Bank Group, Ltd.		187,043
			3,067,829
South Korea: 14.62%
21,360	Daewoo Engineering & Construction, Co., Ltd.		303,953

Shares		Value (Note 3)
6,057	Hana Financial Group, Inc.	$	284,726
3,300	Hyundai Department Store Co., Ltd.		254,970
7,000	Hyundai Development Co.		302,519
3,000	Hyundai Motor Co.		254,875
4,500	Kookmin Bank		369,980
7,582	LG Corp.		222,577
4,480	LG Electronics, Inc.		271,529
49,900	Macquarie Korea Infrastructure Fund, GDR(a)(d)		357,668
5,259	POSCO, ADR(c)(f)		351,827
610	POSCO		163,640
18,640	Samsung Corp.		511,829
2,605	Samsung Electronics Co., Ltd.		1,655,755
1,650	Samsung Fire & Marine Insurance Co., Ltd.		221,751
8,200	Shinhan Financial Group Co., Ltd.		384,632
810	Shinsegae Co., Ltd.		405,555
4,100	SK Corp.		263,624
11,800	SK Telecom Co., Ltd., ADR(c)		276,356
			6,857,766
Taiwan: 14.46%
165,049	Acer, Inc.		290,060
144,632	Asustek Computer, Inc.		355,136
270,620	AU Optronics Corp.		381,979
231,000	Cathay Financial Holding, Co., Ltd.		505,136
281,000	China Steel Corp.		278,596
630,000	Chinatrust Financial Holding, Co., Ltd.		522,454
12,500	Chunghwa Telecom Co., Ltd., ADR(c)		230,875
198,000	Compal Electronics, Inc.		188,968
102,900	Delta Electronics, Inc.		292,393
434,346	First Financial Holding Co., Ltd.		328,674
26,000	Foxconn Technology Co., Ltd.		208,790
526,772	Fubon Financial Holding Co., Ltd.		455,558
47,887	Hon Hai Precision Industry Co., Ltd.		295,809
20,000	MediaTek, Inc.		185,317
435,000	Mega Financial Holding Co., Ltd.		321,779

June 30, 2006 22 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Global Emerging Markets Fund

Shares		Value (Note 3)
Taiwan: 14.46%
19,000	Nan Ya Printed Circuit Board Corp.	$	147,003
187,992	Siliconware Precision Industries Co.		231,093
634,038	Taiwan Semiconductor Manufacturing Co., Ltd.		1,143,646
477,243	United Microelectronics Corp.		285,960
204,000	Yuanta Core Pacific Securities Co.		134,836
			6,784,062
Thailand: 2.17%
157,564	Bangkok Bank Public Co., Ltd.		437,735
172,254	Kasikornbank Public Co., Ltd.		275,390
1,287,300	True Corporation Public Co., Ltd.(a)		303,648
			1,016,773
Turkey: 2.48%
28,949	Akbank TAS		138,501
53,000	Aksigorta AS		146,138
11,923	Arcelik AS		67,928
43,901	Haci Omer Sabanci Holding AS		118,284
54,377	Koc Holding AS(a)		161,572
23,000	Migros Turk TAS(a)		183,884
46,770	Turkcell Iletisim Hizmetleri AS		213,461
27,338	Turkiye Is Bankasi, Class C		134,240
			1,164,008
	Total Common Stocks (Cost $37,456,811)		43,895,888
PREFERRED STOCKS: 2.32%
Brazil: 2.32%
18,508	Banco Bradesco SA, Preference No Par		577,482
11,955,600	Cia Energetica de Minas Gerais, Preference		508,761
			1,086,243
	Total Preferred Stocks (Cost $955,580)		1,086,243

Shares		Value (Note 3)
RIGHTS: 0.00%(b)
Thailand: 0.00%(b)
47,704	True Corporation Public Co., Ltd., Rights(a)	$	0
	Total Rights (Cost $0)		0
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 2.89%
$1,355,000	CitiBank: Nassau 4.350%, due 07/03/06		1,355,000
	Total Short-Term Bank Debt Instruments (Cost $1,355,000)		1,355,000
	Total Investments: 98.80% (Cost $39,767,391)		46,337,131
	Net Other Assets and Liabilities: 1.20%		562,413
	Net Assets: 100.00%	$	46,899,544

(a) Non-income producing security.

(b) Amount represents less than 0.01%.

(c) ADR — American Depositary Receipt

(d) GDR — Global Depositary Receipt

(e) PDR — Philippine Depositary Receipt

(f) Security, or portion of security, is currently on loan.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 23 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Sierra Club Equity Income Fund

Shares		Value (Note 3)
COMMON STOCKS: 78.84%
Air Freight & Logistics: 0.56%
5,000	Pacer International, Inc.	$	162,900
Banks: 8.21%
14,015	Astoria Financial Corp.		426,757
5,000	KeyCorp		178,400
7,653	Northern Trust Corp.		423,211
6,118	The PNC Financial Services Group, Inc.		429,300
2,100	SunTrust Banks, Inc.		160,146
13,686	U.S. Bancorp		422,623
5,000	Wells Fargo & Co.		335,400
			2,375,837
Biotechnology: 4.07%
8,000	Celgene Corp.(a)		379,440
13,487	Gilead Sciences, Inc.(a)		797,891
			1,177,331
Commercial Services & Supplies: 11.00%
1,134	Ceridian Corp.(a)		27,715
7,000	Checkfree Corp.(a)		346,920
4,000	Corporate Executive Board Co.		400,800
6,187	Dun & Bradstreet Corp.(a)		431,110
16,330	Equifax, Inc.		560,772
473	First Data Corp.		21,304
5,664	Manpower, Inc.		365,894
7,542	Moody’s Corp.		410,737
8,330	Paychex, Inc.		324,704
7,000	Robert Half International, Inc.		294,000
			3,183,956
Communications Equipment: 1.33%
834	QLogic Corp.(a)		14,378
9,266	QUALCOMM, Inc.		371,289
			385,667
Computers & Peripherals: 2.39%
21,840	Hewlett-Packard Co.		691,891
Cosmetics/Personal Care: 1.07%
8,000	The Estee Lauder Companies, Inc.		309,360

Shares		Value (Note 3)
Diversified Financials: 5.89%
762	A.G. Edwards, Inc.	$	42,154
6,100	Bank of America Corp.		293,410
3,279	Bear Stearns Cos., Inc.		459,322
2,613	Freddie Mac		148,967
12,405	Mellon Financial Corp.		427,104
5,764	State Street Corp.		334,831
			1,705,788
Diversified Telecommunication Services: 1.49%
11,631	CenturyTel, Inc.		432,092
Food: 0.89%
10,000	The Hain Celestial Group, Inc.(a)		257,600
Food & Drug Retailing: 1.89%
12,000	Kroger Co.		262,320
4,400	Whole Foods Market, Inc.		284,416
			546,736
Health Care Equipment & Supplies: 2.70%
3,318	Becton Dickinson & Co.		202,829
4,800	Edwards Lifesciences Corp.(a)		218,064
7,635	Varian Medical Systems, Inc.(a)		361,517
			782,410
Health Care Providers & Services: 3.83%
1,827	Cardinal Health, Inc.		117,531
3,689	Cigna Corp.		363,403
4,000	Quest Diagnostics, Inc.		239,680
14,000	Sunrise Senior Living, Inc.(a)		387,100
			1,107,714
Hotels, Restaurants & Leisure: 6.51%
4,471	Choice Hotels International, Inc.		270,943
16,725	International Game Technology		634,547
2,346	Las Vegas Sands Corp.(a)		182,660
11,476	Starbucks Corp.(a)		433,334
6,000	Starwood Hotels & Resorts Worldwide, Inc.		362,040
			1,883,524

June 30, 2006 24 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Sierra Club Equity Income Fund

Shares		Value (Note 3)
Household Durables: 0.16%
97	NVR, Inc.(a)	$	47,651
Insurance: 2.39%
3,500	Aflac, Inc.		162,225
10,786	Progressive Corp.		277,308
4,500	Safeco Corp.		253,575
			693,108
Internet: 0.26%
6,000	Emdeon Corp.(a)		74,460
Internet Software & Services: 0.40%
279	Google, Inc., Class A(a)		116,993
Media: 4.32%
11,194	McGraw-Hill Cos., Inc.		562,275
2,000	Omnicom Group, Inc.		178,180
15,274	Univision Communications, Inc.(a)		511,679
			1,252,134
Office Furnishings: 0.62%
7,000	Herman Miller, Inc.		180,390
Pharmaceuticals: 2.66%
2,378	Barr Pharmaceuticals, Inc.(a)		113,407
12,000	Endo Pharmaceuticals Holdings, Inc.(a)		395,760
13,000	Mylan Laboratories, Inc.		260,000
			769,167
Real Estate: 4.77%
8,000	AMB Property Corp.		404,400
13,000	Kimco Realty Corp.		474,370
1,426	New Century Financial Corp.		65,239
4,000	SL Green Realty Corp.		437,880
			1,381,889
Semiconductors: 0.74%
9,000	Veeco Instruments, Inc.(a)		214,560
Semiconductors & Semiconductor Equipment: 2.37%
10,000	Applied Materials, Inc.		162,800
334	KLA-Tencor Corp.		13,884

Shares		Value (Note 3)
5,100	Microchip Technology, Inc.	$	171,105
11,191	Texas Instruments, Inc.		338,976
			686,765
Software: 6.65%
5,600	Autodesk, Inc.(a)		192,976
5,330	BEA Systems, Inc.(a)		69,770
2,292	Fair Isaac Corp.		83,222
5,000	Fiserv, Inc.(a)		226,800
6,000	IMS Health, Inc.		161,100
12,722	Intuit, Inc.(a)		768,282
18,195	Microsoft Corp.		423,943
			1,926,093
Specialty Retail: 1.67%
165	Claire’s Stores, Inc.		4,209
11,900	Fastenal Co.		479,451
			483,660
	Total Common Stocks (Cost $20,186,980)		22,829,676
MUTUAL FUNDS: 1.64%
25,000	PowerShares Wilderhill Clean Energy Portfolio(b)		475,250
	Total Mutual Funds (Cost $452,520)		475,250
Par Value
U.S. GOVERNMENT AND AGENCY OBLIGATIONS: 6.91%
Federal Home Loan Bank: 3.59%
$1,040,000	5.200%, 01/05/07		1,038,121
Federal Home Loan Mortgage Corp.: 3.32%
960,000	5.500%, 07/15/06		959,985
	Total U.S. Government and Agency Obligations (Amortized Cost $1,999,317)		1,998,106

See Notes to Financial Statements 25 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Sierra Club Equity Income Fund

Par Value		Value (Note 3)
CORPORATE NOTES AND BONDS: 8.28%
Banks: 2.34%
	National City Corp.
$150,000	5.750%, 02/01/09	$	150,728
	Wachovia Bank NA
200,000	4.850%, 07/30/07		198,338
	Wells Fargo & Co.
150,000	3.500%, 04/04/08		144,720
125,000	7.550%, 06/21/10		133,597
50,000	6.125%, 04/18/12		50,756
			678,139
Computers & Peripherals: 0.44%
	Dell, Inc.
125,000	6.550%, 04/15/08		126,702
Diversified Telecommunications Services: 1.37%
	Alltel Corp.
375,000	7.000%, 07/01/12		396,242
Finance: 3.61%
	Bank of America Corp.
100,000	7.125%, 03/01/09		103,523
175,000	7.125%, 10/15/11		186,168
	Bear Stearns Cos., Inc.
75,000	7.625%, 12/07/09		79,581
	Key Bank NA
150,000	7.000%, 02/01/11		157,387
	Mellon Funding Corp.
150,000	6.375%, 02/15/10		153,271
	National City Bank
50,000	6.250%, 03/15/11		51,057
	U.S. Bank NA Minnesota
150,000	6.375%, 08/01/11		154,539
150,000	7.800%, 08/18/10		160,680
			1,046,206

Par Value		Value (Note 3)
Health Care: 0.52%
	Becton Dickinson & Co.
$145,000	7.150%, 10/01/09	$	151,440
	Total Corporate Notes and Bonds (Amortized Cost $2,484,690)		2,398,729
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 4.07%
$1,177,779	Brown Brothers Harriman & Co.— Grand Cayman 4.350%, due 07/03/06		1,177,779
	Total Short-Term Bank Debt Instruments (Cost $1,177,779)		1,177,779
	Total Investments: 99.74% (Cost $26,301,286)		28,879,540
	Net Other Assets and Liabilities: 0.26%		76,007
	Net Assets: 100.00%	$	28,955,547

(a) Non-income producing security.

(b) Investments in other funds are calculated at their respective net asset values as determined by those funds, in accordance with the Investment Company Act of 1940.

Percentages are stated as a percent of net assets.

June 30, 2006 26 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Sierra Club Stock Fund

Shares		Value (Note 3)
COMMON STOCKS: 97.88%
Airlines: 0.47%
9,145	Southwest Airlines Co.	$	149,704
Banks: 14.08%
5,704	AmSouth Bancorp		150,871
20,912	Astoria Financial Corp.		636,770
3,600	BB&T Corp.		149,724
29	Comerica, Inc.		1,508
4,131	Fifth Third Bancorp		152,640
2,060	Golden West Financial Corp.		152,852
4,262	KeyCorp		152,068
4,168	National City Corp.		150,840
5,020	North Fork Bancorp		151,453
14,165	Northern Trust Corp.		783,325
11,318	The PNC Financial Services Group, Inc.		794,184
2,017	SunTrust Banks, Inc.		153,816
25,267	U.S. Bancorp		780,245
2,851	Wachovia Corp.		154,182
2,294	Wells Fargo & Co.		153,882
			4,518,360
Biotechnology: 3.51%
3,367	Biogen Idec, Inc.(a)		155,993
2,452	Genzyme Corp.(a)		149,695
13,897	Gilead Sciences, Inc.(a)		822,146
			1,127,834
Commercial Services & Supplies: 10.45%
2,887	Apollo Group, Inc., Class A(a)		149,171
3,438	Automatic Data Processing, Inc.		155,913
1,682	Ceridian Corp.(a)		41,108
9,231	Dun & Bradstreet Corp.(a)		643,216
5,049	eBay, Inc.(a)		147,885
12,430	Equifax, Inc.		426,846
4,043	First Data Corp.		182,097
3,229	Manpower, Inc.		208,593
14,084	Moody’s Corp.		767,015
16,216	Paychex, Inc.		632,100
			3,353,944

Shares		Value (Note 3)
Communications Equipment: 2.27%
1,245	QLogic Corp.(a)	$	21,464
17,635	QUALCOMM, Inc.		706,634
			728,098
Computers & Peripherals: 4.76%
2,558	Apple Computer, Inc.(a)		146,113
6,280	Dell, Inc.(a)		153,295
13,236	EMC Corp.(a)		145,199
24,498	Hewlett-Packard Co.		776,096
4,370	Network Appliance, Inc.(a)		154,261
36,899	Sun Microsystems, Inc.(a)		153,131
			1,528,095
Diversified Financials: 10.16%
1,137	A.G. Edwards, Inc.		62,899
2,837	American Express Co.		150,985
3,171	Bank of America Corp.		152,525
3,007	Bear Stearns Cos., Inc.		421,221
1,799	Capital One Financial Corp.		153,725
9,846	The Charles Schwab Corp.		157,339
4,030	Countrywide Financial Corp.		153,462
3,214	Fannie Mae		154,593
1,725	Franklin Resources, Inc.		149,747
6,566	Freddie Mac		374,328
22,826	Mellon Financial Corp.		785,899
2,844	SLM Corp.		150,504
6,766	State Street Corp.		393,037
			3,260,264
Diversified Telecommunication Services: 2.50%
2,484	Alltel Corp.		158,554
17,355	CenturyTel, Inc.		644,738
			803,292
Food & Drug Retailing: 1.95%
5,021	CVS Corp.		154,145
7,268	Kroger Co.		158,878

See Notes to Financial Statements 27 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Sierra Club Stock Fund

Shares		Value (Note 3)
Food & Drug Retailing: 1.95%
3,390	Walgreen Co.	$	152,007
2,462	Whole Foods Market, Inc.		159,144
			624,174
Food Products: 0.94%
2,778	The Hershey Co.		152,985
2,664	Wm. Wrigley Jr. Co.		120,839
641	Wm. Wrigley Jr. Co., Class B		29,037
			302,861
Health Care Equipment & Supplies: 5.41%
4,106	Baxter International, Inc.		150,937
7,431	Becton Dickinson & Co.		454,257
4,500	Biomet, Inc.		140,805
8,805	Boston Scientific Corp.(a)		148,276
4,652	St. Jude Medical, Inc.(a)		150,818
3,580	Stryker Corp.		150,754
11,392	Varian Medical Systems, Inc.(a)		539,411
			1,735,258
Health Care Providers & Services: 7.08%
5,117	Cardinal Health, Inc.		329,177
3,098	Caremark Rx, Inc.		154,497
7,074	Cigna Corp.		696,860
2,800	Coventry Health Care, Inc.(a)		153,832
2,257	Express Scripts, Inc.(a)		161,917
2,900	Humana, Inc.(a)		155,730
2,735	Medco Health Solutions, Inc.(a)		156,661
2,608	Quest Diagnostics, Inc.		156,271
3,395	UnitedHealth Group, Inc.		152,028
2,118	WellPoint, Inc.(a)		154,127
			2,271,100
Hotels, Restaurants & Leisure: 8.15%
6,671	Choice Hotels International, Inc.		404,263
2,173	Harrah’s Entertainment, Inc.		154,674
21,791	International Game Technology		826,751
3,501	Las Vegas Sands Corp.(a)		272,588

Shares		Value (Note 3)
21,277	Starbucks Corp.(a)	$	803,419
2,545	Starwood Hotels & Resorts Worldwide, Inc.		153,565
			2,615,260
Household Durables: 0.19%
127	NVR, Inc.(a)		62,389
Insurance: 2.25%
3,357	Aflac, Inc.		155,597
21,970	Progressive Corp.		564,849
			720,446
Internet & Catalog Retail: 0.49%
4,061	Amazon.com, Inc.(a)		157,079
Internet Software & Services: 1.55%
811	Google, Inc., Class A(a)		340,077
4,730	Yahoo!, Inc.(a)		156,090
			496,167
IT Consulting & Services: 0.47%
6,233	Electronic Data Systems Corp.		149,966
Leisure Equipment & Products: 0.48%
3,600	Electronic Arts, Inc.(a)		154,944
Media: 4.45%
4,738	Comcast Corp., Class A(a)		155,122
7,893	McGraw-Hill Cos., Inc.		396,466
1,764	Omnicom Group, Inc.		157,155
21,481	Univision Communications, Inc.(a)		719,613
			1,428,356
Multi-Line Insurance: 0.96%
1,900	Ambac Financial Group, Inc.		154,090
1,808	The Hartford Financial Services Group, Inc.		152,957
			307,047
Multi-Line Retail: 0.47%
2,635	Costco Wholesale Corp.		150,538
Pharmaceuticals: 0.53%
3,545	Barr Pharmaceuticals, Inc.(a)		169,061

June 30, 2006 28 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Sierra Club Stock Fund

Shares		Value (Note 3)
Property & Casualty Insurance: 1.42%
3,055	ACE Ltd.	$	154,552
3,004	Chubb Corp.		149,900
2,485	XL Capital Ltd.		152,330
			456,782
Real Estate: 0.78%
4,199	Kimco Realty Corp.		153,222
2,128	New Century Financial Corp.		97,356
			250,578
Semiconductors & Semiconductor Equipment: 2.66%
4,815	Analog Devices, Inc.		154,754
9,321	Applied Materials, Inc.		151,746
538	KLA-Tencor Corp.		22,365
20	NVIDIA Corp.(a)		426
17,291	Texas Instruments, Inc.		523,744
			853,035
Software: 8.02%
4,914	Adobe Systems, Inc.(a)		149,189
7,953	BEA Systems, Inc.(a)		104,105
7,227	CA, Inc.		148,515
4,000	Citrix Systems, Inc.(a)		160,560
3,419	Fair Isaac Corp.		124,144
13,305	Intuit, Inc.(a)		803,489
33,737	Microsoft Corp.		786,072
10,268	Oracle Corp.(a)		148,783
9,564	Symantec Corp.(a)		148,624
			2,573,481
Specialty Retail: 0.96%
4,458	Bed Bath & Beyond, Inc.(a)		147,872
2,778	Best Buy Co., Inc.		152,346
246	Claire’s Stores, Inc.		6,275
			306,493
Telecommunications: 0.47%
9,500	Juniper Networks, Inc.(a)		151,906
	Total Common Stocks (Cost $30,708,146)		31,406,512

Shares		Value (Note 3)
MUTUAL FUNDS: 0.47%
7,951	Powershares Wilderhill Clean Energy Portfolio(b)	$	151,149
	Total Mutual Funds (Cost $158,147)		151,149
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 1.30%
$415,688	Brown Brothers Harriman & Co. — Grand Cayman 4.350%, due 07/03/06		415,688
	Total Short-Term Bank Debt Instruments (Cost $415,688)		415,688
	Total Investments: 99.65% (Cost $31,281,981)		31,973,349
	Net Other Assets and Liabilities: 0.35%		112,503
	Net Assets: 100.00%	$	32,085,852

(a) Non-income producing security.

(b) Investments in other funds are calculated at their respective net asset values as determined by those funds, in accordance with the Investment Company Act of 1940.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 29 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Banking and Finance Fund

Shares	Value (Note 3)
COMMON STOCKS: 96.43%
Financial Services: 96.43%

Banks Regional: 68.94%
57,905	Alabama National Bancorp Delaware	$	3,946,226
74,800	Appalachian Bancshares, Inc.(a)		1,363,230
121,454	Bank of The Ozarks, Inc.		4,044,418
106,550	Boston Private Bancorp, Inc.		2,972,745
62,400	Camden National Corp.		2,489,760
52,840	Capital Corp. of The West		1,690,880
140,504	Capital Crossing Bank(a)		3,456,398
125,000	Cardinal Financial Corp.		1,452,500
146,928	Cascade Financial Corp.		2,273,483
111,846	Central Pacific Financial Corp.		4,328,440
55,800	CoBiz, Inc.		1,256,616
89,917	Codorus Valley Bancorp, Inc.		1,723,709
218,200	Colonial Bancgroup, Inc.		5,603,376
195,781	Community Banks, Inc.		5,090,306
42,890	Dearborn Bancorp, Inc.(a)		952,148
131,080	Desert Community Bank Vicorville CA		2,422,935
31,183	East Penn Financial Corp.		273,475
143,273	East West Bancorp, Inc.		5,431,479
25,400	Enterprise Financial Services Corp.		646,430
31,725	First Regional Bancorp(a)		2,791,800
242,638	First Security Group, Inc.		2,814,601
32,000	First State Bancorp		760,960
19,800	First State Financial Corp.		358,380
47,700	FNB Corp. VA.		1,764,900
147,620	Gateway Financial Holdings, Inc.		2,239,395
28,800	GB&T Bancshares, Inc.		626,688
101,600	Great Southern Bancorp, Inc.		3,101,848
32,942	Harrington West Financial Group, Inc.		523,778
101,700	Heartland Financial USA, Inc.		2,710,305
30,300	Heritage Commerce Corp.		751,137
72,275	International Bancshares Corp.		1,986,117
144,461	Lakeland Financial Corp.		3,508,958
31,824	Leesport Financial Corp.		731,952
86,099	Macatawa Bank Corp.		2,013,844

Shares Value
(Note 3)

116,463	Mercantile Bank Corp.	$	4,641,051
66,528	Mercantile Bankshare Corp.		2,373,054
38,200	New Century Bancorp, Inc.(a)		750,630
388,890	Nexity Financial Corp.(a)		4,861,125
62,980	Oak Hill Financial, Inc.		1,604,730
107,500	Pinnacle Financial Partners, Inc.(a)		3,271,225
110,754	Preferred Bank of Los Angeles		5,937,522
57,500	Princeton National Bancorp, Inc.		1,877,375
35,300	Private Bancorp, Inc.		1,461,773
201,722	Prosperity Bancshares, Inc.		6,634,637
86,300	Pulaski Financial Corp.		1,437,758
37,500	Sandy Springs Bancorp, Inc.		1,352,250
90,200	Seacoast Banking Corp. of Florida		2,402,026
160,042	Security Bank Corp.		3,564,135
33,500	Signature Bank(a)		1,084,730
128,836	Smithtown Bancorp, Inc.		3,112,666
176,638	Southwest Bancorp, Inc. Oklahoma		4,504,269
278,767	Sterling Financial Corp.		6,104,997
145,697	Summit Bancshares, Inc. Fort Worth Texas		3,090,233
183,674	Superior Bancorp(a)		2,020,414
36,900	SVB Financial Group(a)		1,677,474
355,202	Texas Capital Bancshares, Inc.(a)		8,276,207
331,101	Texas United Bancshares, Inc.		9,320,493
31,500	UCBH Holdings, Inc.		521,010
120,026	Union Bankshares Corp.		5,177,922
190,700	United Community Banks, Inc.		5,804,908
15,450	United Security Bancshares, Inc.		330,475
131,671	Virginia Commerce Bancorp, Inc.(a)		3,146,937
70,300	Virginia Financial Group, Inc.		2,968,066
20,000	West Coast Bancorp		589,400
84,500	Western Alliance Bancorp(a)		2,938,910
361,982	Wilshire Bancorp, Inc.		6,522,916
104,733	Yardville National Bancorp		3,742,110
			191,206,645

June 30, 2006 30 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Banking and Finance Fund

Shares Value (Note 3)

Diversified Financial Services: 3.79%
203,200	E*Trade Financial Corp.(a)	$	4,637,024
31,600	Legg Mason, Inc.		3,144,832
77,233	Stifel Financial Corp.(a)		2,727,097
			10,508,953
Financial Data Processing Services: 2.89%
128,179	Digital Insight Corp.(a)		4,395,258
73,100	Penson Worldwide, Inc.(a)		1,258,051
185,900	TradeStation Group, Inc.(a)		2,355,353
			8,008,662
Financial Information Services: 0.98%
211,800	TheStreet.com, Inc.		2,715,276
Financial Miscellaneous: 3.13%
130,500	Advanta Corp.		4,691,475
210,442	Thomas Weisel Partners Group Llc(a)		4,000,503
			8,691,978
Insurance Carriers: Property & Casualty: 8.27%
27,400	Erie Indemnity Co.		1,424,800
115,600	First Acceptance Corp.(a)		1,361,768
169,300	HUB International, Ltd.		4,437,353
68,700	Navigators Group, Inc.(a)		3,010,434
70,000	North Pointe Holdings Corp.(a)		511,000
3,100	PartnerRe, Ltd.		198,555
106,981	Philadelphia Consolidated Holding Corp.(a)		3,247,943
56,756	Selective Insurance Group, Inc.		3,170,958
267,154	United America Indemnity, Ltd.(a)		5,567,489
			22,930,300
Insurance: Multi-Line: 0.62%
142,717	Brooke Corp.		1,712,604
Investment Management Companies: 4.60%
69,000	Affiliated Managers Group, Inc.(a)		5,995,410
74,568	Calamos Asset Management, Inc.		2,161,726
94,400	SEI Investments Co.		4,614,272
			12,771,408
Property Casualty: 0.25%
43,300	SeaBright Insurance Holdings, Inc.(a)		697,563

Shares Value (Note 3)

Real Estate Investment Trusts: 0.73%
12,500	Mid-America Apartment Communities, Inc.	$	696,875
82,000	Urstadt Biddle Properties, Inc.		1,335,780
			2,032,655
Savings & Loans: 1.79%
27,000	Guaranty Federal Bancshares, Inc.		757,350
187,600	Pacific Premier Bancorp.(a)		2,194,920
19,800	PFF Bancorp, Inc.		656,568
85,181	Willow Grove Bancorp, Inc.		1,355,230
			4,964,068
Securities Brokerage & Service: 0.44%
15,200	Investment Technology Group, Inc.(a)		773,072
15,000	Raymond James Financial, Inc.		454,050
			1,227,122
	Total Financial Services		267,467,234
	Total Common Stocks (Cost $202,952,595)		267,467,234

Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 4.43%
$12,278,735	Bank of America — London 4.350%, due 07/03/06
	Total Short-Term Bank Debt Instruments (Cost $12,278,735)		12,278,735
	Total Investments: 100.86% (Cost $215,231,330)		279,745,969
	Net Other Assets and Liabilities: (0.86)%		(2,372,935	)
	Net Assets: 100.00%	$	277,373,034

(a) Non-income producing security.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 31 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Opportunities Fund

Shares		Value (Note 3)
COMMON STOCKS: 73.45%
Auto & Transportation: 0.46%
1,100	Landstar System, Inc.	$	51,953
Consumer Discretionary: 15.03%
3,600	Coach, Inc.(a)		107,640
300	Google, Inc.(a)		125,799
5,000	GSI Commerce, Inc.(a)(c)		67,650
3,000	Hilton Hotels Corp.		84,840
4,000	Iconix Brand Group, Inc.(a)		65,360
45,000	Internap Network Services Corp.(a)		47,250
2,000	Jarden Corp.(a)		60,900
3,000	Jupitermedia Corp.(a)		39,000
200	LoopNet, Inc.(a)		3,722
4,100	NutriSystem, Inc.(a) (c)		254,733
2,000	Pinnacle Entertainment, Inc.(a)		61,300
2,000	The Providence Service Corp.(a)		54,460
300	Sears Holdings Corp.(a)		46,452
20,000	Smith & Wesson Holding Corp.(a)		164,400
2,500	THQ, Inc.(a)		54,000
37,000	Traffic.com, Inc.(a)		206,830
4,000	Trump Entertainment Resorts, Inc.(a)		80,600
2,400	WESCO International, Inc.(a)		165,600
1,000	XM Satellite Radio Holdings, Inc.(a)		14,650
			1,705,186
Consumer Staples: 6.75%
1,000	Altria Group, Inc.		73,430
1,500	The Clorox Co.		91,455
2,000	H.J. Heinz Co. Ltd.		82,440
400	Hansen Natural Corp.(a)		76,148
3,000	The Hershey Co.(c)		165,210
6,000	Jones Soda Co.(a)		54,000
6,000	Vical, Inc.(a)		33,300
3,700	Wild Oats Markets, Inc.(a)		72,520
1,000	Wm. Wrigley Jr. Co.		45,360
15,000	Youbet.com, Inc.(a)		72,450
			766,313

