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, 11^th 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: June 30, 2009

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 the 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 reports transmitted to shareholders of the Forward Emerging Markets Fund, the Forward International Equity Fund, the Forward International Small Companies Fund, the Forward Large Cap Equity Fund, the Forward Banking and Finance Fund, the Forward Growth Fund, the Forward Legato Fund, the Forward Long/Short Credit Analysis Fund, the Forward International Fixed Income Fund, the Forward Real Estate Fund, the Forward Small Cap Equity Fund, the Forward Global Infrastructure Fund, the Forward International Real Estate Fund, the Forward Select Income Fund and the Forward Strategic Realty Fund, each a series of the registrant, pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1). The report transmitted to shareholders of the Accessor series, which were reorganized as series of the registrant effective September 1, 2008, has been or will be submitted in a separate Form N-CSR.

Forward Funds

Semiannual Report

Forward Emerging Markets Fund

Forward International Equity Fund

Forward International Small Companies Fund

Forward Large Cap Equity Fund

Forward Banking and Finance Fund

Forward Growth Fund

Forward Legato Fund

Forward Long/Short Credit Analysis Fund

Forward International Fixed Income Fund

Forward Real Estate Fund

June 30, 2009

FORWARD FUNDS: Table of Contents

Shareholder Update	2
Fund Performance	4
Disclosure of Fund Expenses	8
Summary of Portfolio Holdings	12
Portfolio of Investments	15
Statement of Assets and Liabilities	54
Statement of Operations	59
Statement of Changes in Net Assets	64
Statement of Cash Flows	75
Financial Highlights	76
Notes to Financial Statements	103

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, 2009

1

Shareholder Update June 30, 2009

A MESSAGE FROM: J. Alan Reid Jr., President Chief Executive Officer

Dear Shareholder:

Over the last few years, investors have faced a crisis of confidence as perceived investment wisdom has been turned on its head. Traditional asset allocation has suffered as investments that typically were not correlated became correlated during the recent market crisis, and traditional safe-haven investments like CD’s, bonds, real estate and large cap stocks also were drawn into question. In response, government officials and global central bankers provided massive capital infusions to help jump start the markets. Starting in early 2009, these support measures began to pay off as credit spreads began narrowing, and the overall outlook started to improve.

In March of this year, a recovery in the global equity markets began to signal that the worst days of this economic crisis might be behind us. During the second quarter, banks, REITs and other leveraged players around the globe began to issue equity in an effort to avoid default and strengthen their balance sheets. In addition, banks began repaying government capital infusions and were in the process of being able to function normally on their own once again.

The markets still have a way to go before we can conclude that there has been a complete recovery. There will be much need for continued strengthening in consumer, government and corporate balance sheets. Legal and regulatory structures will no doubt be overhauled, as one of the biggest lessons learned was that too much leverage is hazardous to the markets.

In reviewing the past six months, I found it interesting to note that companies and countries with less debt—like technology companies and emerging market countries—performed strongly in the rebound as they were able to bounce back more quickly. As the recovery phase unfolded, many high yielding securities enjoyed a significant improvement as the panic mentality surrounding the market began to decline. I also was intrigued to see that diversification internationally and across asset classes began to reassert itself as a powerful driver of investment returns. We have always believed that an asset allocation with non-correlated asset classes is the best way to maintain a strong portfolio.

We remain focused on asset classes that will benefit from the continued recovery, as well as overall global growth. In June 2009, we added four new funds to the Forward Funds family. These funds, formerly the Kensington Funds, add additional diversification options for our shareholders seeking exposure to global infrastructure, real estate and income-oriented portfolios:

• Forward Global Infrastructure Fund invests in a broad universe of infrastructure equities in developed and emerging markets

• Forward Select Income Fund invests in real estate preferred stocks, bonds and high-income common stocks and utilizes portfolio leverage

• Forward International Real Estate Fund invests in large, high quality international real estate equities

• Forward Strategic Realty Fund invests in a broad investment universe of real estate equities which may include foreign real estate companies and utilizes portfolio leverage

June 30, 2009 2

Our newest real estate funds offer additional alternatives for investors seeking exposure to real estate, and complement one of our flagship funds, the Forward Real Estate Fund, which was launched in 1999:

• Forward Real Estate Fund invests in U.S. real estate equities, investing primarily in REITs and REOCs

The portfolio management teams for these funds have built deep expertise investing in real estate and infrastructure, and these portfolios offer investors access to companies involved in the ownership, development, management and financing of commercial real estate and infrastructure assets throughout the world. With low valuations in real estate—and the potential for substantial yield opportunities—our newest funds offer our investors solid investment alternatives. To learn more about our newest portfolios, visit www.forwardfunds.com.

As always, we remain committed to helping our shareholders attain true portfolio diversification and achieve their long-term financial goals. We also believe that transparent practices give our investors access to the information they need to make important investment decisions. I invite you to review the information in this report and the performance of the Forward Funds in the first half of 2009, and thank you for the continued confidence that you place in our Funds.

Best regards,

J. Alan Reid, Jr.

Chief Executive Officer

Forward Management, LLC

The statements and opinions expressed herein are those of the author and should not be considered investment advice.

You should consider the investment objectives, risks, charges and expenses of the Forward Funds carefully before investing. A prospectus with this and other information may be obtained by calling (800) 999-6809 or by downloading one from www.forwardfunds.com. It should be read carefully before investing.

REIT funds will be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic sector. Risks also include declines in the value of real estate, general and economic conditions.

Foreign securities, especially emerging markets, will involve additional risks including exchange rate fluctuations, social and political instability, liquidity, greater volatility and less regulation.

Forward Global Infrastructure Fund, Forward Select Income Fund, Forward International Real Estate, Fund Forward Strategic Realty Fund and the Forward Real Estate Fund are non-diversified, meaning they may concentrate their assets in fewer individual holdings than diversified funds. Therefore, these Funds are more exposed to individual stock volatility than diversified funds.

Because the Forward Global Infrastructure Fund concentrates its investments in infrastructure-related entities, the Fund has a greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities.

Forward Select Income and Forward Strategic Realty Funds’ use of short selling involves additional risks and transaction costs, and creates leverage, which can increase the volatility of these Funds.

Certain of the Funds will invest in lower-rated debt securities and may utilize derivatives for hedging purposes.

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

J. Alan Reid, Jr. is a registered representative of ALPS Distributors, Inc.

Forward Funds are distributed by ALPS Distributors, Inc.

Not FDIC Insured | No Bank Guarantee |May Lose Value

3 June 30, 2009

Fund Performance (Unaudited)

Performance Results for Periods Ended June 30, 2009

The performance quoted represents past performance, does not guarantee future results and current performance may be lower or higher than the data quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. 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. Performance data current to the most recent month end may be obtained at www.forwardfunds.com.

Forward Emerging Markets Fund^(f)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	-31.63%	12.53%	N/A	19.12%	04/09/03
Institutional Class	-31.28%	12.94%	8.23%	5.96%	10/04/95

Forward International Equity Fund^(g)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	-41.74%	0.27%	-0.84%	1.48%	10/01/98
Institutional Class	-41.50%	N/A	N/A	-25.82%	05/01/07

Forward International Small Companies Fund^(h)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	-35.24%	2.96%	N/A	8.26%	03/05/02
Institutional Class	-35.04%	3.28%	8.24%	7.35%	02/07/96
Class A (load adjusted)(a)	-39.04%	N/A	N/A	-2.11%	05/02/05
Class A (without load)(b)	-35.32%	N/A	N/A	-0.71%	05/02/05

Forward Large Cap Equity Fund

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Institutional Class	-26.09%	-11.68%	01/31/07
Class A (load adjusted)(a)	-30.62%	-11.09%	10/31/06
Class A (without load)(b)	-26.37%	-9.09%	10/31/06

June 30, 2009 4

Fund Performance (Unaudited)

Performance Results for Periods Ended June 30, 2009

See page 4 for important performance disclosure information about the Forward Funds.

Forward Banking and Finance Fund⁽ⁱ⁾

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Class A (load adjusted)(a)	-20.62%	-8.26%	2.89%	5.11%	02/18/97
Class A (without load)(b)	-15.76%	-7.16%	3.50%	5.62%	02/18/97
Class C (with CDSC)(c)	-17.15%	-7.73%	N/A	5.28%	07/01/00
Class C (without CDSC)(d)	-16.31%	-7.73%	N/A	5.28%	07/01/00

Forward Growth Fund^(j)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Institutional Class(e)	N/A	N/A	N/A	-4.83%	10/21/08
Class A (load adjusted)(a)	-28.93%	-3.84%	2.57%	7.97%	10/01/92
Class A (without load)(b)	-24.61%	-2.70%	3.17%	8.35%	10/01/92
Class C (with CDSC)(c)	-25.76%	-3.24%	N/A	-2.73%	07/01/00
Class C (without CDSC)(d)	-25.01%	-3.24%	N/A	-2.73%	07/01/00

Forward Legato Fund

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class(e)	N/A	-1.36%	10/21/08
Institutional Class	-19.64%	-18.83%	05/01/08
Class A (load adjusted)(a)	-24.63%	-1.55%	04/01/05
Class A (without load)(b)	-20.03%	-0.17%	04/01/05

Forward Long/Short Credit Analysis Fund

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	5.73%	1.77%	05/01/08
Institutional Class	6.23%	2.22%	05/01/08
Class C (with CDSC)(c)(e)	N/A	-3.76%	06/03/09
Class C (without CDSC)(d)(e)	N/A	-2.80%	06/03/09

5 June 30, 2009

Fund Performance (Unaudited)

Performance Results for Periods Ended June 30, 2009

See page 4 for important performance disclosure information about the Forward Funds.

Forward International Fixed Income Fund

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	-0.87%	3.21%	10/05/07
Institutional Class	-0.62%	3.45%	10/05/07
Class C (with CDSC)(c)	-1.78%	3.05%	10/05/07
Class C (without CDSC)(d)	-0.83%	3.05%	10/05/07

Forward Real Estate Fund^(k)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	-46.17%	-4.78%	3.80%	3.58%	05/10/99
Institutional Class	-45.92%	N/A	N/A	-46.79%	05/01/08
Class A (load adjusted)(a)(e)	N/A	N/A	N/A	-6.07%	06/12/09
Class A (without load)(b)(e)	N/A	N/A	N/A	-0.28%	06/12/09
Class C (with CDSC)(c)(e)	N/A	N/A	N/A	-1.30%	06/12/09
Class C (without CDSC)(d)(e)	N/A	N/A	N/A	-0.31%	06/12/09

(a) Includes the effect of the maximum 5.75% sales charge.

(b) Excludes sales charge.

(c) Includes the 1.00% contingent deferred sales charge (“CDSC”).

(d) Excludes the 1.00% contingent deferred sales charge (“CDSC”).

(e) “Since inception” performance is not annualized for a “since inception” period that is less than 1 year.

(f) 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 prior periods prior to September 16, 2004 represent performance of the Retail Class and Institutional Class of the Pictet Global Emerging Markets Fund. Prior to May 1, 2008, the Forward Emerging Markets Fund was known as the Forward Global Emerging Markets Fund.

(g) As of December 1, 2008, the Fund is directly managed by Forward Management, LLC., the Advisor to the Forward Funds. Performance figures and other portfolio data shown for periods prior to December 1, 2008, do not reflect Forward Management’s performance or strategy. Prior to September 1, 2005, the Forward International Equity Fund was known as the Forward Hansberger International Growth Fund. 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.

(h) 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.

(i) As of May 1, 2005, Forward Management became the Investment Advisor and Emerald Mutual Fund Advisers Trust became the Sub-Advisor to the Fund. Prior to May 1, 2005, Emerald Advisors, Inc. was the investment advisor. Prior to October 20, 1998, the Fund was named the HomeState Select Opportunities Fund and pursued a different objective. Prior to May 1, 2008, the Forward Banking and Finance Fund was known as the Forward Emerald Banking and Finance Fund.

June 30, 2009 6

Fund Performance (Unaudited)

Performance Results for Periods Ended June 30, 2009

See page 4 for important performance disclosure information about the Forward Funds.

(j) As of May 1, 2005, Forward Management became the Investment Advisor and Emerald Mutual Fund Advisers Trust became the Sub-Advisor to the Fund. Prior to May 1, 2005, Emerald Advisors, Inc. 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. Prior to May 1, 2008, the Forward Growth Fund was known as the Forward Emerald Growth Fund.

(k) Prior to October 30, 2006, the Forward Progressive Real Estate Fund was known as the Forward Uniplan Real Estate Investment Fund. Prior to January 20, 2009, the Forward Real Estate Fund was known as the Forward Progressive Real Estate Fund.

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

For the Forward Emerging Markets Fund, the Forward International Equity Fund and the Forward International Small Companies Fund, investing in foreign securities, especially emerging markets, will involve certain additional risks, including social and political instability, liquidity, greater volatility and less regulation. For Forward International Small Companies Fund investing in small company stocks is generally riskier than large company stocks due to greater volatility and less liquidity.

For the Forward Banking and Finance Fund and the Forward Growth Fund investing in small company stocks is generally riskier than large company stocks due to greater volatility and less liquidity. Funds that concentrate in a particular industry will involve a greater degree of risk than a fund with a more diversified portfolio.

For the Forward Legato Fund investing in small company stocks is generally riskier than large company stocks due to greater volatility and less liquidity.

The Forward Long/Short Credit Analysis Fund will invest in lower-rated debt securities and may utilize derivatives for hedging purposes. The Fund’s use of short selling involves additional risks and transaction costs, and creates leverage, which can increase the volatility of the Fund. The Fund may invest a larger percentage of its assets in the securities of a smaller number of issuers, since it is a “non-diversified” mutual fund. High-yield bonds involve a greater risk of default and price volatility than U.S. Government and other high quality bonds. High-yield/high-risk bonds can experience sudden and sharp price swings which will affect net asset value. The Fund’s prospectus allows for investment in non-investment grade securities.

For Forward International Fixed Income Fund investing in foreign securities, especially emerging markets, will involve certain additional risks, including social and political instability, liquidity, greater volatility and less regulation. High-yield bonds involve a greater risk of default and price volatility than U.S. Government and other high quality bonds. High-yield/high-risk bonds can experience sudden and sharp price swings which will affect net asset value.

For the Forward Real Estate Fund, investments in Real Estate Investment Trusts will be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic sector. Risks also include declines in the value of real estate, general and economic conditions.

7 June 30, 2009

Disclosure of Fund Expenses (Unaudited)

For the Six Months Ended June 30, 2009

As a shareholder of the Forward Funds, you incur two types of costs: (1) transaction costs, including applicable sales charges (loads); 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, 2009 through June 30, 2009.

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 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 of 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 01/01/09		ENDING ACCOUNT VALUE 06/30/09		EXPENSE RATIO(a)	EXPENSES PAID DURING PERIOD(b) 01/01/09-06/30/09
FORWARD EMERGING MARKETS FUND
Investor Class
Actual	$	1,000.00	$	1,315.10	1.76%	$	10.10
Hypothetical	$	1,000.00	$	1,016.07	1.76%	$	8.80
Institutional Class
Actual	$	1,000.00	$	1,318.50	1.39%	$	7.99
Hypothetical	$	1,000.00	$	1,017.90	1.39%	$	6.95
FORWARD INTERNATIONAL EQUITY FUND
Investor Class
Actual	$	1,000.00	$	1,075.30	1.34%	$	6.89
Hypothetical	$	1,000.00	$	1,018.15	1.34%	$	6.70

June 30, 2009 8

Disclosure of Fund Expenses (Unaudited)

For the Six Months Ended June 30, 2009

	BEGINNING ACCOUNT VALUE 01/01/09		ENDING ACCOUNT VALUE 06/30/09		EXPENSE RATIO(a)	EXPENSES PAID DURING PERIOD(b) 01/01/09-06/30/09
FORWARD INTERNATIONAL EQUITY FUND
Institutional Class
Actual	$	1,000.00	$	1,078.90	0.99%	$	5.10
Hypothetical	$	1,000.00	$	1,019.89	0.99%	$	4.96
FORWARD INTERNATIONAL SMALL COMPANIES FUND
Investor Class
Actual	$	1,000.00	$	1,090.40	1.54%	$	7.97
Hypothetical	$	1,000.00	$	1,017.17	1.54%	$	7.69
Institutional Class
Actual	$	1,000.00	$	1,092.40	1.19%	$	6.15
Hypothetical	$	1,000.00	$	1,018.91	1.19%	$	5.94
Class A
Actual	$	1,000.00	$	1,090.40	1.63%	$	8.46
Hypothetical	$	1,000.00	$	1,016.70	1.63%	$	8.16
FORWARD LARGE CAP EQUITY FUND
Institutional Class
Actual	$	1,000.00	$	1,029.60	0.99%	$	4.98
Hypothetical	$	1,000.00	$	1,019.88	0.99%	$	4.96
Class A
Actual	$	1,000.00	$	1,028.20	1.49%	$	7.49
Hypothetical	$	1,000.00	$	1,017.41	1.49%	$	7.45
FORWARD BANKING AND FINANCE FUND
Class A
Actual	$	1,000.00	$	847.30	1.79%	$	8.20
Hypothetical	$	1,000.00	$	1,015.92	1.79%	$	8.95
Class C
Actual	$	1,000.00	$	844.40	2.44%	$	11.16
Hypothetical	$	1,000.00	$	1,012.69	2.44%	$	12.18
FORWARD GROWTH FUND
Institutional Class
Actual	$	1,000.00	$	1,068.80	0.99%	$	5.08
Hypothetical	$	1,000.00	$	1,019.89	0.99%	$	4.96

9 June 30, 2009

Disclosure of Fund Expenses (Unaudited)

For the Six Months Ended June 30, 2009

	BEGINNING ACCOUNT VALUE 01/01/09		ENDING ACCOUNT VALUE 06/30/09		EXPENSE RATIO(a)	EXPENSES PAID DURING PERIOD(b) 01/01/09-06/30/09
FORWARD GROWTH FUND
Class A
Actual	$	1,000.00	$	1,066.30	1.29%	$	6.61
Hypothetical	$	1,000.00	$	1,018.40	1.29%	$	6.46
Class C
Actual	$	1,000.00	$	1,065.40	1.94%	$	9.93
Hypothetical	$	1,000.00	$	1,015.17	1.94%	$	9.69
FORWARD LEGATO FUND
Investor Class
Actual	$	1,000.00	$	1,065.00	1.69%	$	8.65
Hypothetical	$	1,000.00	$	1,016.41	1.69%	$	8.45
Institutional Class
Actual	$	1,000.00	$	1,067.30	1.29%	$	6.61
Hypothetical	$	1,000.00	$	1,018.40	1.29%	$	6.46
Class A
Actual	$	1,000.00	$	1,065.10	1.84%	$	9.42
Hypothetical	$	1,000.00	$	1,015.67	1.84%	$	9.20
FORWARD LONG/SHORT CREDIT ANALYSIS FUND
Investor Class
Actual	$	1,000.00	$	1,223.60	1.89%	$	10.41
Hypothetical	$	1,000.00	$	1,015.43	1.89%	$	9.44
Institutional Class
Actual	$	1,000.00	$	1,226.50	1.54%	$	8.51
Hypothetical	$	1,000.00	$	1,017.15	1.54%	$	7.71
Class C(c)
Actual	$	1,000.00	$	972.00	1.89%	$	1.33
Hypothetical	$	1,000.00	$	1,002.21	1.89%	$	9.40
FORWARD INTERNATIONAL FIXED INCOME FUND
Investor Class
Actual	$	1,000.00	$	1,081.30	1.13%	$	5.82
Hypothetical	$	1,000.00	$	1,019.20	1.13%	$	5.64
Institutional Class
Actual	$	1,000.00	$	1,081.40	0.96%	$	4.95
Hypothetical	$	1,000.00	$	1,020.03	0.96%	$	4.81

June 30, 2009 10

Disclosure of Fund Expenses (Unaudited)

For the Six Months Ended June 30, 2009

	BEGINNING ACCOUNT VALUE 01/01/09		ENDING ACCOUNT VALUE 06/30/09		EXPENSE RATIO(a)	EXPENSES PAID DURING PERIOD(b) 01/01/09-06/30/09
FORWARD INTERNATIONAL FIXED INCOME FUND
Class C
Actual	$	1,000.00	$	1,080.30	1.27%	$	6.53
Hypothetical	$	1,000.00	$	1,018.52	1.27%	$	6.34
FORWARD REAL ESTATE FUND
Investor Class
Actual	$	1,000.00	$	859.10	1.80%	$	8.30
Hypothetical	$	1,000.00	$	1,015.87	1.80%	$	9.00
Institutional Class
Actual	$	1,000.00	$	861.70	1.43%	$	6.60
Hypothetical	$	1,000.00	$	1,017.70	1.43%	$	7.15
Class A(d)
Actual	$	1,000.00	$	997.20	1.45%	$	0.63
Hypothetical	$	1,000.00	$	1,017.60	1.45%	$	7.25
Class C(d)
Actual	$	1,000.00	$	996.90	2.05%	$	0.90
Hypothetical	$	1,000.00	$	1,014.63	2.05%	$	10.24

(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.

(c) The Forward Long/Short Credit Analysis Fund Class C shares commenced operations on June 3, 2009.

(d) The Forward Real Estate Class A and Class C shares commenced operations on June 12, 2009.

11 June 30, 2009

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 EMERGING MARKETS FUND
Financials	30.74%	(a)
Materials	15.28%
Energy	13.51%
Information Technology	11.68%
Telecommunication Services	10.33%
Industrials	4.68%
Consumer Discretionary	3.70%
Utilities	2.73%
Consumer Staples	2.13%
Health Care	1.93%
Investment Holdings Companies	1.01%
Short-Term Bank Debt Instruments & Net Cash	2.28%
	100.00%
FORWARD INTERNATIONAL EQUITY FUND
Financials	26.84%	(a)
Industrials	14.63%
Materials	14.45%
Energy	10.76%
Information Technology	9.36%
Health Care	7.37%
Telecommunication Services	6.62%
Consumer Staples	5.80%
Consumer Discretionary	5.20%
Utilities	1.12%
Short-Term Bank Debt Instruments & Net Cash	-2.15%
	100.00%
FORWARD INTERNATIONAL SMALL COMPANIES FUND
Industrials	18.27%
Financials	13.98%
Consumer Discretionary	13.68%
Information Technology	13.29%
Health Care	10.78%

Consumer Staples	10.42%
Energy	7.42%
Materials	6.34%
Telecommunication Services	2.12%
Utilities	1.87%
Short-Term Bank Debt Instruments & Net Cash	1.83%
	100.00%
FORWARD LARGE CAP EQUITY FUND
Information Technology	19.65%
Health Care	14.49%
Financials	13.44%
Energy	12.33%
Consumer Staples	11.76%
Consumer Discretionary	8.34%
Industrials	7.96%
Telecommunication Services	3.96%
Utilities	3.35%
Materials	3.20%
Short-Term Bank Debt Instruments & Net Cash	1.52%
	100.00%
FORWARD BANKING AND FINANCE FUND
Banks Regional	52.40%
Insurance Carriers: Property & Casualty	10.36%
Savings & Loans	8.28%
Securities Brokerage & Service	6.09%
Insurance: Multi-Line	5.64%
Diversified Financial Services	3.15%
Financial Data Processing Services	2.84%
Real Estate Investment Trusts	2.66%
Investment Management Companies	2.15%
Financial Information Services	0.28%
Short-Term Bank Debt Instruments & Net Cash	6.15%
	100.00%

June 30, 2009 12

Summary of Portfolio Holdings (Note 10) (Unaudited)

FORWARD GROWTH FUND
Technology	29.07%	(a)
Health Care	19.34%
Consumer Discretionary	18.43%
Financial Services	7.26%
Materials & Processing	5.88%
Producer Durables	5.44%
Utilities	3.31%
Energy	3.04%
Consumer Staples	2.98%
Auto & Transportation	2.92%
Short-Term Bank Debt Instruments & Net Cash	2.33%
	100.00%
FORWARD LEGATO FUND
Information Technology	22.37%
Industrials	21.11%
Health Care	20.55%
Consumer Discretionary	10.86%
Financials	7.87%
Consumer Staples	5.24%
Energy	4.43%
Materials	2.90%
Telecommunication Services	0.19%
Short-Term Bank Debt Instruments & Net Cash	4.48%
	100.00%
FORWARD LONG/SHORT CREDIT ANALYSIS FUND
Municipal Bonds	177.48%
Corporate Bonds	13.42%
Exchange-Traded Funds	0.33%
Short-Term Bank Debt Instruments & Net Cash	-91.23%
	100.00%
FORWARD INTERNATIONAL FIXED INCOME FUND
Europe	53.22%
Japan	15.23%
United Kingdom	6.86%
Asia ex-Japan	4.60%
North America	4.48%
South America	4.03%
Africa	2.57%

Latin America	2.07%
Short-Term Bank Debt Instruments & Net Cash	6.94%
	100.00%
FORWARD REAL ESTATE FUND
Retail	29.28%
Industrial	13.78%
Residential	12.39%
Health Care	11.79%
Office	8.60%
Self Storage	8.03%
Mutual Funds	4.82%
Specialized	4.13%
Diversified	3.54%
Hotels	2.43%
Short-Term Bank Debt Instruments & Net Cash	1.21%
	100.00%

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

13 June 30, 2009

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 quarters ended March 31, 2009. 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, 2009 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.

June 30, 2009 14

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerging Markets Fund

Shares		Value (Note 2)
COMMON STOCKS: 94.37%
Argentina: 0.00%(a)
138	Banco Macro SA, ADR(b)(c)	$	2,234
Bermuda: 0.80%
20,919,000	G-Resources Group, Ltd.(b)(f)		1,453,524
Brazil: 15.37%
236,894	Banco do Brasil SA		2,556,932
261,507	Companhia Brasileira de Meios de Pagamento(b)		2,259,410
76,198	Companhia de Saneamento Basico do Estado de Sao Paulo		1,137,429
388,040	Companhia Vale do Rio Doce		5,960,706
195,863	Itau Unibanco Holding SA, ADR(c)		3,100,511
139,025	Lojas Renner SA		1,539,598
1,368	OGX Petroleo e Gas Participacoes SA		701,621
276,012	Petroleo Brasileiro SA, ADR(c)		9,207,760
74,590	Vivo Participacoes SA, ADR(c)		1,412,735
			27,876,702
Cayman Islands: 1.35%
842,000	BaWang International Group Holding, Ltd.(b)(e)		258,574
3,223,100	Shui On Land, Ltd.(f)		2,191,818
			2,450,392
China: 21.12%
2,757,231	361 Degrees International, Ltd.(b)		1,387,501
1,264,000	Agile Property Holdings, Ltd.(f)		1,800,822
7,958,000	Bank of China, Ltd.(f)		3,768,370
443	Bosideng International Holdings, Ltd.(f)		47
3,124,000	China CITIC Bank(f)		2,014,262
3,353,000	China Construction Bank Corp.(f)		2,583,610
730,436	China Life Insurance Co.(f)		2,684,490
341,750	China Mobile, Ltd.(f)		3,421,738
513,675	China National Building Material Co., Ltd.(f)		987,615

2,280,000	China Petroleum & Chemical Corp.(f)	1,726,228
2,304,546	China Shanshui Cement Group, Ltd.(f)	1,592,297
1,086,000	China Unicom, Ltd.(f)	1,443,964

Shares		Value (Note 2)
2,463,000	CNOOC, Ltd.(f)	$	3,034,047
1,072,000	Datang International Power Generation Co., Ltd(f)		647,830
400	Great Wall Motor Co., Ltd.(f)		316
1,290,000	Huadian Power International Corp., Ltd.(b)(f)		404,308
5,291,410	Industrial & Commercial Bank of China, Ltd.(f)		3,665,251
693,000	Shanghai Industrial Holdings, Ltd.(f)		2,779,914
799,169	Shimao Property Holdings, Ltd.(f)		1,540,798
12,158	Sohu.com, Inc.(b)		763,887
57,478	Suntech Power Holdings Co., Ltd., ADR(b)(c)		1,026,557
88,000	Tencent Holdings, Ltd.(f)		1,021,029
			38,294,881
Hong Kong: 1.12%
1,608,000	Nine Dragons Paper Holdings, Ltd.(f)		1,053,596
1,168,700	Real Gold Mining, Ltd.(b)		986,226
			2,039,822
Hungary: 0.80%
80,608	OTP Bank Nyrt.(b)(f)		1,457,384
India: 3.47%
53,684	Dr. Reddy’s Laboratories, Ltd., ADR(c)		909,944
73,615	ICICI Bank, Ltd., Sponsored ADR(c)		2,171,643
43,557	Infosys Technologies, Ltd., Sponsored ADR(c)		1,602,026
22,726	State Bank of India, GDR(d)(e)		1,613,546
			6,297,159
Indonesia: 3.16%
5,275,500	PT Bank Mandiri Tbk(f)		1,633,803
625,000	PT Indocement Tunggal Prakarsa Tbk(f)		472,692
7,107,500	PT Indofood Sukses Makmur Tbk(f)		1,308,973
4,613,500	PT Perusahaan Gas Negara Tbk(f)		1,414,234
1,210,000	PT Telekomunikasi Indonesia Tbk(f)		895,761
			5,725,463

See Notes to Financial Statements 15 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerging Markets Fund

Shares		Value (Note 2)
Israel: 1.43%
52,773	Teva Pharmaceutical Industries, Ltd.(f)	$	2,599,879
Luxembourg: 1.35%
37,443	Evraz Group SA, GDR(d)(e)(f)		711,413
30,771	Millicom International Cellular SA(b)		1,731,177
			2,442,590
Malaysia: 0.79%
555,100	Bumiputra-Commerce Holdings Bhd(f)		1,425,162
Mexico: 4.90%
123,482	America Movil SA de CV, ADR, Series L(c)		4,781,223
1,132,721	Grupo Financiero Banorte SAB de CV		2,744,009
378,597	Grupo Modelo SAB de CV Series C(b)		1,352,435
			8,877,667
Peru: 0.64%
48,064	Compania de Minas Buenaventura SA, ADR(c)		1,154,978
Russia: 6.58%
290,400	Cherepovets MK Severstal, GDR(d)(e)(f)		1,581,750
82,100	MMC Norilsk Nickel JSC, ADR(b)(c)		756,749
154,447	OAO Gazprom, Sponsored ADR(c)(f)		3,136,232
55,190	OAO LUKOIL(f)		2,546,450
392,950	OAO Rosneft Oil Co., GDR(d)(f)		2,146,607
52,678	OAO Vimpel-Communications, Sponsored ADR(b)(c)		620,020
93,900	Sistema JSFC, Sponsored GDR(b)(d)(e)(f)		1,136,913
			11,924,721
South Africa: 3.78%
71,652	AngloGold Ashanti, Ltd., Sponsored ADR(c)		2,624,612
80,853	ArcelorMittal South Africa, Ltd.(f)		1,002,221
43,733	Impala Platinum Holdings, Ltd.(f)		967,698
93,954	MTN Group, Ltd.(f)		1,442,984
23,448	Sasol, Ltd.(f)		820,321
			6,857,836
South Korea: 13.54%
24,275	Daelim Industrial Co., Ltd.(f)		1,168,189
66,300	Doosan Infracore Co., Ltd.(f)		730,323