Shares		Value (Note 3)
Energy: 4.47%
2,500	Carrizo Oil & Gas, Inc.(a)	$	78,275
1,000	Halliburton Co.		74,210
2,500	Helix Energy Solutions, Inc.(a)		100,900
1,500	Hornbeck Offshore Services, Inc.(a)		53,280
3,000	KFx, Inc.(a)		45,840
3,500	Parallel Petroleum Corp.(a)		86,485
2,000	Superior Energy Services, Inc.(a)		67,800
			506,790
Financial Services: 6.67%
3,000	Bankrate, Inc.(a)		113,280
1,000	CheckFree Corp.(a)		49,560
2,200	Citigroup, Inc.		106,128
2,000	Digital Insight Corp.(a)		68,580
2,000	E*TRADE Financial Corp.(a)		45,640
400	The Goldman Sachs Group, Inc.		60,172
2,000	SEI Investments Co.(c)		97,760
16,800	TheStreet.com, Inc.(c)		215,376
			756,496
Health Care: 12.39%

Biotechnology: 7.61%
2,000	Alnylam Pharmaceuticals, Inc.(a)	30,160
1,400	Amylin Pharmaceuticals, Inc.(a)(c)	69,118
3,000	BioCryst Pharmaceuticals, Inc.(a)	42,990
4,000	Cardiome Pharmaceutical Corp.(a)	35,360
4,700	Celgene Corp.(a)(c)	222,921
1,500	Crucell NV ADR(a)(b)	31,170
4,000	Cubist Pharmaceuticals, Inc.(a)	100,720
2,600	Digene Corp.(a)	100,724
1,300	Illumina, Inc.(a)	38,558
2,000	Myriad Genetics, Inc.(a)	50,500
4,200	Novavax, Inc.(a)	21,168
8,000	Sirna Therapeutics, Inc.(a)	45,600
4,500	Telik, Inc.(a)(c)	74,250
		863,239

June 30, 2006 32 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Opportunities Fund

Shares Value (Note 3)

Drugs & Pharmaceuticals: 1.48%
3,000	CV Therapeutics, Inc.(a)	$	41,910
3,500	Dr. Reddy’s Laboratories, Ltd.(b)		96,950
3,000	Quidel Corp.(a)		28,500
			167,360
Medical & Dental Instruments: 3.01%
1,500	dj Orthopedics, Inc.(a)		55,245
1,600	I-Flow Corp.(a)		17,312
15,000	Inovio Biomedical Corp.(a)		31,050
7,700	LifeCell Corp.(a)(c)		238,084
			341,691
Miscellaneous Health Care: 0.29%
8,000	Thermogenesis Corp.(a)		32,960
	Total Health Care		1,405,250

Materials & Processing: 3.17%
1,800	McDermott International, Inc.(a)	81,846
700	Mobile Mini, Inc.(a)	20,482
8,500	PW Eagle, Inc.(c)	257,040
		359,368
Producer Durables: 3.74%
3,500	BEA Systems, Inc.(a)	45,815
500	Caterpillar, Inc.	37,240
14,000	C-COR, Inc.(a)	108,080
2,000	General Electric Co.(c)	65,920
2,000	InterDigital Communications Corp.(a)(c)	69,820
3,000	Varian Semiconductor Equipment Associates, Inc.(a)	97,830
		424,705
Technology: 18.67%
500	Allegheny Technologies, Inc.	34,620
1,000	Ansoft Corp.(a)	20,480
1,300	Apple Computer, Inc.(a)	74,256
1,300	BE Aerospace, Inc.(a)	29,718
1,500	Blackboard, Inc.(a)	43,440
15,000	Callidus Software, Inc.(a)(c)	79,200
10,000	Ciena Corp.(a)	48,100

Shares		Value (Note 3)
800	Cognizant Technology Solutions Corp.(a)	$	53,896
7,000	EXFO Electro-Optical Engineering, Inc.(a)		43,120
1,000	Fiserv, Inc.(a)		45,360
2,500	Fuel-Tech NV(a)		30,250
1,500	Gen-Probe, Inc.(a)		80,970
4,000	Hewlett-Packard Co.		126,720
6,000	Intel Corp.		113,700
10,000	Internet Capital Group, Inc.(a)		90,000
1,000	IntraLase Corp.(a)		16,740
3,000	j2 Global Communications, Inc.(a)		93,660
2,000	Kenexa Corp.(a)		63,700
5,000	Micrus Endovascular Corp.(a)		60,300
1,500	Motorola, Inc.		30,225
2,800	MRO Software, Inc.(a)		56,196
9,000	ON Semiconductor Corp.(a)		52,920
4,000	OPNET Technologies, Inc.(a)		51,840
5,000	Radiant Systems, Inc.(a)		52,850
3,000	Respironics, Inc.(a)		102,660
2,000	Sify Ltd.(a)(b)		19,960
7,000	Smith Micro Software(a)		112,140
5,400	SPSS, Inc.(a)		173,556
6,500	TASER International, Inc.(a)		51,415
4,500	Technitrol, Inc.		104,175
10,000	Tut Systems, Inc.(a)		24,200
2,000	Vishay Intertechnology, Inc.(a)		31,460
3,000	WebEx Communications, Inc.(a)		106,621
			2,118,448
Utilities: 2.10%
5,500	Comcast Corp.(a)		180,070
2,000	Duke Energy Corp.		58,740
			238,810
	Total Common Stocks (Cost $7,836,144)		8,333,319

See Notes to Financial Statements 33 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Opportunities Fund

Contracts		Value (Note 3)
OPTIONS PURCHASED: 2.98%
Calls: 2.87%
	Allegheny Technology
15	Expiration: August 2006 at $65.00	$	12,900
	Apple Computer Inc.
30	Expiration: October 2006 at $60.00		12,600
	Bankrate, Inc.
30	Expiration: November 2006 at $40.00		11,250
	BioCryst Pharmaceuticals, Inc.
50	Expiration: September 2006 at $17.50		3,500
	Celgene Corp.
10	Expiration: July 2006 at $42.50		5,250
20	Expiration: July 2006 at $40.00		15,200
	Cognizant Technology Solutions Corp.
15	Expiration: July 2006 at $60.00		12,600
10	Expiration: August 2006 at $65.00		10,100
	Cubist Pharmaceuticals, Inc.
30	Expiration: November 2006 at $22.50		14,100
	Dr. Reddy’s Laboratories, Ltd.
20	Expiration: September 2006 at $30.00		3,300
60	Expiration: September 2006 at $35.00		3,300
	Gen-Probe, Inc.
20	Expiration: July 2006 at $50.00		8,800
	Google, Inc.
4	Expiration: July 2006 at $390.00		13,640
4	Expiration: August 2006 at $420.00		8,740
	Hyperion Solutions Corp.
25	Expiration: August 2006 at $25.00		10,750
	Illumina, Inc.
30	Expiration: August 2006 at $30.00		6,750
	KFX, Inc.
40	Expiration: January 2007 at $17.50		6,300
	LifeCell Corp.
30	Expiration: December 2006 at $27.50		19,200
	Micron Technology, Inc.
60	Expiration: July 2006 at $17.00		600

Contracts		Value (Note 3)
	Nektar Therapeutics
40	Expiration: August 2006 at $20.00	$	9,100
	Netlogic Microsystems, Inc.
35	Expiration: July 2006 at $35.00		2,975
	NutriSystem, Inc.
20	Expiration: July 2006 at $55.00		9,800
10	Expiration: September 2006 at $55.00		5,650
	Onyx Pharmaceuticals, Inc.
50	Expiration: July 2006 at $17.50		5,000
	Penn National Gaming
40	Expiration: July 2006 at $40.00		3,000
	PW Eagle, Inc.
60	Expiration: September 2006 at $30.00		21,600
	Respironics, Inc.
40	Expiration: October 2006 at $40.00		2,200
	RPC, Inc.
20	Expiration: September 2006 at $25.00		4,750
	S&P 100 Index
10	Expiration: July 2006 at $570.00		2,300
	Sears Holdings Corp.
15	Expiration: September 2006 at $145.00		25,650
	Telik, Inc.
70	Expiration: January 2007 at $17.50		28,000
35	Expiration: July 2006 at $15.00		612
20	Expiration: January 2007 at $15.00		10,300
	THQ, Inc.
20	Expiration: September 2006 at $20.00		5,100
	WESCO International, Inc.
20	Expiration: August 2006 at $65.00		10,600
			325,517
Puts: 0.11%
	eBAY, Inc.
30	Expiration: July 2006 at $40.00		75
	Jarden Corp.
30	Expiration: July 2006 at $35.00		225

June 30, 2006 34 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Opportunities Fund

Contracts		Value (Note 3)
	Myriad Genetics, Inc.
30	Expiration: August 2006 at $30.00	$	825
	Telik, Inc.
90	Expiration: July 2006 at $17.50		2,250
30	Expiration: January 2007 at $20.00		9,000
			12,375
	Total Options Purchased (Cost $431,429)		337,892
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 38.90%
$4,412,792	Bank of America: London 4.350%, 07/03/06		4,412,792
	Total Short-Term Bank Debt Instruments (Cost $4,412,792)		4,412,792
	Total Investments: 115.33% (Cost $12,680,365)		13,084,003
	Net Other Assets and Liabilities: (15.33)%		(1,739,434	)
	Net Assets: 100.00%	$	11,344,569

Contracts		Value (Note 3)
OPTIONS WRITTEN
Puts
	NutriSystem, Inc.
10	Expiration: September 2006 at $50.00	$	(3,900	)
	Total Options Written (Premiums received $5,070)		(3,900	)
Shares		Value
SCHEDULE OF SECURITIES SOLD SHORT
(9,000)	Arctic Cat, Inc.		(175,590	)
(17,000)	Autobytel, Inc.		(60,010	)
(1,500)	Cognos, Inc.		(42,675	)
(19,000)	Corillian Corp.		(56,810	)
(7,000)	ExpressJet Holdings, Inc.		(48,370	)
(12,000)	INVESTools, Inc.		(95,280	)
(5,000)	Monaco Coach Corp.		(63,500	)
(3,000)	NASDAQ 100 Index Fund(d)		(116,280	)
(500)	Nektar Therapeutics		(9,170	)
(6,800)	New River Pharmaceuticals, Inc.		(193,800	)
(8,800)	Onyx Pharmaceuticals, Inc.		(148,104	)
(1,200)	S1 Corp.		(57,600	)
	Total Securities Sold Short (Proceeds $1,065,271)	$	(1,067,189	)

(a) Non-income producing security.

(b) ADR — American Depositary Receipt

(c) Security, or portion of security, is being held as collateral for short sales.

(d) Investments in other funds are calculated at their respective net asset values as determined by those funds, in accordance with the Investment Company Act of 1940.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 35 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Uniplan Real Estate Investment Fund

Shares		Value (Note 3)
COMMON STOCKS: 97.41%
Health Care: 6.28%
12,750	Alexandria Real Estate Equities, Inc.	$	1,130,670
55,200	BioMed Realty Trust, Inc.		1,652,688
			2,783,358
Hotels: 7.03%
67,000	Great Wolf Resorts, Inc.(a)		804,670
67,225	Interstate Hotels & Resorts, Inc.(a)		624,520
28,000	Starwood Hotels & Resorts Worldwide, Inc.		1,689,520
			3,118,710
Industrial: 12.49%
41,350	AMB Property Corp.		2,090,242
40,300	EastGroup Properties, Inc.		1,881,204
30,000	ProLogis		1,563,600
			5,535,046
Office: 13.52%
16,500	Boston Properties, Inc.		1,491,600
18,400	Kilroy Realty Corp.		1,329,400
21,250	SL Green Realty Corp.		2,326,238
29,500	Trizec Properties, Inc.		844,880
			5,992,118
Residential: 13.98%
36,000	American Campus Communities, Inc.		894,600
20,700	Archstone-Smith Trust		1,053,009
18,000	AvalonBay Communities, Inc.		1,991,160
32,200	Boardwalk Real Estate Investment Trust		742,676
5,000	Camden Property Trust		367,750
25,700	Equity Residential		1,149,561
			6,198,756
Retail: 34.99%
1,000	Alexander’s, Inc.(a)		271,760
31,550	CBL & Associates Properties, Inc.		1,228,241
48,100	Cedar Shopping Centers, Inc.		708,032
26,000	Developers Diversified Realty Corp.		1,356,680
1,800	Feldman Mall Properties, Inc.		19,728
31,200	General Growth Properties, Inc.		1,405,872

Shares		Value (Note 3)
49,100	Kimco Realty Corp.	$	1,791,659
26,200	Realty Income Corp.		573,780
21,250	Regency Centers Corp.		1,320,688
37,108	Simon Property Group, Inc.		3,077,738
25,100	The Mills Corp.		671,425
19,000	Vornado Realty Trust		1,853,450
32,200	Weingarten Realty Investors		1,232,616
			15,511,669
Specialty: 9.12%
42,000	CB Richard Ellis Group, Inc., Class A(a)		1,045,800
19,000	Global Signal, Inc.		880,080
13,944	Patriot Capital Funding, Inc.		154,778
20,000	Potlatch Corp.		755,000
31,800	Rayonier, Inc.		1,205,538
			4,041,196
	Total Common Stocks (Cost $24,712,442)		43,180,853
PREFERRED STOCKS: 1.49%
Health Care: 1.49%
15,000	LTC Properties, Inc., Series E, 8.500%		660,000
	Total Preferred Stocks (Cost $375,000)		660,000
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 0.00%(b)
$1,407	Brown Brothers Harriman & Co.: Grand Cayman 4.350%, 07/03/06		1,407
	Total Short-Term Bank Debt Instruments (Cost $1,407)		1,407
	Total Investments: 98.90% (Cost $25,088,849)		43,842,260
	Net other Assets and Liabilities: 1.10%		488,597
	Net Assets: 100.00%	$	44,330,857

(a) Non-income producing security.

(b) Amount represents less than 0.01%.

Percentages are stated as a percent of net assets.

June 30, 2006 36 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Growth Fund

Shares		Value (Note 3)
COMMON STOCKS: 96.50%
Auto & Transportation: 4.39%
74,250	Forward Air Corp.	$	3,024,202
83,150	Old Dominion Freight Lines, Inc.(a)		3,125,609
57,700	Wabtec Corp.		2,157,980
			8,307,791
Consumer Discretionary: 20.05%
188,600	24/7 Real Media, Inc.(a)		1,655,908
112,800	Aaron Rents, Inc.		3,032,064
42,200	Aéropostale, Inc.(a)		1,219,158
69,400	Cache, Inc.(a)		1,203,396
24,900	Christopher & Banks Corp.		722,100
136,101	DiamondCluster International, Inc.(a)		1,077,920
88,000	EarthLink, Inc.(a)		762,080
37,900	Gevity HR, Inc.		1,006,245
25,514	Hibbett Sporting Goods, Inc.(a)		609,784
144,600	Iconix Brand Group, Inc.(a)		2,362,764
641,800	Internap Network Services Corp.(a)		673,890
54,900	Lifetime Brands, Inc.		1,189,683
71,700	Lions Gate Entertainment Corp.(a)		613,035
3,900	LoopNet, Inc.(a)		72,579
40,800	Marvel Entertainment, Inc.(a)		816,000
25,900	Morgans Hotel Group Co.(a)		403,004
46,200	Navigant Consulting, Inc.(a)		1,046,430
96,600	NutriSystem, Inc.(a)		6,001,758
13,400	Pinnacle Entertainment, Inc.(a)		410,710
64,047	Providence Service Corp.(a)		1,744,000
169,700	Smith & Wesson Holding Corp.(a)		1,394,934
51,100	Stein Mart, Inc.		756,280
28,700	THQ, Inc.(a)		619,920
64,200	WebSideStory, Inc.(a)		783,240
91,500	WESCO International, Inc.(a)		6,313,500
183,500	The Wet Seal, Inc.(a)		895,480
13,400	World Fuel Services Corp.		612,246
			37,998,108
Consumer Staples: 0.74%
7,383	Hansen Natural Corp.(a)		1,405,502

Shares		Value (Note 3)
Energy: 5.92%
23,200	Atwood Oceanics, Inc.(a)	$	1,150,720
52,624	Helix Energy Solutions, Inc.(a)		2,123,905
58,100	Hercules Offshore, Inc.(a)		2,033,500
21,600	Hornbeck Offshore Services, Inc.(a)		767,232
89,500	KFx, Inc.(a)		1,367,560
18,900	Parallel Petroleum Corp.(a)		467,019
86,300	Superior Energy Services, Inc.(a)		2,925,570
15,600	Warrior Energy Services Corp.(a)		379,548
			11,215,054
Financial Services: 6.07%
71,502	Digital Insight Corp.(a)		2,451,803
44,900	Prosperity Bancshares, Inc.		1,476,761
49,538	Texas Capital Bancshares, Inc.(a)		1,154,235
51,900	Thomas Weisel Partners Group, Inc.(a)		986,619
92,500	TheStreet.com, Inc.		1,185,850
69,541	UCBH Holdings, Inc.		1,150,208
33,915	United America Indemnity, Ltd.(a)		706,789
75,993	Wilshire Bancorp, Inc.		1,369,394
28,700	Yardville National Bancorp		1,025,451
			11,507,110
Health Care: 16.35%
2,500	Adeza Biomedical Corp.(a)		35,050
117,775	Allscripts Healthcare Solutions, Inc.(a)		2,066,951
73,401	Cardiome Pharmaceuticals Corp.(a)		648,865
98,100	Cubist Pharmaceuticals, Inc.(a)		2,470,158
69,700	CV Therapeutics, Inc.(a)		973,709
51,742	Digene Corp.(a)		2,004,485
22,300	dj Orthopedics, Inc.(a)		821,309
62,879	Gen-Probe, Inc.(a)		3,394,208
63,891	Horizon Health Corp.(a)		1,334,044
54,600	I-Flow Corp.(a)		590,772
73,827	Illumina, Inc.(a)		2,189,709
43,700	IntraLase Corp.(a)		731,538
103,618	LifeCell Corp.(a)		3,203,869
18,700	Micrus Endovascular Corp.(a)		225,522

See Notes to Financial Statements 37 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Growth Fund

Shares		Value (Note 3)
25,806	Neuro Matrix, Llc.(a)	$	786,051
81,400	NovaMed, Inc.(a)		549,450
46,100	NUCRYST Pharmaceuticals Corp.(a)		594,229
116,644	Psychiatric Solutions, Inc. (a)		3,343,017
47,300	ResMed, Inc.(a)		2,220,735
50,800	The Spectranetics Corp.(a)		544,576
89,627	Telik, Inc.(a)		1,478,845
189,081	Thermogenesis Corp.(a)		779,014
			30,986,106
Materials & Processing: 4.76%
135,800	Airgas, Inc.		5,058,550
29,100	Allegheny Technologies, Inc.		2,014,884
26,700	Mobile Mini, Inc.(a)		781,242
38,600	PW Eagle, Inc.		1,167,264
			9,021,940
Producer Durables: 15.30%
13,243	American Science & Engineering, Inc.(a)		767,035
126,718	Arris Groups, Inc.(a)		1,662,540
137,518	BE Aerospace, Inc.(a)		3,143,661
26,400	Cohu, Inc.		463,320
117,600	EMCORE Corp.(a)		1,128,960
88,000	Entegris, Inc.(a)		838,640
167,450	Environmental Tectonics Corp.(a)		987,955
64,000	Esco Technologies, Inc.(a)		3,420,800
90,800	EXFO Electro-Optical Engineering, Inc.(a)		559,328
46,495	H&E Equipment Services, Inc.(a)		1,369,278
103,904	JLG Industries, Inc.		2,337,840
34,200	Kennametal, Inc.		2,128,950
109,353	Met-Pro Corp.		1,368,006
90,715	Paragon Technologies, Inc.(a)		796,478
42,900	SBA Communications Corp.(a)		1,121,406
106,248	Semitool, Inc.(a)		958,357
158,800	Taser International, Inc.(a)		1,256,108
98,700	Technitrol, Inc.		2,284,905

Shares		Value (Note 3)
50,900	Varian Semiconductor Equipment Association, Inc. (a)	$	1,659,849
30,500	Veeco Instruments, Inc.(a)		727,120
			28,980,536
Technology: 22.74%
85,276	Ansoft Corp.(a)		1,746,452
44,056	Ansys, Inc.(a)		2,106,758
44,400	Atheros Communications, Inc.(a)		841,824
94,359	Blackboard, Inc.(a)		2,732,637
49,100	Cognizant Technology Solutions Corp.(a)		3,307,867
45,300	Fairchild Semiconductor International, Inc.(a)		823,101
370,400	Finisar Corp.(a)		1,211,208
53,501	FormFactor, Inc.(a)		2,387,750
103,649	II-VI, Inc.(a)		1,896,777
76,066	Ikanos Communications(a)		1,155,443
148,996	Ixia, Inc.(a)		1,340,964
98,000	j2 Global Communications, Inc.(a)		3,059,560
27,300	Kenexa Corp.(a)		869,505
135,400	Mindspeed Technologies, Inc.(a)		326,314
94,089	MRO Software, Inc.(a)		1,888,366
85,700	M-Systems Flash Disk Pioneers, Ltd.(a)		2,539,291
26,500	Neoware Systems, Inc.(a)		325,685
78,500	Oplink Communications, Inc.(a)		1,437,335
99,097	Opnet Technologies, Inc.(a)		1,284,297
114,300	Opsware, Inc.(a)		941,832
20,153	Progress Software Corp.(a)		471,782
26,800	Radiant Systems, Inc.(a)		283,276
89,777	Redback Networks, Inc.(a)		1,646,510
24,200	Sirf Technology Holdings, Inc.(a)		779,724
119,700	Smith Micro Software, Inc.(a)		1,917,594
65,200	SPSS, Inc.(a)		2,095,528
114,179	Tut Systems, Inc.(a)		276,313
89,200	Ultimate Software Group, Inc.(a)		1,709,072

June 30, 2006 38 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerald Growth Fund

Shares		Value (Note 3)
38,136	Viasat, Inc.(a)	$	979,332
19,900	WebEx Communications, Inc.(a)		707,246
			43,089,343
Utilities: 0.18%
31,100	First Avenue Networks, Inc.(a)		338,368
	Total Common Stocks (Cost $139,171,652)		182,849,858
WARRANTS: 0.00%(b)
	American Banknote Corp., Series 1,
28	Expiration: 10/01/07, Strike: $10.00(a)		0
	American Banknote Corp., Series 2,
28	Expiration: 10/01/07, Strike: $12.50(a)		0
	Total Warrants		0
	(Cost $0)

Par Value		Value (Note 3)
SHORT-TERM BANK DEBT INSTRUMENTS: 3.86%
$7,311,084	Wachovia Bank: Grand Cayman 4.350%, due 07/03/06	$	7,311,084
	Total Short-Term Bank Debt Instruments (Cost $7,311,084)		7,311,084
	Total Investments: 100.36% (Cost $146,482,736)		190,160,942
	Net Other Assets and Liabilities: (0.36)%		(682,353	)
	Net Assets: 100.00%	$	189,478,589

(a) Non-income producing security.

(b) Amount represents less than 0.01%.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 39 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Hoover Small Cap Equity Fund

Shares		Value (Note 3)
COMMON STOCKS: 97.34%
Auto & Transportation: 3.68%
309,900	Aftermarket Technology Corp.(a)	$	7,701,015
142,500	Bristow Group, Inc.(a)		5,130,000
200,000	U.S. Xpress Enterprises, Inc.(a)		5,404,000
			18,235,015
Consumer Discretionary: 27.06%(b)
192,400	Aeropostale, Inc.(a)		5,558,436
189,700	American Greetings Corp.		3,985,597
125,100	AnnTaylor Stores Corp.(a)		5,426,838
224,500	Cabela’s, Inc.(a)		4,323,870
115,900	Central Garden & Pet Co.(a)		4,989,495
417,000	Charming Shoppes, Inc.(a)		4,687,080
153,600	The Children’s Place Retail Stores, Inc.(a)		9,223,680
254,700	Christopher & Banks Corp.		7,386,300
128,900	Corrections Corporation of America(a)		6,823,966
175,200	The Dress Barn, Inc.(a)		4,441,320
156,000	The GEO Group, Inc.(a)		5,467,800
163,950	Hibbett Sporting Goods, Inc.(a)		3,918,405
215,000	ICT Group, Inc.(a)		5,273,950
139,500	Intrawest Corp.		4,444,470
99,900	Jack in the Box, Inc.(a)		3,916,080
141,950	The Men’s Wearhouse, Inc.		4,301,085
212,000	Movado Group, Inc.		4,865,400
161,000	Oxford Industries, Inc.		6,345,010
129,500	Phillips-Van Heusen		4,941,720
289,500	Quiksilver, Inc.(a)		3,526,110
108,300	Scientific Games Corp., Class A(a)		3,857,646
121,700	Steiner Leisure Ltd.(a)		4,810,801
99,800	Tractor Supply Co.(a)		5,515,946
161,800	United Natural Foods, Inc.(a)		5,342,636
77,100	WESCO International, Inc.(a)		5,147,196
118,800	World Fuel Services Corp.		5,427,972
			133,948,809
Consumer Staples: 4.20%
187,400	The Hain Celestial Group, Inc.(a)		4,827,424
147,100	Longs Drug Stores Corp.		6,710,702

Shares		Value (Note 3)
193,500	NBTY, Inc.(a)	$	4,626,585
152,400	Performance Food Group Co.(a)		4,629,912
			20,794,623
Energy: 6.63%
139,300	Hercules Offshore, Inc.(a)		4,875,500
72,600	The Houston Exploration Co.(a)		4,442,394
182,700	Parallel Petroleum Corp.(a)		4,514,517
236,100	Superior Energy Services, Inc.(a)		8,003,790
279,050	TETRA Technologies, Inc.(a)		8,452,424
62,000	TODCO(a)		2,532,700
			32,821,325
Financial Services: 23.61%
289,300	Advance America Cash Advance Centers, Inc.		5,074,322
146,700	Advent Software, Inc.(a)		5,291,469
55,900	Affiliated Managers Group, Inc.(a)		4,857,151
39,900	Alexandria Real Estate Equities, Inc.		3,538,332
193,200	BioMed Realty Trust, Inc.		5,784,408
121,100	Corporate Office Properties Trust		5,095,888
130,000	Crescent Real Estate Equities Co.		2,412,800
148,300	DiamondRock Hospitality Co.		2,196,323
155,900	Digital Realty Trust, Inc.		3,849,171
134,200	East West Bancorp, Inc.		5,087,522
272,800	Equity Inns, Inc.		4,517,568
142,600	First Midwest Bancorp, Inc.		5,287,608
115,100	GATX Corp.		4,891,750
166,500	Greater Bay Bancorp		4,786,875
95,700	Hancock Holding Co.		5,359,200
107,800	Investment Technology Group, Inc.(a)		5,482,708
137,200	McGrath Rentcorp		3,815,532
68,150	Raymond James Financial, Inc.		2,062,900
311,900	Sotheby’s Holdings, Inc.(a)		8,187,375
101,300	Sovran Self Storage, Inc.		5,145,027
302,700	Sterling Bancshares, Inc.		5,675,625

June 30, 2006 40 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Hoover Small Cap Equity Fund

Shares		Value (Note 3)
77,900	Texas Capital Bancshares, Inc.(a)	$	1,815,070
199,300	Thomas Weisel Partners Group Llc(a)		3,788,693
229,900	Waddell & Reed Financial, Inc., Class A		4,726,744
231,100	Whitney Holding Corp.		8,174,007
			116,904,068
Health Care: 7.95%
147,900	Amedisys, Inc.(a)		5,605,410
188,000	Centene Corp.(a)		4,423,640
109,400	Healthcare Services Group, Inc.		2,291,930
332,520	IRIS International, Inc.(a)		4,375,963
231,150	Meridian Bioscience, Inc.		5,767,193
65,800	Pediatrix Medical Group, Inc.(a)		2,980,740
127,800	Psychiatric Solutions, Inc.(a)		3,662,748
191,700	Viasys Healthcare, Inc.(a)		4,907,520
147,800	West Pharmaceutical Services, Inc.		5,362,184
			39,377,328
Materials & Processing: 6.22%
92,200	The Andersons, Inc.		3,836,442
112,000	Barnes Group, Inc.		2,234,400
272,500	Griffon Corp.(a)		7,112,250
43,000	Harsco Corp.		3,352,280
159,600	Mobile Mini, Inc.(a)		4,669,896
120,600	Oregon Steel Mills, Inc.(a)		6,109,596
99,600	Trammell Crow Co.(a)		3,502,932
			30,817,796
Producer Durables: 10.10%
66,700	Actuant Corp., Class A		3,331,665
204,200	AGCO Corp.(a)		5,374,544
107,200	AMETEK, Inc.		5,079,136
341,800	Flow International Corp.(a)		4,809,126
138,800	Gardner Denver, Inc.(a)		5,343,800
127,100	Gehl Co.(a)		3,244,863
82,500	Kennametal, Inc.		5,135,625
320,500	Kimball International, Inc.		6,317,055

Shares		Value (Note 3)
93,600	The Manitowoc Co., Inc.	$	4,165,200
146,200	Steelcase, Inc., Class A		2,404,990
106,000	United Industrial Corp.		4,796,500
			50,002,504
Technology: 6.85%
73,000	CACI International, Inc.(a)		4,258,090
223,400	Cbeyond Communications, Inc.(a)		4,872,354
253,500	Cypress Semiconductor Corp.(a)		3,685,890
301,400	Foundry Networks, Inc.(a)		3,212,924
235,200	RadiSys Corp.(a)		5,164,992
84,500	SRA International, Inc.(a)		2,250,235
120,600	Varian, Inc.(a)		5,006,106
154,500	WebEx Communications, Inc.(a)		5,490,930
			33,941,521
Utilities: 1.04%
139,400	Northwest Natural Gas Co.		5,161,982
	Total Common Stocks (Cost $434,801,645)		482,004,971
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 3.93%
$19,482,659	CitiBank: Nassau 4.350%, due 07/03/06		19,482,659
	Total Short-Term Bank Debt Instruments (Cost $19,482,659)		19,482,659
	Total Investments: 101.27% (Cost $454,284,304)		501,487,630
	Net Other Assets and Liabilities: (1.27)%		(6,295,325	)
	Net Assets: 100.00%	$	495,192,305

(a) Non-income producing security.

(b) When sector categorization is broken down by industry, no industry exceeds the 25% maximum specified in the Statement of Additional Information.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 41 June 30, 2006

`

Portfolio of Investments (Note 10) (Unaudited)

Forward Hoover Mini-Cap Fund

Shares		Value (Note 3)
COMMON STOCKS: 95.74%
Auto & Transportation: 10.58%
29,700	Aftermarket Technology Corp.(a)	$	738,045
37,100	Air Methods Corp.(a)		971,278
13,600	Bristow Group, Inc.(a)		489,600
38,400	Celadon Group, Inc.(a)		846,336
102,700	Force Protection, Inc.(a)		657,280
39,000	U.S. Xpress Enterprises, Inc.(a)		1,053,780
			4,756,319
Consumer Discretionary: 23.89%
19,100	Central Garden & Pet Co.(a)		822,255
32,400	Charlotte Russe Holding, Inc.(a)		775,656
39,100	Charming Shoppes, Inc.(a)		439,484
36,900	Christopher & Banks Corp.		1,070,100
16,700	The Dress Barn, Inc.(a)		423,345
23,000	The GEO Group, Inc.(a)		806,150
28,212	Hibbett Sporting Goods, Inc.(a)		674,267
33,600	ICT Group, Inc.(a)		824,208
10,800	Jack in the Box, Inc.(a)		423,360
21,600	Movado Group, Inc.		495,720
71,000	Nathans Famous, Inc.(a)		958,500
15,300	Oxford Industries, Inc.		602,973
95,900	Restoration Hardware, Inc.(a)		688,562
17,400	Steiner Leisure Ltd.(a)		687,822
66,000	The Topps Company, Inc.		542,520
13,500	Zumiez, Inc.(a)		507,195
			10,742,117
Consumer Staples: 5.49%
53,700	Jones Soda Co.(a)		483,300
18,700	The Hain Celestial Group, Inc.(a)		481,712
31,200	Lance, Inc.		718,224
7,600	Longs Drug Stores Corp.		346,712
14,500	Performance Food Group Co.(a)		440,510
			2,470,458

Shares		Value (Note 3)
Energy: 3.29%
13,400	Hercules Offshore, Inc.(a)	$	469,000
20,500	Parallel Petroleum Corp.(a)		506,555
16,650	TETRA Technologies, Inc.(a)		504,328
			1,479,883
Financial Services: 15.30%
17,400	ACE Cash Express, Inc.(a)		509,298
18,900	Advent Software, Inc.(a)		681,723
800	Carolina Bank Holdings, Inc.(a)		10,520
17,800	CentraCore Properties Trust		440,550
14,500	DiamondRock Hospitality Co.		214,745
18,400	Digital Realty Trust, Inc.		454,296
26,100	Equity Inns, Inc.		432,216
15,300	First Potomac Realty Trust		455,787
49,400	Highland Hospitality Corp.		695,552
17,000	PrivateBancorp, Inc.		703,970
14,300	Sovran Self Storage, Inc.		726,297
28,800	Sterling Bancshares, Inc.		540,000
36,500	TheStreet.com, Inc.		467,930
7,900	Texas Capital Bancshares, Inc.(a)		184,070
19,100	Thomas Weisel Partners Group Llc(a)		363,091
			6,880,045
Health Care: 15.15%
14,200	Amedisys, Inc.(a)		538,180
18,000	Centene Corp.(a)		423,540
81,300	Cholestech Corp.(a)		1,032,510
63,300	Five Star Quality Care, Inc.(a)		700,731
30,375	Healthcare Services Group, Inc.		636,356
38,100	LHC Group, Inc.(a)		758,952
23,500	Meridian Bioscience, Inc.		586,325
45,300	Psychemedics Corp.		795,468
13,700	Utah Medical Products, Inc.		411,137
15,000	Viasys Healthcare, Inc.(a)		384,000
15,100	West Pharmaceutical Services, Inc.		547,828
			6,815,027

June 30, 2006 42 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Hoover Mini-Cap Fund

Shares		Value (Note 3)
Materials & Processing: 11.99%
15,900	AAON, Inc.	$	407,994
14,400	Alico, Inc.		793,584
8,400	The Andersons, Inc.		349,524
48,100	Ennis, Inc.		946,608
26,200	Griffon Corp.(a)		683,820
15,600	Mobile Mini, Inc.(a)		456,456
5,100	Oregon Steel Mills, Inc.(a)		258,366
22,600	Trammell Crow Co.(a)		794,842
23,400	Zoltek Companies, Inc.(a)		699,426
			5,390,620
Producer Durables: 4.78%
34,800	Flow International Corp.(a)		489,636
12,500	Gehl Co.(a)		319,125
32,500	Kimball International, Inc.		640,575
31,050	Napco Security Systems, Inc.(a)		301,806
8,800	United Industrial Corp.		398,200
			2,149,342

Shares		Value (Note 3)
Technology: 4.18%
21,000	Cbeyond Communications, Inc.(a)	$	458,010
13,300	ManTech International Corp.(a)		410,438
22,300	RadiSys Corp.(a)		489,708
14,700	WebEx Communications, Inc.(a)		522,438
			1,880,594
Utilities: 1.09%
13,300	Northwest Natural Gas Co.		492,499
	Total Common Stocks (Cost $38,354,999)		43,056,904
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 6.30%
$2,834,353	CitiBank — Nassau 4.350%, due 07/03/06		2,834,353
	Total Short-Term Bank Debt Instruments (Cost $2,834,353)		2,834,353
	Total Investments: 102.04% (Cost $41,189,352)		45,891,257
	Net Other Assets and Liabilities: (2.04)%		(918,316	)
	Net Assets: 100.00%	$	44,972,941

(a) Non-income producing security.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 43 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Legato Fund

Shares		Value (Note 3)
COMMON STOCKS: 98.26%
Auto & Transportation: 4.88%
2,156	AirTran Holdings, Inc.(a)	$	32,038
3,170	Fleetwood Enterprises, Inc.(a)		23,902
1,232	General Maritime Corp.		45,534
1,408	Keystone Automotive Industries, Inc.(a)		59,446
3,000	Knight Transportation, Inc.		60,600
6,932	Visteon Corp.(a)		49,980
2,141	Wabtec Corp.		80,073
2,050	Winnebago Industries, Inc.		63,632
			415,205
Consumer Discretionary: 14.62%
1,125	Advisory Board Co.(a)		54,101
1,495	ADVO, Inc.		36,792
1,449	Arbitron, Inc.		55,540
1,047	California Pizza Kitchen, Inc.(a)		28,772
5,209	Casual Male Retail Group, Inc.(a)		52,350
1,320	The Cheesecake Factory, Inc.(a)		35,574
1,300	Cherokee, Inc.		53,768
3,702	Corinthian Colleges, Inc.(a)		53,161
2,709	Cost Plus, Inc.(a)		39,714
2,066	Cox Radio, Inc.(a)		29,792
1,839	DeVry, Inc.(a)		40,403
5,103	DiamondCluster International, Inc.(a)		40,416
2,310	Fred’s, Inc.		30,839
5,740	Gentex Corp.		80,360
1,900	Iconix Brand Group, Inc.(a)		31,046
1,592	Jarden Corp.(a)		48,476
2,225	LoJack Corp.(a)		41,964
1,500	Matthews International Corp., Class A		51,705
2,466	O’Charleys, Inc.(a)		41,922
3,349	Reader’s Digest Association, Inc.		46,752
1,450	Ritchie Bros. Auctioneers, Inc.		77,111
4,810	Rollins, Inc.		94,468
857	School Specialty, Inc.(a)		27,295
1,075	SCP Pool Corp.		46,902
2,025	Select Comfort Corp.(a)		46,514

Shares		Value (Note 3)
4,620	Sturm, Ruger, & Co., Inc.	$	28,875
1,325	Universal Technical Institute, Inc.(a)		29,177
			1,243,789
Consumer Staples: 3.58%
4,689	Del Monte Foods Co.		52,657
2,344	Lance, Inc.		53,959
2,130	Performance Food Group Co.(a)		64,709
2,610	United Natural Foods, Inc.(a)		86,182
1,240	USANA Health Sciences, Inc.(a)		46,996
			304,503
Energy: 6.03%
1,051	CARBO Ceramics, Inc.		51,636
1,979	Encore Acquisition Co.(a)		53,097
2,660	Global Industries, Ltd.(a)		44,422
3,350	Hanover Compressor Co.(a)		62,913
714	James River Coal Co.(a)		18,914
4,615	Matrix Service Co.(a)		52,796
1,250	St. Mary Land & Exploration Co.		50,312
2,475	W-H Energy Services, Inc.(a)		125,804
1,259	Whiting Petroleum Corp.(a)		52,714
			512,608
Financial Services: 10.41%
6,316	The BISYS Group, Inc.(a)		86,529
2,500	Boston Private Financial Holdings, Inc.		69,750
2,805	Cedar Shopping Centers, Inc.		41,290
1,750	FactSet Research Systems, Inc.		82,775
2,250	Financial Federal Corp.		62,572
1,107	First Industrial Realty Trust, Inc.		42,000
742	The First Marblehead Corp.		42,249
1,063	GATX Corp.		45,178
1,234	Hanover Insurance Group, Inc.		58,566
2,190	Kronos, Inc.(a)		79,300
1,000	Portfolio Recovery Associates, Inc.(a)		45,700
1,500	PrivateBancorp, Inc.		62,115
672	Sun Communities, Inc.		21,860

June 30, 2006 44 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Legato Fund

Shares		Value (Note 3)
925	TSX Group, Inc.	$	37,259
687	WestAmerica BanCorp.		33,642
2,100	World Acceptance Corp.(a)		74,592
			885,377
Health Care: 19.04%
1,980	American Medical Systems Holdings, Inc.(a)		32,967
1,800	Angiodynamics, Inc.(a)		48,690
1,240	ArthroCare Corp.(a)		52,092
850	Aspect Medical Systems, Inc.(a)		14,824
4,780	Cepheid, Inc.(a)		46,414
1,510	Chemed Corp.		82,340
1,900	Computer Programs & Systems, Inc.		75,924
2,573	Gentiva Health Services, Inc.(a)		41,245
2,870	Greatbatch, Inc.(a)		67,732
2,910	Integra LifeSciences Holdings(a)		112,937
1,500	Kensey Nash Corp.(a)		44,250
2,568	K-V Pharmaceutical Co., Class A(a)		47,919
1,435	Kyphon, Inc.(a)		55,047
1,250	Landauer, Inc.		59,875
1,644	LifePoint Hospitals, Inc.(a)		52,822
1,344	Matria Healthcare, Inc.(a)		28,788
1,300	Medicis Pharmaceutical, Class A		31,200
1,000	Mentor Corp.		43,500
740	Millipore Corp.(a)		46,613
1,910	Neogen Corp.(a)		36,519
1,799	Par Pharmaceutical Cos., Inc.(a)		33,209
1,700	Pediatrix Medical Group, Inc.(a)		77,010
1,626	PolyMedica Corp.		58,471
2,814	PSS World Medical, Inc.(a)		49,667
3,100	Psychemedics Corp.		54,436
1,201	Sunrise Senior Living, Inc.(a)		33,208
2,975	SurModics, Inc.(a)		107,427
3,260	Synovis Life Technologies, Inc. (a)		32,046
2,350	Techne Corp.(a)		119,662
2,230	U.S. Physical Therapy, Inc.(a)		32,647
			1,619,481

Shares		Value (Note 3)
Industrials: 4.82%
3,536	Federal Signal Corp.	$	53,535
8,500	First Consulting Group, Inc.(a)		75,140
1,590	G & K Services, Inc., Class A		54,537
1,950	Mobile Mini, Inc. (a)		57,057
1,775	Resources Connection, Inc.(a)		44,411
1,930	Stericycle, Inc.(a)		125,643
			410,323
Information Technology: 18.52%
3,800	Ansoft Corp.(a)		77,824
1,425	ANSYS, Inc.(a)		68,143
1,186	Avid Technology Corp.(a)		39,529
2,000	Avocent Corp.(a)		52,500
2,250	Blackboard, Inc.(a)		65,160
1,990	Cree, Inc.(a)		47,282
5,970	Digi International, Inc.(a)		74,804
1,670	Digital Insight Corp.(a)		57,264
3,320	Echelon Corp.(a)		24,867
7,230	Entegris, Inc.(a)		68,902
480	F5 Networks, Inc. (a)		25,670
1,106	FileNET Corp.(a)		29,785
1,400	Hutchinson Technology, Inc.(a)		30,282
2,000	II-VI, Inc.(a)		36,600
1,446	Internet Security Systems, Inc.(a)		27,257
2,805	iPass, Inc.(a)		15,708
1,936	IXYS Corp.(a)		18,586
4,380	Keane, Inc.(a)		54,750
1,634	ManTech International Corp., Class A(a)		50,425
1,330	Maximus, Inc.		30,790
4,490	Microsemi Corp.(a)		109,466
2,340	National Instruments Corp.		64,116
2,250	Power Integrations, Inc.(a)		39,330
1,225	Rimage Corp.(a)		25,015
1,642	Rudolph Technologies, Inc.(a)		23,809
2,610	Semtech Corp.(a)		37,715
1,280	Sybase, Inc.(a)		24,832

See Notes to Financial Statements 45 June 30, 2006

Portfolio of Investments (Note 10) (Unaudited)

Forward Legato Fund

Shares		Value (Note 3)
1,100	Tech Data Corp.(a)	$	42,141
1,850	Trimble Navigation, Ltd.(a)		82,584
821	Varian, Inc.(a)		34,080
2,380	Verint Systems, Inc.(a)		69,472
3,560	WebEx Communications, Inc.(a)		126,523
			1,575,211
Materials & Processing: 6.70%
1,457	Acuity Brands, Inc.		56,692
2,250	Amcol International Corp.		59,287
2,614	Brush Engineered Materials, Inc.(a)		54,502
1,966	Commercial Metals Co.		50,526
3,134	Gold Kist, Inc.(a)		41,902
4,341	Modtech Holdings, Inc.(a)		29,389
2,000	Simpson Manufacturing Co., Inc.		72,100
4,758	Spartech Corp.		107,531
2,520	Symyx Technologies, Inc.(a)		60,858
1,762	Worthington Industries, Inc.		36,914
			569,701
Other: 1.05%
2,850	Raven Industries, Inc.		89,775

Shares		Value (Note 3)
Producer Durables: 8.01%
1,575	A.S.V., Inc.(a)	$	36,288
1,983	Applied Signal Technology, Inc.		33,790
2,589	BE Aerospace, Inc.(a)		59,185
7,716	C&D Technologies, Inc.		58,024
4,097	Champion Enterprises, Inc.(a)		45,231
1,275	Crane Co.		53,040
1,000	Curtiss-Wright Corp.		30,880
1,281	Esterline Technologies Corp.(a)		53,277
1,500	Franklin Electric Co., Inc.		77,460
1,967	General Cable Corp.(a)		68,845
1,051	IDEX Corp.		49,607
1,500	Plantronics, Inc.		33,315
1,478	Robbins & Myers, Inc.		38,635
1,340	Varian Semiconductor Equipment Associates, Inc.(a)		43,697
			681,274
Utilities: 0.60%
4,058	Alaska Communications Systems Group, Inc.		51,334
	Total Common Stocks (Cost $7,601,046)		8,358,581
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 2.08%
$177,148	Brown Brothers Harriman & Co. — Grand Cayman 4.350%, due 07/03/06		177,148
	Total Short-Term Bank Debt Instruments (Cost $177,148)		177,148
	Total Investments: 100.34% (Cost $7,778,194)		8,535,729
	Net Other Assets and Liabilities: -0.34%		(29,655	)
	Net Assets: 100.00%	$	8,506,074

(a) Non-income producing security.

Percentages are stated as a percent of net assets.

June 30, 2006 46 See Notes to Financial Statements

Statement of Assets and Liabilities (Unaudited)

	FORWARD INTERNATIONAL EQUITY FUND		FORWARD INTERNATIONAL SMALL COMPANIES FUND
ASSETS:
Investments, at value	$	28,694,707	$	435,586,606
Cash		0		475
Foreign currency, at value (Cost $0 and $34,997, respectively)		0		35,585
Receivable for investments sold		198,775		7,673,651
Receivable from advisor		8,422		0
Receivable for shares sold		310		920,272
Interest and dividends receivable		103,049		655,173
Other assets		3,092		107,550
Total Assets		29,008,355		444,979,312
LIABILITIES:
Payable to custodian (Cost $118,613 and $0, respectively)		119,073		0
Payable for investments purchased		0		7,484,286
Payable for shares redeemed		13,424		282,491
Payable to advisor		19,213		341,835
Payable for distribution and service fees		4,746		52,360
Payable to trustees		361		855
Accrued expenses and other liabilities		45,656		20,117
Total Liabilities		202,473		8,181,944
NET ASSETS	$	28,805,882	$	436,797,368
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	23,428,337	$	382,631,250
Accumulated net investment income		212,677		2,040,045
Accumulated net realized gain on investments and foreign currency transactions		1,615,730		14,267,179
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies		3,549,138		37,858,894
TOTAL NET ASSETS	$	28,805,882	$	436,797,368
INVESTMENTS, AT COST	$	25,151,131	$	397,772,275
PRICING OF SHARES
Investor Class:
Net Asset Value, offering, and redemption price per share		$16.78		$16.75
Net Assets	$	28,805,882	$	188,153,151
Shares of beneficial interest outstanding		1,716,249		11,230,268
Institutional Class:
Net Asset Value, offering, and redemption price per share				$16.82
Net Assets			$	243,333,913
Shares of beneficial interest outstanding				14,468,699
Class A:
Net Asset Value, offering, and redemption price per share				$16.72
Net Assets				$5,310,304
Shares of beneficial interest outstanding				317,665
Maximum offering price per share (NAV/0.9525, based on maximum sales charge of 4.75% of the offering price)				$17.55

See Notes to Financial Statements 47 June 30, 2006

Statement of Assets and Liabilities (Unaudited)

	FORWARD GLOBAL EMERGING MARKETS FUND			SIERRA CLUB EQUITY INCOME FUND
ASSETS:
Investments, at value	$	46,337,131		$	28,879,540
Cash		403			0
Foreign currency, at value (Cost $300,795 and $0, respectively)		299,905			0
Receivable for investments sold		983,919			409,275
Receivable from advisor		16,603			0
Receivable for shares sold		54,134			0
Interest and dividends receivable		143,289			99,410
Other assets		20,893			452
Total Assets		47,856,277			29,388,677
LIABILITIES:
Distributions payable		0			30,697
Payable to custodian		0			345,626
Payable for investments purchased		845,232			0
Payable for shares redeemed		0			1,617
Payable to advisor		45,856			24,767
Payable for distribution and service fees		3,112			3,002
Payable to trustees		437			631
Accrued expenses and other liabilities		62,096			26,790
Total Liabilities		956,733			433,130
NET ASSETS	$	46,899,544		$	28,955,547
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	42,491,993		$	26,301,286
Accumulated net investment income/(loss)		268,084			(2,423	)
Accumulated net realized gain/(loss) on investments and foreign currency transactions		(2,426,622	)		849,527
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies		6,566,089			2,578,254
TOTAL NET ASSETS	$	46,899,544		$	28,955,547
INVESTMENTS, AT COST	$	39,767,391		$	26,301,286
PRICING OF SHARES
Investor Class:
Net Asset Value, offering, and redemption price per share		$19.49			$11.52
Net Assets	$	13,247,043		$	28,955,547
Shares of beneficial interest outstanding		679,858			2,512,733
Institutional Class:
Net Asset Value, offering, and redemption price per share		$19.56
Net Assets	$	33,652,501
Shares of beneficial interest outstanding		1,720,229

June 30, 2006 48 See Notes to Financial Statements

Statement of Assets and Liabilities (Unaudited)

		SIERRA CLUB STOCK FUND		FORWARD EMERALD BANKING AND FINANCE FUND
ASSETS:
Investments, at value		$	31,973,349	$	279,745,969
Receivable for investments sold			282,219		884,060
Receivable from advisor			1,953		33,310
Receivable for shares sold			4,000		115,708
Interest and dividends receivable			34,776		271,316
Other assets			9,660		34,566
Total Assets			32,305,957		281,084,929
LIABILITIES:
Payable to custodian			43,180		11,208
Payable for investments purchased			103,207		2,882,785
Payable for shares redeemed			16,103		436,637
Payable to advisor			22,039		172,818
Payable for distribution and service fees			7,557		138,212
Payable to trustees	��		2,495		3,701
Accrued expenses and other liabilities			25,524		66,534
Total Liabilities			220,105		3,711,895
NET ASSETS		$	32,085,852	$	277,373,034
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)		$	28,716,943	$	201,304,956
Accumulated net investment income/(loss)			13,396		(301,567	)
Accumulated net realized gain on investments			2,664,145		11,855,006
Net unrealized appreciation on investments			691,368		64,514,639
TOTAL NET ASSETS		$	32,085,852	$	277,373,034
INVESTMENTS, AT COST		$	31,281,981	$	215,231,330
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share			$11.70
Net Assets		$	26,653,002
Shares of beneficial interest outstanding			2,277,210
Class A:
Net Asset Value, offering and redemption price per share			$11.70		$28.71
Net Assets		$	5,432,850	$	165,902,854
Shares of beneficial interest outstanding			464,186		5,778,433
Maximum offering price per share (NAV/0.9525, based on maximum sales charge of 4.75% of the offering price)			$12.28		$30.14
Class C:
Net Asset Value, offering and redemption price per share					$27.70
Net Assets				$	111,470,180
Shares of beneficial interest outstanding					4,024,467

See Notes to Financial Statements 49 June 30, 2006

Statement of Assets and Liabilities (Unaudited)

	FORWARD EMERALD OPPORTUNITIES FUND			FORWARD UNIPLAN REAL ESTATE INVESTMENT FUND
ASSETS:
Investments, at value	$	13,084,003		$	43,842,260
Deposit with broker for securities sold short and written options		1,158,615			0
Receivable for investments sold		26,711			533,552
Receivable from advisor		0			0
Receivable for shares sold		25,000			1,137
Interest and dividends receivable		1,860			130,573
Other assets		28,532			7,968
Total Assets		14,324,721			44,515,490
LIABILITIES:
Securities sold short (Proceeds $1,065,271)		1,067,189			—
Options written at value (Premiums received $5,070)		3,900			—
Distributions payable		0			45,035
Payable to custodian		2,661			0
Payable for investments purchased		1,876,039			0
Payable for shares redeemed		4,728			51,235
Payable to advisor		10,544			31,736
Payable for distribution and service fees		5,346			6,347
Payable to trustees		429			4,687
Accrued expenses and other liabilities		9,316			45,593
Total Liabilities		2,980,152			184,633
NET ASSETS	$	11,344,569		$	44,330,857
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	17,992,067		$	23,465,523
Accumulated net investment income/(loss)		(66,627	)		97,202
Accumulated net realized gain/(loss) on investments, options and securities sold short		(6,983,761	)		2,014,721
Net unrealized appreciation on investments, options and securities sold short		402,890			18,753,411
TOTAL NET ASSETS	$	11,344,569		$	44,330,857
INVESTMENTS, AT COST	$	12,680,365		$	25,088,849
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share					$18.53
Net Assets				$	44,330,857
Shares of beneficial interest outstanding					2,392,878
Class A:
Net Asset Value, offering and redemption price per share		$8.89
Net Assets	$	8,694,860
Shares of beneficial interest outstanding		978,191
Maximum offering price per share (NAV/0.9525, based on maximum sales charge of 4.75% of the offering price)		$9.33
Class C:
Net Asset Value, offering and redemption price per share		$8.63
Net Assets	$	2,649,709
Shares of beneficial interest outstanding		307,034

June 30, 2006 50 See Notes to Financial Statements

Statement of Assets and Liabilities (Unaudited)

	FORWARD EMERALD GROWTH FUND			FORWARD HOOVER SMALL CAP EQUITY FUND
ASSETS:
Investments, at value	$	190,160,942		$	501,487,630
Receivable for investments sold		1,359,162			7,792,173
Receivable for shares sold		152,949			1,181,520
Interest and dividends receivable		19,553			356,348
Other assets		24,261			36,708
Total Assets		191,716,867			510,854,379
LIABILITIES:
Payable to custodian		10,842			0
Payable for investments purchased		1,842,686			14,432,011
Payable for shares redeemed		171,694			598,646
Payable to advisor		117,283			426,695
Payable for distribution and service fees		58,610			122,998
Payable to trustees		2,498			4,073
Accrued expenses and other liabilities		34,665			77,651
Total Liabilities		2,238,278			15,662,074
NET ASSETS	$	189,478,589		$	495,192,305
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	132,697,128		$	419,112,484
Accumulated net investment loss		(1,058,639	)		(1,610,022	)
Accumulated net realized gain on investments		14,161,894			30,486,517
Net unrealized appreciation on investments		43,678,206			47,203,326
TOTAL NET ASSETS	$	189,478,589		$	495,192,305
INVESTMENTS, AT COST	$	146,482,736		$	454,284,304
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share					$20.32
Net Assets				$	421,701,473
Shares of beneficial interest outstanding					20,755,235
Institutional Class:
Net Asset Value, offering and redemption price per share					$20.74
Net Assets				$	53,559,325
Shares of beneficial interest outstanding					2,582,167
Class A:
Net Asset Value, offering and redemption price per share		$15.10			$20.33
Net Assets	$	178,099,627		$	19,931,507
Shares of beneficial interest outstanding		11,797,319			980,288
Maximum offering price per share (NAV/0.9525, based on maximum sales charge of 4.75% of the offering price)		$15.85			$21.34
Class C:
Net Asset Value, offering and redemption price per share		$14.49
Net Assets	$	11,378,962
Shares of beneficial interest outstanding		785,418

See Notes to Financial Statements 51 June 30, 2006

Statement of Assets and Liabilities (Unaudited)

	FORWARD HOOVER MINI-CAP FUND			FORWARD LEGATO FUND
ASSETS:
Investments, at value	$	45,891,257		$	8,535,729
Receivable for investments sold		653,357			4,979
Receivable from advisor		4,440			0
Receivable for shares sold		104,240			0
Interest and dividends receivable		29,018			3,564
Other assets		18,189			462
Total Assets		46,700,501			8,544,734
LIABILITIES:
Payable for investments purchased		1,665,855			9,136
Payable to advisor		41,910			6,884
Payable for distribution and service fees		2,182			688
Payable to trustees		516			734
Accrued expenses and other liabilities		17,097			21,218
Total Liabilities		1,727,560			38,660
NET ASSETS	$	44,972,941		$	8,506,074
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	33,957,482		$	7,545,191
Accumulated net investment loss		(100,087	)		(37,758	)
Accumulated net realized gain on investments		6,413,641			241,106
Net unrealized appreciation on investments		4,701,905			757,535
TOTAL NET ASSETS	$	44,972,941		$	8,506,074
INVESTMENTS, AT COST	$	41,189,352		$	7,778,194
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share		$18.91
Net Assets	$	11,410,826
Shares of beneficial interest outstanding		603,271
Institutional Class:
Net Asset Value, offering and redemption price per share		$19.22
Net Assets	$	33,562,115
Shares of beneficial interest outstanding		1,746,568
Class A:
Net Asset Value, offering and redemption price per share					$11.64
Net Assets				$	8,506,074
Shares of beneficial interest outstanding					730,810
Maximum offering price per share (NAV/0.9525, based on maximum sales charge of 4.75% of the offering price)					$12.22

June 30, 2006 52 See Notes to Financial Statements

Statement of Operations

For the Six Months Ended June 30, 2006 (Unaudited)

	FORWARD INTERNATIONAL EQUITY FUND			FORWARD INTERNATIONAL SMALL COMPANIES FUND
INVESTMENT INCOME:
Interest	$	1,849		$	387,375
Dividends		458,601			4,118,637
Securities lending income		12,279			197,232
Foreign taxes withheld		(45,516	)		(435,827	)
Total Investment Income		427,213			4,267,417
EXPENSES:
Investment advisory fee		118,627			1,676,808
Administrative fee		19,750			125,969
Custodian fee		25,694			38,735
Legal and audit fee		17,447			50,275
Transfer agent fee		6,238			41,150
Trustees' fees and expenses		1,031			15,170
Registration/filing fees		4,714			17,133
Report to shareholder and printing fees		12,421			13,796
Distribution and service fees
Investor Class		29,308			224,253
Class A		—			7,323
ReFlow fees (Note 2)		852			1,891
Other		11,329			14,957
Total expenses before waiver		247,411			2,227,460
Less fees waived/reimbursed by investment advisor		(32,875	)		(18,883	)
Total net expenses		214,536			2,208,577
NET INVESTMENT INCOME:		212,677			2,058,840
Net realized gain on investments		1,869,155			12,239,929
Net realized gain on foreign currency transactions		94,535			869,134
Net change in unrealized appreciation on investments		764,873			5,628,415
Net change in unrealized appreciation/(depreciation) on translation of assets and liabilities in foreign currencies		(10,115	)		36,683
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY		2,718,448			18,774,161
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	2,931,125		$	20,833,001

See Notes to Financial Statements 53 June 30, 2006

Statement of Operations

For the Six Months Ended June 30, 2006 (Unaudited)

	FORWARD GLOBAL EMERGING MARKETS FUND			SIERRA CLUB EQUITY INCOME FUND
INVESTMENT INCOME:
Interest	$	17,947		$	143,871
Dividends		639,654			271,820
Securities lending income		3,158			0
Foreign taxes withheld		(67,686	)		0
Total Investment Income		593,073			415,691
EXPENSES:
Investment advisory fee		283,111			144,634
Administrative fee		30,866			20,654
Custodian fee		63,134			4,894
Legal and audit fee		14,389			11,842
Transfer agent fee		7,000			10,206
Trustees’ fees and expenses		2,065			1,314
Registration/filing fees		2,083			9,639
Report to shareholder and printing fees		12,811			17,985
Distribution and service fees
Investor Class		18,983			18,464
Repayment of reimbursed expenses		0			1,249
ReFlow fees (Note 2)		5,777			2,057
Other		7,974			7,281
Total expenses before waiver		448,193			250,219
Less fees waived/reimbursed by investment advisor		(83,844	)		(8,474	)
Total net expenses		364,349			241,745
NET INVESTMENT INCOME:		228,724			173,946
Net realized gain on investments		2,791,072			619,450
Net realized gain on foreign currency transactions		180,493			0
Net change in unrealized depreciation on investments		(2,255,325	)		(539,184	)
Net change in unrealized depreciation on translation of assets and liabilities in foreign currencies		(2,839	)		0
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY		713,401			80,266
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	942,125		$	254,212

June 30, 2006 54 See Notes to Financial Statements

Statement of Operations

For the Six Months Ended June 30, 2006 (Unaudited)

	SIERRA CLUB STOCK FUND			FORWARD EMERALD BANKING AND FINANCE FUND
INVESTMENT INCOME:
Interest	$	13,028		$	192,487
Dividends		231,867			2,216,276
Foreign taxes withheld		0			(2,930	)
Total Investment Income		244,895			2,405,833
EXPENSES:
Investment advisory fee		132,684			1,355,183
Administrative fee		25,116			87,318
Custodian fee		889			16,291
Legal and audit fee		13,090			88,449
Transfer agent fee		13,015			121,457
Trustees’ fees and expenses		3,090			18,116
Registration/filing fees		1,711			40,571
Report to shareholder and printing fees		19,069			75,561
Distribution and service fees
Investor Class		38,542			—
Class A		6,906			308,303
Class C		—			569,489
ReFlow fees (Note 2)		659			496
Other		7,930			26,166
Total expenses before waiver		262,701			2,707,400
Less fees waived/reimbursed by investment advisor		(31,202	)		0
Total net expenses		231,499			2,707,400
NET INVESTMENT INCOME/(LOSS):		13,396			(301,567	)
Net realized gain on investments		2,420,515			6,591,986
Net change in unrealized appreciation/(depreciation) on investments		(3,062,057	)		5,093,952
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS		(641,542	)		11,685,938
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	(628,146	)	$	11,384,371

See Notes to Financial Statements 55 June 30, 2006

Statement of Operations

	FORWARD EMERALD OPPORTUNITIES FUND			FORWARD UNIPLAN REAL ESTATE INVESTMENT FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005 (AUDITED)
INVESTMENT INCOME:
Interest	$	44,570		$	22,833		$	20,537
Dividends		12,631			657,439			1,666,307	(a)
Foreign taxes withheld		0			(2,241	)		(5,166	)
Total Investment Income		57,201			678,031			1,681,678	(a)
EXPENSES:
Investment advisory fee		47,116			193,467			379,381
Administrative fee		3,384			27,737			92,869
Custodian fee		15,243			6,182			16,964
Legal and audit fee		4,606			18,184			47,880
Transfer agent fee		9,262			10,583			13,905
Trustees' fees and expenses		3,078			5,432			9,755
Registration/filing fees		12,370			4,635			16,949
Report to shareholder and printing fees		7,081			6,952			43,153
Distribution and service fees
Investor Class		—			38,693			75,876
Class A		19,420			—			—
Class C		8,071			—			—
Repayment of reimbursed expenses		—			—			80,300
ReFlow fees (Note 2)		0			3,731			3,283
Other		4,751			16,016			18,478
Total expenses before waiver		134,382			331,612			798,793
Less fees waived/reimbursed by investment advisor		(10,554	)		0			0
Total net expenses		123,828			331,612			798,793
NET INVESTMENT INCOME/(LOSS):		(66,627	)		346,419			882,885	(a)
Net realized gain on investments		421,799			2,022,323			3,193,635	(a)
Net realized gain/(loss) on foreign currency transactions		0			(94	)		58
Net realized loss on options		(32,075	)		—			—
Net realized loss on securities sold short		(23,701	)		—			—
Net change in unrealized appreciation on investments, options and securities sold short		41,086			2,470,599			357,351	(a)
Net change in unrealized appreciation/(depreciation) on translation of assets and liabilities in foreign currencies		0			12			(52	)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS, OPTIONS, SECURITIES SOLD SHORT AND FOREIGN CURRENCY		407,109			4,492,840			3,550,992
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	340,482		$	4,839,259		$	4,433,877

(a) Amount has been restated. See Note 2 to December 31, 2005 Financial Statements.