Shares		Value (Note 2)
45,890	Hana Financial Group, Inc.(f)	$	977,632
8,761	Hyundai Department Store Co., Ltd.(f)		613,978
15,906	Hyundai Engineering & Construction Co., Ltd.(f)		662,942
5,756	Hyundai Heavy Industries Co., Ltd.(f)		854,585
24,446	Hyundai Motor Co.(f)		1,413,922
20,314	Hyundai Steel Co.(f)		933,854
20,340	KB Financial Group, Inc.(b)(f)		678,112
57,090	Korea Electric Power Corp.(b)(f)		1,321,399
156,040	Korea Exchange Bank(f)		1,206,854
26,860	LG Corp.(f)		1,276,914
15,681	LG Electronics, Inc.(f)		1,432,450
7,083	NHN Corp.(b)(f)		976,347
7,645	POSCO		2,541,432
11,448	Samsung Electronics Co., Ltd.(f)		5,293,149
8,684	Samsung Fire & Marine Insurance Co., Ltd.(f)		1,276,699
3,041	Shinsegae Co., Ltd.(f)		1,201,727
			24,560,508
Taiwan: 9.68%
748,000	Acer, Inc.(f)		1,294,765
1,492,548	AU Optronics Corp.(f)		1,440,785
3,342,088	Chinatrust Financial Holding Co., Ltd.(f)		2,007,647
322,650	Chunghwa Telecom Co., Ltd.(f)		643,574
1,819,000	Fubon Financial Holding Co., Ltd.(f)		1,692,312
100,000	HTC Corp.(f)		1,405,201
107,000	MediaTek, Inc.(f)		1,270,352
1,052,000	Nan Ya Plastics Corp.(f)		1,361,800
2,540,000	Polaris Securities Co., Ltd.(f)		1,272,183
686,842	Siliconware Precision Industries Co.(f)		794,696
1,448,570	Taiwan Cement Corp.(f)		1,379,651
992,000	Taiwan Semiconductor Manufacturing Co., Ltd.(f)		1,628,071
2,033,000	Yuanta Financial Holding Co., Ltd.(f)		1,358,975
			17,550,012

June 30, 2009 16 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerging Markets Fund

Shares		Value (Note 2)
Thailand: 2.32%
694,500	Bangkok Bank Pcl, Non-Voting Depository Receipt(f)	$	2,190,804
301,800	PTT Exploration & Production Pcl(f)		1,196,013
383,200	The Siam Commercial Bank Public Co., Ltd.(f)		819,678
			4,206,495
Turkey: 1.94%
218,079	Turkcell Iletisim Hizmetleri AS(f)		1,205,676
868,202	Turkiye Garanti Bankasi AS(b)(f)		2,309,684
			3,515,360
United Kingdom: 0.23%
19,803	Vedanta Resources Plc(f)		421,590
	Total Common Stocks (Cost $148,800,629)		171,134,359
INVESTMENT HOLDING COMPANIES: 1.01%
United States: 0.88%
158,483	iShares MSCI Taiwan Index Fund		1,599,093
Vietnam: 0.13%
9,858	Vietnam Growth Fund, Ltd.(b)		99,319
26,000	Vietnam Resource Investments Holdings, Ltd.(b)		143,000
			242,319
	Total Investment Holding Companies (Cost $2,199,002)		1,841,412
LOAN PARTICIPATION NOTES: 1.65%
India: 1.65%
552,150	Infrastructure Development Finance Co., Ltd., (Loan Participation Notes issued by UBS AG — London), expiring 06/07/10(b)		1,564,646
173,476	Tata Iron & Steel Co., Ltd. (Loan Participation Notes issued by UBS AG - London), expiring 01/11/10(b)		1,414,641
			2,979,287
	Total Loan Participation Notes (Cost $2,433,908)		2,979,287

Shares		Value (Note 2)
PREFERRED STOCKS: 0.69%
Brazil: 0.69%
58,748	Usinas Siderurgicas de Minas Gerais SA, Preference	$	1,257,711
	Total Preferred Stocks (Cost $728,898)		1,257,711
WARRANTS: 0.00%
Vietnam: 0.00%
2,600	Vietnam Resource Investments Holdings, Ltd., Warrants (expiring 06/18/10)(b)(f)(g)		0
	Total Warrants (Cost $0)		0
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 3.90%
$7,078,000	Wells Fargo — Grand Cayman 0.030%, due 07/01/09		7,078,000
	Total Short-Term Bank Debt Instruments (Cost $7,078,000)		7,078,000
	Total Investments: 101.62% (Cost $161,240,437)		184,290,769
	Net Other Assets and Liabilities: (1.62)%		(2,934,165	)
	Net Assets: 100.00%	$	181,356,604

(a) Amount represents less than 0.01%.

(b) Non-income producing security.

(c) ADR — American Depositary Receipt.

(d) GDR — Global Depositary Receipt.

(e) Securities were purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Fund’s Board of Trustees. At period end, the aggregate market value of those securities was $5,302,196 representing 2.92% of net assets.

(f) Fair valued security.

(g) Security determined to be illiquid under the procedures approved by the Fund’s Board of Trustees.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 17 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Emerging Markets Fund

Security determined to be illiquid under procedures approved by the Fund’s Board of Trustees.

Information related to the illiquid security is as follows:

Date of Purchase	Security	Cost		Market Value		% of Net Assets
06/27/08	Vietnam Resource Investments Holdings, Ltd., Warrants (expiring 06/18/10)(b)(f)	$	0	$	0	0.00%

June 30, 2009 18 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Equity Fund

Shares		Value (Note 2)
COMMON STOCKS: 102.15%
Australia: 0.58%
4,995	Orica, Ltd.	$	87,423
Austria: 4.56%
15,800	Vienna Insurance Group		686,677
Brazil: 8.82%
100,016	BM&F BOVESPA SA		597,186
5,400	Companhia de Bebidas das Americas, ADR(a)		350,082
24,150	Itau Unibanco Holding SA, ADR(a)		382,295
			1,329,563
China: 5.64%
61,000	China Life Insurance Co., Ltd.		224,321
150,000	China Shipping Development Co., Ltd.		193,547
620,000	Industrial & Commercial Bank of China, Ltd.		431,997
			849,865
Finland: 2.03%
21,000	Nokia Corp., Sponsored ADR(a)		306,180
France: 7.76%
19,000	Air Liquide SA, ADR(a)		346,940
7,500	BNP Paribas, ADR(a)		243,225
4,500	GDF Suez, Sponsored ADR(a)		168,525
7,603	Total SA		410,425
			1,169,115
Hong Kong: 3.86%
5,600	China Mobile, Ltd., Sponsored ADR(a)		280,448
11,000	Jardine Matheson Holdings, Ltd.		301,620
			582,068
Indonesia: 2.31%
100,000	PT Astra Agro Lestari Tbk		165,075
1,000,000	PT Bumi Resources Tbk		182,219
			347,294
Ireland: 0.69%
14,000	Experian Group, Ltd., Sponsored ADR(a)		103,880

Italy: 2.33%
7,400	Eni SpA, Sponsored ADR(a)	350,834

Shares		Value (Note 2)
Japan: 16.65%
49,000	Amada Co., Ltd.	$	304,677
2,700	FANUC, Ltd., ADR(a)		107,325
11,700	Hoya Corp., Sponsored ADR(a)		235,170
26,000	Komatsu, Ltd.		402,679
36,500	Kuraray Co., Ltd.		406,166
12,000	Meitec Corp.		207,526
5,500	Nintendo Co., Ltd., ADR(a)		189,585
29,000	Nippon Electric Glass Co., Ltd.		325,717
6,400	Stanley Electric Co., Ltd.		130,079
10,000	Yamatake Corp.		199,824
			2,508,748
Luxembourg: 1.79%
10,000	Tenaris SA, ADR(a)		270,400
Mexico: 2.38%
9,257	America Movil SA de CV, ADR, Series L(a)		358,431
Netherlands: 4.94%
15,820	Royal Dutch Shell Plc, Class A		395,039
17,930	TNT NV, ADR(a)		349,635
			744,674
Singapore: 1.44%
105,000	Singapore Telecommunications, Ltd.		217,481
Spain: 3.36%
42,166	Banco Santander SA		506,349
Switzerland: 14.71%
18,000	EFG International AG		194,653
9,300	Novartis AG, ADR(a)		379,347
3,373	Roche Holding AG		458,509
15,300	Syngenta AG, ADR(a)		711,756
2,679	Zurich Financial Services AG		471,916
			2,216,181
Taiwan: 2.28%
36,444	Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR(a)		342,938

See Notes to Financial Statements 19 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward International Equity Fund

Shares		Value (Note 2)
Thailand: 1.30%
50,000	PTT Exploration & Production Pcl, NVDR(b)	$	195,920
Turkey: 4.51%
80,000	Adana Cimento Sanayii TAS, Class A		204,569
18,845	Anadolu Efes Biracilik Ve Malt Sanayii AS		170,006
192,000	Anadolu Hayat Emeklilik AS		305,296
			679,871
United Kingdom: 10.21%
125,453	BBA Aviation Plc		235,290
10,625	BHP Billiton Plc		238,430
7,700	GlaxoSmithKline Plc, Sponsored ADR(a)		272,118
8,000	Unilever Plc, Sponsored ADR(a)		188,000
7,250	Vodafone Group Plc, Sponsored ADR(a)		141,303

Shares		Value (Note 2)
13,947	WPP Group Plc, Sponsored ADR(a)	$	463,877
			1,539,018
	Total Common Stocks (Cost $15,041,383)		15,392,910
	Total Investments: 102.15% (Cost $15,041,383)		15,392,910
	Net Other Assets and Liabilities: (2.15)%		(324,675	)
	Net Assets: 100.00%	$	15,068,235

(a) ADR — American Depositary Receipt.

(b) Non-income producing security.

Percentages are stated as a percent of net assets.

June 30, 2009 20 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Small Companies Fund

Shares		Value (Note 2)
COMMON STOCKS: 97.44%
Australia: 2.62%
1,451,800	Australian Worldwide Exploration, Ltd.(a)	$	3,006,548
1,337,060	Centennial Coal Co., Ltd.		2,650,417
1,884,700	DUET Group		2,338,790
1,356,345	Metcash, Ltd.		4,710,594
			12,706,349
Austria: 2.21%
139,384	Intercell AG(a)		4,773,036
67,600	Vienna Insurance Group		2,937,935
109,700	Voestalpine AG		3,008,621
			10,719,592
Belgium: 1.56%
303,419	Ion Beam Applications		2,383,663
244,846	Telenet Group Holding NV(a)		5,193,484
			7,577,147
Cayman Islands: 1.89%
275,832	China Digital TV Holding Co., Ltd., ADR(b)		2,410,772
18,860,176	Inspur International, Ltd.		3,236,628
906,931	Kingboard Chemical Holdings, Ltd.		2,235,132
1,847,000	Shui On Land, Ltd.		1,265,485
			9,148,017
China: 0.57%
663,510	Sino Gold Mining, Ltd.(a)		2,769,526
Denmark: 2.12%
27,736	SimCorp AS		4,300,074
101,040	TrygVesta AS		5,957,581
			10,257,655
Finland: 0.53%
155,583	Elisa Oyj		2,560,202
France: 5.81%
11,284	Arkema		264,359
55,709	bioMerieux SA		4,881,366
1,345,644	Bull SA(a)		3,548,968

Shares		Value (Note 2)
43,062	Compagnie Generale de Geophysique-Veritas(a)	$	773,851
107,692	Gemalto NV(a)		3,725,551
128,634	M6-Metropole Television		2,432,538
39,469	SA des Ciments Vicat		2,270,147
45,510	SEB SA		1,883,401
117,818	Teleperformance SA		3,581,662
59,385	Virbac SA		4,787,756
			28,149,599
Germany: 7.40%
29,908	Bijou Brigitte Modische Accessoires AG		3,876,380
30,900	Fielmann AG		2,035,205
133,721	Gerresheimer AG		2,984,583
86,550	Hannover Rueckversicherung AG(a)		3,181,137
409,130	Kontron AG		5,222,961
208,200	Leoni AG		3,449,409
68,325	Pfeiffer Vacuum Technology AG		5,029,268
137,326	QIAGEN NV(a)		2,537,188
117,200	Rhoen-Klinikum AG		2,581,317
11,066	Sfc Smart Fuel Cell AG(a)		89,418
68,327	Software AG		4,823,330
			35,810,196
Hong Kong: 2.95%
4,072,000	Ajisen China Holdings, Ltd.		2,579,792
3,362,277	China Green Holdings, Ltd.		3,496,746
7,957,200	First Tractor Co., Ltd.		2,279,338
2,789,861	Huabao International Holdings, Ltd.		2,699,848
6,157,168	Prime Success International Group, Ltd.		3,241,430
			14,297,154
Italy: 5.55%
317,610	Ansaldo STS SpA		5,845,774
255,045	Danieli & Co., SpA		2,347,117
559,065	Davide Campari-Milano SpA		4,474,371
519,218	Enia SpA		3,689,294

See Notes to Financial Statements 21 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward International Small Companies Fund

Shares		Value (Note 2)
Italy (continued): 5.55%
138,447	Fondiaria-Sai SpA	$	2,227,722
2,179,627	Parmalat SpA		5,256,202
200,550	Prysmian SpA		3,013,187
			26,853,667
Japan: 24.69%
310,300	Aeon Delight Co., Ltd.		5,037,725
299,444	Daibiru Corp.		2,583,048
240,600	Don Quijote Co., Ltd.		4,627,932
1,369	Fields Corp.		1,860,197
259,600	Hitachi High-Technologies Corp.		4,438,274
78,400	Hogy Medical Co., Ltd.		3,987,751
173,800	Hokuto Corp.		3,582,984
36,700	Idemitsu Kosan Co., Ltd.		3,154,367
282,000	Izumi Co., Ltd.		3,495,178
385,300	JSR Corp.		6,611,314
422,296	JTEKT Corp.		4,300,331
308,000	Kaken Pharmaceutical Co., Ltd.		2,749,572
698,000	The Keiyo Bank, Ltd.		3,659,003
89,200	Kobayashi Pharmaceutical Co., Ltd.		3,379,665
199,000	Kyorin Co., Ltd.		3,020,065
155,200	McDonald’s Holdings Co., Ltd.		2,882,159
763	MID REIT, Inc.		1,705,236
242,000	Mochida Pharmaceutical Co., Ltd.		2,331,198
6,707	Monex Group, Inc.		2,993,730
337,000	Nippon Electric Glass Co., Ltd.		3,785,063
345,400	NOK Corp.		4,026,410
709	Nomura Real Estate Office Fund, Inc.		4,518,877
113,537	NSD Co., Ltd.		1,152,636
1,689	Seven Bank, Ltd.		4,433,987
367,500	Shinko Plantech Co., Ltd.		2,922,147
196,500	Sugi Holdings Co., Ltd.		4,048,918
339,100	SUMCO Corp.		4,840,011
869,000	Sumitomo Heavy Industries, Ltd.		3,887,881
172,800	Sundrug Co., Ltd.		3,829,636
93,600	Sysmex Corp.		3,400,633
138,500	Tsumura & Co.		4,327,452

Shares		Value (Note 2)
259,000	Yamaguchi Financial Group, Inc.	$	3,422,505
917,000	The Yokohama Rubber Co., Ltd.		4,550,018
			119,545,903
Netherlands: 3.52%
198,406	ASM International NV(a)		2,897,474
418,994	CSM NV		6,183,546
113,902	Fugro NV		4,716,955
83,370	Nutreco Holding NV		3,249,632
			17,047,607
New Zealand: 0.49%
560,300	Fletcher Building, Ltd.		2,378,702
Norway: 0.53%
257,473	TGS NOPEC Geophysical Co., ASA(a)		2,542,637
Portugal: 0.47%
423,773	Banco Espirito Santo SA		2,282,856
Singapore: 2.46%
3,927,000	ComfortDelGro Corp., Ltd.		3,470,422
12,101,872	Golden Agri-Resources, Ltd.		3,175,029
2,368,309	MobileOne, Ltd.		2,501,735
574,500	Venture Corp., Ltd.		2,768,579
			11,915,765
Spain: 2.23%
425,155	Grifols SA		7,509,086
152,657	Indra Sistemas SA		3,303,360
			10,812,446
Sweden: 2.45%
316,200	Intrum Justitia AB		3,043,281
623,331	Kappahl Holding AB		2,706,745
110,270	Oriflame Cosmetics SA		4,795,498
171,875	Saab AB		1,314,463
			11,859,987
Switzerland: 6.74%
11,555	Banque Cantonale Vaudoise		3,645,001
41,302	BKW FMB Energie AG		3,040,965
763,500	Clariant AG(a)		4,820,404

June 30, 2009 22 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Small Companies Fund

Shares		Value (Note 2)
Switzerland (continued): 6.74%
20,417	Helvetia Holding AG	$	5,402,317
47,060	Partners Group Holding AG		4,565,021
149,800	Petroplus Holdings AG(a)		2,474,723
2,420	Sika AG		2,686,043
353,356	Temenos Group AG(a)		6,016,369
			32,650,843
United Kingdom: 20.65%
1,616,300	Aberdeen Asset Management Plc		3,297,323
502,883	Aggreko Plc		4,289,766
607,108	Amlin Plc		3,018,910
621,700	Babcock International Group Plc		4,919,759
1,280,000	Carillion Plc		5,312,012
340,000	Charter International Plc		2,422,059
729,500	Daily Mail & General Trust Plc		3,408,486
507,300	Greene King Plc		3,227,848
505,076	Halfords Group Plc		2,586,330
741,139	IG Group Holdings Plc		3,417,143
895,924	Informa Plc		3,227,997
1,773,633	Meggitt Plc		4,624,991
912,728	Micro Focus International Plc		5,623,557
1,352,390	Mitie Group Plc		4,772,513
1,035,384	Mouchel Group Plc		2,810,627
922,900	N. Brown Group Plc		3,260,661
944,646	Pace Plc		3,088,831
478,498	Premier Oil Plc(a)		8,596,480
2,196,860	QinetiQ Plc		5,186,473
1,600,000	RPS Group Plc		5,271,211
803,968	Serco Group Plc		5,581,732
972,052	St. James’s Place Capital Plc		3,162,451
381,805	Venture Production Plc		5,100,532
1,180,700	William Hill Plc		3,816,981
			100,024,673
	Total Common Stocks (Cost $495,301,835)		471,910,523

Shares		Value (Note 2)
PREFERRED STOCKS: 0.67%
Germany: 0.67%
59,600	Fuchs Petrolub AG	$	3,231,542
	Total Preferred Stocks (Cost $4,639,571)		3,231,542
RIGHTS: 0.06%
Singapore: 0.06%
2,057,318	Golden Agri-Resources, Ltd., Rights (expiring 07/16/09)(a)(c)(d)		284,081
	Total Rights (Cost $0)		284,081
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 1.77%
$8,559,000	Wells Fargo — Grand Cayman 0.030%, due 07/01/09		8,559,000
	Total Short-Term Bank Debt Instruments (Cost $8,559,000)		8,559,000
	Total Investments: 99.94% (Cost $508,500,406)		483,985,146
	Net Other Assets and Liabilities: 0.06%		307,567
	Net Assets: 100.00%	$	484,292,713

(a) Non-income producing security.

(b) ADR — American Depositary Receipt.

(c) Fair valued security.

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

Percentages are stated as a percent of net assets.

Security determined to be illiquid under procedures approved by the Fund’s Board of Trustees.

See Notes to Financial Statements 23 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward International Small Companies Fund

Information related to the illiquid security is as follows:

Date of Purchase	Security	Cost		Market Value		% of Net Assets
06/24/09	Golden Agri-Resources, Ltd., Rights (expiring 07/16/09)(a)(c)	$	0	$	284,081	0.06%

June 30, 2009 24 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Large Cap Equity Fund

Shares		Value (Note 2)
COMMON STOCKS: 98.48%
Consumer Discretionary: 8.34%
8,440	The DIRECTV Group, Inc.(a)	$	208,552
14,010	Macy’s, Inc.		164,758
5,137	McDonald’s Corp.		295,326
5,744	TJX Cos., Inc.		180,706
			849,342
Consumer Staples: 11.76%
6,290	The Coca-Cola Co.		301,857
2,830	Colgate-Palmolive Co.		200,194
5,430	McCormick & Co., Inc.		176,638
4,421	The Procter & Gamble Co.		225,913
6,040	Wal-Mart Stores, Inc.		292,578
			1,197,180
Energy: 12.33%
4,020	Apache Corp.		290,043
5,190	Chevron Corp.		343,837
5,800	Exxon Mobil Corp.		405,478
6,590	National Oilwell Varco, Inc.(a)		215,229
			1,254,587
Financials: 13.44%
4,581	ACE, Ltd.		202,618
18,659	Bank of America Corp.		246,298
1	First Horizon National Corp.		7
6,710	JPMorgan Chase & Co.		228,878
9,364	MetLife, Inc.		281,014
7,430	Morgan Stanley		211,829
8,150	Wells Fargo & Co.		197,719
			1,368,363
Health Care: 14.49%
3,740	Baxter International, Inc.		198,070
15,760	Bristol-Myers Squibb Co.		320,086
4,810	Gilead Sciences, Inc.(a)		225,300
7,296	Johnson & Johnson		414,413
6,950	Medco Health Solutions, Inc.(a)		316,990
			1,474,859
Industrials: 7.96%
4,730	The Boeing Co.		201,025
3,650	Deere & Co.		145,818

Shares		Value (Note 2)
20,850	General Electric Co.	$	244,362
5,821	Norfolk Southern Corp.		219,277
			810,482
Information Technology: 19.65%
14,730	Cisco Systems, Inc.(a)		274,567
817	Google, Inc., Class A(a)		344,439
3,790	International Business Machines Corp.		395,752
6,400	Microsoft Corp.		152,128
31,340	NVIDIA Corp.(a)		353,829
14,140	Oracle Corp.		302,878
3,900	QUALCOMM, Inc.		176,280
			1,999,873
Materials: 3.20%
7,580	Crown Holdings, Inc.(a)		182,981
2,842	Freeport-McMoRan Copper & Gold, Inc., Class B		142,413
			325,394
Telecommunication Services: 3.96%
32,890	Sprint Nextel Corp.(a)		158,201
7,960	Verizon Communications, Inc.		244,611
			402,812
Utilities: 3.35%
8,801	FirstEnergy Corp.		341,039
	Total Common Stocks (Cost $9,859,036)		10,023,931
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 1.66%
$168,527	Wells Fargo — Grand Cayman 0.030%, due 07/01/09		168,527
	Total Short-Term Bank Debt Instruments (Cost $168,527)		168,527
	Total Investments: 100.14% (Cost $10,027,563)		10,192,458
	Net Other Assets and Liabilities: (0.14)%		(13,898	)
	Net Assets: 100.00%	$	10,178,560

(a) Non-income producing security.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 25 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Banking and Finance Fund

Shares	Value (Note 2)
COMMON STOCKS: 93.85%
Financial Services: 93.85%

Banks Regional: 52.40%
5,300	Alliance Financial Corp.	$	150,308
30,720	Arrow Financial Corp.		829,440
26,400	BancorpSouth, Inc.		541,992
43,366	Bank of Marin Bancorp		1,168,714
51,479	Bank of The Ozarks, Inc.		1,113,491
4,750	Beverly National Corp.		104,025
93,600	Boston Private Financial Holdings, Inc.		419,328
11,457	Camden National Corp.		389,882
45,700	Cardinal Financial Corp.		357,831
42,267	Codorus Valley Bancorp, Inc.		266,282
51,500	Community Bank System, Inc.		749,840
98,529	Community Bankers Trust Corp.		364,557
21,400	Cullen/Frost Bankers, Inc.		986,968
56,100	Danvers Bancorp, Inc.		754,545
61,446	Enterprise Financial Services Corp.		558,544
9,900	Financial Institutions, Inc.		135,234
26,366	First Financial Bancorp		198,272
19,500	First Financial Bankshares, Inc.		982,020
11,174	First Horizon National Corp.		134,083
21,100	The First of Long Island Corp.		488,254
16,823	FirstMerit Corp.		285,655
23,500	F.N.B. Corp.		145,465
45,600	Glacier Bancorp, Inc.		673,512
25,000	Guaranty Bancorp(a)		47,750
13,400	Hancock Holding Co.		435,366
30,338	IBERIABANK Corp.		1,195,621
43,900	Independent Bank Corp.		864,830
19,800	International Bancshares Corp.		204,138
25,030	Lakeland Financial Corp.		475,570
2,300	MidSouth Bancorp, Inc.		38,640
26,800	MidWestOne Financial Group, Inc.		209,308
12,400	NBT Bancorp, Inc.		269,204
5,168	Orrstown Financial Services, Inc.		192,456
8,800	Pacific Continental Corp.		106,744

Shares Value
(Note 2)

66,500	Pinnacle Financial Partners, Inc.(a)	$	885,780
31,586	Princeton National Bancorp, Inc.		462,735
60,001	PrivateBancorp, Inc.		1,334,422
46,140	Prosperity Bancshares, Inc.		1,376,356
48,369	Signature Bank(a)		1,311,767
101,768	Smithtown Bancorp, Inc.		1,301,613
9,820	Southside Bancshares, Inc.		224,583
120,954	Tamalpais Bancorp		637,428
14,100	TCF Financial Corp.		188,517
119,104	Texas Capital Bancshares, Inc.(a)		1,842,538
2,400	Tompkins Financial Corp.		115,080
4,347	Valley National Bancorp		50,860
26,400	Washington Trust Bancorp, Inc.		470,712
209,741	Western Alliance Bancorp(a)		1,434,628
8,200	Wintrust Financial Corp.		131,856
62,994	Yadkin Valley Financial Corp.		435,289
			28,042,033
Diversified Financial Services: 3.15%
35,034	Stifel Financial Corp.(a)		1,684,785
Financial Data Processing Services: 2.84%
8,670	Advent Software, Inc.(a)		284,289
37,743	Cass Information Systems, Inc.		1,235,706
			1,519,995
Financial Information Services: 0.28%
6,100	MSCI, Inc., Class A(a)		149,084
Insurance Carriers: Property & Casualty: 10.36%
50,400	Amtrust Financial Services, Inc.		574,560
25,400	Harleysville Group, Inc.		716,788
201,552	Meadowbrook Insurance Group, Inc.		1,316,135
74,230	Mercer Insurance Group, Inc.		1,180,257
27,400	The Navigators Group, Inc.(a)		1,217,382
8,900	RenaissanceRe Holdings, Ltd.		414,206
25,762	United America Indemnity, Ltd., Class A(a)		123,400
			5,542,728

June 30, 2009 26 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Banking and Finance Fund

Shares Value
(Note 2)

Insurance: Multi-Line: 5.64%
30,900	The Hanover Insurance Group, Inc.	$	1,177,599
59,950	HCC Insurance Holdings, Inc.		1,439,400
18,700	W.R. Berkley Corp.		401,489
			3,018,488
Investment Management Companies: 2.15%
9,600	Affiliated Managers Group, Inc.(a)		558,624
6,600	SEI Investments Co.		119,064
8,300	Waddell & Reed Financial, Inc., Class A		218,871
6,049	Westwood Holdings Group, Inc.		252,909
			1,149,468
Real Estate Investment Trusts: 2.66%
23,900	American Campus Communities, Inc.		530,102
63,300	Urstadt Biddle Properties, Inc., Class A		891,264
			1,421,366
Savings & Loans: 8.28%
53,679	Berkshire Hills Bancorp, Inc.		1,115,449
46,100	Dime Community Bancshares, Inc.		419,971
17,866	First Niagara Financial Group, Inc.		204,030
68,305	HF Financial Corp.		803,267
41,800	NewAlliance Bancshares, Inc.		480,700
23,700	Teche Holding Co.		784,470
9,700	TFS Financial Corp.		103,014
48,100	Westfield Financial, Inc.		435,786
3,119	WSFS Financial Corp.		85,180
			4,431,867
Securities Brokerage & Service: 6.09%
61,300	KBW, Inc.(a)		1,762,988
45,700	MF Global, Ltd.(a)		271,001
5,800	optionsXpress Holdings, Inc.		90,074
59,300	Raymond James Financial, Inc.		1,020,553
19,100	Thomas Weisel Partners Group, Inc.(a)		114,982
			3,259,598
	Total Common Stocks (Cost $52,524,529)		50,219,412

Par Value		Value (Note 2)
SHORT-TERM BANK DEBT INSTRUMENTS: 5.37%
$2,872,772	Wells Fargo — Grand Cayman 0.030%, due 07/01/09	$	2,872,772
	Total Short-Term Bank Debt Instruments (Cost $2,872,772)		2,872,772
	Total Investments: 99.22% (Cost $55,397,301)		53,092,184
	Net Other Assets and Liabilities: 0.78%		418,622
	Net Assets: 100.00%	$	53,510,806

(a) Non-income producing security.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 27 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Growth Fund

Shares		Value (Note 2)
COMMON STOCKS: 97.67%
Auto & Transportation: 2.92%
110,163	AirTran Holdings, Inc.(a)	$	681,909
40,924	Hub Group, Inc., Class A(a)		844,671
11,513	Old Dominion Freight Line, Inc.(a)		386,491
30,015	Wabtec Corp.		965,583
			2,878,654
Consumer Discretionary: 18.43%
117,059	99 Cents Only Stores(a)		1,589,661
26,990	Aéropostale, Inc.(a)		924,947
45,139	BJ’s Restaurants, Inc.(a)		761,495
25,265	California Pizza Kitchen, Inc.(a)		335,772
11,210	Capella Education Co.(a)		672,040
141,884	Charming Shoppes, Inc.(a)		527,808
55,796	Chico’s FAS, Inc.(a)		542,895
5,890	Chipotle Mexican Grill, Inc., Class A(a)		471,200
35,682	Coldwater Creek, Inc.(a)		216,233
103,897	Iconix Brand Group, Inc.(a)		1,597,936
41,349	IMAX Corp.(a)		335,754
8,758	J. Crew Group, Inc.(a)		236,641
26,603	Jack in the Box, Inc.(a)		597,237
42,266	Jarden Corp.(a)		792,488
53,887	Marvel Entertainment, Inc.(a)		1,917,837
13,095	MWI Veterinary Supply, Inc.(a)		456,492
38,864	Tetra Tech, Inc.(a)		1,113,454
72,670	Ulta Salon Cosmetics & Fragrance, Inc.(a)		808,090
23,112	Under Armour, Inc., Class A(a)		517,247
16,389	VistaPrint, Ltd.(a)		698,991
32,034	The Warnaco Group, Inc.(a)		1,037,901
341,496	The Wet Seal, Inc., Class A(a)		1,048,393
31,450	WMS Industries, Inc.(a)		990,990
			18,191,502
Consumer Staples: 2.98%
33,662	American Italian Pasta Co., Class A(a)		980,911
132,106	Chiquita Brands International, Inc.(a)		1,355,407
21,735	Diamond Foods, Inc.		606,407
			2,942,725