June 30, 2006 56 See Notes to Financial Statements

Statement of Operations

For the Six Months Ended June 30, 2006 (Unaudited)

	FORWARD EMERALD GROWTH FUND			FORWARD HOOVER SMALL CAP EQUITY FUND
INVESTMENT INCOME:
Interest	$	148,959		$	429,415
Dividends		146,104			1,710,660
Foreign taxes withheld		0			(2,937	)
Total Investment Income		295,063			2,137,138
EXPENSES:
Investment advisory fee		707,969			2,431,642
Administrative fee		58,481			148,731
Custodian fee		25,044			25,949
Legal and audit fee		51,920			98,594
Transfer agent fee		51,061			174,892
Trustees’ fees and expenses		11,829			25,409
Registration/filing fees		26,259			35,222
Report to shareholder and printing fees		38,016			57,699
Distribution and service fees
Investor Class		—			692,859
Class A		306,775			31,577
Class C		59,153			—
Repayment of reimbursed expenses		0			19,743
ReFlow fees (Note 2)		0			1,452
Other		17,195			43,304
Total expenses before waiver		1,353,702			3,787,073
Less fees waived/reimbursed by investment advisor		0			(39,913	)
Total net expenses		1,353,702			3,747,160	��
NET INVESTMENT LOSS:		(1,058,639	)		(1,610,022	)
Net realized gain on investments		14,078,311			21,994,410
Net change in unrealized appreciation/(depreciation) on investments		5,609,215			(7,843,538	)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS		19,687,526			14,150,872
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	18,628,887		$	12,540,850

See Notes to Financial Statements 57 June 30, 2006

Statement of Operations

For the Six Months Ended June 30, 2006 (Unaudited)

	FORWARD HOOVER MINI-CAP FUND			FORWARD LEGATO FUND
INVESTMENT INCOME:
Interest	$	66,482		$	3,930
Dividends		146,716			25,952
Foreign taxes withheld		0			(142	)
Total Investment Income		213,198			29,740
EXPENSES:
Investment advisory fee		239,347			41,997
Administrative fee		23,360			22,110
Custodian fee		10,586			2,340
Legal and audit fee		15,870			4,963
Transfer agent fee		5,519			1,078
Trustees’ fees and expenses		11,360			1,302
Registration/filing fees		7,966			2,255
Report to shareholder and printing fees		3,856			1,902
Distribution and service fees
Investor Class		9,737			—
Class A		—			4,200
Repayment of reimbursed expenses		11,605			0
Other		10,203			1,273
Total expenses before waiver		349,409			83,420
Less fees waived/reimbursed by investment advisor		(36,124	)		(14,823	)
Total net expenses		313,285			68,597
NET INVESTMENT LOSS:		(100,087	)		(38,857	)
Net realized gain on investments		3,296,338			186,871
Net change in unrealized appreciation/(depreciation) on investments		(972,683	)		32,130
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS		2,323,655			219,001
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	2,223,568		$	180,144

June 30, 2006 58 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD INTERNATIONAL EQUITY FUND(a)
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005
OPERATIONS:
Net investment income	$	212,677		$	84,298
Net realized gain on investments		1,869,155			6,882,682
Net realized gain/(loss) on foreign currency		94,535			(172,131	)
Net change in unrealized appreciation/(depreciation) on investments and foreign currency		754,758			(3,125,506	)
Net increase in net assets resulting from operations		2,931,125			3,669,343
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income		0			(10,770	)
Total distributions		0			(10,770	)
SHARE TRANSACTIONS:
INVESTOR CLASS
Proceeds from sale of shares		1,739,738			2,446,975
Issued to shareholders in reinvestment of distributions		0			1,894
Cost of shares redeemed, net of redemption fees (Note 7)		(744,829	)		(5,431,797	)
Net increase/(decrease) from share transactions		994,909			(2,982,928	)
Net increase in net assets	$	3,926,034		$	675,645
NET ASSETS:
Beginning of period		24,879,848			24,204,203
End of period (including accumulated net investment income of $212,677 and $0, respectively)	$	28,805,882		$	24,879,848
Other Information:
SHARE TRANSACTIONS:
INVESTOR CLASS
Sold		106,675			189,729
Distributions reinvested		0			126
Redeemed		(47,551	)		(425,902	)
Net increase/(decrease) in shares outstanding		59,124			(236,047	)

(a) Prior to September 1, 2005, the Forward International Equity Fund was known as the Forward Hansberger International Growth Fund.

See Notes to Financial Statements 59 June 30, 2006

Statement of Changes in Net Assets

	FORWARD INTERNATIONAL SMALL COMPANIES FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005
OPERATIONS:
Net investment income	$	2,058,840		$	1,357,606
Net realized gain on investments		12,239,929			12,254,422
Net realized gain/(loss) on foreign currency		869,134			(103,213	)
Net change in unrealized appreciation on investments and foreign currency		5,665,098			22,185,401
Net increase in net assets resulting from operations		20,833,001			35,694,216
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Investor Class		0			(331,158	)
Institutional Class		0			(994,070	)
Class A		0			(18,509	)
From net realized gains on investments
Investor Class		0			(3,679,469	)
Institutional Class		0			(8,552,479	)
Class A		0			(201,289	)
Total distributions		0			(13,776,974	)
SHARE TRANSACTIONS:
INVESTOR CLASS
Proceeds from sale of shares		138,085,618			62,930,686
Issued to shareholders in reinvestment of distributions		0			3,685,830
Cost of shares redeemed, net of redemption fees (Note 7)		(19,316,242	)		(17,178,000	)
Net increase from share transactions		118,769,376			49,438,516
INSTITUTIONAL CLASS
Proceeds from sale of shares		103,591,902			79,363,770
Issued to shareholders in reinvestment of distributions		0			9,357,468
Cost of shares redeemed, net of redemption fees (Note 7)		(19,944,790	)		(9,854,783	)
Net increase from share transactions		83,647,112			78,866,455
CLASS A
Proceeds from sale of shares		777,163			4,476,025
Issued to shareholders in reinvestment of distributions		0			217,433
Cost of shares redeemed, net of redemption fees (Note 7)		(1,031,770	)		0
Net increase/(decrease) from share transactions		(254,607	)		4,693,458
Net increase in net assets	$	222,994,882		$	154,915,671
NET ASSETS:
Beginning of period		213,802,486			58,886,815
End of period (including accumulated net investment income of $2,040,045 and $0, respectively)	$	436,797,368		$	213,802,486

Other Information:
SHARE TRANSACTIONS:
INVESTOR CLASS
Sold	8,132,658		4,486,491
Distributions reinvested	0		261,485
Redeemed	(1,168,004	)	(1,245,002	)
Net increase in shares outstanding	6,964,654		3,502,974
INSTITUTIONAL CLASS
Sold	6,147,823		5,748,013
Distributions reinvested	0		660,131
Redeemed	(1,207,136	)	(686,978	)
Net increase in shares outstanding	4,940,687		5,721,166
CLASS A
Sold	45,898		320,862
Distributions reinvested	0		15,428
Redeemed	(64,523	)	0
Net increase/(decrease) in shares outstanding	(18,625	)	336,290

June 30, 2006 60 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD GLOBAL EMERGING MARKETS FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005
OPERATIONS:
Net investment income	$	228,724		$	626,905
Net realized gain on investments		2,791,072			3,770,099
Net realized gain/(loss) on foreign currency		180,493			(9,999	)
Net change in unrealized appreciation/(depreciation) on investments and foreign currency		(2,258,164	)		3,933,761
Net increase in net assets resulting from operations		942,125			8,320,766
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Investor Class		0			(122,863	)
Institutional Class		0			(454,683	)
Total distributions		0			(577,546	)
SHARE TRANSACTIONS:
INVESTOR CLASS
Proceeds from sale of shares		7,363,527			10,737,828
Issued to shareholders in reinvestment of distributions		0			23,796
Cost of shares redeemed, net of redemption fees (Note 7)		(3,120,608	)		(4,472,740	)
Net increase from share transactions		4,242,919			6,288,884
INSTITUTIONAL CLASS
Proceeds from sale of shares		7,119,872			8,038,233
Issued to shareholders in reinvestment of distributions		0			170,186
Cost of shares redeemed, net of redemption fees (Note 7)		(3,003,112	)		(4,465,956	)
Net increase from share transactions		4,116,760			3,742,463
Net increase in net assets	$	9,301,804		$	17,774,567
NET ASSETS:
Beginning of period		37,597,740			19,823,173
End of period (including accumulated net investment income of $268,084 and $39,360, respectively)	$	46,899,544		$	37,597,740
Other Information:
SHARE TRANSACTIONS:
INVESTOR CLASS
Sold		365,149			689,415
Distributions reinvested		0			1,264
Redeemed		(154,346	)		(289,852	)
Net increase in shares outstanding		210,803			400,827
INSTITUTIONAL CLASS
Sold		348,329			465,253
Distributions reinvested		0			9,014
Redeemed		(151,440	)		(275,548	)
Net increase in shares outstanding		196,889			198,719

See Notes to Financial Statements 61 June 30, 2006

Statement of Changes in Net Assets

	SIERRA CLUB EQUITY INCOME FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005
OPERATIONS:
Net investment income	$	173,946		$	35,131
Net realized gain on investments		619,450			1,010,658
Net change in unrealized appreciation/(depreciation) on investments		(539,184	)		(862,223	)
Net increase in net assets resulting from operations		254,212			183,566
DISTRIBUTIONS TO SHAREHOLDERS:
INVESTOR CLASS
From net investment income		(176,369	)		(31,551	)
From net realized gains on investments		0			(1,589,307	)
Total distributions		(176,369	)		(1,620,858	)
SHARE TRANSACTIONS:
INVESTOR CLASS
Proceeds from sale of shares		2,406,325			4,156,404
Issued to shareholders in reinvestment of distributions		101,518			555,674
Cost of shares redeemed, net of redemption fees (Note 7)		(3,776,440	)		(3,550,379	)
Net increase/(decrease) from share transactions		(1,268,597	)		1,161,699
Net decrease in net assets	$	(1,190,754	)	$	(275,593	)
NET ASSETS:
Beginning of period		30,146,301			30,421,894
End of period (including accumulated net investment loss of $(2,423) and $0, respectively)	$	28,955,547		$	30,146,301
Other Information:
SHARE TRANSACTIONS:
INVESTOR CLASS
Sold		207,933			359,003
Distributions reinvested		8,812			48,400
Redeemed		(330,841	)		(304,543	)
Net increase/(decrease) in shares outstanding		(114,096	)		102,860

June 30, 2006 62 See Notes to Financial Statements

Statement of Changes in Net Assets

	SIERRA CLUB STOCK FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005
OPERATIONS:
Net investment income/(loss)	$	13,396		$	(180,683	)
Net realized gain on investments		2,420,515			906,248
Net change in unrealized appreciation/(depreciation) on investments		(3,062,057	)		296,307
Net increase/(decrease) in net assets resulting from operations		(628,146	)		1,021,872
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments
Investor Class		0			(610,736	)
Class A		0			(138,034	)
Total distributions		0			(748,770	)
SHARE TRANSACTIONS:
INVESTOR CLASS
Proceeds from sale of shares		4,289,606			10,482,206
Issued to shareholders in reinvestment of distributions		0			349,977
Cost of shares redeemed, net of redemption fees (Note 7)		(1,380,488	)		(6,482,743	)
Net increase from share transactions		2,909,118			4,349,440
CLASS A
Proceeds from sale of shares		48,589			4,867,522
Issued to shareholders in reinvestment of distributions		0			65,470
Net increase from share transactions		48,589			4,932,992
Net increase in net assets	$	2,329,561		$	9,555,534
NET ASSETS:
Beginning of period		29,756,291			20,200,757
End of period (including accumulated net investment income of $13,396 and $0, respectively)	$	32,085,852		$	29,756,291
Other Information:
SHARE TRANSACTIONS:
INVESTOR CLASS
Sold		4,289,606			918,708
Distributions reinvested		0			29,360
Redeemed		(1,380,488	)		(593,034	)
Net increase in shares outstanding		2,909,118			355,034
CLASS A
Sold		48,589			454,658
Distributions reinvested		0			5,492
Net increase in shares outstanding		48,589			460,150

See Notes to Financial Statements 63 June 30, 2006

Statement of Changes in Net Assets

	FORWARD EMERALD BANKING AND FINANCE FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005
OPERATIONS:
Net investment loss	$	(301,567	)	$	(517,397	)	$	(1,278,059	)
Net realized gain on investments		6,591,986			15,711,697			9,230,290
Net change in unrealized appreciation/(depreciation) on investments		5,093,952			(313,635	)		20,528,532
Net increase in net assets resulting from operations		11,384,371			14,880,665			28,480,763
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments
Class A		0			(12,042,011	)		(4,974,573	)
Class C		0			(7,512,376	)		(3,519,861	)
Total distributions		0			(19,554,387	)		(8,494,434	)
SHARE TRANSACTIONS:
CLASS A
Proceeds from sale of shares		22,341,005			22,581,054			76,906,237
Issued to shareholders in reinvestment of distributions		0			10,658,780			4,386,921
Cost of shares redeemed, net of redemption fees (Note 7)		(48,293,343	)		(29,771,823	)		(43,394,497	)
Net increase/(decrease) from share transactions		(25,952,338	)		3,468,011			37,898,661
CLASS C
Proceeds from sale of shares		6,317,661			11,975,900			29,488,435
Issued to shareholders in reinvestment of distributions		0			5,290,512			2,520,733
Cost of shares redeemed, net of redemption fees (Note 7)		(11,700,210	)		(10,096,985	)		(19,919,675	)
Net increase/(decrease) from share transactions		(5,382,549	)		7,169,427			12,089,493
Net increase/(decrease) in net assets	$	(19,950,516	)	$	5,963,716		$	69,974,483
NET ASSETS:
Beginning of period		297,323,550			291,359,834			221,385,351
End of period (including accumulated net investment loss of $(301,567), $0 and $0, respectively)	$	277,373,034		$	297,323,550		$	291,359,834
Other Information:
SHARE TRANSACTIONS:
CLASS A
Sold		782,352			793,282			2,836,726
Distributions reinvested		0			380,328			177,520
Redeemed		(1,687,416	)		(1,047,668	)		(1,628,134	)
Net increase/(decrease) in shares outstanding		(905,064	)		125,942			1,386,112
CLASS C
Sold		227,740			433,269			1,114,582
Distributions reinvested		0			194,685			104,304
Redeemed		(423,021	)		(366,719	)		(758,076	)
Net increase/(decrease) in shares outstanding		(195,281	)		261,235			460,810

June 30, 2006 64 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD EMERALD OPPORTUNITIES FUND(a)
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005
OPERATIONS:
Net investment loss	$	(66,627	)	$	(46,163	)	$	(89,381	)
Net realized gain on investments		421,799			621,397			440,202
Net realized loss on options		(32,075	)		0			0
Net realized loss on securities sold short		(23,701	)		0			0
Net change in unrealized appreciation/(depreciation) on investments, option contracts and securities sold short		41,086			69,744			(433,809	)
Net increase/(decrease) in net assets resulting from operations		340,482			644,978			(82,988	)
SHARE TRANSACTIONS:
CLASS A
Proceeds from sale of shares		2,869,774			2,965,879			635,411
Cost of shares redeemed, net of redemption fees (Note 7)		(496,849	)		(329,007	)		(974,092	)
Net increase/(decrease) from share transactions		2,372,925			2,636,872			(338,681	)
CLASS C
Proceeds from sale of shares		1,910,161			416,562			100
Cost of shares redeemed, net of redemption fees (Note 7)		(102,694	)		(55,350	)		(117,862	)
Net increase/(decrease) from share transactions		1,807,467			361,212			(117,762	)
Net increase in net assets	$	4,520,874		$	3,643,062		$	(539,431	)
NET ASSETS:
Beginning of period		6,823,695			3,180,633			3,720,064
End of period (including accumulated net investment loss of $(66,627), $0 and $0, respectively)	$	11,344,569		$	6,823,695		$	3,180,633
Other Information:
SHARE TRANSACTIONS:
CLASS A
Sold		317,981			360,643			91,573
Redeemed		(55,614	)		(41,996	)		(143,726	)
Net increase/(decrease) in shares outstanding		262,367			318,647			(52,153	)
CLASS C
Sold		218,603			50,829			14
Redeemed		(11,780	)		(7,032	)		(17,637	)
Net increase/(decrease) in shares outstanding		206,823			43,797			(17,623	)

(a) Prior to September 29, 2005, the Forward Emerald Opportunities Fund was known as the Forward Emerald Technology Fund.

See Notes to Financial Statements 65 June 30, 2006

Statement of Changes in Net Assets

	FORWARD UNIPLAN REAL ESTATE INVESTMENT FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
OPERATIONS:
Net investment income	$	346,419		$	882,885	(a)	$	945,295	(a)
Net realized gain on investments		2,022,323			3,193,635	(a)		2,883,186	(a)
Net realized gain/(loss) on foreign currency		(94	)		58			2
Net change in unrealized appreciation on investments and foreign currency		2,470,611			357,299	(a)		7,342,381	(a)
Net increase in net assets resulting from operations		4,839,259			4,433,877			11,170,864
DISTRIBUTIONS TO SHAREHOLDERS:
INVESTOR CLASS
From net investment income		(249,170	)		(498,174	)		(1,647,621	)
From net realized gains on investments		0			(3,748,049	)		(2,123,003	)
Tax return of capital		0			(127,254	)		—
Total distributions		(249,170	)		(4,373,477	)		(3,770,624	)
SHARE TRANSACTIONS:
INVESTOR CLASS
Proceeds from sale of shares		3,143,789			8,536,177			13,529,123
Issued to shareholders in reinvestment of distributions		59,533			2,402,766			3,738,910
Cost of shares redeemed, net of redemption fees (Note 7)		(6,750,194	)		(16,057,968	)		(13,057,217	)
Net decrease from share transactions		(3,546,872	)		(5,119,025	)		4,210,816
Net increase/(decrease) in net assets	$	1,043,217		$	(5,058,625	)	$	11,611,056
NET ASSETS:
Beginning of period		43,287,640			48,346,265			36,735,209
End of period (including accumulated net investment income/(loss) of $97,202, $(47) and $(88), respectively)	$	44,330,857		$	43,287,640		$	48,346,265
Other Information:
SHARE TRANSACTIONS:
INVESTOR CLASS
Sold		175,733			525,466			910,437
Distributions reinvested		3,256			144,930			232,060
Redeemed		(379,313	)		(986,315	)		(856,293	)
Net increase/(decrease) in shares outstanding		(200,324	)		(315,919	)		286,204

(a) Amount has been restated. See Note 2 to December 31, 2005 Financial Statements.

June 30, 2006 66 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD EMERALD GROWTH FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005
OPERATIONS:
Net investment loss	$	(1,058,639	)	$	(929,230	)	$	(1,874,331	)
Net realized gain on investments		14,078,311			5,254,272			3,714,337
Net change in unrealized appreciation on investments		5,609,215			11,403,665			169,849
Net increase in net assets resulting from operations		18,628,887			15,728,707			2,009,855
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments
Class A		0			(8,074,838	)		(2,630,169	)
Class C		0			(625,150	)		(325,503	)
Total distributions		0			(8,699,988	)		(2,955,672	)
SHARE TRANSACTIONS:
CLASS A
Proceeds from sale of shares		29,694,190			17,022,352			65,162,367
Issued to shareholders in reinvestment of distributions		0			5,255,650			2,443,099
Cost of shares redeemed, net of redemption fees (Note 7)		(27,062,377	)		(15,984,977	)		(33,965,754	)
Net increase from share transactions		2,631,813			6,293,025			33,639,712
CLASS C
Proceeds from sale of shares		500,247			444,804			1,419,286
Issued to shareholders in reinvestment of distributions		0			553,045			287,362
Cost of shares redeemed, net of redemption fees (Note 7)		(1,625,433	)		(1,667,584	)		(3,374,467	)
Net decrease from share transactions		(1,125,186	)		(669,735	)		(1,667,819	)
Net increase in net assets	$	20,135,514		$	12,652,009		$	31,026,076
NET ASSETS:
Beginning of period		169,343,075			156,691,066			125,664,990
End of period (including accumulated net investment loss of $(1,058,639), $0 and $0, respectively)	$	189,478,589		$	169,343,075		$	156,691,066
Other Information:
SHARE TRANSACTIONS:
CLASS A
Sold		1,947,766			1,261,758			5,083,947
Distributions reinvested		0			390,288			220,696
Redeemed		(1,802,060	)		(1,186,341	)		(2,746,701	)
Net increase in shares outstanding		145,706			465,705			2,557,942
CLASS C
Sold		34,157			34,248			119,823
Distributions reinvested		0			42,582			26,657
Redeemed		(112,964	)		(127,716	)		(279,651	)
Net decrease in shares outstanding		(78,807	)		(50,886	)		(133,171	)

See Notes to Financial Statements 67 June 30, 2006

Statement of Changes in Net Assets

	FORWARD HOOVER SMALL CAP EQUITY FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005
OPERATIONS:
Net investment loss	$	(1,610,022	)	$	(2,528,304	)
Net realized gain on investments		21,994,410			17,724,942
Net change in unrealized appreciation/(depreciation) on investments		(7,843,538	)		14,337,667
Net increase in net assets resulting from operations		12,540,850			29,534,305
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments
Investor Class		0			(12,526,784	)
Institutional Class		0			(1,456,466	)
Class A		0			(973,071	)
Total distributions		0			(14,956,321	)
SHARE TRANSACTIONS:
INVESTOR CLASS
Proceeds from sale of shares		160,951,381			240,899,990
Issued to shareholders in reinvestment of distributions		0			11,991,950
Cost of shares redeemed, net of redemption fees (Note 7)		(72,751,877	)		(126,598,951	)
Net increase from share transactions		88,199,504			126,292,989
INSTITUTIONAL CLASS
Proceeds from sale of shares		20,376,835			24,871,831
Issued to shareholders in reinvestment of distributions		0			1,453,098
Cost of shares redeemed, net of redemption fees (Note 7)		(2,577,192	)		(4,383,075	)
Net increase from share transactions		17,799,643			21,941,854
CLASS A
Proceeds from sale of shares		998,157			20,113,667
Issued to shareholders in reinvestment of distributions		0			9,956
Cost of shares redeemed, net of redemption fees (Note 7)		(5,003,219	)		0
Net increase/(decrease) from share transactions		(4,005,062	)		20,123,623
Net increase in net assets	$	114,534,935		$	182,936,450
NET ASSETS:
Beginning of period		380,657,370			197,720,920
End of period (including accumulated net investment loss of $(1,610,022) and $0, respectively)	$	495,192,305		$	380,657,370
Other Information:
SHARE TRANSACTIONS:
INVESTOR CLASS
Sold		7,588,186			12,864,804
Distributions reinvested		0			620,911
Redeemed		(3,485,065	)		(6,982,750	)
Net increase in shares outstanding		4,103,121			6,502,965
INSTITUTIONAL CLASS
Sold		957,542			1,330,628
Distributions reinvested		0			73,874
Redeemed		(117,233	)		(223,384	)
Net increase in shares outstanding		840,309			1,181,118
CLASS A
Sold		46,521			1,189,148
Distributions reinvested		0			515
Redeemed		(255,896	)		0
Net increase/(decrease) in shares outstanding		(209,375	)		1,189,663

June 30, 2006 68 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD HOOVER MINI-CAP FUND
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005
OPERATIONS:
Net investment loss	$	(100,087	)	$	(290,216	)
Net realized gain on investments		3,296,338			4,019,729
Net change in unrealized appreciation/(depreciation) on investments		(972,683	)		910,005
Net increase in net assets resulting from operations		2,223,568			4,639,518
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments
Investor Class		0			(217,422	)
Institutional Class		0			(767,721	)
Total distributions		0			(985,143	)
SHARE TRANSACTIONS:
INVESTOR CLASS
Proceeds from sale of shares		5,460,329			1,583,091
Issued to shareholders in reinvestment of distributions		0			70,470
Cost of shares redeemed, net of redemption fees (Note 7)		(3,033,156	)		(1,362,147	)
Net increase from share transactions		2,427,173			291,414
INSTITUTIONAL CLASS
Proceeds from sale of shares		952,562			8,380,445
Issued to shareholders in reinvestment of distributions		0			204,634
Cost of shares redeemed, net of redemption fees (Note 7)		(459,492	)		(5,129,997	)
Net increase from share transactions		493,070			3,455,082
Net increase in net assets	$	5,143,811		$	7,400,871
NET ASSETS:
Beginning of period		39,829,130			32,428,259
End of period (including accumulated net investment loss of $(100,087) and $0, respectively)	$	44,972,941		$	39,829,130
Other Information:
SHARE TRANSACTIONS:
INVESTOR CLASS
Sold		276,526			94,322
Distributions reinvested		0			3,957
Redeemed		(163,994	)		(82,356	)
Net increase in shares outstanding		112,532			15,923
INSTITUTIONAL CLASS
Sold		47,727			515,622
Distributions reinvested		0			11,330
Redeemed		(23,825	)		(312,142	)
Net increase in shares outstanding		23,902			214,810

See Notes to Financial Statements 69 June 30, 2006

Statement of Changes in Net Assets

	FORWARD LEGATO FUND(a)
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2005
OPERATIONS:
Net investment loss	$	(38,857	)	$	(60,712	)
Net realized gain on investments		186,871			136,559
Net change in unrealized appreciation on investments		32,130			725,405
Net increase in net assets resulting from operations		180,144			801,252
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments		0			(20,513	)
Total distributions		0			(20,513	)
SHARE TRANSACTIONS:
CLASS A
Proceeds from sale of shares		1,450,090			6,094,808
Issued to shareholders in reinvestment of distributions		0			293
Net increase from share transactions		1,450,090			6,095,101
Net increase in net assets	$	1,630,234		$	6,875,840
NET ASSETS:
Beginning of period		6,875,840			—
End of period (including accumulated net investment income/(loss) of $(37,758) and $1,099, respectively)	$	8,506,074		$	6,875,840
Other Information:
SHARE TRANSACTIONS:
CLASS A
Sold		122,087			608,697
Distributions reinvested		0			26
Net increase in shares outstanding		122,087			608,723

(a) The Forward Legato Fund commenced operations on April 1, 2005

June 30, 2006 70 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Equity Fund^(a)

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004			YEAR ENDED DECEMBER 31, 2003			YEAR ENDED DECEMBER 31, 2002			YEAR ENDED DECEMBER 31, 2001
NET ASSET VALUE, BEGINNING OF PERIOD	$	15.01		$	12.78		$	11.31		$	8.21		$	9.63		$	12.18
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.12			0.05			(0.02	)		(0.01	)		(0.04	)		(0.04	)
Net realized and unrealized gain/(loss) on investments		1.65			2.19			1.49			3.11			(1.38	)		(2.51	)
Total from Investment Operations		1.77			2.24			1.47			3.10			(1.42	)		(2.55	)
LESS DISTRIBUTIONS:
From net investment income		—			(0.01	)		—			—			—			—
Total Distributions		—			(0.01	)		—			—			—			—
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(b)		—	(b)		—	(b)		—	(b)		—	(b)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.77			2.23			1.47			3.10			(1.42	)		(2.55	)
NET ASSET VALUE, END OF PERIOD	$	16.78		$	15.01		$	12.78		$	11.31		$	8.21		$	9.63
TOTAL RETURN		11.79	%(c)		17.50	%		13.00	%		37.76	%		(14.75	)%		(20.94	)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	28,806		$	24,880		$	24,204		$	21,189		$	15,322		$	17,979
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		1.52	%(d)		0.37	%		(0.20	)%		(0.16	)%		(0.44	)%		(0.33	)%
Operating expenses including reimbursement/waiver		1.54	%(d)(f)		1.69	%		1.71	%(f)		1.99	%		1.95	%		1.68	%
Operating expenses excluding reimbursement/waiver		1.77	%(d)		2.28	%		2.09	%		2.48	%		2.43	%		2.47	%
PORTFOLIO TURNOVER RATE		42	%(c)		138	%		50	%		25	%		37	%		64	%

(a) Prior to September 1, 2005, the Forward International Equity Fund was known as the Forward Hansberger International Growth Fund.

(b) Amount represents less than $0.01 per share.

(c) Not Annualized.

(d) Annualized.

(e) Effective May 1, 2006, the net expense limitation changed from 1.69% to 1.29%.

(f) Effective January 26, 2004, the net expense limitation changed from 1.99% to 1.69%.

See Notes to Financial Statements 71 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Small Companies Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004			YEAR ENDED DECEMBER 31, 2003(a)			PERIOD ENDED DECEMBER 31, 2002(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	15.11		$	12.87		$	10.39		$	6.44		$	7.34
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.08			0.11	(c)		0.05	(c)		0.02	(c)		0.02	(c)
Net realized and unrealized gain/(loss) on investments		1.55			3.23			2.59			3.94			(0.90	)
Total from Investment Operations		1.63			3.34			2.64			3.96			(0.88	)
LESS DISTRIBUTIONS:
From net investment income		—			(0.08	)		(0.03	)		(0.02	)		(0.03	)
From capital gains		—			(1.02	)		(0.14	)		—			—
Total Distributions		—			(1.10	)		(0.17	)		(0.02	)		(0.03	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		0.01			—	(d)		0.01			0.01			0.01
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.64			2.24			2.48			3.95			(0.90	)
NET ASSET VALUE, END OF PERIOD	$	16.75		$	15.11		$	12.87		$	10.39		$	6.44
TOTAL RETURN		10.85	%(e)		26.57	%		25.55	%		61.64	%		(11.82	)%(e)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	188,153		$	64,346		$	9,819		$	15,981		$	312
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		1.02	%(f)		0.82	%		0.47	%		0.24	%		0.27	%(f)
Operating expenses including reimbursement/waiver		1.53	%(f)(g)		1.45	%		1.46	%(h)		1.45	%		1.45	%(f)
Operating expenses excluding reimbursement/waiver		1.54	%(f)		1.84	%		2.26	%(h)		2.45	%		2.82	%(f)
PORTFOLIO TURNOVER RATE		35	%(e)		91	%		175	%		52	%		133	%

(a) On December 23, 2003, the Forward International Small Companies Fund, a newly created fund, acquired all of the assets and assumed all of the liabilities of the Pictet International Small Companies Fund. The financial highlights for the periods presented previous to December 31, 2003 are that of the Pictet International Small Companies Fund. In addition, for the periods presented prior to December 31, 2003, the Investor Class of shares was known as the Retail Class.

(b) The Pictet International Small Companies Fund—Retail Class commenced operations on March 5, 2002.

(c) Per share numbers have been calculated using the average share method.

(d) Amount represents less than $0.01 per share.

(e) Not Annualized.

(f) Annualized.

(g) Effective January 2, 2006, the net expense limitation changed from 1.45% to 1.56%.

(h) The Fund incurred ReFlow fees during the year. If the ReFlow fees had been excluded, the ratios of expenses including reimbursement and excluding reimbursement to average net assets would have been 1.45% and 2.25%, respectively.

June 30, 2006 72 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Small Companies Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004			YEAR ENDED DECEMBER 31, 2003(a)			YEAR ENDED DECEMBER 31, 2002			YEAR ENDED DECEMBER 31, 2001
NET ASSET VALUE, BEGINNING OF PERIOD	$	15.15		$	12.89		$	10.40		$	6.44		$	7.35		$	10.21
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.11			0.16	(b)		0.08	(b)		0.04	(b)		0.04	(b)		0.01
Net realized and unrealized gain/(loss) on investments		1.55			3.23			2.61			3.94			(0.92	)		(2.87	)
Total from Investment Operations		1.66			3.39			2.69			3.98			(0.88	)		(2.86	)
LESS DISTRIBUTIONS:
From net investment income		—			(0.11	)		(0.07	)		(0.03	)		(0.04	)		—
From capital gains		—			(1.02	)		(0.14	)		—			—			(0.01	)
Total Distributions		—			(1.13	)		(0.21	)		(0.03	)		(0.04	)		(0.01	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		0.01			—	(c)		0.01			0.01			0.01			0.01
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.67			2.26			2.49			3.96			(0.91	)		(2.86	)
NET ASSET VALUE, END OF PERIOD	$	16.82		$	15.15		$	12.89		$	10.40		$	6.44		$	7.35
TOTAL RETURN		11.02	%(d)		26.81	%		25.99	%		61.95	%		(11.87	)%		(27.95	)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	243,334		$	144,302		$	49,068		$	26,221		$	22,251		$	21,934
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		1.36	%(e)		1.12	%		0.75	%		0.49	%		0.52	%		0.17	%
Operating expenses including reimbursement/waiver		1.18	%(e)(f)		1.20	%		1.21	%(g)		1.20	%		1.20	%		1.20	%
Operating expenses excluding reimbursement/waiver		1.19	%(e)		1.46	%		2.12	%(g)		2.20	%		2.57	%		2.28	%
PORTFOLIO TURNOVER RATE		35	%(d)		91	%		175	%		52	%		133	%		122	%

(a) On December 23, 2003, the Forward International Small Companies Fund, a newly created fund, acquired all of the assets and assumed all of the liabilities of the Pictet International Small Companies Fund. The financial highlights for the periods presented previous to December 31, 2003 are that of the Pictet International Small Companies Fund.

(b) Per share numbers have been calculated using the average share method.

(c) Amount represents less than $0.01 per share.

(d) Not Annualized.

(e) Annualized.

(f) Effective January 2, 2006, the net expense limitation changed from 1.20% to 1.26%.

(g) The Fund incurred ReFlow fees during the year. If the ReFlow fees had been excluded, the ratios of expenses including reimbursement and excluding reimbursement to average net assets would have been 1.20% and 2.11%, respectively.

See Notes to Financial Statements 73 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Small Companies Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)		PERIOD ENDED DECEMBER 31, 2005(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$15.06		$13.13
INCOME FROM OPERATIONS:
Net investment income	0.09		0.13	(b)
Net realized and unrealized gain on investments	1.56		2.90
Total from Investment Operations	1.65		3.03
LESS DISTRIBUTIONS:
From net investment income	—		(0.08	)
From capital gains	—		(1.02	)
Total Distributions	—		(1.10	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)	0.01		—	(c)
NET INCREASE IN NET ASSET VALUE	1.66		1.93
NET ASSET VALUE, END OF PERIOD	$16.72		$15.06
TOTAL RETURN(d)	11.02	%(e)	23.78	%(e)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$5,310		$5,065
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver	1.11	%(f)	0.51	%(f)
Operating expenses including reimbursement/waiver	1.43	%(f)(g)	1.78	%(f)
Operating expenses excluding reimbursement/waiver	1.44	%(f)	1.82	%(f)
PORTFOLIO TURNOVER RATE	35	%(e)	91	%

(a) The Fund began offering Class A shares on May 2, 2005.

(b) Per share numbers have been calculated using the average share method.

(c) Amount represents less than $0.01 per share.

(d) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(e) Not Annualized.

(f) Annualized.

(g) Effective January 2, 2006, the net expense limitation changed from 1.78% to 1.56%.

June 30, 2006 74 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Global Emerging Markets Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004(a)			PERIOD ENDED DECEMBER 31, 2003(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	18.83		$	14.21		$	11.86		$	6.98
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.06			0.27			0.21			—	(c)
Net realized and unrealized gain/(loss) on investments		0.59			4.61			2.35			4.94
Total from Investment Operations		0.65			4.88			2.56			4.94
LESS DISTRIBUTIONS:
From net investment income		—			(0.26	)		(0.22	)		(0.06	)
Total Distributions		—			(0.26	)		(0.22	)		(0.06	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		0.01			—	(c)		0.01			—	(c)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.66			4.62			2.35			4.88
NET ASSET VALUE, END OF PERIOD	$	19.49		$	18.83		$	14.21		$	11.86
TOTAL RETURN		3.51	%(d)		34.36	%		22.06	%		70.83	%(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	13,247		$	8,833		$	969		$	227
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		0.78	%(e)		2.57	%		(0.32	)%		0.66	%(e)
Operating expenses including reimbursement/waiver		1.83	%(e)(f)		1.95	%		1.98	%(g)		1.95	%(e)
Operating expenses excluding reimbursement/waiver		2.24	%(e)		3.04	%		3.29	%(g)		2.48	%(e)
PORTFOLIO TURNOVER RATE		44	%(d)		62	%		45	%		44	%

(a) On September 16, 2004, the Forward Global Emerging Markets Fund, a newly created fund, acquired all of the assets and assumed all of the liabilities of the Pictet Global Emerging Markets Fund. The financial highlights for the periods presented previous to December 31, 2004 are that of the Pictet Global Emerging Markets Fund. In addition, for the periods presented prior to December 31, 2004, the Investor Class of shares was known as the Retail Class.

(b) The Pictet Global Emerging Markets Fund—Retail Class commenced operations on April 9, 2003.

(c) Amount represents less than $0.01 per share.

(d) Not Annualized.

(e) Annualized.

(f) Effective January 2, 2006, the net expense limitation changed from 1.95% to 1.89%. Effective May 1, 2006, the net expense limitation changed from 1.89% to 1.39%.

(g) The Fund incurred ReFlow fees during the year. If the ReFlow fees had been excluded, the ratios of expenses including reimbursement and excluding reimbursement to average net assets would have been 1.95% and 3.25%, respectively.

See Notes to Financial Statements 75 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Global Emerging Markets Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004(a)			YEAR ENDED DECEMBER 31, 2003			YEAR ENDED DECEMBER 31, 2002			YEAR ENDED DECEMBER 31, 2001
NET ASSET VALUE, BEGINNING OF PERIOD	$	18.88		$	14.23		$	11.88		$	6.92		$	6.89		$	7.02
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		0.11			0.33			0.23			0.08			0.01			0.10
Net realized and unrealized gain/(loss) on investments		0.56			4.62			2.36			4.95			0.03			(0.15	)
Total from Investment Operations		0.67			4.95			2.59			5.03			0.04			(0.05	)
LESS DISTRIBUTIONS:
From net investment income		—			(0.30	)		(0.25	)		(0.07	)		(0.01	)		(0.08	)
Total Distributions		—			(0.30	)		(0.25	)		(0.07	)		(0.01	)		(0.08	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		0.01			—	(b)		0.01			—	(b)		—	(b)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.68			4.65			2.35			4.96			0.03			(0.13	)
NET ASSET VALUE, END OF PERIOD	$	19.56		$	18.88		$	14.23		$	11.88		$	6.92		$	6.89
TOTAL RETURN		3.60	%(c)		34.79	%		22.26	%		72.72	%		0.60	%		(0.68	)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	33,653		$	28,765		$	18,854		$	116,774		$	67,509		$	66,711
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		1.08	%(d)		2.34	%		0.63	%		0.91	%		0.16	%		1.12	%
Operating expenses including reimbursement/waiver		1.54	%(d)(e)		1.70	%		1.70	%(f)		1.70	%		1.70	%		1.70	%
Operating expenses excluding reimbursement/waiver		1.90	%(d)		2.84	%		2.38	%(f)		2.23	%		2.31	%		2.22	%
PORTFOLIO TURNOVER RATE		44	%(c)		62	%		45	%		44	%		47	%		84	%

(a) On September 16, 2004, the Forward Global Emerging Markets Fund, a newly created fund, acquired all of the assets and assumed all of the liabilities of the Pictet Global Emerging Markets Fund. The financial highlights for the periods presented previous to December 31, 2004 are that of the Pictet Global Emerging Markets Fund.

(b) Amount represents less than $0.01 per share.

(c) Not Annualized.

(d) Annualized.

(e) Effective January 2, 2006, the net expense limitation changed from 1.70% to 1.59%. Effective May 1, 2006, the net expense limitation changed from 1.59% to 1.39%.

(f) The Fund incurred ReFlow fees during the year. If the ReFlow fees had been excluded, the ratios of expenses including reimbursement and excluding reimbursement to average net assets would have been 1.70% and 2.37%, respectively.

June 30, 2006 76 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Sierra Club Equity Income Fund^(b)

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005(b)			YEAR ENDED DECEMBER 31, 2004			YEAR ENDED DECEMBER 31, 2003(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	11.48		$	12.05		$	11.66		$	10.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.07			0.01			(0.02	)		(0.04	)
Net realized and unrealized gain on investments		0.04			0.05			1.09			1.90
Total from Investment Operations		0.11			0.06			1.07			1.86
LESS DISTRIBUTIONS:
From net investment income		(0.07	)		(0.01	)		—			—
From capital gains		—			(0.62	)		(0.68	)		(0.20	)
Total Distributions		(0.07	)		(0.63	)		(0.68	)		(0.20	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(c)		—	(c)		—	(c)		—	(c)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.04			(0.57	)		0.39			1.66
NET ASSET VALUE, END OF PERIOD	$	11.52		$	11.48		$	12.05		$	11.66
TOTAL RETURN		0.95	%(d)		0.49	%		9.18	%		18.65	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	28,956		$	30,146		$	30,422		$	26,882
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		1.13	%(e)		0.12	%		(0.18	)%		(0.36	)%
Operating expenses including reimbursement/waiver		1.57	%(e)		1.69	%		1.72	%(f)(g)		1.84	%
Operating expenses excluding reimbursement/waiver		1.63	%(e)		1.87	%		2.01	%(f)		2.60	%
PORTFOLIO TURNOVER RATE		42	%(d)		89	%		79	%		62	%

(a) The Fund commenced operations on January 1, 2003.

(b) Prior to April 1, 2005, the Sierra Club Equity Income Fund was known as the Sierra Club Balanced Fund.

(c) Amount represents less than $0.01 per share.

(d) Not Annualized.

(e) Annualized.

(f) The Fund incurred ReFlow fees during the year. If the ReFlow fees had been excluded, the ratios of expenses including reimbursement and excluding reimbursement to average net assets would have been 1.71% and 2.00%, respectively.

(g) Effective January 26, 2004, the net expense limitation changed from 1.84% to 1.69%.

See Notes to Financial Statements 77 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Sierra Club Stock Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004			YEAR ENDED DECEMBER 31, 2003			YEAR ENDED DECEMBER 31, 2002			YEAR ENDED DECEMBER 31, 2001
NET ASSET VALUE, BEGINNING OF PERIOD	$	11.92		$	11.99		$	10.39		$	7.87		$	10.32		$	11.96
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.00	(a)		(0.08	)		(0.05	)		(0.05	)		(1.15	)		(0.02	)
Net realized and unrealized gain/(loss) on investments		(0.22	)		0.31			1.74			2.57			(1.30	)		(1.62	)
Total from Investment Operations		(0.22	)		0.23			1.69			2.52			(2.45	)		(1.64	)
LESS DISTRIBUTIONS:
From capital gains		—			(0.30	)		(0.09	)		—			—			—
Total Distributions		—			(0.30	)		(0.09	)		—			—			—
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(a)		—	(a)		—	(a)		—	(a)		—	(a)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		(0.22	)		(0.07	)		1.60			2.52			(2.45	)		(1.64	)
NET ASSET VALUE, END OF PERIOD	$	11.70		$	11.92		$	11.99		$	10.39		$	7.87		$	10.32
TOTAL RETURN		(1.85	)%(b)		1.95	%		16.23	%		32.02	%		(23.74	)%		(13.71	)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	26,653		$	24,272		$	20,201		$	8,155		$	518		$	25,903
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		0.09	%(c)		(0.72	)%		(0.70	)%		(0.95	)%		(0.34	)%		(0.15	)%
Operating expenses including reimbursement/waiver		1.48	%(c)(d)		1.69	%		1.70	%(e)(f)		1.84	%		1.86	%		1.50	%
Operating expenses excluding reimbursement/waiver		1.69	%(c)		2.29	%		2.70	%(e)		6.32	%		1.96	%		1.91	%
PORTFOLIO TURNOVER RATE		74	%(b)		70	%		93	%		56	%		88	%		73	%

(a) Amount represents less than $0.01 per share.

(b) Not Annualized.

(c) Annualized.

(d) Effective January 2, 2006, the net expense limitation changed from 1.69% to 1.49%.

(e) The Fund incurred ReFlow fees during the year ended December 31, 2004. If the ReFlow fees had been excluded, the ratios of expenses including reimbursement and excluding reimbursement to average net assets would have been 1.70% and 2.70%, respectively.

(f) Effective January 26, 2004, the net expense limitation changed from 1.84% to 1.69%.

June 30, 2006 78 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Sierra Club Stock Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2005(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	11.92		$	10.78
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.01			(0.05	)
Net realized and unrealized gain/(loss) on investments		(0.23	)		1.49
Total from Investment Operations		(0.22	)		1.44
LESS DISTRIBUTIONS:
From capital gains		—			(0.30	)
Total Distributions		—			(0.30	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(b)		—	(b)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		(0.22	)		1.14
NET ASSET VALUE, END OF PERIOD	$	11.70		$	11.92
TOTAL RETURN(c)		(1.85	)%(d)		13.39	%(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	5,433		$	5,484
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		0.09	%(e)		(0.68	)%(e)
Operating expenses including reimbursement/waiver		1.48	%(e)(f)		1.69	%(e)
Operating expenses excluding reimbursement/waiver		1.64	%(e)		2.28	%(e)
PORTFOLIO TURNOVER RATE		74	%(d)		70	%

(a) The Fund began offering Class A shares on May 2, 2005.

(b) Amount represents less than $0.01 per share.

(c) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(d) Not Annualized.

(e) Annualized.

(f) Effective January 2, 2006, the net expense limitation changed from 1.69% to 1.49%.

See Notes to Financial Statements 79 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Emerald Banking and Finance Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005			YEAR ENDED JUNE 30, 2004			YEAR ENDED JUNE 30, 2003			YEAR ENDED JUNE 30, 2002			YEAR ENDED JUNE 30, 2001
NET ASSET VALUE, BEGINNING OF PERIOD	$	27.61		$	27.99		$	25.74		$	19.89		$	18.36		$	15.55		$	11.20
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.01			(0.01	)(a)		(0.06	)(a)		(0.03	)(a)		0.03	(a)		0.05	(a)		0.18	(a)
Net realized and unrealized gain on investments		1.09			1.49			3.30			6.07			1.84			3.01			4.34
Total from Investment Operations		1.10			1.48			3.24			6.04			1.87			3.06			4.52
LESS DISTRIBUTIONS:
From net investment income		—			—			—			(0.01	)		—			(0.08	)		(0.17	)
From capital gains		—			(1.86	)		(0.99	)		(0.18	)		(0.34	)		(0.17	)		—
Total Distributions		—			(1.86	)		(0.99	)		(0.19	)		(0.34	)		(0.25	)		(0.17	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(b)		—			—			—			—			—			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.10			(0.38	)		2.25			5.85			1.53			2.81			4.35
NET ASSET VALUE, END OF PERIOD	$	28.71		$	27.61		$	27.99		$	25.74		$	19.89		$	18.36		$	15.55
TOTAL RETURN(c)		3.98	%(d)		5.31	%(d)		13.12	%		30.53	%		10.46	%		19.96	%		40.72	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s)	$	165,903		$	184,550		$	183,556		$	133,136		$	59,565		$	34,933		$	14,822
RATIOS TO AVERAGE NETS ASSETS:
Net investment income including reimbursement/waiver		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		1.38	%
Net investment income/(loss) excluding reimbursement/waiver		0.05	%(f)		(0.10	)%(f)		(0.23	)%		(0.13	)%		0.20	%		0.28	%		0.79	%
Operating expenses including reimbursement/waiver		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		2.35	%
Operating expenses excluding reimbursement/waiver		1.62	%(f)		1.57	%(f)		1.80	%		1.74	%		1.97	%		2.26	%		2.94	%
PORTFOLIO TURNOVER RATE		17	%(d)		15	%(d)		25	%		29	%		47	%		27	%		55	%

(a) Per share amounts calculated based on the average shares outstanding during the period.

(b) Amount represents less than $0.01 per share.

(c) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(d) Not annualized.

(e) Not applicable, no reimbursements/waiver were made by the Advisor.

(f) Annualized.

June 30, 2006 80 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Emerald Banking and Finance Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005			YEAR ENDED JUNE 30, 2004			YEAR ENDED JUNE 30, 2003			YEAR ENDED JUNE 30, 2002			YEAR ENDED JUNE 30, 2001(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	26.73		$	27.23		$	25.23		$	19.62		$	18.24		$	15.47		$	11.20
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		(0.08	)		(0.10	)(b)		(0.23	)(b)		(0.18	)(b)		(0.08	)(b)		(0.06	)(b)		0.10	(b)
Net realized and unrealized gain/(loss) on investments		1.05			1.46			3.22			5.97			1.80			3.00			4.34
Total from Investment Operations		0.97			1.36			2.99			5.79			1.72			2.94			4.44
LESS DISTRIBUTIONS:
From net investment income		—			—			—			—			—			—			(0.17	)
From capital gains		—			(1.86	)		(0.99	)		(0.18	)		(0.34	)		(0.17	)		—
Total Distributions		—			(1.86	)		(0.99	)		(0.18	)		(0.34	)		(0.17	)		(0.17	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(c)		—			—			—			—			—			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.97			(0.50	)		2.00			5.61			1.38			2.77			4.27
NET ASSET VALUE, END OF PERIOD	$	27.70		$	26.73		$	27.23		$	25.23		$	19.62		$	18.24		$	15.47
TOTAL RETURN(d)		3.63	%(f)		5.01	%(f)		12.37	%		29.68	%		9.69	%		19.22	%		40.00	%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s)	$	111,470		$	112,774		$	107,804		$	88,249		$	27,482		$	6,210		$	513
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		0.73	%
Net investment income/(loss) excluding reimbursement/waiver		(0.61	)%(g)		(0.75	)%(g)		(0.88	)%		(0.77	)%		(0.43	)%		(0.37	)%		0.14	%
Operating expenses including reimbursement/waiver		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		n/a	(e)		3.00	%
Operating expenses excluding reimbursement/waiver		2.27	%(g)		2.22	%(g)		2.45	%		2.39	%		2.66	%		2.91	%		3.59	%
PORTFOLIO TURNOVER RATE		17	%(f)		15	%(f)		25	%		29	%		47	%		27	%		55	%

(a) The Fund began offering Class C Shares on July 1, 2000.

(b) Per share amounts calculated based on the average shares outstanding during the period.

(c) Amount represents less than $0.01 per share.

(d) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(e) Not applicable, no reimbursements/waiver were made by the Advisor.

(f) Not annualized.

(g) Annualized.

See Notes to Financial Statements 81 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Emerald Opportunities Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)		SIX MONTHS ENDED DECEMBER 31, 2005(a)		YEAR ENDED JUNE 30, 2005(a)		YEAR ENDED JUNE 30, 2004(a)		YEAR ENDED JUNE 30, 2003(a)		YEAR ENDED JUNE 30, 2002(a)		YEAR ENDED JUNE 30, 2001(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$8.39		$7.03		$7.13		$5.64		$5.38		$12.15		$29.59
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss	(0.05	)	(0.08	)(b)	(0.17	)(b)	(0.19	)(b)	(0.12	)(b)	(0.20	)(b)	(0.43	)
Net realized and unrealized gain/(loss) on investments	0.55		1.44		0.07		1.68		0.38		(6.15	)	(13.01	)
Total from Investment Operations	0.50		1.36		(0.10	)	1.49		0.26		(6.35	)	(13.44	)
LESS DISTRIBUTIONS
From capital gains	—		—		—		—		—		(0.42	)	(4.00	)
Total Distributions	—		—		—		—		—		(0.42	)	(4.00	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)	—	(c)	—		—		—		—		—		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE	0.50		1.36		(0.10	)	1.49		0.26		(6.77	)	(17.44	)
NET ASSET VALUE, END OF PERIOD	$8.89		$8.39		$7.03		$7.13		$5.64		$5.38		$12.15
TOTAL RETURN(d)	11.27	%(e)	19.35	%(e)	(1.40	)%	26.42	%	4.83	%	(53.76	)%	(51.80	)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s)	$8,695		$6,004		$2,793		$3,202		$2,572		$3,132		$8,054
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver	(1.30	)%(f)	(2.15	)%(f)	(2.62	)%	(2.65	)%	(2.69	)%	(2.50	)%	(2.25	)%
Net investment loss excluding reimbursement/waiver	(1.55	)%(f)	(2.56	)%(f)	(2.76	)%	(2.67	)%	(4.78	)%	(4.26	)%	(2.76	)%
Operating expenses including reimbursement/waiver	2.51	%(f)(g)	2.73	%(f)	2.76	%	2.74	%	2.90	%	2.90	%	2.90	%
Operating expenses excluding reimbursement/waiver	2.77	%(f)	3.14	%(f)	2.90	%	2.75	%	4.99	%	4.66	%	3.41	%
PORTFOLIO TURNOVER RATE	200	%(e)	156	%(e)	189	%	65	%	151	%	249	%	193	%

(a) Prior to September 29, 2005, the Fund was named the Forward Emerald Technology Fund and invested a minimum 80% of its net assets, plus borrowings for investment purposes, if any, in a non-diversified portfolio of equity securities of public companies in the Technology sector. Accordingly, performance figures for periods prior to September 29, 2005, do not reflect the current strategy. Prior to February 29, 2000, the Fund was named the HomeState Year 2000 Fund and its investment objective focused on a specific industry within the Technology sector.

(b) Per share numbers have been calculated using the average shares method.

(c) Amount represents less than $0.01 per share.

(d) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(e) Not annualized.

(f) Annualized.

(g) Effective May 1, 2006, the net expense limitation changed from 2.90% to 1.99%.

June 30, 2006 82 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Emerald Opportunities Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			SIX MONTHS ENDED DECEMBER 31, 2005(a)			YEAR ENDED JUNE 30, 2005(a)			YEAR ENDED JUNE 30, 2004(a)			YEAR ENDED JUNE 30, 2003(a)			YEAR ENDED JUNE 30, 2002(a)			YEAR ENDED JUNE 30, 2001(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	8.18		$	6.87		$	7.00		$	5.56		$	5.33		$	12.10		$	29.59
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.05	)		(0.10	)(c)		(0.20	)(c)		(0.22	)(c)		(0.15	)(c)		(0.24	)(c)		(0.37	)
Net realized and unrealized gain/(loss) on investments		0.50			1.41			0.07			1.66			0.38			(6.11	)		(13.12	)
Total from Investment Operations		0.45			1.31			(0.13	)		1.44			0.23			(6.35	)		(13.49	)
LESS DISTRIBUTIONS
From capital gains		—			—			—			—			—			(0.42	)		(4.00	)
Total Distributions		—			—			—			—			—			(0.42	)		(4.00	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(d)		—			—			—			—			—			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.45			1.31			(0.13	)		1.44			0.23			(6.77	)		(17.49	)
NET ASSET VALUE, END OF PERIOD	$	8.63		$	8.18		$	6.87		$	7.00		$	5.56		$	5.33		$	12.10
TOTAL RETURN(e)		10.95	%(f)		19.07	%(f)		(1.86	)%		25.90	%		4.32	%		(53.99	)%		(52.00	)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000’s)	$	2,650		$	820		$	388		$	518		$	201		$	89		$	301
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(1.97	)%(g)		(2.64	)%(g)		(3.11	)%		(3.15	)%		(3.19	)%		(3.00	)%		(2.75	)%
Net investment loss excluding reimbursement/waiver		(2.06	)%(g)		(3.05	)%(g)		(3.24	)%		(3.17	)%		(5.28	)%		(4.76	)%		(3.26	)%
Operating expenses including reimbursement/waiver		3.18	%(g)(h)		3.22	%(g)		3.26	%		3.24	%		3.40	%		3.40	%		3.40	%
Operating expenses excluding reimbursement/waiver		3.27	%(g)		3.63	%(g)		3.40	%		3.25	%		5.49	%		5.16	%		3.91	%
PORTFOLIO TURNOVER RATE		200	%(f)		156	%(f)		189	%		65	%		151	%		249	%		193	%

(a) Prior to September 29, 2005, the Fund was named the Forward Emerald Technology Fund and invested a minimum 80% of its net assets, plus borrowings for investment purposes, if any, in a non-diversified portfolio of equity securities of public companies in the Technology sector. Accordingly, performance figures for periods prior to September 29, 2005, do not reflect the current strategy. Prior to February 29, 2000, the Fund was named the HomeState Year 2000 Fund and its investment objective focused on a specific industry within the Technology sector.

(b) The Fund began offering Class C Shares on July 1, 2000.

(c) Per share amounts calculated based on the average shares outstanding during the period.

(d) Amount represents less than $0.01 per share.

(e) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(f) Not annualized.

(g) Annualized.

(h) Effective May 1, 2006, the net expense limitation changed from 3.40% to 2.49%.