Shares		Value (Note 2)
Energy: 3.04%
24,978	Atlas Energy Resources Llc	$	510,301
9,250	Dril-Quip, Inc.(a)		352,425
129,023	Mariner Energy, Inc.(a)		1,516,020
17,530	Whiting Petroleum Corp.(a)		616,355
			2,995,101
Financial Services: 7.26%
35,827	HCC Insurance Holdings, Inc.		860,206
7,288	IBERIABANK Corp.		287,220
19,397	KBW, Inc.(a)		557,858
18,968	The Navigators Group, Inc.(a)		842,748
61,269	PrivateBancorp, Inc.		1,362,623
33,122	Prosperity Bancshares, Inc.		988,029
14,930	Signature Bank(a)		404,902
51,485	Texas Capital Bancshares, Inc.(a)		796,473
118,958	Western Alliance Bancorp(a)		813,673
5,909	Westwood Holdings Group, Inc.		247,055
			7,160,787
Health Care: 19.34%
19,352	Alexion Pharmaceuticals, Inc.(a)		795,754
24,497	athenahealth, Inc.(a)		906,634
99,968	BioMimetic Therapeutics, Inc.(a)		923,704
50,273	Bio-Reference Laboratories, Inc.(a)		1,589,130
55,981	Catalyst Health Solutions, Inc.(a)		1,396,166
26,667	Cepheid, Inc.(a)		251,203
40,829	Emergent BioSolutions, Inc.(a)		585,080
17,310	Haemonetics Corp.(a)		986,670
13,290	HMS Holdings Corp.(a)		541,169
20,490	Illumina, Inc.(a)		797,881
23,725	ImmunoGen, Inc.(a)		204,272
19,980	Martek Biosciences Corp.		422,577
14,666	Medarex, Inc.(a)		122,461
31,961	MedAssets, Inc.(a)		621,641
22,255	Myriad Genetics, Inc.(a)		793,391
6,951	Myriad Pharmaceuticals, Inc.(a)		32,322
14,792	NuVasive, Inc.(a)		659,723

June 30, 2009 28 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Growth Fund

Shares		Value (Note 2)
Health Care (continued): 19.34%
16,211	Owens & Minor, Inc.	$	710,366
17,134	Phase Forward, Inc.(a)		258,895
30,395	Quidel Corp.(a)		442,551
52,618	Regeneron Pharmaceuticals, Inc.(a)		942,914
32,234	ResMed, Inc.(a)		1,312,891
48,892	Seattle Genetics, Inc.(a)		475,230
54,144	Thoratec Corp.(a)		1,449,976
11,760	United Therapeutics Corp.(a)		979,962
63,388	Volcano Corp.(a)		886,164
			19,088,727
Materials & Processing: 5.88%
14,387	Airgas, Inc.		583,105
38,750	Allied Nevada Gold Corp.(a)		312,325
16,186	Arch Chemicals, Inc.		398,014
92,644	Calgon Carbon Corp.(a)		1,286,826
22,490	Dynamic Materials Corp.		433,607
13,802	Greif, Inc., Class A		610,324
71,907	Horsehead Holding Corp.(a)		535,707
12,655	Koppers Holdings, Inc.		333,712
29,308	Metalico, Inc.(a)		136,575
21,399	MYR Group, Inc.(a)		432,688
19,340	Rock-Tenn Co., Class A		738,015
			5,800,898
Producer Durables: 5.44%
15,340	American Superconductor Corp.(a)		402,675
24,039	BE Aerospace, Inc.(a)		345,200
46,764	FEI Co.(a)		1,070,895
15,220	Nordson Corp.		588,405
15,518	Regal-Beloit Corp.		616,375
78,715	SBA Communications Corp., Class A(a)		1,931,667
17,013	Varian Semiconductor Equipment Associates, Inc.(a)		408,142
			5,363,359

Shares		Value (Note 2)
Technology: 29.07%(b)
64,120	Ansys, Inc.(a)	$	1,997,978
39,234	Atheros Communications, Inc.(a)		754,862
43,572	Blackboard, Inc.(a)		1,257,488

163,237	Brocade Communications Systems, Inc.(a)	1,276,513
57,293	Cavium Networks, Inc.(a)	963,095
29,940	CommScope, Inc.(a)	786,224
11,143	DigitalGlobe, Inc.(a)	213,946
45,638	Ebix, Inc.(a)	1,429,382
115,842	GSI Commerce, Inc.(a)	1,650,748
100,551	Harmonic, Inc.(a)	592,245
19,290	Hittite Microwave Corp.(a)	670,328
43,447	II-VI, Inc.(a)	963,220
16,242	InterDigital, Inc.(a)	396,954
71,601	Internet Capital Group, Inc.(a)	481,875
31,200	Ixia, Inc.(a)	210,288
45,543	Macrovision Solutions Corp.(a)	993,293
48,990	MICROS Systems, Inc.(a)	1,240,427
100,175	Microsemi Corp.(a)	1,382,415
7,130	MicroStrategy, Inc., Class A(a)	358,069
32,117	Monolithic Power Systems, Inc.(a)	719,742
24,170	NCI, Inc., Class A(a)	735,251
25,453	NetLogic Microsystems, Inc.(a)	928,016
36,720	Nuance Communications, Inc.(a)	443,945
222,080	RF Micro Devices, Inc.(a)	835,021
43,011	Riverbed Technology, Inc.(a)	997,425
119,061	SuccessFactors, Inc.(a)	1,092,980
23,782	Sybase, Inc.(a)	745,328
42,473	Taleo Corp., Class A(a)	775,982
46,249	The Ultimate Software Group, Inc.(a)	1,121,076
82,326	Universal Display Corp.(a)	805,148
73,037	Viasat, Inc.(a)	1,872,670
		28,691,934

See Notes to Financial Statements 29 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Growth Fund

Shares		Value (Note 2)
Utilities: 3.31%
9,960	ITC Holdings Corp.	$	451,786
24,130	j2 Global Communications, Inc.(a)		544,373
77,003	Neutral Tandem, Inc.(a)		2,273,128
			3,269,287
	Total Common Stocks (Cost $85,551,113)		96,382,974
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 2.45%
$2,420,903	Wells Fargo — Grand Cayman 0.030%, due 07/01/09		2,420,903
	Total Short-Term Bank Debt Instruments (Cost $2,420,903)		2,420,903
	Total Investments: 100.12% (Cost $87,972,016)		98,803,877
	Net Other Assets and Liabilities: (0.12)%		(122,485	)
	Net Assets: 100.00%	$	98,681,392

(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.

June 30, 2009 30 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Legato Fund

Shares		Value (Note 2)
COMMON STOCKS: 95.52%
Consumer Discretionary: 10.86%
1,218	Abercrombie & Fitch Co., Class A	$	30,925
1,351	Arbitron, Inc.		21,467
1,250	Capella Education Co.(a)		74,937
2,901	Carter’s, Inc.(a)		71,394
4,708	Champion Enterprises, Inc.(a)		1,507
6,568	The Cheesecake Factory, Inc.(a)		113,626
1,330	Corinthian Colleges, Inc.(a)		22,517
1,206	DreamWorks Animation SKG, Inc., Class A(a)		33,274
4,493	Fred’s, Inc.		56,612
6,100	Gentex Corp.		70,760
3,000	Iconix Brand Group, Inc.(a)		46,140
4,725	LKQ Corp.(a)		77,726
1,250	Morningstar, Inc.(a)		51,537
5,859	Smith & Wesson Holding Corp.(a)		33,279
2,843	Tenneco, Inc.(a)		30,136
1,310	Tractor Supply Co.(a)		54,129
1,912	Under Armour, Inc., Class A(a)		42,791
1,350	Universal Technical Institute, Inc.(a)		20,156
			852,913
Consumer Staples: 5.24%
846	Chattem, Inc.(a)		57,613
2,100	The Hain Celestial Group, Inc.(a)		32,781
2,694	Lance, Inc.		62,312
2,066	TreeHouse Foods, Inc.(a)		59,439
6,915	United Natural Foods, Inc.(a)		181,518
600	USANA Health Sciences, Inc.(a)		17,838
			411,501
Energy: 4.43%
1,751	CARBO Ceramics, Inc.		59,884
325	Core Laboratories NV		28,324
1,291	Encore Acquisition Co.(a)		39,827
3,304	ENGlobal Corp.(a)		16,256
1,975	Forest Oil Corp.(a)		29,467
3,392	General Maritime Corp.		33,547
5,572	ION Geophysical Corp.(a)		14,320

Shares		Value (Note 2)
3,724	North American Energy Partners, Inc.(a)	$	22,679
736	Smith International, Inc.		18,952
1,000	St. Mary Land & Exploration Co.		20,870
3,250	Tesco Corp.(a)		25,805
1,081	Whiting Petroleum Corp.(a)		38,008
			347,939
Financials: 7.87%
3,909	Cedar Shopping Centers, Inc.		17,669
2,000	Financial Federal Corp.		41,100
2,089	First Industrial Realty Trust, Inc.		9,087
1,123	First Midwest Bancorp, Inc.		8,209
1,681	Glacier Bancorp, Inc.		24,828
309	Greenhill & Co., Inc.		22,313
1,113	Hanover Insurance Group, Inc.		42,416
8,052	MGIC Investment Corp.		35,429
1,193	Mid-America Apartment Communities, Inc.		43,795
3,614	Old National Bancorp		35,489
2,325	Portfolio Recovery Associates, Inc.(a)		90,048
750	PrivateBancorp, Inc.		16,680
929	Prosperity Bancshares, Inc.		27,712
1,670	Stewart Information Services Corp.		23,798
2,391	Sun Communities, Inc.		32,948
400	TMX Group, Inc.		11,637
5,200	UCBH Holdings, Inc.		6,552
1,117	WestAmerica BanCorp.		55,415
1,750	Westwood Holdings Group, Inc.		73,167
			618,292
Health Care: 20.55%
4,920	Abaxis, Inc.(a)		101,057
4,550	Allscripts-Misys Healthcare Solutions, Inc.		72,163
5,100	Angiodynamics, Inc.(a)		67,677
6,827	Cepheid, Inc.(a)		64,310
2,450	Chemed Corp.		96,726
2,157	Gentiva Health Services, Inc.(a)		35,504
898	Haemonetics Corp.(a)		51,186

See Notes to Financial Statements 31 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Legato Fund

Shares		Value (Note 2)
Health Care (continued): 20.55%
1,729	ICU Medical, Inc.(a)	$	71,148
1,500	Integra LifeSciences Holdings Corp.(a)		39,765
1,725	IPC The Hospitalist Co., Inc.(a)		46,040
725	Kensey Nash Corp.(a)		19,002
1,050	Landauer, Inc.		64,407
3,642	Medical Action Industries, Inc.(a)		41,701
2,775	Medicis Pharmaceutical Corp., Class A		45,288
1,775	MEDNAX, Inc.(a)		74,781
1,400	MEDTOX Scientific, Inc.(a)		13,202
2,150	Meridian Bioscience, Inc.		48,547
4,469	Merit Medical Systems, Inc.(a)		72,845
4,802	Neogen Corp.(a)		139,162
3,250	Phase Forward, Inc.(a)		49,108
3,157	PSS World Medical, Inc.(a)		58,436
5,375	Somanetics Corp.(a)		88,741
5,432	Sunrise Senior Living, Inc.(a)		8,963
1,500	SurModics, Inc.(a)		33,945
2,150	Techne Corp.		137,192
2,188	U.S. Physical Therapy, Inc.(a)		32,273
1,014	Varian, Inc.(a)		39,982
			1,613,151
Industrials: 21.11%
2,000	The Advisory Board Co.(a)		51,400
950	AeroVironment, Inc.(a)		29,317
929	Alexander & Baldwin, Inc.		21,776
701	American Science & Engineering, Inc.		48,453
4,450	Beacon Roofing Supply, Inc.(a)		64,347
4,838	C&D Technologies, Inc.(a)		9,676
3,025	CoStar Group, Inc.(a)		120,607
875	Curtiss-Wright Corp.		26,014
1,550	Dynamex, Inc.(a)		23,855
4,857	EnergySolutions, Inc.		44,684
1,650	Forward Air Corp.		35,178
950	Franklin Electric Co., Inc.		24,624
3,315	Fuel Tech, Inc.(a)		32,156

Shares		Value (Note 2)
1,700	G&K Services, Inc., Class A	$	35,955

1,281	GATX Corp.	32,947
1,871	General Cable Corp.(a)	70,312
1,528	Genesee & Wyoming, Inc., Class A(a)	40,507
1,155	IDEX Corp.	28,378
2,000	II-VI, Inc.(a)	44,340
4,470	Innerworkings, Inc.(a)	21,233
1,744	Kansas City Southern(a)	28,096
1,045	Kaydon Corp.	34,025
500	K-Tron International, Inc.(a)	39,840
2,025	Mobile Mini, Inc.(a)	29,707
2,000	Raven Industries, Inc.	51,200
4,325	Resources Connection, Inc.(a)	74,260
4,873	Ritchie Bros. Auctioneers, Inc.	114,271
1,610	Robbins & Myers, Inc.	30,993
9,708	Rollins, Inc.	168,044
1,448	School Specialty, Inc.(a)	29,264
2,500	Simpson Manufacturing Co., Inc.	54,050
2,950	Sun Hydraulics Corp.	47,702
2,404	Tetra Tech, Inc.(a)	68,875
1,530	Tutor Perini Corp.(a)	26,561
1,694	Wabtec Corp.	54,496
		1,657,143
Information Technology: 22.37%
2,200	Advent Software, Inc.(a)	72,138
3,261	ANSYS, Inc.(a)	101,612
2,750	Blackbaud, Inc.	42,763
2,500	Blackboard, Inc.(a)	72,150
1,425	Cabot Microelectronics Corp.(a)	40,313
1,330	CACI International, Inc., Class A(a)	56,804
1,550	Cass Information Systems, Inc.	50,747
965	Concur Technologies, Inc.(a)	29,992
3,050	DealerTrack Holdings, Inc.(a)	51,850
7,080	Digi International, Inc.(a)	69,030
3,550	Echelon Corp.(a)	30,104

June 30, 2009 32 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Legato Fund

Shares		Value (Note 2)
Information Technology (continued): 22.37%
1,500	EMS Technologies, Inc.(a)	$	31,350
1,900	F5 Networks, Inc.(a)		65,721
900	FactSet Research Systems, Inc.		44,883
2,684	Fair Isaac Corp.		41,495
1,600	FARO Technologies, Inc.(a)		24,848
2,075	Forrester Research, Inc.(a)		50,941
3,255	GTSI Corp.(a)		17,479
3,395	Guidance Software, Inc.(a)		12,731
2,100	Manhattan Associates, Inc.(a)		38,262
1,305	ManTech International Corp., Class A(a)		56,167
1,400	Maximus, Inc.		57,751
2,000	MICROS Systems, Inc.(a)		50,640
2,260	Napco Security Technologies, Inc.(a)		2,667
3,875	National Instruments Corp.		87,420
2,000	NVE Corp.(a)		97,200
2,360	Power Integrations, Inc.		56,144
1,475	Quality Systems, Inc.		84,016
1,275	Rimage Corp.(a)		21,178
1,878	Rudolph Technologies, Inc.(a)		10,367
5,250	Semtech Corp.(a)		83,528
3,125	Stratasys, Inc.(a)		34,344
4,275	Tyler Technologies, Inc.(a)		66,776
3,000	Ultimate Software Group, Inc.(a)		72,719
2,900	Verint Systems, Inc.(a)		29,870
			1,756,000
Materials: 2.90%
2,382	Commercial Metals Co.		38,183
1,261	Compass Minerals International, Inc.		69,242
4,800	Landec Corp.(a)		32,592
1,072	Spartech Corp.		9,852
1,873	Terra Industries, Inc.		45,364
3,350	Zoltek Cos., Inc.(a)		32,562
			227,795

Shares		Value (Note 2)
Telecommunication Services: 0.19%
2,079	Alaska Communications Systems Group, Inc.	$	15,219
	Total Common Stocks (Cost $7,511,732)		7,499,953
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 4.45%
$  89,208	JPMorgan Chase — London 0.030%, due 07/01/09		89,208
260,391	Wells Fargo — Grand Cayman 0.030%, due 07/01/09		260,391
	Total Short-Term Bank Debt Instruments (Cost $349,599)		349,599
	Total Investments: 99.97% (Cost $7,861,331)		7,849,552
	Net Other Assets and Liabilities: 0.03%		2,188
	Net Assets: 100.00%	$	7,851,740

(a) Non-income producing security.