See Notes to Financial Statements 83 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Uniplan Real Estate Investment Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004			YEAR ENDED DECEMBER 31, 2003			YEAR ENDED DECEMBER 31, 2002			YEAR ENDED DECEMBER 31, 2001
NET ASSET VALUE, BEGINNING OF PERIOD	$	16.69		$	16.62		$	14.01		$	11.24		$	11.43		$	10.91
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.14			0.33	(a)		0.34	(a)		0.30	(a)		0.40	(a)		0.45	(a)
Net realized and unrealized gain on investments		1.80			1.47	(a)		3.62	(a)		2.85	(a)		0.02	(a)		0.77	(a)
Total from Investment Operations		1.94			1.80			3.96			3.15			0.42			1.22
LESS DISTRIBUTIONS:
From net investment income		(0.10	)		(0.22	)		(0.59	)		(0.31	)		(0.44	)		(0.44	)
From capital gains		(0.00	)		(1.50	)		(0.76	)		(0.07	)		(0.17	)		(0.18	)
Tax return of capital		(0.00	)		(0.01	)		—			—			—			(0.08	)
Total Distributions		(0.10	)		(1.73	)		(1.35	)		(0.38	)		(0.61	)		(0.70	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(b)		—	(b)		—	(b)		—	(b)		—	(b)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.84			0.07			2.61			2.77			(0.19	)		0.52
NET ASSET VALUE, END OF PERIOD	$	18.53		$	16.69		$	16.62		$	14.01		$	11.24		$	11.43
TOTAL RETURN		11.62	%(c)		11.01	%		28.77	%		28.53	%		3.56	%		11.31	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	44,331		$	43,288		$	48,346		$	36,735		$	23,456		$	15,085
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		1.52	%(d)		1.98	%(a)		2.23	%(a)		2.50	%(a)		3.63	%(a)		3.98	%(a)
Operating expenses including reimbursement/waiver		1.46	%(d)(e)		1.79	%		1.85	%		1.91	%		1.94	%		1.80	%
Operating expenses excluding reimbursement/waiver		n/a	(f)		n/a	(f)		n/a	(f)		2.16	%		2.09	%		2.41	%
PORTFOLIO TURNOVER RATE		16	%(c)		21	%		32	%		17	%		22	%		7	%

^(a) Amount has been restated. See Note 2 to December 31, 2005 Financial Statements.

^(b) Amount represents less than $0.01 per share.

^(c) Not Annualized.

^(d) Annualized.

^(e) Effective January 2, 2006, the net expense limitation changed from 1.79% to 1.69%.

^(f) Not applicable, no reimbursements/waiver were made by the Advisor.

June 30, 2006 84 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Emerald Growth Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)		SIX MONTHS ENDED DECEMBER 31, 2005		YEAR ENDED JUNE 30, 2005		YEAR ENDED JUNE 30, 2004		YEAR ENDED JUNE 30, 2003		YEAR ENDED JUNE 30, 2002		YEAR ENDED JUNE 30, 2001(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$13.57		$12.98		$13.02		$10.21		$10.26		$12.50		$18.31
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss	(0.08	)	(0.07	)(b)	(0.16	)(b)	(0.17	)(b)	(0.10	)(b)	(0.10	)(b)	(0.05	)(b)
Net realized and unrealized gain/(loss) on investments	1.61		1.38		0.43		2.98		0.05		(2.14	)	(1.58	)
Total from Investment Operations	1.53		1.31		0.27		2.81		(0.05	)	(2.24	)	(1.63	)
LESS DISTRIBUTIONS:
From capital gains	—		(0.72	)	(0.31	)	—		—		—		(4.18	)
Total Distributions	—		(0.72	)	(0.31	)	—		—		—		(4.18	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)	—	(c)	—		—		—		—		—		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE	1.53		0.59		(0.04	)	—		—		—		(5.81	)
Net Asset Value, End of Period	$15.10		$13.57		$12.98		$13.02		$10.21		$10.26		$12.50
TOTAL RETURN(d)	5.96	%(e)	10.21	%(e)	2.48	%	27.52	%	(0.49	)%	(17.92	)%	(9.62	)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)	$178,100		$158,056		$145,193		$112,354		$78,060		$82,805		$107,325
Ratio to average net assets:
Net Investment loss	(1.10	)%(f)	(1.08	)%(f)	(1.31	)%	(1.34	)%	(1.14	)%	(0.88	)%	(0.40	)%
Operating expenses	1.41	%(f)	1.40	%(f)	1.63	%	1.57	%	1.73	%	1.62	%	1.56	%
PORTFOLIO TURNOVER RATE	44	%(e)	34	%(e)	73	%	62	%	79	%	61	%	60	%

(a) Prior to July 1, 2001, the Fund was named the HomeState Pennsylvania Growth Fund and focused on a specific geographic region within the U.S.

(b) Per share numbers have been calculated using the average shares method.

(c) Amount represents less than $0.01 per share.

(d) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(e) Not Annualized.

(f) Annualized.

See Notes to Financial Statements 85 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Emerald Growth Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005			YEAR ENDED JUNE 30, 2004			YEAR ENDED JUNE 30, 2003			YEAR ENDED JUNE 30, 2002			YEAR ENDED JUNE 30, 2001(a)
NET ASSET VALUE, BEGINNING OF PERIOD		$13.06			$12.56			$12.70			$10.02			$10.14			$12.43			$18.31
INCOME/(LOSS) FROM OPERATIONS
Net investment loss		(0.13	)(b)		(0.11	)(b)		(0.23	)(b)		(0.25	)(b)		(0.16	)(b)		(0.17	)(b)		(0.13	)(b)
Net realized and unrealized gain/(loss) on investments		1.56			1.33			0.40			2.93			0.40			(2.12	)		(1.57	)
Total from Investment Operations		1.43			1.22			0.17			2.68			(0.12	)		(2.29	)		(1.70	)
LESS DISTRIBUTIONS
From capital gains		—			(0.72	)		(0.31	)		—			—			—			(4.18	)
Total Distributions		—			(0.72	)		(0.31	)		—			—			—			(4.18	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(c)		—			—			—			—			—			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.43			0.50			(0.14	)		2.68			(0.12	)		(2.29	)		(5.88	)
NET ASSET VALUE, END OF PERIOD	$	14.49		$	13.06		$	12.56		$	12.70		$	10.02		$	10.14		$	12.43
TOTAL RETURN(d)		5.50	%(e)		9.82	%(e)		1.74	%		26.75	%		(1.18	)%		(18.42	)%		(10.08	)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000s)		$11,379			$11,287			$11,498			$13,311			$4,905			$3,505			$1,434
Ratios to average net assets:
Net investment loss		(1.75	)%(f)		(1.73	)%(f)		(1.94	)%		(1.99	)%		(1.81	)%		(1.53	)%		(1.05	)%
Operating expenses		2.07	%(f)		2.04	%(f)		2.28	%		2.22	%		2.39	%		2.27	%		2.21	%
PORTFOLIO TURNOVER RATE		44	%(e)		34	%(e)		73	%		62	%		79	%		61	%		60	%

(a) The Fund began offering Class C Shares on July 1, 2000. Prior to July 1, 2001, the Fund was named the HomeState Pennsylvania Growth Fund and focused on a specific geographic region within the U.S.

(b) Per share numbers have been calculated using the average shares method.

(c) Amount represents less than $0.01 per share.

(d) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(e) Not Annualized.

(f) Annualized.

June 30, 2006 86 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Hoover Small Cap Equity Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)		YEAR ENDED DECEMBER 31, 2005		YEAR ENDED DECEMBER 31, 2004		YEAR ENDED DECEMBER 31, 2003		YEAR ENDED DECEMBER 31, 2002		YEAR ENDED DECEMBER 31, 2001
NET ASSET VALUE, BEGINNING OF PERIOD	$19.40		$18.45		$16.17		$12.05		$14.78		$14.26
INCOME/(LOSS) FROM OPERATIONS:
Net investment income loss	(0.07	)	(0.14	)	(0.17	)	(0.17	)	(0.18	)	(0.14	)
Net realized and unrealized gain/(loss) on investments	0.98		1.91		3.86		4.57		(2.55	)	0.75
Total from Investment Operations	0.91		1.77		3.69		4.40		(2.73	)	0.61
LESS DISTRIBUTIONS:
From capital gains	—		(0.82	)	(1.41	)	(0.28	)	—		(0.09	)
Tax return of capital	—		—		—		—		—		(—	)(a)
Total Distributions	—		(0.82	)	(1.41	)	(0.28	)	—		(0.09	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)	0.01		—	(a)	—	(a)	—	(a)	—	(a)	—
NET INCREASE/(DECREASE) IN NET ASSET VALUE	0.92		0.95		2.28		4.12		(2.73	)	0.52
NET ASSET VALUE, END OF PERIOD	$20.32		$19.40		$18.45		$16.17		$12.05		$14.78
TOTAL RETURN	4.74	%(b)	9.63	%	22.77	%	36.49	%	(18.47	)%	4.27	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$421,701		$323,125		$187,230		$128,317		$91,979		$115,546
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver	(0.73	)%(c)	(0.96	)%	(1.21	)%	(1.28	)%	(1.30	)%	(1.04	)%
Operating expenses including reimbursement/waiver	1.65	%(c)	1.73	%(d)	1.78	%	1.83	%	1.85	%	1.65	%
Operating expenses excluding reimbursement/waiver	1.67	%(c)	1.98	%	1.80	%	1.89	%	1.89	%	1.99	%
PORTFOLIO TURNOVER RATE	100	%(b)	181	%	207	%	190	%	147	%	140	%

(a) Amount represents less than $0.01 per share.

(b) Not Annualized.

(c) Annualized.

(d) Effective July 1, 2005, the net expense limitation changed from 1.89% to 1.69%.

See Notes to Financial Statements 87 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Hoover Small Cap Equity Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004			YEAR ENDED DECEMBER 31, 2003			PERIOD ENDED DECEMBER 31, 2002(a)
NET ASSET VALUE, BEGINNING OF PERIOD		$19.77			$18.71			$16.31			$12.10			$14.12
INCOME/(LOSS) FROM OPERATIONS:
Net investment income loss		(0.02	)		(0.08	)		(0.07	)		(0.05	)		(0.08	)
Net realized and unrealized gain/(loss) on investments		0.98			1.96			3.88			4.54			(1.94	)
Total from Investment Operations		0.96			1.88			3.81			4.49			(2.02	)
LESS DISTRIBUTIONS:
From capital gains		—			(0.82	)		(1.41	)		(0.28	)		—
Tax return of capital		—			—			—			—			—
Total Distributions		—			(0.82	)		(1.41	)		(0.28	)		—
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		0.01			—	(b)		—	(b)		—	(b)		—	(b)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.97			1.06			2.40			4.21			(2.02	)
NET ASSET VALUE, END OF PERIOD	$	20.74		$	19.77		$	18.71		$	16.31		$	12.10
TOTAL RETURN		4.91	%(c)		10.08	%		23.31	%		37.08	%		(14.31	)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)		$53,559			$34,442			$10,491			$3,926			$214
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(0.37	)%(d)		(0.53	)%		(0.76	)%		(0.82	)%		(1.13	)%(d)
Operating expenses including reimbursement/waiver		1.29	%(d)		1.34	%		1.34	%		1.35	%		1.85	%(d)
Operating expenses excluding reimbursement/waiver		1.31	%(d)		1.66	%		1.48	%		1.74	%		1.85	%(d)
PORTFOLIO TURNOVER RATE		100	%(c)		181	%		207	%		190	%		147	%(c)(e)

(a) The Fund began offering Institutional Class shares on June 6, 2002.

(b) Amount represents less than $0.01 per share.

(c) Not Annualized.

(d) Annualized.

(e) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2002.

June 30, 2006 88 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Hoover Small Cap Equity Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2005(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	19.41		$	17.13
INCOME/(LOSS) FROM OPERATIONS:
Net investment income loss		(0.08	)		(0.10	)
Net realized and unrealized gain on investments		0.99			3.20
Total from Investment Operations		0.91			3.10
LESS DISTRIBUTIONS:
From capital gains		—			(0.82	)
Total Distributions		—			(0.82	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		0.01			—	(b)
NET INCREASE IN NET ASSET VALUE		0.92			2.28
NET ASSET VALUE, END OF PERIOD	$	20.33		$	19.41
TOTAL RETURN(c)		4.75	%(d)		18.13	%(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	19,932		$	23,090
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(0.63	)%(e)		(0.82	)%(e)
Operating expenses including reimbursement/waiver		1.56	%(e)		1.69	%(e)(f)
Operating expenses excluding reimbursement/waiver		1.56	%(e)		1.92	%(e)
PORTFOLIO TURNOVER RATE		100	%(d)		181	%

(a) The Fund began offering Class A shares on May 2, 2005.

(b) Amount represents less than $0.01 per share.

(c) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(d) Not Annualized.

(e) Annualized.

(f) Effective July 1, 2005, the net expense limitation changed from 1.89% to 1.69%.

See Notes to Financial Statements 89 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Hoover Mini-Cap Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004			YEAR ENDED DECEMBER 31, 2003(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	17.81		$	16.26		$	14.21		$	10.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.07	)		(0.20	)		(0.19	)		(0.13	)
Net realized and unrealized gain on investments		1.17			2.20			2.41			4.52
Total from Investment Operations		1.10			2.00			2.22			4.39
LESS DISTRIBUTIONS:
From capital gains		—			(0.45	)		(0.17	)		(0.18	)
Total Distributions		—			(0.45	)		(0.17	)		(0.18	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(b)		—	(b)		—	(b)		—	(b)
NET INCREASE IN NET ASSET VALUE		1.10			1.55			2.05			4.21
NET ASSET VALUE, END OF PERIOD	$	18.91		$	17.81		$	16.26		$	14.21
TOTAL RETURN		6.18	%(c)		12.28	%		15.64	%		43.91	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	11,411		$	8,741		$	7,722		$	6,027
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(0.87	)%(d)		(1.25	)%		(1.41	)%		(1.67	)%
Operating expenses including reimbursement/waiver		1.79	%(d)(e)		1.99	%		1.95	%		1.99	%
Operating expenses excluding reimbursement/waiver		n/a	(f)		1.99	%		2.21	%		4.84	%
PORTFOLIO TURNOVER RATE		152	%(c)		277	%		306	%		421	%

(a) The Fund began offering Investor Class shares on January 1, 2003.

(b) Amount represents less than $0.01 per share.

(c) Not Annualized.

(d) Annualized.

(e) Effective January 2, 2006, the net expense limitation changed from 1.99% to 1.79%.

(f) Not applicable, no reimbursement/waiver made by Advisor.

June 30, 2006 90 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Hoover Mini-Cap Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004			PERIOD ENDED DECEMBER 31, 2003(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	18.05		$	16.38		$	14.24		$	13.02
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.03	)		(0.11	)		(0.09	)		(0.03	)
Net realized and unrealized gain on investments		1.20			2.23			2.40			1.43
Total from Investment Operations		1.17			2.12			2.31			1.40
LESS DISTRIBUTIONS:
From capital gains		—			(0.45	)		(0.17	)		(0.18	)
Total Distributions		—			(0.45	)		(0.17	)		(0.18	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(b)		—	(b)		—	(b)		—
NET INCREASE IN NET ASSET VALUE		1.17			1.67			2.14			1.22
NET ASSET VALUE, END OF PERIOD	$	19.22		$	18.05		$	16.38		$	14.24
TOTAL RETURN		6.48	%(c)		12.92	%		16.24	%		10.76	%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	33,562		$	31,088		$	24,706		$	9,373
Ratios to average net assets:
Net investment loss including reimbursement/waiver		(0.29	)%(d)		(0.69	)%		(0.86	)%		(1.04	)%(d)
Operating expenses including reimbursement/waiver		1.23	%(d)(e)		1.43	%		1.43	%		1.43	%(d)
Operating expenses excluding reimbursement/waiver		1.44	%(d)		1.71	%		1.87	%		3.44	%(d)
PORTFOLIO TURNOVER RATE		152	%(c)		277	%		306	%		421	%

(a) The Fund began offering Institutional Class shares on August 15, 2003.

(b) Amount represents less than $0.01 per share.

(c) Not Annualized.

(d) Annualized.

(e) Effective January 2, 2006, the net expense limitation changed from 1.43% to 1.23%.

See Notes to Financial Statements 91 June 30, 2006

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Legato Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2005(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	11.30		$	10.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.05	)		(0.10	)
Net realized and unrealized gain on investments		0.39			1.43
Total from Investment Operations		0.34			1.33
LESS DISTRIBUTIONS:
From net investment income		—			(0.03	)
Total Distributions		—			(0.03	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL (NOTE 7)		—	(b)		—	(b)
NET INCREASE IN NET ASSET VALUE		0.34			1.30
NET ASSET VALUE, END OF PERIOD	$	11.64		$	11.30
TOTAL RETURN(c)		3.01	%(d)		13.34	%(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000’s)	$	8,506		$	6,876
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(0.93	)%(e)		(1.25	)%(e)
Operating expenses including reimbursement/waiver		1.63	%(e)(f)		1.89	%(e)
Operating expenses excluding reimbursement/waiver		1.99	%(e)		3.53	%(e)
PORTFOLIO TURNOVER RATE		21	%(d)		28	%(d)

(a) The Fund commenced operations on April 1, 2005.

(b) Amount represents less than $0.01 per share.

(c) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(d) Not Annualized.

(e) Annualized.

(f) Effective May 1, 2006, the net expense limitation changed from 1.89% to 1.79%.

June 30, 2006 92 See Notes to Financial Statements

Notes to Financial Statements (Unaudited)

1. Organization

Forward Funds (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The accompanying financial statements and financial highlights are those of the Forward International Equity Fund (the “International Equity Fund”), the Forward International Small Companies Fund (the “International Small Companies Fund”), the Forward Global Emerging Markets Fund (the “Global Emerging Markets Fund”), the Sierra Club Equity Income Fund (the “Equity Income Fund”), the Sierra Club Stock Fund (the “Stock Fund”), the Forward Emerald Banking and Finance Fund (the “Banking and Finance Fund”), the Forward Emerald Opportunities Fund (the “Opportunities Fund”), the Forward Uniplan Real Estate Investment Fund (the “Real Estate Fund”), the Forward Emerald Growth Fund (the “Growth Fund”), the Forward Hoover Small Cap Equity Fund (the “Small Cap Fund”), the Forward Hoover Mini-Cap Fund (the “Mini-Cap Fund”) and the Forward Legato Fund (the “Legato Fund”) (each a “Fund” and collectively the “Funds”).

The International Equity Fund seeks to achieve high total returns and invests primarily in the equity securities of companies organized or located outside of the United States. The International Small Companies Fund seeks to achieve long-term growth of capital and invests in equity securities of companies with small market capitalizations located outside the United States. The Global Emerging Markets Fund seeks to achieve long-term growth of capital and invests primarily in the equity securities of emerging market countries. The Equity Income Fund seeks to achieve a competitive total return through capital appreciation and current income. The Equity Income Fund’s portfolio managers actively manage a portfolio of stocks and fixed-income securities that satisfy environmental and social criteria of the Sierra Club. The Stock Fund seeks to achieve high total return by investing in stocks that meet environmental and social criteria of the Sierra Club. The Banking and Finance Fund seeks to achieve long-term growth through capital appreciation with income as a secondary objective. The Opportunities Fund seeks to achieve capital appreciation and, under normal conditions will invest at least 25% of its net assets, plus borrowings for investment purposes, if any, in a non-diversified portfolio of equity securities of public companies in the technology sector. The Real Estate Fund seeks income with capital appreciation as a secondary goal and invests in real estate securities, including real estate investment trusts (“REITs”). The Growth Fund seeks to achieve long-term growth of capital through capital appreciation and invests in stocks and securities convertible into stocks. The Small Cap Fund and Mini-Cap Fund seek to achieve high total returns and invest primarily in the equity securities of companies that have small market capitalizations and offer future growth potential. The Legato Fund seeks to achieve high total return and invests primarily in the equity securities of companies that have small market capitalizations and offer future growth potential.

The International Equity Fund, International Small Companies Fund, Global Emerging Markets Fund, Equity Income Fund, Stock Fund, Real Estate Fund, Small Cap Fund and Mini-Cap Fund offer Investor Class shares.

The International Small Companies Fund, Global Emerging Markets Fund, Small Cap Fund, Mini-Cap Fund and Legato Fund offer Institutional Class shares.

The International Small Companies Fund, Stock Fund, Banking and Finance Fund, Opportunities Fund, Growth Fund, Small Cap Fund and Legato Fund offer Class A shares.

93 June 30, 2006

Notes to Financial Statements (Unaudited)

The Banking and Finance Fund, Opportunities Fund and Growth Fund offer Class C shares.

All classes of shares have identical rights to earnings, assets and voting privileges, except for class specific expenses and exclusive rights to vote on matters affecting only individual classes.

Class A Shares are subject to an initial sales charge of up to 4.75% imposed at the time of purchase. Class A shares for which no initial sales charge was paid are subject to a contingent deferred sales charge (“CDSC”) of 0.50% if the shares are sold within eighteen months, in accordance with the Fund’s prospectus. Class C shares are subject to a 1% CDSC for redemptions made within one year of purchase, in accordance with the Fund’s prospectus. The amount of the CDSC is determined as a percentage of the lesser of the current market value or the cost of shares being redeemed.

Certain funds invest a high percentage of their assets in specific sectors of the market. As a result, the economic and regulatory developments in a particular sector of the market, positive or negative, can have a greater impact on the relevant Fund’s net asset value and may cause its shares to fluctuate more than if the Fund did not concentrate in investments in a particular sector.

2. Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by each Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America.

Prior year information has been changed to reflect current presentation.

Portfolio Valuation: Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the mean of the closing bid and ask price. Portfolio securities that are primarily traded on foreign securities exchanges are valued at the last quoted sale or closing price of such securities on their respective exchanges. Investments in open-ended registered investment companies are valued at their net asset value each business day. An option contract is valued at the last sales price as quoted on the principal exchange on which such option is traded, or in the absence of a sale, the mean between the last bid and ask prices. Investments in short-term obligations that mature in 60 days or less are valued at amortized cost, which approximates fair value. All other securities and other assets are carried at their fair value as determined in good faith by or under the direction of the Board of Trustees. The Funds generally value their holdings, including fixed income securities, through the use of independent pricing agents, except for securities for which a ready market does not exist, which are valued under the direction of the Board of Trustees or by the Sub-Advisors using methodologies approved by the Board of Trustees. The valuation methodologies include, but are not limited to, the analysis of the effect of any restrictions on the sale of the security, product development and trends of the security’s issuer, changes in the industry and other competing companies, significant changes

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in the issuer’s financial position and any other event that could have a significant impact on the value of the security.

Securities Transactions and Investment Income: Securities transactions are accounted for on a trade date basis. Net realized gains or losses on sales of securities are determined by the identified cost method. Interest income, adjusted for accretion of discounts and amortization of premiums, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as a Fund is informed of such dividends in the exercise of reasonable diligence.

Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investments and income and expenses are converted into U.S. dollars based upon exchange rates prevailing on the respective dates of such transactions. The portion of unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed.

Option Writing/Purchasing: The Funds, excluding the Growth Fund, may write or purchase financial options contracts solely for the purpose of hedging their existing portfolio securities, or securities that the funds intend to purchase, against fluctuations in market value caused by changes in prevailing market interest rates. When the Fund writes or purchases an option, an amount equal to the premium received or paid by the Fund is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options, which expire unexercised, are treated by the Fund on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or proceeds from the sale in determining whether the funds have realized a gain or loss on investment transactions. Risks from entering into option transactions arise from the potential inability of counterparties to meet the terms of the contracts, the potential inability to enter into closing transactions because of an illiquid secondary market and from unexpected movements in security values. At June 30, 2006, the Opportunities Fund held purchased options with a market value of $337,892 and written options with a market value of $3,900, and the other Funds held no purchased or written options.

Written option activity for Opportunities Fund for the six months ended June 30, 2006 was as follows:

WRITTEN PUT OPTIONS	CONTRACTS	PREMIUMS
Outstanding at December 31, 2005	0	$	0
Positions opened	10		5,070
Exercised or closed	—		—
Expired	—		—
Outstanding at June 30, 2006	10	$	5,070

Short Sales: The Funds, excluding the Growth Fund, may sell securities short. Short sales are transactions in which a Fund sells a security that it does not own, in anticipation of a decline in the market value of that security. To complete such a transaction, a Fund must borrow the security to deliver to the buyer. The Fund then is obligated to replace the security borrowed by purchasing it in the open market at some later date. The Fund bears the risk of a loss if the market price of the

95 June 30, 2006

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security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund will realize a gain if the security declines in value between those dates. There can be no assurance that securities necessary to cover a short position will be available for purchase. All short sales must be fully collateralized. The Fund maintains collateral consisting of cash, U.S. Government securities or other liquid assets in an amount at least equal to the market value of their respective short positions. The Fund is liable for any dividends payable on securities while those securities are in a short position. At June 30, 2006, the Opportunities Fund held securities sold short with a market value of $1,067,189, and the other Funds held no securities sold short.

Cash Management Transactions: The Funds subscribe to the Brown Brothers Harriman & Co. (“BBH”) Cash Management Service (“CMS”). The BBH CMS is an investment product that automatically sweeps the Funds’ cash balances into overnight offshore time deposits with either BBH Grand Cayman branch or branches of pre-approved world class commercial banks. This fully automated program allows the Funds to earn interest on cash balances while remaining diversified. Excess cash invested with deposit institutions domiciled outside of the United States, as with any offshore deposit, may be subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure, or diminution. The Funds bear the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit is ultimately placed. Balances in the CMS are accounted for on a cost basis.

Lending of Portfolio Securities: The Funds, excluding the Equity Income Fund and the Stock Fund, from time to time may lend portfolio securities to broker-dealers, banks or institutional borrowers of securities. Upon lending its securities to third parties, a Fund receives compensation in the form of fees. The loans are secured by collateral which is at least 102% to the fair value of the securities loaned plus accrued interest in the form of cash or U.S. government securities. Gain or loss in the fair value of the securities loaned that may occur during the term of the loan will be for the account of the Fund. The Fund has the right under the lending agreement to recover the securities from the borrower on demand. Additionally, the Fund does not have the right to sell or repledge collateral received in the form of securities unless the borrower goes into default. The risks to the Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. 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 the matter to be voted upon is considered significant 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. At June 30, 2006, the International Equity Fund, International Small Companies Fund and Global Emerging Markets Fund had securities on loan valued at $55,426, $38,826,995 and $2,345,931, respectively, and received cash with a value of $56,710, $44,355,828 and $2,407,443, respectively, as collateral. At June 30, 2006, there were no securities on loan from the portfolios of the Banking and Finance Fund, Oppor - -

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tunities Fund, Real Estate Fund, Growth Fund, Small Cap Fund, Mini-Cap Fund and Legato Fund. Interest income from securities lending transactions are recorded in the Statement of Operations.

Foreign Securities: Each Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.

REITs: The Real Estate Fund invests a substantial portion of its assets in REITs and is subject to certain risks associated with direct investments in REITs. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend generally on their ability to generate cash flow to make distributions to shareowners, and certain REITs have self-liquidation provisions by which mortgages held may be paid in full and distributions of capital returns may be made at any time. In addition, the performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Internal Revenue Code of 1986 or its failure to maintain exemption from registration under the 1940 Act.

Distributions to Shareholders: Dividends from net investment income are declared and paid annually for the International Equity Fund, International Small Companies Fund, Global Emerging Markets Fund, Stock Fund, Banking and Finance Fund, Opportunities Fund, Growth Fund, Small Cap Fund, Mini-Cap Fund and Legato Fund, quarterly for the Equity Income Fund and monthly for the Real Estate Fund. Net realized capital gains, if any, are distributed at least annually.

Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Therefore, the source of the Funds’ distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain, or from paid-in-capital, depending upon the type of book/tax differences that may exist.

A portion of the dividend income recorded by the Real Estate Fund is from distributions by publicly traded REITs held by the Fund, and such distributions may also consist of capital gains and return of capital for tax purposes. The actual return of capital and capital gains portions of such distributions may be determined by formal notifications from the REITs subsequent to the calendar year-end. Distributions received from the REITs that are determined to be a return of capital are recorded by the Fund as a reduction of the cost basis of the securities held.

Federal Income Taxes: The Trust treats each Fund as a separate entity for Federal income tax purposes. Each Fund intends to continue to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). By so qualifying, each Fund will not be subject to Federal income taxes to the extent that it distributes substantially all of its taxable or tax-exempt income, if any, for its tax year ending December 31. In addition, by distributing in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, each Fund will not be subject to a Federal excise tax. Therefore, no provision is made by the Funds for Federal income or excise

97 June 30, 2006

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taxes. Withholding taxes on foreign dividends are paid or provided for in accordance with the applicable country’s tax rules and rates.

Expenses: Expenses that are specific to a Fund are charged directly to that Fund. Expenses that are common to all Funds generally are allocated among the Funds in proportion to their average daily net assets. For Funds offering multiple share classes, all of the realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class in proportion to its average daily net assets. Fees provided under the Rule 12b-1 plan for a particular class of the fund are charged to the operations of such class.

When-Issued and Delayed-Delivery Transactions: The Funds may purchase securities on a when-issued or delayed-delivery basis. A Fund will engage in when-issued and delayed-delivery transactions only for the purpose of acquiring portfolio securities consistent with its investment objective and policies and not for investment leverage. When-issued securities are securities purchased for delivery beyond the normal settlement date at a stated price and yield and thereby involve a risk that the yield obtained in the transaction will be less than that available in the market when delivery takes place. A Fund will not pay for such securities or start earning interest on them until they are received. When a Fund agrees to purchase securities on a when-issued basis, the custodian will set aside cash or liquid securities equal to the amount of the commitment in a segregated account. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in value based upon changes in the general level of interest rates. In when-issued and delayed-delivery transactions, a Fund relies on the seller to complete the transaction; the seller’s failure to do so may cause a Fund to miss an advantageous price or yield.

ReFlow Transactions: The Funds may participate in ReFlow, a program designed to provide an alternative liquidity source for mutual funds experiencing redemptions of their shares. In order to pay cash to shareholders who redeem their shares on a given day, a mutual fund typically must hold cash in its portfolio, liquidate portfolio securities, or borrow money, all of which impose certain costs on the fund. ReFlow provides participating mutual funds with another source of cash by standing ready to purchase shares from a fund equal to the amount of the fund’s net redemptions on a given day. ReFlow then generally redeems those shares when the fund experiences net sales. In return for this service, the Fund will pay a fee to ReFlow at a rate determined by a daily auction with other participating mutual funds. The costs to a Fund for participating in ReFlow are expected to be influenced by and comparable to the cost of other sources of liquidity, such as the Fund’s short-term lending arrangements or the costs of selling portfolio securities to meet redemptions. ReFlow will be prohibited from acquiring more than 3% of the outstanding voting securities of any Fund. The Funds will waive their redemption fee with respect to redemptions by ReFlow.

ReFlow Management Co., LLC, the entity that facilitates the day-to-day operations of ReFlow, is under common control with Forward Management, LLC, the investment advisor to the Funds. In light of this, the Board of Trustees has adopted certain procedures to govern the Funds’ participation in ReFlow. During the six months ended June 30, 2006, ReFlow fees that were incurred by the International Equity Fund, International Small Companies Fund, Global Emerging Markets Fund, Equity Income Fund, Stock Fund, Banking and Finance Fund, Real Estate Fund and Small Cap Fund are recorded in the Statement of Operations. During that same period there were no ReFlow fees incurred by the

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Opportunities Fund, Growth Fund, Mini-Cap Fund and Legato Fund.

3. Investment Management Services

The Trust has entered into an investment management agreement with Forward Management, LLC (“Forward Management” or the “Advisor”) pursuant to which Forward Management provides investment management services to the Funds and is entitled to receive a fee calculated daily and payable monthly at the following annual rates, as of June 30, 2006, based on each Fund’s average daily net assets: International Equity Fund, 0.85% up to $250 million, 0.75% over $250 million up to $1 billion, 0.65% over $1 billion; International Small Companies Fund, 1.00% up to $1 billion and 0.95% over $1 billion; Global Emerging Markets Fund, 1.25% up to $500 million, 1.20% over $500 million up to $1 billion, and 1.15% over $1 billion; Equity Income Fund, 0.94% up to $100 million, 0.87% over $100 million up to $250 million, 0.82% over $250 million up to $500 million, 0.78% over $500 million; Stock Fund, 0.85% up to $100 million, 0.81% over $100 million up to $250 million, 0.78% over $250 million up to $500 million, and 0.70% over $500 million; Banking and Finance Fund and Opportunities Fund, 1.00% on assets up to $100 million and 0.90% for assets over $100 million; Real Estate Fund, 0.85% up to $100 million, 0.80% over $100 million up to $500 million and 0.70% on assets over $500 million; Growth Fund, 0.75% on assets up to $250 million, 0.65% for the next $250 million, 0.55% for the next $250 million and 0.45% for assets over $750 million; Small Cap Fund, 1.05% up to $500 million and 1.00% over $500 million; Mini-Cap Fund, 1.05%; and Legato Fund, 1.00% up to $500 million and 0.85% on assets over $500 million.

Forward Management has entered into investment sub-advisory agreements with Pictet Asset Management Ltd. (“PAM”) for International Equity Fund, International Small Companies Fund and Global Emerging Markets Fund; New York Life Investment Management LLC (“NYLIM”) and Forward Uniplan Advisors, Inc. (“Uniplan”) for Equity Income Fund; NYLIM for Stock Fund; Emerald Mutual Fund Advisers Trust for Banking and Finance Fund, Opportunities Fund and Growth Fund; Hoover Investment Management Co., LLC (“Hoover”) for Small Cap Fund and Mini-Cap Fund; Uniplan for the Real Estate Fund; Netols Asset Management Inc. (“Netols”), Conestoga Capital Investment Advisors, LLC (“CCA”) and Riverbridge Partners, LLC (“Riverbridge”) for Legato Fund (each a “Sub-Advisor”). Pursuant to these agreements, the Sub-Advisors provide investment sub-advisory services to the Funds and are entitled to receive a fee from Forward Management calculated daily and payable monthly at the following annual rates, based on each Fund’s average daily net assets (for the Equity Income Fund, Stock Fund and Legato Fund, based on the portion of the Fund that is managed by each Sub-Advisor): International Equity Fund, 0.45% on assets up to $250 million, 0.40% on assets over $250 million up to $1 billion and 0.35% on assets over $1 billion; International Small Companies Fund, 0.65%; Global Emerging Markets Fund, 0.80%; Equity Income Fund, pursuant to the sub-advisory agreement with NYLIM, 0.37% on assets less than $100 million, 0.32% on assets $100 million to less than $250 million, 0.27% on assets $250 million to less than $500 million and 0.22% on assets $500 million and over; Equity Income Fund, pursuant to the sub-advisory agreement with Uniplan, 0.41% on assets less than $100 million, 0.32% on assets $100 million to less than $500 million, 0.27% on assets $250 million to less than $500 million, and 0.24% on assets $500 million and over; Stock Fund, pursuant to the sub-advisory agreement with NYLIM, 0.45% on assets less than $100 million, 0.40% on assets $100 million to less than $250 million, 0.35% on assets $250 million to less than

99 June 30, 2006

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$500 million and 0.30% on assets $500 million and over; Real Estate Fund, 0.60% on assets through $100 million, 0.55% on assets over $100 million through $500 million and 0.45% on assets over $500 million; Small Cap Fund, 0.70% on assets through $100 million and 0.55% on assets over $100 million; Mini-Cap Fund, 0.70% on assets through $100 million and 0.55% on assets over $100 million; and Legato Fund, 0.60%.

Effective January 1, 2006, Forward Management, the Funds’ investment advisor, took over direct management of a portion of the Stock Fund. Forward Management retains the entire fee for, and does not pay a sub-advisory fee with respect to, the portion of the portfolio of the Stock Fund that it directly manages.

Expense Limitations

The Investment Advisor has agreed to limit the total expenses of the Funds, exclusive of brokerage costs, interest, taxes, dividends and extraordinary expenses through the dates indicated to the annual rates stated below. Pursuant to these agreements, each Fund, except for the Growth Fund, Banking and Finance Fund and Opportunities Fund, will reimburse the Investment Advisor for any fee waivers or expense reimbursements made by the Advisor, provided that any such reimbursements made by a Fund to the Advisor will not cause the Fund’s expense limitation to exceed expense limitations in existence at the time the expense was incurred, or at the time of the reimbursement, whichever is lower, and the reimbursement is made within three years after the expenses were incurred.

Expense Limitations

FUND	INSTITUTIONAL CLASS		INVESTOR CLASS		CLASS A		CLASS C		END DATE
International Equity(a)	N/A		1.29	%	N/A		N/A		January 1, 2007
International Small Companies	1.26	%	1.56	%	1.56	%	N/A		January 1, 2007
Global Emerging Markets(b)	1.39	%	1.69	%	N/A		N/A		January 1, 2007
Equity Income	N/A		1.69	%	N/A		N/A		January 1, 2007
Stock	N/A		1.49	%	1.49	%	N/A		January 1, 2007
Banking and Finance	N/A		N/A		2.35	%	3.00	%	June 30, 2007
Opportunities(c)	N/A		N/A		1.99	%	2.49	%	June 30, 2007
Real Estate	N/A		1.69	%	N/A		N/A		January 1, 2007
Growth	N/A		N/A		2.25	%	2.90	%	June 30, 2007
Small Cap	1.34	%	1.69	%	1.69	%	N/A		January 1, 2007
Mini-Cap	1.23	%	1.79	%	N/A		N/A		January 1, 2007
Legato (d)	N/A		N/A		1.79	%	N/A		January 1, 2007

(a) From January 2, 2006 to April 30, 2006, the Advisor contractually agreed to waive a portion of its fees in amounts necessary to limit the Fund’s Investor Class shares’ operating expenses to an annual rate (as a percentage of the Fund’s average daily net assets) of 1.69%.

(b) From January 2, 2006 to April 30, 2006, the Advisor contractually agreed to waive a portion of its fees in amounts necessary to limit the Fund’s Institutional Class and Investor Class shares’ operating expenses to an annual rate (as a percentage of the Fund’s average daily net assets) of 1.59% and 1.89%, respectively.

(c) From January 2, 2006 to April 30, 2006, the Advisor contractually agreed to waive a portion of its fees in amounts necessary to limit the Fund’s Class A and Class C shares’ operating expenses to an annual rate (as a percentage of the Fund’s average daily net assets) of 2.90% and 3.40%, respectively.

(d) From January 2, 2006 to April 30, 2006, the Advisor contractually agreed to waive a portion of its fees in amounts necessary to limit the Fund’s Class A shares’ operating expenses to an annual rate (as a percentage of the Fund’s average daily net assets) of 1.89%.

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For the six months ended June, 2006, the fee waivers and/or reimbursements were as follows:

FUND	FEES WAIVED BY ADVISOR		RECOUPMENT OF PAST WAIVED/ REIMBURSED FEES BY ADVISOR			TOTAL
International Equity	$	32,875	$	0		$	32,875
International Small Companies		18,883		0			18,883
Global Emerging Markets		83,844		0			83,844
Equity Income		8,474		(1,249	)		7,225
Stock		31,202		0			31,202
Opportunities		10,554		N/A	(a)		10,554
Small Cap		39,913		(19,743	)		20,170
Mini-Cap		36,124		(11,605	)		24,519
Legato		14,823		0			14,823

(a) Opportunities Fund does not have a recoupment plan^.

At June 30, 2006, the balance of recoupable expenses for each Fund was:

FUND	2003		2004		2005		2006		TOTAL
International Equity	$	84,748	$	82,632	$	134,862	$	32,875	$	335,117
International Small Companies		0		379,991		379,970		18,883		778,844
Global Emerging Markets		N/A		99,444		296,908		83,844		480,196
Equity Income		175,961		79,228		52,666		8,474		316,329
Stock		178,542		133,688		151,523		31,202		494,955
Small Cap		53,297		43,565		714,343		39,913		851,118
Mini-Cap		114,887		88,725		78,439		36,124		318,174
Legato		N/A		N/A		79,728		14,823		94,551

4. Distribution Plans and Shareholder Services Plans

The Funds have adopted service and distribution plans pursuant to Rule 12b-1 under the 1940 Act (each a “Distribution Plan” and collectively “Distribution Plans”). Under the Distribution Plan for the Investor Class shares of International Equity Fund, International Small Companies Fund, Global Emerging Markets Fund, Equity Income Fund, Stock Fund, Real Estate Fund, Small Cap Equity Fund and Mini-Cap Fund, the Funds pay distribution fees on a monthly basis at an annual rate up to 0.25% of each Fund’s average daily net assets. Under the Distribution Plan for the Class A shares of the International Small Companies Fund, Stock Fund, Small Cap Fund and Legato Fund, the Funds pay distribution fees on a monthly basis at an annual rate up to 0.35% of each Fund’s average daily net assets.

Under the Distribution Plans for the Class A shares of the Growth Fund, the Banking and Finance Fund and the Opportunities Fund, the Growth Fund and Banking and Finance Fund will each reimburse the Distributor at an annual rate up to 0.35% and the Opportunities Fund will reimburse the distributor at an annual rate up to 0.50% of the average net assets attributable to the Class A shares of each of the Funds. Under the Distribution Plan for the Class C shares of the Growth Fund, the Banking and Finance Fund and the Opportunities Fund, each Fund will pay the Distributor at an annual rate of 1.00%, payable monthly, of which 0.25% is a shareholder servicing fee and 0.75% is for distribution-related expenses, of the average daily net assets attributable to the Class C shares of each of the Funds.

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In addition, the Investor Class shares of the International Equity Fund, Global Emerging Markets Fund, Real Estate Fund and Mini-Cap Fund; the Investor Class shares and Class A shares of the International Small Companies Fund, Stock Fund and Small Cap Fund; and the Institutional Class and Class A shares of the Legato Fund have a shareholder services plan (the “Shareholder Services Plan”) that may be used to pay shareholder servicing fees at an annual rate of up to 0.10% of each Fund’s average daily net assets.

The expenses of the Distribution and Shareholder Services Plans are reflected as distribution and service fees in the Statement of Operations. Institutional Class shares of the International Small Companies Fund, Global Emerging Markets Fund, Small Cap Fund and Mini-Cap Fund are not subject to distribution or shareholder service fees.

ALPS Distributors, Inc. (the “Distributor”) serves as the Funds’ distributor. The Distributor acts as an agent for the Funds and the distributor of their shares.

The Trust has entered into an administration agreement with ALPS Mutual Fund Services, Inc. (“AMFS”), pursuant to which AMFS serves as the administrator of the Funds. For International Equity Fund, International Small Companies, Global Emerging Markets Fund, Equity Income Fund, Stock Fund, Real Estate Fund, Small Cap Fund, Mini-Cap Fund and Legato Fund, this agreement became effective March 1, 2006 and prior to that time PFPC Inc. (“PFPC”), an indirect wholly owned subsidiary of PNC Financial Services Group, Inc., was the administrator for those Funds. For the Banking and Finance Fund, Opportunities Fund and Growth Fund, the agreement became effective September 12, 2005 and prior to that time, Citco Mutual Fund Services, Inc. was the administrator for those Funds.

ALPS Mutual Fund Services, Inc. serves as the Trust’s transfer agent and dividend paying agent.

Brown Brothers Harriman & Co. (“BBH”) is the Funds’ custodian.

5. Directors

The overall responsibility for oversight of the Funds rests with the Trustees of the Trust. As of June 30, 2006, there were six Trustees, five of whom are not “interested persons” of the Trust within the meaning of that term under the 1940 Act (each, an “Independent Trustee”). The Funds pay each Independent Trustee a retainer fee in the amount of $12,000 per year, $3,625 each per regular meeting and $1,000 each for attendance in person at each special meeting that is not held in conjunction with a regular meeting, and $750 for attendance at a special telephonic meeting. The Chairman of the Board of Trustees and the Chairman of the Audit Committee each receive a special retainer fee in the amount of $6,000 per year. The interested Trustee receives no compensation from the Funds.

6. Indemnifications

Under the Funds’ organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts with vendors and others that provide general indemnification. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. Based on experience, however, the Funds expect the risk of loss to be remote.

7. Shares of Beneficial Interest

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. The Board of Trust - -

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ees may establish additional Funds and classes of shares at any time in the future without shareholder approval. Holders of shares of the Funds of the Trust 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 are non-assessable, transferable and redeemable at the option of the shareholder. Shares have no pre-emptive rights.

Shares exchanged or redeemed within 180 days of purchase (60 days for the Equity Income Fund and Stock Fund) incur a fee of 2.00% of the total redemption amount. Such redemption fees are reflected in the “cost of shares redeemed” in the Statement of Changes in Net Assets. The redemption fees retained by International Equity Fund, International Small Companies Fund, Global Emerging Markets Fund, Equity Income Fund, Stock Fund, Banking and Finance Fund, Opportunities Fund, Real Estate Fund, Growth Fund, Small Cap Fund and Mini-Cap Fund for the six months ended June 30, 2006, were $3,051, $198,607, $20,432, $705, $1,186, $5,108, $524, $1,830, $4,727, $193,820 and $9,759, respectively. During that same period there were no redemption fees retained by Legato Fund.

The following entities owned of record or beneficially, as of June 30, 2006, 5% or greater of any class of the Funds outstanding equity securities:

FUND	NAME	PERCENTAGE
International Equity Investor Class	Sutton Place Associates, LLC	79.45	%
	ReFlow Management Co., LLC	9.08	%
International Small Companies Investor Class	Charles Schwab & Co., Inc.	50.00	%
	National Financial Services Corp.	13.88	%
International Small Companies Institutional Class	Charles Schwab & Co., Inc.	56.22	%
	Muir & Co.	10.26	%
	National Financial Services Corp.	6.28	%
	Brown Brothers Harriman & Co	5.91	%
International Small Companies Class A	Sutton Place Associates, LLC	83.07	%
Global Emerging Markets Investor Class	Sutton Place Associates, LLC	49.17	%
	ReFlow Management Co., LLC	9.80	%
	National Financial Services Corp.	9.15	%
	Charles Schwab & Co., Inc.	7.95	%
Global Emerging Markets Institutional Class	Brown Brothers Harriman & Co.	41.52	%
	Charles Schwab & Co., Inc.	10.97	%
	Ellard & Co.	10.89	%
	National Financial Services Corp.	10.48	%
Equity Income Investor Class	Sutton Place Associates, LLC	52.82	%
	Sierra Club	10.24	%
	ReFlow Management Co., LLC	5.94	%

103 June 30, 2006

Notes to Financial Statements (Unaudited)

FUND	NAME	PERCENTAGE
Stock Fund Investor Class	Sierra Club	35.44	%
	Charles Schwab & Co., Inc.	23.66	%
	National Financial Services Corp.	12.36	%
Stock Fund Class A	Sutton Place Associates, LLC	51.48	%
	ReFlow Management Co., LLC	31.70	%
	Forward Management, LLC	15.75	%
Banking and Finance Class A	Merrill Lynch Pierce Fenner & Smith	7.00	%
Banking and Finance Class C	Merrill Lynch Pierce Fenner & Smith	22.57	%
Opportunities Class A	Sutton Place Associates, LLC	25.69	%
Real Estate Investor Class	Sutton Place Associates, LLC	45.32	%
	Charles Schwab & Co., Inc.	31.40	%
Growth Class A	Merrill Lynch Pierce Fenner & Smith	35.35	%
	Salomon Smith Barney, Inc.	14.08	%
Growth Class C	Merrill Lynch Pierce Fenner & Smith	6.53	%
Small Cap Investor Class	Charles Schwab & Co., Inc.	36.29	%
	National Financial Services Corp.	13.22	%
	Muir & Co.	8.83	%
	New York Life Trust Co.	5.89	%
Small Cap Institutional Class	Charles Schwab & Co., Inc.	75.61	%
	National Financial Services Corp.	9.79	%
Small Cap Class A	Sutton Place Associates, LLC	76.49	%
	ReFlow Management Co., LLC	11.30	%
	Forward Management, LLC	5.65	%
Mini-Cap Investor Class	Charles Schwab & Co., Inc.	36.59	%
	Sutton Place Associates, LLC	34.81	%
	National Financial Services Corp.	14.18	%
Mini-Cap Institutional Class	Lepick & Co.	42.11	%
	Charles Schwab & Co., Inc.	31.61	%
Legato Class A	Sutton Place Associates, LLC	82.10	%
	Create Foundation	9.89	%
	Franklin Development	6.72	%

Sutton Place Associates, LLC and ReFlow Management Co., LLC are entities under common control with Forward Management.

June 30, 2006 104

Notes to Financial Statements (Unaudited)

8. Purchases and Sales of Investments

Investment transactions for the six months ended June 30, 2006, excluding temporary short-term investments, were as follows:

FUND		COST OF INVESTMENTS PURCHASED		PROCEEDS FROM INVESTMENTS SOLD
International Equity		$	13,030,465	$	11,614,562
International Small Companies			307,640,148		114,705,908
Global Emerging Markets			26,815,149		19,652,361
Equity Income			11,861,509		13,392,406
Stock			26,037,050		22,865,302
Banking and Finance			49,115,723		80,569,654
Opportunities			18,491,606		14,310,767
Real Estate			3,656,716		7,308,256
Growth	��		79,941,642		82,870,353
Small Cap			556,067,243		455,741,570
Mini-Cap			67,777,436		65,999,815
Legato			3,010,304		1,708,021

9. Tax Basis Information

Tax Basis of Investments: At June 30, 2006, the aggregate cost of investments, gross unrealized appreciation/(depreciation) and net unrealized appreciation/(depreciation) for Federal tax purposes was as follows:

FUND	COST OF INVESTMENTS		GROSS UNREALIZED APPRECIATION		GROSS UNREALIZED DEPRECIATION			NET UNREALIZED APPRECIATION/ (DEPRECIATION)
International Equity	$	25,175,643	$	4,504,068	$	(985,004	)	$	3,519,064
International Small Companies		397,772,275		58,151,155		(20,336,824	)		37,814,331
Global Emerging Markets		39,780,926		8,277,286		(1,721,081	)		6,556,205
Equity Income		26,342,823		3,208,284		(671,567	)		2,536,717
Stock		31,321,647		2,159,111		(1,507,409	)		651,702
Banking and Finance		215,274,330		67,727,227		(3,255,588	)		64,471,639
Opportunities		12,727,619		798,748		(442,364	)		356,384
Real Estate		25,088,849		19,457,446		(704,035	)		18,753,411
Growth		146,525,735		50,825,802		(7,190,595	)		43,635,207
Small Cap		455,263,834		58,242,785		(12,018,989	)		46,223,796
Mini-Cap		41,235,047		5,422,522		(766,312	)		4,656,210
Legato		7,780,271		1,170,764		(415,336	)		755,428

105 June 30, 2006

Notes to Financial Statements (Unaudited)

Post October Loss: Under the current tax law, capital and currency losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended December 31, 2005, the Funds elected to defer capital losses and currency losses occurring between November 1, 2005 and December 31, 2005 as follows:

FUND	F/X LOSS
Real Estate	$	47
International Small Companies	$	59,592

Capital Loss Carryforwards: At December 31, 2005 the following Funds had available for Federal income tax purposes unused capital losses as follows:

FUND	EXPIRING IN 2006	2007	2008		2009		2010		2011
International Equity	—	—		—		—		—	$	323,448
Global Emerging Markets	—	—	$	3,651,293	$	2,015,691		—		—
Opportunities	—	—		—	$	5,473,892	$	1,848,987		—

During the six months ended December 31, 2005, the Opportunities Fund utilized capital loss carryovers of $639,096. During the year ended June 30, 2005, the Opportunities Fund utilized capital loss carryovers of $445,067.

10. Portfolio of Investments

The investment categories used in this report may differ from the industry classification categories used for determining compliance with industry concentration restrictions and requirements applicable to each of the Funds.

June 30, 2006 106

Notes to Financial Statements for year ended December 31, 2005 (Audited)

These Notes relate to Forward International Equity Fund, Forward Hoover Small Cap Equity Fund, Forward Hoover Mini-Cap Fund, Forward Global Emerging Markets Fund, Forward International Small Companies Fund, Forward Uniplan Real Estate Investment Fund and Forward Legato Fund, which were included in the Trust at December 31, 2005, and have been included because of a restatement to the Forward Uniplan Real Estate Investment Fund.

Because Note 2 is new, references in the Financial Statements for year ended December 31, 2005 to Notes 2 through 12 are changed to 3 through 13.

1. Organization

Forward Funds (the “Trust”), is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust was organized as a Pennsylvania common law trust on August 26, 1992 under the name HomeState Group and was reorganized effective April 7, 2005 as a Delaware statutory trust created on February 1, 2005. At December 31, 2005, the Trust offered twelve investment portfolios. This annual report describes seven portfolios offered by the Trust. The accompanying financial statements and financial highlights are those of the Forward International Equity Fund (prior to September 1, 2005, the Forward International Equity Fund was called the Forward Hansberger International Growth Fund) (the “International Equity Fund”), the Forward Hoover Small Cap Equity Fund (the “Small Cap Fund”), the Forward Hoover Mini-Cap Fund (the “Mini-Cap Fund”), the Forward Global Emerging Markets Fund (the “Global Emerging Markets Fund”), the Forward International Small Companies Fund (the “International Small Companies Fund”), the Forward Uniplan Real Estate Investment Fund (the “Real Estate Fund”) and the Forward Legato Fund (the “Legato Fund”) (each a “Fund” and collectively the “Funds”). The Funds are successor mutual funds to previously operational funds (the “Predecessor Forward Funds,” each a “Predecessor Forward Fund”), which were series of a separate legal entity called Forward Funds, Inc. (the “Predecessor Company”), a Maryland corporation incorporated on October 3, 1997. The Predecessor Forward Funds were reorganized into the Funds effective after the close of business on June 30, 2005. Any reference in this annual report to events that occurred, payments that were made, and the financial data and information in this annual report prior to June 30, 2005 for the Funds relates to the Predecessor Forward Funds or Predecessor Company. The investment objective, policies and restrictions of each Fund and its respective Predecessor Forward Fund are substantially identical. Each Fund described in this annual report, except the Real Estate Fund, is a diversified portfolio as defined under the 1940 Act. The Sierra Club Stock Fund, the Sierra Club Equity Income Fund, the Forward Emerald Growth Fund, the Forward Emerald Opportunities Fund and the Forward Emerald Banking and Finance Fund have disclosed their financial statements and financial highlights in two separate annual reports.

The Small Cap Fund and Mini-Cap Fund seek to achieve high total returns and they invest primarily in the equity securities of companies that have small market capitalizations and offer future growth potential. The Real Estate Fund seeks income with capital appreciation as a secondary goal and invests in real estate securities, including real estate investment trusts (“REITs”); the International Equity Fund seeks to achieve high total returns and invests primarily in the equity securities of companies organized or located outside of the United States. The Global Emerging Markets Fund seeks to

107 June 30, 2006

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

achieve long-term growth of capital and invests primarily in the equity securities of emerging market countries. The International Small Companies Fund seeks to achieve long-term growth of capital and invests in equity securities of companies with small market capitalizations located outside the United States. The Legato Fund seeks to achieve high total returns and invests primarily in the equity securities of companies that have small market capitalizations and offer future growth potential.

2. Restatement

In the Real Estate Fund’s previously issued December 31, 2005 Annual Report to Shareholders, the Fund incorrectly classified return of capital distributions from real estate investment trust securities held in the Fund’s portfolio in prior years by presenting them as investment income in the Statements of Operations, of Changes in Net Assets and the Financial Highlights. This misclassification has no impact on the amounts previously reported for net asset value, net asset value per share, distributions paid, amounts of taxable income reported to shareholders, total return, portfolio turnover rate, security valuation, or net change in net assets from operations. The Fund’s financial statements have accordingly been restated to reclassify amounts reported as investment income, net realized gain and change in unrealized appreciation on investments in the Statements of Operations and of Changes in Net Assets for the years ended December 31, 2005 and 2004 and to revise the net investment income per share, net realized and unrealized gain/(loss) on investments per share and the ratio of net investment income to average net assets for each of the five years ended December 31, 2005, as presented in the Financial Highlights. In addition, the cost of investment securities as of December 31, 2005 as previously disclosed in the

Fund’s Portfolio of Investments and Statement of Assets and Liabilities, along with net unrealized appreciation on investments, other components of net assets, and certain other amounts in the Fund’s notes to financial statements have been restated as discussed below.

The Fund’s Schedule of Investments and Statement of Assets and Liabilities as of December 31, 2005 have not been presented in these financial statements because only the amounts discussed herein were restated. To read the Fund’s audited Schedule of Investments and Statement of Assets and Liabilities as of December 31, 2005, after taking into account the matters discussed in this Note, refer to the Trust’s Form N-CSR, which was filed with the Securities and Exchange Commission on March 10, 2006.

The amounts before and after restatement for the Real Estate Fund are shown in the table below.

	AS ORIGINALLY REPORTED		RESTATED
Portfolio of Investments — Cost
At December 31, 2005
Total Common Stocks	$	27,004,846	$	26,468,337
Total Investments	$	29,349,955	$	28,813,446
	AS ORIGINALLY REPORTED		RESTATED
Statement of Assets and Liabilities
At December 31, 2005
Accumulated net realized gain/(loss) on investments and foreign currency transactions	$	529,001	$	(7,508	)
Net unrealized appreciation on investments and translation of asset and liabilities in foreign currencies	$	15,746,291	$	16,282,800
Investments, at cost	$	29,349,955	$	28,813,446
	AS ORIGINALLY REPORTED		RESTATED
Statement of Operations
Year Ended December 31, 2005
INVESTMENT INCOME:
Dividends	$	1,985,809	$	1,666,307
Total investment income	$	2,001,180	$	1,681,678
NET INVESTMENT INCOME	$	1,202,387	$	882,885
Net realized gain on investments	$	2,875,816	$	3,193,635
Net change in unrealized appreciation on investments	$	355,668	$	357,351

June 30, 2006 108

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

	AS ORIGINALLY REPORTED		RESTATED
Statement of Changes in Net Assets
Year Ended December 31, 2005
Net investment income	$	1,202,387	$	882,885
Net realized gain on investments		2,875,816		3,193,635
Net realized gain on foreign currency		58		58
Net change in unrealized appreciation on investments		355,616		357,299
Net increase in net assets from operations	$	4,433,877	$	4,433,877
	AS ORIGINALLY REPORTED		RESTATED
Statement of Changes in Net Assets
Year Ended December 31, 2004
Net investment income	$	1,344,539	$	945,295
Net realized gain on investments		2,687,104		2,883,186
Net realized gain on foreign currency		2		2
Net change in unrealized appreciation on investments		7,139,219		7,342,381
Net increase in net assets from operations	$	11,170,864	$	11,170,864

	AS ORIGINALLY REPORTED			RESTATED
Per Share Financial Highlights
Year Ended December 31,
Net Investment Income:
2005	$	0.45		$	0.33
2004	$	0.48		$	0.34
2003	$	0.39		$	0.30
2002	$	0.44		$	0.40
2001	$	0.52		$	0.45
Net realized and unrealized gain/(loss) on investments:
2005	$	1.35		$	1.47
2004	$	3.48		$	3.62
2003	$	2.76		$	2.85
2002	$	(0.02	)	$	0.02
2001	$	0.70		$	0.77
Ratio to average net assets:
Net investment income including reimbursement/waiver
2005		2.69	%		1.98	%
2004		3.17	%		2.23	%
2003		3.30	%		2.50	%
2002		4.03	%		3.63	%
2001		4.63	%		3.98	%

	AS ORIGINALLY REPORTED			RESTATED
Notes to Financial Statements
9. Tax Basis Information
Reclassifications:
Increase/(Decrease) Accumulated Net Investment Income/(Loss)	$	(442,582	)	$	(123,080	)
Increase/(Decrease) Accumulated Net Realized Gain/(Loss)	$	569,836		$	250,334

3. Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by each Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America.

Portfolio Valuation: Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the mean of the closing bid and ask price. Portfolio securities which are primarily traded on foreign securities exchanges are valued at the last quoted sale price of such securities on their respective exchanges. Investments in short-term obligations that mature in 60 days or less are valued at amortized cost, which approximates fair value. All other securities and other assets are carried at their fair value as determined in good faith by or under the direction of the Board of Trustees. The Funds generally value their holdings, including fixed income securities, through the use of independent pricing agents,

109 June 30, 2006

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

except for securities for which a ready market does not exist, which are valued under the direction of the Board of Trustees or by the Sub-Advisors using methodologies approved by the Board of Trustees. The valuation methodologies include, but are not limited to, the analysis of the effect of any restrictions on the sale of the security, product development and trends of the security’s issuer, changes in the industry and other competing companies, significant changes in the issuer’s financial position and any other event that could have a significant impact on the value of the security.

Securities Transactions and Investment Income: Securities transactions are accounted for on a trade date basis. Net realized gains or losses on sales of securities are determined by the identified cost method. Interest income, adjusted for accretion of discounts and amortization of premiums, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities where the ex-dividend date may have passed are recorded as soon as a Fund is informed of such dividends in the exercise of reasonable diligence.

Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investments and income and expenses are converted into U.S. dollars based upon exchange rates prevailing on the respective dates of such transactions. The portion of unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed.

Distributions to Shareholders: Dividends from net investment income are declared and paid annually for the International Equity Fund, Small Cap Fund, Mini-Cap Fund, Global Emerging Markets Fund, International Small Companies Fund, Legato Fund and monthly for the Real Estate Fund. Net realized capital gains, if any, are distributed at least annually.