Percentages are stated as a percent of net assets.

See Notes to Financial Statements 33 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Long/Short Credit Analysis Fund

Principal Amount		Value (Note 2)
MUNICIPAL BONDS: 177.48%
Arizona: 4.76%
$   700,000	Arizona Health Facilities Authority, Revenue Bonds (Banner Health), Series D 5.500%, 01/01/38(a)	$	679,868
1,000,000	Coconino County, Arizona Pollution Control Corp., Revenue Bonds, Series A, VRDN 5.500%, 06/01/34(a)(b)		1,004,200
			1,684,068
Arkansas: 1.34%
550,000	Baxter County, Arkansas, Hospital Revenue Bonds 5.000%, 09/01/26(a)		473,143
California: 29.53%
700,000	Anaheim California Public Financing Authority, Revenue Bonds (Anaheim Electric System Distribution) 5.000%, 10/01/29(a)		690,305
875,000	California Educational Facilities Authority, Revenue Bonds (University of Southern California), Series A 5.000%, 10/01/39(a)		866,845
750,000	California Housing Finance Agency, Home Mortgage Revenue Bonds, Series E 4.750%, 02/01/30(a)		577,815
500,000	California Pollution Control Financing Authority, Pollution Control Revenue Bonds (Pacific Gas & Electric), Insured MBIA, Inc., Series A 5.350%, 12/01/16(a)		490,910
855,000	Golden State Tobacco Securitization Corp., Asset-Backed Revenue Bonds (California Tobacco Settlement), Sr. Series A-1 4.500%, 06/01/27(a)		709,650
1,000,000	5.125%, 06/01/47(a)		541,270
900,000	Los Angeles Regional Airports Improvement Corp., Lease Revenue Bonds, Series C 7.500%, 12/01/24(a)(b)		783,828

Principal Amount		Value (Note 2)
$1,800,000	Northern California Gas Authority, No. 1 Revenue Bonds 1.529%, 07/01/27(a)(b)	$	1,020,852
10,000	Port of Oakland, California, Prerefunded Revenue Bonds, Series K 5.875%, 11/01/30(a)		10,394
1,090,000	Port of Oakland, California, Unrefunded Revenue Bonds, Insured MBIA, Inc., Series K 5.875%, 11/01/30(a)		1,004,260
450,000	San Diego, California Regional Building Authority Lease, Revenue Bonds (County Operations Center & Annex), Series A 5.375%, 02/01/36(a)		430,088
700,000	San Francisco, California City & County Airports Commission, International Airport Revenue Bonds, Series 34B, VRDN 3.750%, 05/01/29(b)		700,000
900,000	State of California Municipal Bonds 6.000%, 04/01/35(a)		902,799
800,000	7.550%, 04/01/39(a)		729,120
500,000	State of California Municipal Bonds, Series B, Sub-Series B-5, VRDN 4.500%, 05/01/40(b)		500,000
800,000	Tobacco Securitization Authority of Southern California, Tobacco Settlement Revenue Bonds, Series A1-SNR 5.000%, 06/01/37(a)		485,728
			10,443,864
Colorado: 1.34%
800,000	Denver City & County, Special Facilities Airport Revenue Bonds (United Airlines Project), Series A 5.250%, 10/01/32(a)		472,520
Connecticut: 5.04%
900,000	Connecticut State Development Authority, Pollution Control Revenue Bonds (Connecticut Light & Power), Series A 5.850%, 09/01/28(a)		905,697

June 30, 2009 34 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Long/Short Credit Analysis Fund

Principal Amount		Value (Note 2)
Connecticut (continued): 5.04%
$600,000	Connecticut State Health & Educational Facility Authority, Revenue Bonds (Yale — New Haven Hospital), Insured Ambac Indemnity Corp., Series J-1 5.000%, 07/01/26(a)	$	578,046
270,000	Connecticut State Special Tax Obligation, Revenue Bonds (Transportation Infrastructure), Series 1 5.000%, 02/01/17(a)		299,943
			1,783,686
Florida: 6.32%
900,000	Citizens Property Insurance Corp., Sr. Sec. High Act Revenue Bonds, Series A-1 6.000%, 06/01/16(a)		936,494
450,000	JEA, Florida Electric Systems, Revenue Bonds, Series 3A 3.500%, 10/01/18(a)		416,201
450,000	JEA, Florida Water & Sewer Systems, Revenue Bonds, Series A 5.375%, 10/01/39(a)		450,612
500,000	Miami-Dade County, Florida, Aviation Revenue Bonds (Miami International Airport), Insured Assured Guaranty, Ltd., Series A 5.250%, 10/01/38(a)		432,310
			2,235,617
Georgia: 4.95%
700,000	Atlanta, Georgia, Airport Revenue Bonds, Series B 5.625%, 01/01/30(a)		653,653
1,000,000	Atlanta, Georgia, Water & Wastewater Revenue Bonds, Series A 6.250%, 11/01/34		1,005,929
100,000	Main Street Natural Gas, Inc., Revenue Bonds (Georgia Gas Project), Series B 5.000%, 03/15/16(a)		91,595
			1,751,177
Guam: 2.48%
900,000	Guam Government Municipal Bonds, Series A 6.750%, 11/15/29		876,627

Principal Amount		Value (Note 2)
Hawaii: 2.73%
$750,000	Hawaii State Department of Budget & Finance, Special Purpose Revenue Bonds (Hawaiian Electric Co. & Subsidiary Projects), Insured MBIA, Inc. 5.450%, 11/01/23(a)	$	672,735
450,000	Hawaii State Department of Transportation, Special Facilities Revenue Bonds (Continental Airlines) 5.625%, 11/15/27(a)		294,111
			966,846
Illinois: 2.83%
1,000,000	Illinois Health Facilities Authority, Revenue Bonds (Loyola University Health Systems), Insured MBIA, Inc., Series B, VRDN 6.000%, 07/01/24(a)(b)		1,000,000
Indiana: 13.11%
1,000,000	Delaware County, Indiana Hospital Authority, Revenue Bonds (Cardinal Health System Obligation), Insured Ambac Indemnity Corp., VRDN 8.000%, 08/01/18(a)(b)		1,000,000
1,000,000	Indiana Finance Authority, Environmental Facilities revenue Bonds (Indiana Power & Light Co.), Series B 4.900%, 01/01/16		997,850
1,500,000	Indianapolis, Indiana Local Public Improvement Bond Bank, Revenue Bonds, Insured MBIA, Inc., Series F-2, VRDN 6.000%, 02/01/20(b)		1,500,000
1,125,000	Purdue University, Indiana, Revenue Bonds (Purdue University Student Facilities System), Series A 5.000%, 07/01/34(a)		1,138,657
			4,636,507
Kentucky: 3.19%
225,000	Kentucky Economic Development Finance Authority, Hospital Facilities Revenue Bonds (Baptist HealthCare Systems), Series A 5.625%, 08/15/27(a)		232,074

See Notes to Financial Statements 35 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Long/Short Credit Analysis Fund

Principal Amount		Value (Note 2)
Kentucky (continued): 3.19%
$900,000	Louisville & Jefferson County, Kentucky, Metropolitan Government Health Facilities Revenue Bonds (Jewish Hospital Saint Mary’s Healthcare) 6.125%, 02/01/37(a)	$	894,959
			1,127,033
Louisiana: 7.75%
1,000,000	DeSoto Parish Louisiana Environmental Improvement, Revenue Bonds (International paper), Series A 4.750%, 03/01/19(a)		777,199
400,000	Louisiana Local Government Environmental Facilities & Community Development Authority, Revenue Bonds (Westlake Chemical Corp. Project) 6.750%, 11/01/32(a)		321,916
925,000	St John Baptist Parish, Louisiana Revenue Bonds (Marathon Oil Corp.), Series A 5.125%, 06/01/37(a)		776,630
900,000	Tobacco Settlement Financing Corp., Revenue Bonds, Series 2001B 5.500%, 05/15/30(a)		864,036
			2,739,781
Maryland: 1.41%
500,000	Montgomery County, Maryland, Housing Opportunities Commission, Single Family Mortgage Revenue Bonds, Series B 5.350%, 07/01/34		498,600
Michigan: 1.06%
500,000	Michigan State Hospital Finance Authority, Revenue Bonds (Henry Ford Health System), Series A 5.450%, 11/15/46(a)		375,545

Mississippi: 0.53%
225,000	Mississippi Business Finance Corp., Revenue Bonds (Northop Grumman Corp. Project), VRDN 4.550%, 12/01/28(a)(b)	186,305

Principal Amount		Value (Note 2)
New Hampshire: 1.43%
$500,000	New Hampshire State, Business Finance Authority Pollution Control Revenue Bonds (The UTD Illuminating Project), Series A 6.875%, 12/01/29(a)	$	505,630
New Jersey: 3.46%
810,000	Tobacco Settlement Financing Corp., Revenue Bonds, Series 1A 4.500%, 06/01/23(a)		682,895
800,000	4.625%, 06/01/26(a)		540,824
			1,223,719
New York: 13.37%
300,000	Hudson Yards Infrastructure Corp., Revenue Bonds, Series A 5.000%, 02/15/47(a)		256,572
850,000	Liberty, New York, Development Corp., Revenue Bonds (Goldman Sachs Headquarters) 5.250%, 10/01/35(a)		771,724
500,000	Metropolitan Transportation Authority, New York Dedicated Tax Fund Revenue Bonds (Build America Taxable Bonds) 7.336%, 11/15/39(a)		590,085
1,000,000	New York City, New York Housing Development Corp., Multifamily Rental Housing Revenue Bonds (Progress of Peoples Development), Insured FNMA, Series B 4.950%, 05/15/36(a)		890,180
400,000	New York City, New York Industrial Development Agency, Special Facilities Revenue Bonds (Jetblue Airways Corp. Project) 5.125%, 05/15/30(a)		256,532
500,000	New York City, New York Municipal Water Finance Authority, Water & Sewer Revenue Bonds, Series FF-2 5.000%, 06/15/40(a)		489,195
675,000	New York City, New York Transitional Finance Authority, Building Aid Revenue Bonds (Fiscal 2009), Series S-3 5.250%, 01/15/39(a)		670,977

June 30, 2009 36 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Long/Short Credit Analysis Fund

Principal Amount		Value (Note 2)
New York (continued): 13.37%
$600,000	New York City, New York, Revenue Bonds, Sub-Series I-1 5.125%, 04/01/25(a)	$	617,802
250,000	Suffolk Tobacco Asset Securitization Corp., Revenue Bonds (NY Tobacco), Series B 6.000%, 06/01/48(a)		184,730
			4,727,797
North Carolina: 2.01%
350,000	North Carolina Capital Facilities Finance Agency, Revenue Bonds (Duke University Project), Series B 5.000%, 10/01/38		355,642
350,000	North Carolina Medical Care Commission, Health Care Facilities Revenue Bonds (Wakemed), Series A 5.625%, 10/01/38(a)		354,631
			710,273
Ohio: 5.84%
560,000	Buckeye, Ohio Tobacco Settlement Financing Authority, Revenue Bonds (Asset Backed Sr. Turbo), Series A-2 5.125%, 06/01/24(a)		452,614
1,000,000	5.875%, 06/01/47(a)		565,750
700,000	6.000%, 06/01/42(a)		416,346
630,000	Ohio State Housing Finance Agency, Residential Mortgage Revenue Bonds (Mortgage Backed Securities Program), Insured GNMA/FNMA, Series F 5.250%, 09/01/28(a)		631,695
			2,066,405
Oklahoma: 1.86%
800,000	Tulsa, Oklahoma Municipal Airport Trust Revenue Bonds, Series A, VRDN 7.750%, 06/01/35(a)(b)		657,208
Pennsylvania: 1.44%
380,000	Pennsylvania Economic Development Financing Authority Exempt Facilities, Revenue Bonds (Reliant Energy), Series B 6.750%, 12/01/36(a)		353,826

Principal Amount		Value (Note 2)
$250,000	Pennsylvania Economic Development Financing Authority, Solid Waste Disposal Revenue Bonds (USG Corp. Project) 6.000%, 06/01/31	$	154,188
			508,014
Puerto Rico: 17.49%
700,000	Puerto Rico Commonwealth Aqueduct & Sewer Authority, Revenue Bonds, Sr. Lien Series A 6.000%, 07/01/44(a)		632,415
400,000	Puerto Rico Commonwealth Highway & Transportation Authority Highway, Insured MBIA, Inc., Revenue Bonds, Series Z 6.250%, 07/01/15(a)		419,688
1,000,000	Puerto Rico Commonwealth Infrastructure Financing Authority, Special Tax Revenue Bonds, Insured Ambac Indemnity Corp., Series C 5.500%, 07/01/24 (a)		896,470
1,250,000	Puerto Rico Electric Power Authority, Power Revenue Bonds, Series WW 5.250%, 07/01/25(a)		1,218,338
900,000	Puerto Rico Public Buildings Authority, Guaranteed Revenue Bonds (Government Facilities), Insured XL Capital Assurance, Inc., Series H 5.250%, 07/01/13(a)		897,435
1,000,000	Puerto Rico Sales Tax Financing Corp., Sales Tax Revenue Bonds (First Subordinate), Series A 5.500%, 08/01/28		975,750
1,200,000	5.750%, 08/01/37		1,143,828
			6,183,924
Rhode Island: 3.87%
1,000,000	Rhode Island Student Loan Authority, Student Loan Revenue Bonds, Insured Ambac Indemnity Corp., Series I, VRDN 0.840%, 12/01/37(b)(c)(d)		1,000,000

See Notes to Financial Statements 37 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Long/Short Credit Analysis Fund