Income and capital gain distributions are determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. Therefore, the source of the Funds’ distributions may be shown in the accompanying financial statements as either from or in excess of net investment income or net realized gain, or from paid-in-capital, depending upon the type of book/tax differences that may exist.

A portion of the dividend income recorded by the Real Estate Fund is from distributions by publicly traded REITs, and such distributions may also consist of capital gains and return of capital for tax purposes. The actual return of capital and capital gains portions of such distributions may be determined by formal notifications from the REITs subsequent to the calendar year-end. Distributions received from the REITs that are determined to be a return of capital, are recorded by the Fund as a reduction of the cost basis of the securities held.

Federal Income Taxes: The Trust treats each Fund as a separate entity for Federal income tax purposes. Each Fund intends to continue to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). By so qualifying, each Fund will not be subject to Federal income taxes to the extent that it distributes substantially all of its taxable or tax-exempt income, if any, for its tax year ending December 31. In addition, by distributing in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, each Fund will not be subject to a Federal excise tax. Therefore, no provision is

June 30, 2006 110

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

made by the Funds for Federal income or excise taxes. Withholding taxes on foreign dividends have been paid or provided for in accordance with the applicable country’s tax rules and rates.

Expenses: Expenses that are specific to a Fund are charged directly to that Fund. Expenses that are common to all Funds generally are allocated among the Funds in proportion to their average daily net assets. For Funds offering multiple share classes, all of the realized and unrealized gains and losses and net investment income, other than class specific expenses, are allocated daily to each class in proportion to its average daily net assets.

ReFlow Transactions: The Funds may participate in ReFlow, a program designed to provide an alternative liquidity source for mutual funds experiencing redemptions of their shares. In order to pay cash to shareholders who redeem their shares on a given day, a mutual fund typically must hold cash in its portfolio, liquidate portfolio securities, or borrow money, all of which impose certain costs on the fund. ReFlow provides participating mutual funds with another source of cash by standing ready to purchase shares from a fund equal to the amount of the fund’s net redemptions on a given day. ReFlow then generally redeems those shares when the fund experiences net sales. In return for this service, the Fund will pay a fee to ReFlow at a rate determined by a daily auction with other participating mutual funds. The costs to a Fund for participating in ReFlow are expected to be influenced by and comparable to the cost of other sources of liquidity, such as the Fund’s short-term lending arrangements or the costs of selling portfolio securities to meet redemptions. ReFlow will be prohibited from acquiring more than 3% of the outstanding voting securities of any Fund. The Funds will waive their redemption fee with respect to redemptions by ReFlow.

ReFlow Management Co., LLC, the entity which facilitates the day to day operations of ReFlow, is under common control with Forward Management, LLC the investment advisor to the Funds. In light of this, the Board of Trustees has adopted certain procedures to govern the Funds’ participation in ReFlow. During the year ended December 31, 2005, ReFlow fees which were incurred by the Small Cap Fund, Mini-Cap Fund, Real Estate Fund, International Equity Fund, Global Emerging Markets Fund and International Small Companies Fund were $14,073, $1,142, $3,283, $2,946, $5,099, $8,641, respectively.

Cash Management Transactions: The Funds subscribe to the Brown Brothers Harriman & Co. (“BBH&Co.”) Cash Management Service (“CMS”). The BBH&Co. CMS is an investment product that automatically sweeps the Funds’ cash balances into overnight offshore time deposits with either BBH&Co.’s Grand Cayman branch or branches of pre-approved world class commercial banks. This fully automated program allows the Funds to earn interest on cash balances while remaining diversified. Excess cash invested with deposit institutions domiciled outside of the United States, as with any offshore deposit, may be subject to sovereign actions in the jurisdiction of the deposit institution including, but not limited to, freeze, seizure, or diminution. The Funds bear the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit is ultimately placed. Balances in the CMS are accounted for on a cost basis.

4. Investment Management Services

The Trust has entered into an investment management agreement with Forward Management, LLC (“Forward Management” or the “Advisor”) pursuant to which Forward Management provides investment management services to the Funds and is entitled to receive a fee calculated

111 June 30, 2006

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

daily and payable monthly at the following annual rates, as of December 31, 2005, based on each Fund’s average daily net assets: International Equity Fund, 0.85% up to $250 million, 0.75% over $250 million up to $1 billion, 0.65% over $1 billion; Small Cap Fund, 1.05%; Mini-Cap Fund, 1.05%; Global Emerging Markets Fund, 1.25%; International Small Companies Fund, 1.00%; Real Estate Fund, 0.85% up to $100 million, 0.80% over $100 million up to $500 million and 0.70% on assets over $500 million; and Legato Fund, 1.00% up to $500 million, 0.85% on assets over $500 million.

Prior to September 1, 2005, the International Equity Fund was known as the Forward Hansberger International Growth Fund and the fee was 0.85% up to $50 million, 0.75% over $50 million up to $100 million, 0.65% over $100 million up to $250 million, 0.60% over $250 million up to $500 million and 0.55% over $500 million.

As of January 1, 2006, the fee for the Small Cap Fund will be 1.05% up to $500 million and 1.00% over $500 million; the fee for the Global Emerging Markets Fund will be 1.25% up to $500 million, 1.20% over $500 million up to $1 billion, and 1.15% over $1 billion; and the fee for the International Small Companies Fund will be 1.00% up to $1 billion and 0.95% over $1 billion.

Forward Management has entered into investment sub-advisory agreements with Hoover Investment Management Co., LLC (“Hoover”) for the Small Cap Fund and Mini-Cap Fund; Pictet Asset Management Ltd. (formerly known as Pictet International Management Ltd.) (“Pictet”) for the Global Emerging Markets Fund, the International Equity Fund, and the International Small Companies Fund; Forward Uniplan Advisors, Inc. (“Uniplan”) for the Real Estate Fund and Netols Asset Management Inc. (“Netols”), Conestoga Capital Investment Advisors, LLC (“CCA”) and Riverbridge Partners, LLC (“Riverbridge”) for the Legato Fund (each a “Sub- Advisor”). Pursuant to these agreements, the Sub-Advisors provide investment sub-advisory services to the Funds and are entitled to receive a fee from Forward Management calculated daily and payable monthly at the following annual rates, as of December 31, 2005, based on each Fund’s average daily net assets: International Equity Fund, 0.45% on assets up to $250 million, 0.40% on assets over $250 million up to $1 billion, 0.35% on assets over $1 billion; Small Cap Fund, 0.70% on the first $100 million and 0.60% on assets over $100 million; Mini-Cap Fund, 0.70% on the first $100 million and 0.60% on assets over $100 million; Global Emerging Markets Fund, 0.65%; International Small Companies Fund, 0.65%; Real Estate Fund, 0.60% on the first $100 million, 0.55% on the next $400 million and 0.45% on assets over $500 million; and Legato Fund, 0.60%. The fees payable to each Sub-Advisor for the Legato Fund are computed with respect to the portion of the Fund’s portfolio allocated to the respective Sub-Advisor.

Prior to September 1, 2005, the International Equity Fund was known as the Forward Hansberger International Growth Fund and the Sub-Advisor was Hansberger Global Investors, Inc. (“HGI”). The fee payable from Forward to HGI was 0.50%.

As of January 1, 2006, the sub-advisory fee for the Small Cap Fund will be 0.70% on the first $100 million and 0.55% on assets over $100 million.

Waiver of Fees: The Advisor contractually agreed to waive a portion of its fees and/or reimburse certain expenses. These waivers and/or reimbursements continued until January 1, 2006 for all the funds except for the Legato Fund, for which these waivers and/or reimbursements will continue through May 1, 2006. As a result of such waivers, the total annual fund operating expenses (as a percentage of net assets) for the year ended December 31, 2005 were limited to

June 30, 2006 112

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

1.69% for the International Equity Fund, 1.69% for the Small Cap Fund Investor Class, 1.34% for the Small Cap Fund Institutional Class, 1.69% for the Small Cap Fund Class A, 1.99% for the Mini-Cap Fund Investor Class, 1.43% for the Mini-Cap Fund Institutional Class, 1.95% for the Global Emerging Markets Fund Investor Class, 1.70% for the Global Emerging Markets Fund Institutional Class, 1.45% for the International Small Companies Fund Investor Class, 1.20% for the International Small Companies Fund Institutional Class, 1.78% for the International Small Companies Fund Class A, 1.79% for the Real Estate Fund and 1.89% for the Legato Fund Class A shares. Any waiver or reimbursement by the Advisor is subject to recoupment from the Fund within the three years following the date on which the expense was incurred, to the extent such recoupment would not cause total expenses to exceed the expense limitations in existence at the time the expense was incurred, or at the time of the reimbursement, whichever is lower.

For the year ended December 31, 2005, the fee waivers and/or reimbursements were as follows:

FUND	FEES WAIVED BY ADVISOR		RECOUPMENT OF PAST WAIVED/ REIMBURSED FEES BY ADVISOR			TOTAL
Small Cap	$	714,343		—		$	714,343
Mini-Cap		78,439	$	(9,349	)		69,090
Real Estate		—		(80,300	)		(80,300	)
International Equity		134,862		—			134,862
Global Emerging Markets		296,908		—			296,908
International Small Companies		379,970		—			379,970
Legato		79,728		—			79,728

At December 31, 2005, the balance of recoupable expenses for each Fund was:

FUND	2003		2004		2005		TOTAL
Small Cap	$	73,040	$	43,565	$	714,343	$	830,948
Mini-Cap		135,841		81,858		69,090		286,789
Real Estate		80,300		—		—		—
International Equity		84,748		82,632		134,862		302,242
Global Emerging Markets		—		99,444		296,908		396,352
International Small Companies		—		379,991		379,970		759,961
Legato		—		—		79,728		79,728

As of January 2, 2006, the Advisor has contractually agreed to waive a portion of its fees and/or reimburse certain expenses which should have the effect of limiting the total annual fund operating expenses (as a percentage of assets) as follows: 1.69% for the International Equity Fund, 1.69% for the Small Cap Fund Investor Class, 1.34% for the Small Cap Fund Institutional Class, 1.69% for the Small Cap Fund Class A, 1.79% for the Mini-Cap Fund Investor Class, 1.23% for the Mini-Cap Fund Institutional Class, 1.89% for the Global Emerging Markets Fund Investor Class, 1.59% for the Global Emerging Markets Fund Institutional Class, 1.56% for the International Small Companies Fund Investor Class, 1.26% for the International Small Companies Fund Institutional Class, 1.56% for the International Small Companies Fund Class A, and 1.69% for the Real Estate Fund. These waivers and reimbursements will continue through January 1, 2007. Any waiver or reimbursement by the Advisor is subject to recoupment from the Fund within the three years following the date on which the expense was incurred, to the extent

113 June 30, 2006

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

such recoupment would not cause total expenses to exceed the expense limitations in existence at the time the expense was incurred, or at the time of the reimbursement, whichever is lower.

5. Distribution Plan and Shareholder Services Plan

The Investor Class shares of the Funds have a Distribution Plan pursuant to Rule 12b-1 for which up to 0.25% of each Fund’s average daily net assets may be used to pay distribution fees. The Class A shares of the Small Cap Fund, International Small Companies Fund and Legato Fund have a Distribution Plan pursuant to Rule 12b-1 for which up to 0.35% of each Fund’s average daily net assets may be used to pay distribution fees. In addition, the Investor Class shares of the International Equity Fund, Mini-Cap Fund, Global Emerging Markets Fund, and Real Estate Fund; the Investor Class shares and Class A shares of the Small Cap Fund and International Small Companies Fund; and the Institutional Class shares and Class A shares of the Legato Fund have a Shareholder Services Plan which may be used to pay shareholder servicing fees at an annual rate of up to 0.10% of each Fund’s average daily net assets. The expenses of the Distribution and Shareholder Services Plans are reflected as distribution and service fees in the Statement of Operations. Institutional Class shares of the Small Cap Fund, Mini-Cap Fund, Global Emerging Markets Fund and International Small Companies Fund are not subject to distribution or service fees.

The Trust has entered into an administration agreement with PFPC Inc. (“PFPC”), an indirect wholly owned subsidiary of PNC Financial Services Group, Inc., which will terminate effective March 1, 2006. Accordingly, the Trust has entered into an administration agreement with ALPS Mutual Fund Services, Inc. (“AMFS”), pursuant to which AMFS will become the administrator of the Funds effective March 1, 2006.

Effective September 9, 2005, ALPS Distributors, Inc. (the “Distributor”) serves as the Funds’ distributor. Prior to that time, PFPC Distributors, Inc. served as the Funds’ distributor. The Distributor acts as an agent for the Funds and the distributor of their shares.

Effective October 17, 2005, ALPS Mutual Fund Services, Inc. serves as the Trust’s transfer agent and dividend paying agent. Prior to that time, PFPC served as the Trust’s transfer agent and dividend paying agent.

6. Trustees and Officers

The overall responsibility for oversight of the Funds rests with the Trustees of the Trust. As of December 31, 2005, there were five Trustees, four of whom are not “interested persons” of the Trust within the meaning of that term under the 1940 Act. As of January 1, 2006, the number of Trustees was increased to six and Mr. DeWitt F. Bowman was appointed as a non-interested Trustee. The Funds pay each non-interested Trustee a retainer fee in the amount of $12,000 per year, $3,625 each per regular meeting and $1,000 each for attendance in person at each special meeting that is not held in conjunction with a regular meeting, and $750.00 for attendance at a special telephonic meeting. The Chairman of the Board of Trustees and the Chairman of the Audit Committee each receive a special retainer fee in the amount of $6,000 per year. The Funds will also reimburse Trustees’ travel expenses incurred attending Board Meetings. The interested Trustee does not receive any compensation by the Funds.

Prior to his appointment as a non-interested Trustee, Mr. Bowman served as a consultant to the Trust from July 21, 2005 through December 31, 2005, and was paid consulting fees by the Trust in the amount of $7,015.57 for his services as an advisory board member during the year ended December 31, 2005.

June 30, 2006 114

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

7. Indemnifications

Under the Funds’ organizational documents, its officers and trustees are indemnified against certain liability arising out of the performance of their duties to the Funds. In addition, in the normal course of business, the Funds enter into contracts with their vendors and others that provide general indemnification. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds. However, based on experience, the Funds expect the risk of loss to be remote.

8. Shares of Beneficial Interest

The capitalization of the Trust consists of an unlimited number of shares of beneficial interest with no par value per share. Each Fund, other than the Forward Legato Fund, Forward Emerald Growth Fund, Forward Emerald Opportunities Fund and Forward Emerald Banking and Finance Fund, currently offers a class of shares called the Investor Class shares. The Forward Hoover Small Cap Equity Fund, Forward Hoover Mini-Cap Fund, Forward International Small Companies Fund, Forward Global Emerging Markets Fund and Forward Legato Fund offer a class of shares called the Institutional Class shares to institutional investors and investors meeting certain purchase qualifications. The Forward Legato Fund, Forward Hoover Small Cap Equity Fund, Forward International Small Companies Fund, Sierra Club Stock Fund, Forward Emerald Growth Fund, Forward Emerald Opportunities Fund and Forward Emerald Banking and Finance Fund offer a class of shares called Class A shares. In addition, the Forward Emerald Growth Fund, Forward Emerald Opportunities Fund and Forward Emerald Banking and Finance Fund offer a class of shares called Class C shares. The Board of Trustees may establish additional Funds and classes of shares at any time in the future without shareholder approval. Holders of shares of the Funds of the Trust 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 are non-assessable, transferable and redeemable at the option of the shareholder. Shares have no pre-emptive rights.

Shares exchanged or redeemed within 180 days of purchase incur a fee of 2.00% of the total redemption amount. Such redemption fees are reflected in the “cost of shares redeemed” in the Statement of Changes in Net Assets. The redemption fees retained by the Small Cap Fund, the Mini-Cap Fund, the Real Estate Fund, the International Equity Fund, the Global Emerging Markets Fund and the International Small Companies Fund for the year ended December 31, 2005 were $119,959, $8,283, $4,881, $759, $7,319 and $55,281, respectively.

115 June 30, 2006

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

The following entities owned of record or beneficially, as of December 31, 2005, 5% or greater of any class of the Funds outstanding equity securities:

FUND	NAME	PERCENTAGE
Small Cap Investor Class	Charles Schwab & Co., Inc.	37.28	%
	Muir & Co.	9.88	%
	New York Life Trust Co.	6.64	%
Small Cap Institutional Class	Charles Schwab & Co., Inc.	68.81	%
	The Northern Trust Company	14.25	%
Small Cap Class A	Sutton Place Associates LLC	84.48	%
	ReFlow Management Co., LLC	9.31	%
Mini-Cap Investor Class	Sutton Place Associates LLC	65.18	%
	Charles Schwab & Co., Inc.	23.22	%
	National Investor Services	5.47	%
Mini-Cap Institutional Class	Lepick & Co	43.19	%
	Charles Schwab & Co., Inc.	25.40	%
	Trust Management for Bank of West	5.01	%
	Sherjac c/o Amegy Bank of Texas	5.00	%
Real Estate	Sutton Place Associates LLC	50.53	%
	Charles Schwab & Co., Inc.	28.80	%
International Equity	Sutton Place Associates LLC	82.32	%
	ReFlow Management Co., LLC	9.40	%
Global Emerging Markets Investor Class	Sutton Place Associates LLC	70.98	%
	ReFlow Management Co., LLC	8.35	%
Global Emerging Markets Institutional Class	Brown Brothers Harriman & Co.	46.61	%
	Ellard & Co	12.30	%
	Charles Schwab & Co., Inc.	10.92	%
	Jupiter & Co	6.96	%
	Wells Fargo Bank N.A.	5.33	%
International Small Companies Investor Class	Charles Schwab & Co., Inc.	33.90	%
	Reliance Trust	9.24	%
	National Investor Services	8.04	%
International Small Companies Institutional Class	Charles Schwab & Co., Inc.	63.93	%
	Brown Brothers Harriman & Co.	7.70	%
International Small Companies Class A	Sutton Place Associates LLC	95.24	%
Legato Class A	Sutton Place Associates LLC	98.57	%

Sutton Place Associates LLC and ReFlow Management Co., LLC are entities under common control with Forward Management.

June 30, 2006 116

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

9. Purchases and Sales of Investments

Investment transactions for the year ended December 31, 2005, excluding temporary short-term investments, were as follows:

FUND	COST OF INVESTMENTS PURCHASED		PROCEEDS FROM INVESTMENTS SOLD
Small Cap	$	627,462,766	$	484,409,783
Mini-Cap		98,338,384		94,351,227
Real Estate		9,154,465		17,162,699
International Equity		31,475,590		34,282,109
Global Emerging Markets		25,224,113		15,981,218
International Small Companies		228,750,516		115,348,212
Legato		7,590,688		1,643,818

10. Tax Basis Information

Reclassifications: At December 31, 2005, permanent differences in book and tax accounting have been reclassified as follows:

	INCREASE/ (DECREASE) PAID-IN CAPITAL			INCREASE/ (DECREASE) ACCUMULATIVE NET INVESTMENT INCOME/(LOSS)			INCREASE/ (DECREASE) ACCUMULATIVE NET REALIZED GAIN/(LOSS)
Small Cap		—		$	2,528,304		$	(2,528,304	)
Mini-Cap	$	82			290,216			(290,298	)
Real Estate		(127,254	)		(123,080	)(a)		250,334	(a)
International Equity		(10,726	)		(3,979	)		14,705
Global Emerging Markets		—			(9,999	)		9,999
International Small Companies		—			(100,324	)		100,324
Legato		—			61,811			(61,811	)

(a) Amounts have been restated. See Note 2.

Tax Basis of Investments: At December 31, 2005, the aggregate cost of investments, gross unrealized appreciation/(depreciation) and net unrealized appreciation/(depreciation) for Federal tax purposes was as follows:

FUND	COST OF INVESTMENTS		GROSS UNREALIZED APPRECIATION		GROSS UNREALIZED DEPRECIATION			NET UNREALIZED APPRECIATION/ (DEPRECIATION)
Small Cap	$	328,359,477	$	57,733,858	$	(3,058,635	)	$	54,675,223
Mini-Cap		35,788,750		5,933,145		(291,796	)		5,641,349
Real Estate		28,820,957		16,935,887		(660,586	)		16,275,301
International Equity		21,965,486		3,196,570		(442,379	)		2,754,191
Global Emerging Markets		29,300,387		9,266,378		(444,629	)		8,821,749
International Small Companies		181,391,821		36,624,218		(4,541,114	)		32,083,104
Legato		6,265,905		910,639		(185,550	)		725,089

117 June 30, 2006

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

Post October Loss: Under the current tax law, capital and currency losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. For the fiscal year ended December 31, 2005, the Funds elected to defer capital losses and currency losses occurring between November 1, 2005 and December 31, 2005 as follows:

FUND	F/X LOSS
Real Estate	$	47
International Small Companies		59,592

Capital Loss Carryforwards: At December 31, 2005 the following Funds had available for Federal income tax purposes unused capital losses as follows:

FUND	EXPIRING IN 2005	2006	2007	2008		2009		2010	2011
International Equity	—	—	—		—		—	—	$	323,448
Global Emerging Markets	—	—	—	$	3,651,293	$	2,015,691	—		—

Tax Basis of Distributable Earnings: At December 31, 2005, the components of accumulated earnings on a tax basis were as follows:

	SMALL CAP		MINI-CAP		REAL ESTATE
Post-October losses		—		—	$	(47	)
Accumulated capital loss carryforwards		—		—		—
Undistributed Ordinary Income		—		—		—
Undistributed short-term gain	$	3,022,040	$	2,369,142		—
Undistributed long-term gain		5,841,708		781,400		—
Net unrealized appreciation/(depreciation) of F/X		—		—		—
Net unrealized appreciation on Investments		54,675,223		5,641,349		16,275,292
Total distributable earnings		63,538,971		8,791,891		16,275,245

	INTERNATIONAL EQUITY			GLOBAL EMERGING MARKETS			INTERNATIONAL SMALL COMPANIES			LEGATO
Post-October losses		—			—		$	(59,592	)		—
Accumulated capital loss carryforwards	$	(323,448	)	$	(5,666,984	)		—			—
Undistributed Ordinary Income					39,360			40,797			—
Undistributed short-term gain		—			—			336,450		$	55,650
Undistributed long-term gain		—			272,114			924,478			—
Net unrealized appreciation/(depreciation) of F/X		15,677			(814	)		7,881			—
Net unrealized appreciation on Investments		2,754,191			8,821,749			32,083,104			725,089
Total distributable earnings		2,446,420			3,465,425			33,333,118			780,739

June 30, 2006 118

Notes to Financial Statements for year ended December 31, 2005 (Audited) (continued)

Tax Basis of Distributions to Shareholders: Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States. The tax character of distributions paid were as follows:

	2005 ORDINARY INCOME TOTAL		2005 SHORT-TERM CAPITAL GAIN TOTAL		2005 LONG-TERM CAPITAL GAIN TOTAL		2005 RETURN OF CAPITAL TOTAL
Small Cap		—	$	4,663,448	$	10,292,873		—
Mini-Cap		—		379,852		605,292		—
Real Estate	$	498,174		248,707		3,499,342	$	127,254
International Equity		10,770		—		—		—
Global Emerging Markets		577,546		—		—		—
International Small Companies		1,343,737		7,983,872		4,449,365		—
Legato		—		20,078		435		—

11. Foreign Securities

Each Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.

12. REITs

The Real Estate Fund invests a substantial portion of its assets in REITs and is subject to certain risks associated with direct investments in REITs. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend generally on their ability to generate cash flow to make distributions to shareowners, and certain REITs have self-liquidation provisions by which mortgages held may be paid in full and distributions of capital returns may be made at any time. In addition, the performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Code or its failure to maintain exemption from registration under the 1940 Act.

13. Portfolio of Investments

The investment categories used in this report may differ from the industry classification categories used for determining compliance with industry concentration restrictions and requirements applicable to each of the Funds.

119 June 30, 2006

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of

Forward Uniplan Real Estate Investment Fund:

In our opinion, the accompanying statement of assets and liabilities at December 31, 2005, including the schedule of investments (as incorporated by reference herein, see Note 2), and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Forward Uniplan Real Estate Investment Fund (the “Fund”) at December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2005 by correspondence with the custodian, provide a reasonable basis for our opinion.

As described in Note 2, the financial statements have been restated.

PricewaterhouseCoopers LLP

San Francisco, California

February 24, 2006, except for the information in Note 2, as to which the date is August 29, 2006

June 30, 2006 120

Subsequent Events (Unaudited)

��

The following information applies to the Forward Hoover Small Cap Equity Fund only:

Effective September 1, 2006, the Forward Hoover Small Cap Equity Fund will change its definition of “small market capitalization companies” as follows:

For purposes of the Fund, small capitalization companies generally are companies with market capitalizations of up to $2.5 billion at the time of initial purchase. However, small capitalization companies may include any company with a market capitalization equal to or less than any company in the Russell 2000 Index at time of purchase so long as the purchase of those securities would not cause the average weighted market capitalization of the Fund to exceed $2.5 billion. The sub-advisor is not required to sell a stock when its market capitalization exceeds $2.5 billion although it may do so.

The following information applies to the Forward Uniplan Real Estate Investment Fund only:

Effective October 30, 2006, the Forward Uniplan Real Estate Investment Fund will change its name to the Forward Progressive Real Estate Fund and will change its investment strategy.

The Forward Progressive Real Estate Fund will invest at least 80% of its net assets plus borrowings, if any, in securities of progressive real estate companies. Under normal conditions, the Fund expects to invest principally in 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. If market conditions warrant, the Fund may invest in debt securities issued or guaranteed by real estate companies. The Fund may invest in securities of real estate companies of any market capitalization.

“Progressive real estate” refers to real estate companies that, in the assessment of the sub-advisor, have policies and exhibit certain specific positive behaviors that demonstrate environmental and/or social awareness on the part of management. These would include policies that take into account the interests of local communities and governments, employees, tenants, vendors, and the environment. The sub-advisor believes that “progressive” policies and corporate behaviors are indicative of quality management teams and consequently may offer superior long-term shareholder value.

The sub-advisor will employ a two-part process to select individual investments for the Fund: fundamental analysis and social and environmental (“progressive”) analysis.

The sub-advisor conducts fundamental analysis to select the universe of investments for the Fund. The sub-advisor 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 sub-advisor 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 sub-advisor 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 sub-advisor then proceeds to select investments that attempt to take advantage of those factors.

The Fund’s sub-advisor believes that the management quality of a real estate investment is one of the most important determinants of its performance. The sub-advisor believes that many of the common traits among the management of the

121 June 30, 2006

Subsequent Events (Unaudited)

best performing real estate investments can be considered indications of a socially and environmentally responsible management culture. Accordingly, the sub-advisor conducts a social and environmental analysis of potential real estate investments, which includes the following factors: (1) management culture—does management work to align the interest of shareholders, management, employees, the local community and environment, and the vendors to the company? (2) real estate policy—including issues regarding community planning, urban development and general construction practices. (3) general social, environmental and business policy—the company’s general social and business practices in relation to the environment. The sub-advisor selects companies that it believes have a positive approach to these factors.

The following information applies to the Sierra Club Stock Fund only:

Effective August 11, 2006, New York Life Investment Management LLC (“NYLIM”) no longer serves as a sub-advisor for a portion of the Sierra Club Stock Fund. Forward Management, LLC, which formerly managed a portion of the Sierra Club Stock Fund, took over management of NYLIM’s portion of the Sierra Club Stock Fund.

Effective September 1, 2006, the net expense limitation for the Investor Class and Class A shares of the Sierra Club Stock Fund will be lowered from 1.49% to 1.29%.

The following information applies to the Sierra Club Equity Income Fund only:

Effective August 11, 2006, New York Life Investment Management LLC (“NYLIM”) no longer serves as a sub-advisor for a portion of the Sierra Club Equity Income Fund. Forward Uniplan Advisors, Inc., which formerly managed a portion of the Sierra Club Equity Income Fund, took over management of NYLIM’s portion of the Sierra Club Equity Income Fund.

June 30, 2006 122

Investment Advisor

Forward Management, LLC

Administrator

ALPS Mutual Fund Services, Inc.

Distributor

ALPS Distributors, Inc.

Counsel

Dechert LLP

Independent Registered Public Accounting Firm

PricewaterhouseCoopers, LLP

Custodian

Brown Brothers Harriman & Co.

Transfer Agent

ALPS Mutual Funds Services, Inc.

Forward Funds

Forward Funds

P.O. Box 1345

Denver, CO

80201 (800) 999-6809

www.forwardfunds.com

International

Forward International Equity Fund

Forward International Small Companies Fund

Forward Global Emerging Markets Fund

Forward Sustainable

Sierra Club Equity Income Fund

Sierra Club Stock Fund

Banking and Finance

Forward Emerald Banking and Finance Fund

Long/Short

Forward Emerald Opportunities Fund

Real Estate

Forward Uniplan Real Estate Investment Fund

Small Cap and Mini Cap

Forward Emerald Growth Fund

Forward Hoover Small Cap Equity Fund

Forward Hoover Mini-Cap Fund

Forward Legato Fund

Printed on recycled paper using soy-based inks.

FWD000475 083107

Item 2. Code of Ethics.

Not applicable to semi-annual report.

Item 3. Audit Committee Financial Expert.

Not applicable to semi-annual report.

Item 4. Principal Accountant Fees and Services.

Not applicable to semi-annual report.

Item 5. Audit Committee of Listed Registrants.

Not applicable.

Item 6. Schedule of Investments.

Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchases.

Not applicable.

2

Item 10. Submission of Matters to Vote of Security Holders.

There have been no material change to the procedures by which the shareholders may recommend nominees to the registrant’s Board of Trustees, where those changes were implemented after the registrant’s last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item.

Item 11. Controls and Procedures.

(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. Exhibits.

(a)(1)	Not applicable to semi-annual report.
(a)(2)	Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3)	Not applicable.
(b)	Certifications pursuant to Rule 30a-2(b) under the 1940 act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.

3

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FORWARD FUNDS
By:	/s/ J. Alan Reid, Jr.
	J. Alan Reid, Jr.
	President & Trustee
Date:	September 5, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ J. Alan Reid, Jr.
	J. Alan Reid, Jr.
	President & Trustee
Date:	September 5, 2006
By:	/s/ Barbara Tolle
	Barbara Tolle
	Treasurer
Date:	September 5, 2006

4