Principal Amount		Value (Note 2)
Rhode Island (continued): 3.87%
$500,000	Tobacco Settlement Financing Corp., Revenue Bonds, Series A 6.250%, 06/01/42(a)	$	367,690
			1,367,690
South Carolina: 0.41%
145,000	Tobacco Settlement Revenue Management Authority, South Carolina Tobacco Settlement Revenue Bonds 5.000%, 06/01/18(a)		145,044
Tennessee: 10.13%
1,000,000	Memphis-Shelby County, Tennessee Sports Authority, Inc., Revenue Bonds (Memphis Arena Project), Insured MBIA, Inc., Series B, VRDN 6.000%, 11/01/29(a)(b)		1,000,000
900,000	Sullivan County, Tennessee, Health Educational & Housing Facilities Board, Hospital Revenue Bonds (Wellmont Health System Project), Series C 5.250%, 09/01/36(a)		602,712
700,000	Tennessee Energy Acquisition Corp., Gas Revenue Bonds, Series A 5.000%, 09/01/15(a)		673,491
1,500,000	5.250%, 09/01/21(a)		1,304,715
			3,580,918
Texas: 18.22%
650,000	Brazos River Authority Texas, Pollution Control Revenue Bonds (Texas Electric Co. Project), Series C, VRDN 5.750%, 05/01/36(a)(b)		506,259
700,000	Brazos River Authority Texas, Pollution Control Revenue Bonds (Texas Energy Co. Llc Project), Series A, VRDN 6.750%, 04/01/38(a)(b)		458,185

750,000 Brazos River Authority Texas, Revenue Bonds (Houston Industries, Inc. Project), Insured Ambac Indemnity Corp., Series A
5.125%, 05/01/19^(a) 741,690

Principal Amount		Value (Note 2)
$300,000	Dallas-Fort Worth, Texas International Airport Facilities Improvement Corp., Revenue Bonds (American Airlines, Inc. Project) 5.500%, 11/01/30(a)	$	135,366
1,290,000	6.375%, 05/01/35(a)		581,842
165,000	Houston Texas Airport, Special Facilities Revenue Bonds (Continental Airlines), Series B 6.125%, 07/15/27(a)		114,965
250,000	Houston Texas Airport, Special Facilities Revenue Bonds (Continental Airlines), Series E 6.750%, 07/01/29(a)		210,795
1,000,000	Panhandle-Plains Higher Education Authority, Inc., Student Loan Revenue Bonds, Insured Federal Student Loans, Sr. Series A-1, VRDN 0.613%, 12/01/33(b)(c)(d)		1,000,000
345,000	Sabine River Authority Texas, Pollution Control Revenue Bonds (Texas Electric Co. Project), Series A 6.450%, 06/01/21(a)		166,049
700,000	State of Texas Municipal Bonds (Vets Housing Assistance II — D), VRDN 5.750%, 12/01/36(b)		700,000
1,040,000	Texas Municipal Gas Acquisition & Supply Corp., Gas Supply Revenue Bonds, Series D 6.250%, 12/15/26(a)		975,988
700,000	Texas Transportation Commission, Central Texas, Turnpike System Revenue Bonds (First Tier Put) 5.000%, 08/15/42(a)		710,003
300,000	Trinity River Authority Texas, Pollution Control Revenue Bonds (Texas Electric Co. Project) 6.250%, 05/01/28(a)		144,369
			6,445,511

June 30, 2009 38 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Long/Short Credit Analysis Fund

Principal Amount		Value (Note 2)
Utah: 0.81%
$300,000	Tooele County, Utah, Hazardous Waste Treatment Revenue Bonds (Union Pacific Project), Series A 5.700%, 11/01/26(a)	$	288,486
Virginia: 4.32%
500,000	University of Virginia, University Revenue Bonds 5.000%, 06/01/40(a)		511,520
700,000	Virginia State Housing Development Authority, Revenue Bonds (Commonwealth Mortgage), Series B 4.850%, 01/01/36(a)		600,397
425,000	Virginia State Public School Authority, Revenue Bonds (School Financing 1997), Series B1 4.000%, 08/01/25(a)		414,643
			1,526,560
West Virginia: 1.97%
700,000	West Virginia Housing Development Fund, Revenue Bonds (Housing Finance), Series A 5.450%, 11/01/30(a)		697,543
Wisconsin: 2.48%
1,000,000	Wisconsin State Health & Educational Facilities Authority, Revenue Bonds (Aurora Health Care Inc.), Series A 5.600%, 02/15/29(a)		878,560
	Total Municipal Bonds (Cost $62,526,064)		62,764,601
CORPORATE BONDS: 13.42%
Consumer Cyclical: 1.07%
600,000	Continental Airlines, Inc., Sr. Unsec. Notes 8.750%, 12/01/11(a)		378,000
Consumer Discretionary: 0.09%
250,000	General Motors Corp., Sr. Unsec. Notes 7.200%, 01/15/11(a)		32,500
Energy: 1.94%
1,000,000	Southern Union Co., Jr. Sub. Notes 7.200%, 11/01/66(a)(b)		685,000

Principal Amount		Value (Note 2)
Financials: 3.32%
$400,000	Bank of America Corp., Sr. Unsec. Notes 7.375%, 05/15/14(a)	$	413,793
500,000	Citigroup, Inc., Sr. Notes 8.500%, 05/22/19(a)		509,464
250,000	Jefferies Group, Inc., Sr. Unsec. Notes 8.500%, 07/15/19		248,405
			1,171,662
Industrials: 2.60%
500,000	The Dow Chemical Co., Sr. Unsec. Notes 8.550%, 05/15/19(a)		501,714
400,000	Whirlpool Corp., Notes 8.600%, 05/01/14(a)		418,410
			920,124
Technology: 1.47%
500,000	Xerox Corp., Sr. Notes 8.500%, 05/15/14(a)		520,614
Telecommunications : 2.61%
900,000	CBS Corp., Gtd. Notes 8.200%, 05/15/14(a)		924,196
Utility: 0.32%
150,000	Dominion Resources, Inc., Jr. Sub. Notes 7.500%, 06/30/66(a)(b)		112,640
	Total Corporate Bonds (Cost $4,854,427)		4,744,736
Shares
EXCHANGE TRADED FUNDS: 0.33%
2,300	ProShares UltraShort Real Estate Fund		45,264
1,300	ProShares UltraShort S&P 500 Fund		71,825
			117,089
	Total Exchange Traded Funds (Cost $227,282)		117,089

See Notes to Financial Statements 39 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Long/Short Credit Analysis Fund

Par Value		Value (Note 2)
SHORT-TERM BANK DEBT INSTRUMENTS: 7.15%
$2,528,612	Wells Fargo — Grand Cayman 0.030%, due 07/01/09	$	2,528,612
	Total Short-Term Bank Debt Instruments (Cost $2,528,612)		2,528,612
	Total Investments: 198.38% (Cost $70,136,385)		70,155,038
	Net Other Assets and Liabilities: (98.38)%		(34,790,233	)
	Net Assets: 100.00%	$	35,364,805
Principal Amount
SCHEDULE OF SECURITIES SOLD SHORT
Corporate Bonds
$(250,000)	Duke Energy Carolinas Llc, Unsub. Sr. Notes 6.100%, 06/01/37	$	(262,215	)
(500,000)	The Goldman Sachs Group, Inc., Sr. Unsec. Notes 6.150%, 04/01/18		(487,598	)
(150,000)	International Paper Co., Unsec. Sr. Notes 5.300%, 04/01/15		(137,800	)
(475,000)	Lennar Corp., Gtd. Notes, Series B 6.500%, 04/15/16		(382,375	)
(500,000)	Limited Brands, Inc., Unsec. Sr. Notes 5.250%, 11/01/14		(425,740	)
(250,000)	Northrop Grumman Systems Corp., Gtd. Notes 7.750%, 02/15/31		(313,378	)
(500,000)	Safeway, Inc., Sr. Unsec. Notes 7.250%, 02/01/31		(562,278	)
(500,000)	TXU Corp., Sr. Unsec. Global Notes, Series R 6.550%, 11/15/34		(242,736	)
(410,000)	Union Pacific Corp., Sr. Unsec. Notes 7.875%, 01/15/19		(470,127	)

Principal Amount		Value (Note 2)
U.S. Government Agency
$(5,000,000)	Federal Home Loan Mortgage Corp. 5.000%, 04/18/17	$	(5,467,325	)
(7,500,000)	United States Treasury Notes 1.500%, 12/31/13		(7,228,718	)
(1,250,000)	1.750%, 11/15/11		(1,263,766	)
(1,400,000)	2.375%, 08/31/10		(1,429,586	)
(600,000)	2.750%, 02/15/19		(562,076	)
(4,000,000)	3.500%, 11/15/09		(4,048,752	)
(2,950,000)	3.750%, 11/15/18		(3,001,398	)
(250,000)	4.375%, 02/15/38		(252,227	)
(1,300,000)	4.500%, 11/15/15		(1,414,969	)
(850,000)	4.500%, 05/15/38		(876,563	)
	Total Securities Sold Short (Proceeds $29,346,895)	$	(28,829,627	)

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

(b) Interest rate will change at a future date. Interest rate shown reflects the rate in effect at June 30, 2009.

(c) Security determined to be illiquid under the procedures approved by the Fund’s Board of Trustees.

(d) Fair valued security.

Percentages are stated as a percent of net assets.

Investment Abbreviations:

GNMA/FNMA — Government National Mortgage Association/Federal National Mortgage Association

Gtd. — Guaranteed

Jr. — Junior Sec.-Secured

Sr. — Senior

Sub. — Subordinated

Unsec. — Unsecured

Unsub. — Unsubordinated

VRDN — Variable Rate Demand Notes

June 30, 2009 40 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Long/Short Credit Analysis Fund

Securities determined to be illiquid under procedures approved by the Fund’s Board of Trustees.

Information related to the illiquid securities is as follows:

Dates of Purchase	Security	Cost		Market Value		% of Net Assets
12/21/07	Panhandle-Plains Higher Education Authority, Inc., Student Loan Revenue Bonds, Insured Federal Student Loans, Sr. Series A-1, VRDN 0.613%, 12/01/33(b)(d)	$	1,000,000	$	1,000,000	2.83%
12/14/07	Rhode Island Student Loan Authority, Student Loan Revenue Bonds, Insured Ambac Indemnity Corp., Series I, VRDN 0.840%, 12/01/37(b)(d)		1,000,000		1,000,000	2.83%

See Notes to Financial Statements 41 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward International Fixed Income Fund

Principal Amount		Currency	Value (Note 2)
FOREIGN GOVERNMENT OBLIGATIONS: 71.23%
Australia: 0.18%
	Australian Government, Bonds, Series 124
9,000	5.750%, 05/15/21	AUD	$	7,329
	Australian Government, Bonds, Series 513
40,000	6.500%, 05/15/13	AUD		34,013
				41,342
Austria: 1.72%
	Republic of Austria, Notes
128,000	3.400%, 10/20/14	EUR		181,048
17,000	4.300%, 07/15/14	EUR		24,710
110,000	6.250%, 07/15/27	EUR		183,270
				389,028
Brazil: 1.90%
	Brazil Notas do Tesouro Nacional, Notes, Series F
500	10.000%, 01/01/12	BRL		261,305
200	10.000%, 01/01/14	BRL		99,397
150	10.000%, 01/01/17	BRL		70,466
				431,168
Canada: 0.90%
	Canadian Government, Bonds
40,000	3.750%, 06/01/12	CAD		36,243
25,000	4.000%, 09/01/10	CAD		22,347
35,000	4.000%, 06/01/16	CAD		32,154
30,000	5.000%, 06/01/14	CAD		28,804
45,000	5.000%, 06/01/37	CAD		46,194
	Canadian Government, Bonds, Series A55
30,000	8.000%, 06/01/23	CAD		37,558
				203,300
Chile: 0.77%
	Bonos del Banco Central de Chile en UF
2,112	3.000%, 04/01/13(a)(b)	CLP		79,960

Principal Amount		Currency	Value (Note 2)
2,445	5.000%, 01/01/16(a)(b)	CLP	$	94,708
				174,668
Colombia: 0.92%
	Republic of Colombia, Unsub. Bonds
390,000,000	12.000%, 10/22/15	COP		208,967
Denmark: 0.92%
	Denmark (Kingdom of), Bonds
120,000	4.500%, 11/15/39	DKK		23,606
220,000	5.000%, 11/15/13	DKK		45,070
	Denmark (Kingdom of), Sr. Unsec. Bonds
100,000	3.125%, 03/17/14	EUR		140,579
				209,255
France: 4.26%
	French Government O.A.T., Bonds
50,000	3.750%, 04/25/21	EUR		68,782
21,000	4.000%, 04/25/55	EUR		27,561
100,000	4.250%, 04/25/19	EUR		146,262
	French Government Treasury Notes
400,000	2.500%, 07/04/27	EUR		570,146
100,000	4.500%, 07/12/13	EUR		151,067
				963,818
Germany: 7.20%
	Bundesobligation, Bonds, Series 147
37,000	2.500%, 10/08/10	EUR		52,887
	Bundesrepublik Deutschland, Bonds, Series 02
100,000	5.000%, 01/04/12	EUR		151,525
	Bundesrepublik Deutschland, Bonds, Series 03
223,000	3.750%, 07/04/13	EUR		329,768

June 30, 2009 42 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Fixed Income Fund

Principal Amount		Currency	Value (Note 2)
Germany (continued): 7.20%
	Bundesrepublik Deutschland, Bonds, Series 06
424,000	3.750%, 01/04/17	EUR	$	618,723
	Bundesrepublik Deutschland, Bonds, Series 07
147,000	4.250%, 07/04/39	EUR		208,463
	Bundesrepublik Deutschland, Bonds, Series 09
50,000	3.750%, 01/04/19	EUR		72,526
	Bundesrepublik Deutschland, Bonds, Series 97
110,000	6.500%, 07/04/27	EUR		197,384
				1,631,276
Greece: 5.29%
	Hellenic Republic, Bonds
100,000	5.250%, 05/18/12	EUR		149,867
78,000	6.500%, 10/22/19	EUR		122,954
	Hellenic Republic, Unsub. Bonds
400,000	4.500%, 05/20/14	EUR		584,535
	Hellenic Republic, Unsub. Bonds, Series 15YR
157,000	4.700%, 03/20/24	EUR		202,433
	Hellenic Republic, Unsub. Bonds, Series 30YR
118,000	4.600%, 09/20/40	EUR		138,261
				1,198,050
Hungary: 1.47%
	Hungary Government, Bonds, Series 15/A
46,000,000	8.000%, 02/12/15	HUF		218,667
	Hungary Government, Bonds, Series 20/A
26,000,000	7.500%, 11/12/20	HUF		113,862
				332,529
Italy: 6.90%
	Buoni Poliennali Del Tesoro, Bonds
145,000	4.250%, 08/01/13	EUR		213,585

Principal Amount		Currency	Value (Note 2)
326,000	4.250%, 08/01/14	EUR	$	476,014
500,000	4.500%, 08/01/10	EUR		727,593
96,000	6.000%, 05/01/31	EUR		145,927
				1,563,119
Japan: 14.96%
	Japan Government, Bonds, Series 21
37,000,000	2.300%, 12/20/35	JPY		392,576
	Japan Government, Bonds, Series 80
20,000,000	2.100%, 06/20/25	JPY		212,775
	Japan Government, Bonds, Series 236
20,000,000	1.500%, 12/20/11	JPY		213,408
	Japan Government, Bonds, Series 257
71,000,000	1.300%, 12/20/13	JPY		758,329
	Japan Government, Bonds, Series 258
90,000,000	1.300%, 03/20/14	JPY		960,750
	Japan Government, Bonds, Series 274
74,000,000	1.500%, 12/20/15	JPY		796,937
	Japan Government, Bonds, Series 300
5,000,000	1.500%, 09/20/09	JPY		52,710
				3,387,485
Malaysia: 1.63%
	Malaysian Government, Bonds, Series 0204
300,000	5.094%, 04/30/14	MYR		90,505
	Malaysian Government, Bonds, Series 0207
1,000,000	3.814%, 02/15/17	MYR		279,129
				369,634

See Notes to Financial Statements 43 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward International Fixed Income Fund

Principal Amount		Currency	Value (Note 2)
Mauritius: 0.03%
	Mauritius Treasury Notes
200,000	9.750%, 11/23/09(a)	MUR	$	6,340
Mexico: 2.07%
	Mexican Bonos, Bonds, Series M10
37,000	8.000%, 12/17/15	MXN		284,730
	Mexican Bonos, Gtd. Bonds, Series M20
5,000	10.000%, 12/05/24	MXN		43,157
	Mexican Bonos, Bonds, Series MI10
18,000	8.000%, 12/19/13	MXN		141,012
				468,899
Norway: 0.11%
	Norway Government, Bonds
154,000	4.250%, 05/19/17	NOK		24,536
Peru: 0.44%
	Peru Bono Soberano, Bonds
100	6.900%, 08/12/37	PEN		34,419
170	8.200%, 08/12/26	PEN		66,213
				100,632
Poland: 2.13%
	Poland Government, Bonds, Series 0413
740,000	5.250%, 04/25/13	PLN		229,833
	Poland Government, Bonds, Series 1015
200,000	6.250%, 10/24/15	PLN		63,816
	Poland Government, Bonds, Series 1017
630,000	5.250%, 10/25/17	PLN		188,263
				481,912
Portugal: 4.45%
	Portugal Obrigacoes do Tesouro OT, Bonds
392,000	4.375%, 06/16/14	EUR		579,490

Principal Amount		Currency	Value (Note 2)
278,000	5.450%, 09/23/13	EUR	$	427,982
				1,007,472
South Africa: 2.23%
	Republic of South Africa, Bonds, Series R153
400,000	13.000%, 08/31/10	ZAR		55,164
	Republic of South Africa, Bonds, Series R157
1,340,000	13.500%, 09/15/15	ZAR		215,280
	Republic of South Africa, Bonds, Series R186
800,000	10.500%, 12/21/26	ZAR		118,036
	Republic of South Africa, Bonds, Series R201
400,000	8.750%, 12/21/14	ZAR		52,221
	Republic of South Africa, Bonds, Series R204
520,000	8.000%, 12/21/18	ZAR		63,438
				504,139
Spain: 1.98%
	Bonos Y Oblig Del Estado, Bonds
285,000	5.500%, 07/30/17(b)	EUR		448,342
Sweden: 0.26%
	Swedish Government, Bonds, Series 1050
460,000	3.000%, 07/12/16	SEK		59,015
Switzerland: 0.28%
	Switzerland Government, Bonds
65,000	3.000%, 05/12/19	CHF		63,445
Thailand: 1.70%
	Thailand Government, Bonds
9,500,000	5.000%, 05/26/17	THB		304,373
2,500,000	5.250%, 05/12/14	THB		80,412
				384,785

June 30, 2009 44 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Fixed Income Fund

Principal Amount		Currency	Value (Note 2)
Turkey: 2.17%
	Turkey Government, Bonds
440,000	14.000%, 01/19/11	TRL	$	294,562
280,000	16.000%, 03/07/12	TRL		195,898
				490,460
United Kingdom: 4.36%
	United Kingdom, Treasury Bonds
50,000	3.250%, 12/07/11	GBP		84,867
146,000	4.250%, 12/07/55	GBP		235,851
177,000	4.750%, 03/07/20	GBP		318,864
70,000	5.000%, 09/07/14	GBP		126,830
100,000	5.000%, 03/07/18	GBP		185,348
15,000	8.000%, 06/07/21	GBP		34,648
				986,408
	Total Foreign Government Obligations (Cost $15,459,414)			16,130,024
CORPORATE BONDS: 20.74%
Austria: 0.81%
	FMG Finance Pty Ltd., Sr. Secured Notes
50,000	9.750%, 09/01/13(c)	EUR		64,181
	Raiffeisen Zentralbank Oesterreich AG, Gov’t Gtd. Notes
85,000	2.500%, 05/04/11	EUR		120,218
				184,399
Belgium: 0.29%
	Barry Callebaut Services NV, Gtd. Notes
50,000	6.000%, 07/13/17	EUR		64,882
Canada: 0.27%
	Bombardier, Inc., Sr. Unsec. Notes
50,000	7.250%, 11/15/16(c)	EUR		60,323
Denmark: 1.52%
	ISS Global A/S, Sr. Unsub. Euro Medium-Term Notes
50,000	4.750%, 09/18/10	EUR		69,441

Principal Amount		Currency	Value (Note 2)
	ISS Holding A/S, Secured Notes
50,000	8.875%, 05/15/16(c)	EUR	$	57,868
	Nordic Telephone Co., Holdings, Sr. Secured Notes
100,000	6.872%, 05/01/16(c)(d)	EUR		131,168
	PERI GmbH, Gtd. Notes
30,000	5.625%, 12/15/11(c)	EUR		40,928
	TUI AG, Sr. Unsec. Notes
50,000	5.125%, 12/10/12(c)	EUR		45,593
				344,998
France: 1.79%
	CMA CGM SA, Sr. Unsec. Notes
100,000	5.500%, 05/16/12(c)	EUR		63,830
	Dexia Credit Local, Jr. Sub. Notes
50,000	4.300%(d)(e)	EUR		27,005
	Europcar Groupe SA, Sr. Sub. Notes
50,000	8.125%, 05/15/14(c)	EUR		36,825
	Nexans SA
50,000	5.750%, 05/02/17	EUR		61,024
	RCI Banque SA, Unsub. Euro Medium-Term Notes
20,000	8.125%, 05/15/12	EUR		29,219
	Tereos Europe, Gtd. Notes
50,000	6.375%, 04/15/14(c)	EUR		59,271
	Wendel Investment, Sr. Unsec. Notes
50,000	4.875%, 09/21/15	EUR		50,854
20,000	5.000%, 02/16/11	EUR		27,356
	Wendel, Sr. Unsec. Notes
50,000	4.875%, 05/26/16	EUR		48,749
				404,133
Germany: 1.61%
	Cognis GmbH, Sr. Secured Notes
50,000	9.500%, 05/15/14(c)	EUR		55,413
	Gerresheimer Holdings GmbH, Gtd. Notes
30,000	7.875%, 03/01/15(c)	EUR		42,717

See Notes to Financial Statements 45 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward International Fixed Income Fund

Principal Amount		Currency	Value (Note 2)
Germany (continued): 1.61%
	Heckler & Koch, Inc. GmbH, Sr. Secured Notes
65,000	9.250%, 07/15/11(c)	EUR	$	94,377
	Unity Media GmbH, Secured Notes
75,000	10.125%, 02/15/15(c)	EUR		108,371
	Unitymedia Hessen GmbH & Co., Sr. Secured Notes
50,000	4.259%, 04/15/13(c)(d)	EUR		64,649
				365,527
Ireland: 0.59%
	Allied Irish Banks Plc
60,000	12.500%, 06/25/19	EUR		77,947
	Ardagh Glass Group Plc, Sr. Unsec. PIK Bonds
11,104	10.750%, 03/01/15	EUR		7,555
	Smurfit Kappa Funding Plc, Sr. Sub. Notes
40,000	7.750%, 04/01/15	EUR		48,819
				134,321
Italy: 0.74%
	Banca Italease SpA, Sr. Unsec. Euro Medium-Term Notes
50,000	1.527%, 03/14/12(d)	EUR		62,743
	CIR-Compagnie Industriali Riunite SpA, Sr. Unsec. Notes
50,000	5.750%, 12/16/24	EUR		46,564
	Lottomatica SpA, Jr. Sub. Bonds
50,000	8.250%, 03/31/66(c)(d)	EUR		57,868
				167,175
Japan: 0.27%
	Softbank Corp., Sr. Unsec. Notes
50,000	7.750%, 10/15/13	EUR		61,375
Jersey: 0.45%
	HBOS Capital Funding LP, Bank Gtd., Perpetual Maturity
100,000	4.939%(d)(e)	EUR		48,399

Principal Amount		Currency	Value (Note 2)
	HBOS Euro Finance LP, Bank Gtd., Perpetual Maturity
50,000	7.627%(d)(e)	EUR	$	29,460
	Lloyds TSB Capital, Bank Gtd., Perpetual Maturity
25,000	7.375%(d)(e)	EUR		24,024
				101,883
Luxembourg: 2.04%
	Beverage Packaging Holdings, Sr. Sub. Notes
50,000	9.500%, 06/15/17(c)	EUR		56,114
	Cirsa Capital Luxembourg SA, Gtd. Notes
100,000	7.875%, 07/15/12(c)	EUR		111,527
	Dexia Funding SA, Bank Gtd. Notes
50,000	4.892%(d)(e)	EUR		25,870
	Fiat Finance & Trade, Ltd., Gtd. Euro Medium-Term Notes
50,000	5.625%, 11/15/11	EUR		64,882
50,000	6.625%, 02/15/13	EUR		59,622
	Lecta SA, Sr. Secured Notes
50,000	3.906%, 02/15/14(c)(d)	EUR		41,735
	Lighthouse International Co., SA, Sr. Secured Bonds
50,000	8.000%, 04/30/14(c)	EUR		33,318
	Wind Acquisition Finance SA, Secured Notes
50,000	9.750%, 12/01/15(c)	EUR		68,740
				461,808
Netherlands: 2.56%
	Ardagh Glass Finance BV, Gtd. Notes
50,000	8.875%, 07/01/13(c)	EUR		64,882
	Cemex Finance Europe BV, Gtd. Notes
90,000	4.750%, 03/05/14	EUR		82,872
	Clondalkin Industries BV, Gtd. Notes
100,000	8.000%, 03/15/14(c)	EUR		81,366

June 30, 2009 46 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Fixed Income Fund

Principal Amount		Currency	Value (Note 2)
Netherlands (continued): 2.56%
	HeidelbergCement Finance BV, Gtd. Euro Medium-Term Notes
30,000	5.625%, 01/04/18	EUR	$	29,670
70,000	6.375%, 01/25/12	EUR		81,015
	Impress Holdings BV, Gtd. Notes
50,000	4.560%, 09/15/13(c)(d)	EUR		61,726
	Kazkommerts International BV, Euro Medium-Term Notes
50,000	7.625%, 02/13/12	GBP		51,001
	Suedzucker International Finance BV, Gtd. Notes
60,000	5.250%(d)(e)	EUR		62,287
	UPC Holding BV, Sr. Secured Notes
50,000	8.625%, 01/15/14(c)	EUR		64,532
				579,351
South Africa: 0.31%
	Foodcorp, Ltd., Gtd. Notes
60,000	8.875%, 06/15/12(c)	EUR		70,704
Spain: 1.24%
	Caixa d’Estalvis de Catalunya, Gov’t Gtd. Notes
100,000	3.000%, 05/07/12	EUR		140,075
	Caja de Ahorros de Valencia Castellon y Alicante, Gov’t Gtd. Notes
100,000	3.000%, 05/11/12	EUR		141,082
				281,157
Sweden: 0.44%
	Corral Finans AB, Secured PIK Bonds
51,797	2.935%, 04/15/10(c)(d)	EUR		47,232
	Stena AB, Sr. Unsec. Notes
50,000	6.125%, 02/01/17(c)	EUR		51,905
				99,137
United Kingdom: 2.50%
	CEVA Group Plc, Gtd. Notes
50,000	10.000%, 12/01/16(c)	EUR		24,550

Principal Amount		Currency	Value (Note 2)
	Eco-Bat Finance Plc, Gtd. Notes
20,000	10.125%, 01/31/13(c)	EUR	$	27,636
	FCE Bank Plc, Sr. Unsec. Euro Medium-Term Notes
55,000	2.120%, 09/30/09(d)	EUR		76,000
50,000	7.125%, 01/16/12	EUR		59,972
	Lloyds Banking Group Plc
100,000	7.875%(e)	EUR		60,035
	Lloyds TSB Bank Plc, Sub., Perpetual Maturity
30,000	6.350%(d)(e)	EUR		22,091
	National Westminster Bank Plc, Jr. Sub. Euro Medium-Term Notes
95,000	6.625%, 10/29/49(d)	EUR		113,948
	Northern Rock Plc, Sub. Euro Medium-Term Notes
70,000	5.625%, 01/13/15(d)	GBP		25,912
	Virgin Media Finance Plc, Gtd. Notes
100,000	9.750%, 04/15/14	GBP		155,471
				565,615
United States: 3.31%
	AGCO Corp., Sr. Sub. Notes
50,000	6.875%, 04/15/14	EUR		64,181
	CIT Group, Inc., Sr. Unsec. Notes
50,000	4.250%, 09/22/11	EUR		49,100
100,000	5.000%, 05/13/14	EUR		76,455
	Fresenius US Finance II, Inc., Senior Notes
50,000	8.750%, 07/15/15(c)	EUR		75,579
	GMAC Llc, Sr. Unsec. Notes
50,000	4.750%, 09/14/09	EUR		69,091
	HCA, Inc., Sr. Unsec. Notes
25,000	8.750%, 11/01/10	GBP		41,336
	Hertz Corp., Gtd. Notes
50,000	7.875%, 01/01/14	EUR		57,868

See Notes to Financial Statements 47 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward International Fixed Income Fund

Principal Amount		Currency	Value (Note 2)
United States (continued): 3.31%
	Huntsman International Llc, Gtd. Notes
50,000	6.875%, 11/15/13(c)	EUR	$	51,906
	Nalco Co., Gtd. Notes
25,000	9.000%, 11/15/13	EUR		34,721
	Nielsen Finance LLC/Nielsen Finance Co., Gtd. Notes
100,000	9.000%, 08/01/14	EUR		121,346
	Owens Brockway Glass Container, Inc., Gtd. Notes
50,000	6.750%, 12/01/14	EUR		63,830
	RBS Capital Trust A, Bank Gtd., Perpetual Maturity
20,000	6.467%(d)(e)	EUR		12,766
	Travelport Llc, Gtd. Notes
50,000	10.875%, 09/01/16	EUR		31,214
				749,393
	Total Corporate Bonds (Cost $4,635,258)			4,696,181
CREDIT LINKED NOTES : 1.09%
Indonesia: 1.09%
	Indonesia Government, Bonds, Series FR45
235,294	10.002%, 05/15/37(a)(d)	USD		163,639
	Indonesia Government, Bonds, Series FR47
110,955	10.000%, 02/17/28(a)	USD		83,385
				247,024
	Total Credit Linked Notes (Cost $269,113)			247,024
SHORT-TERM BANK DEBT INSTRUMENTS: 4.13%
	Brown Brothers Harriman & Co. — Grand Cayman
86,000	0.030%, due 07/01/09	ZAR		11,153
14,000	0.030%, due 07/01/09	CAD		12,036
10,000	0.030%, due 07/01/09	AUD		8,058

Principal Amount		Currency	Value (Note 2)
	Citibank — London
101,000	0.030%, due 07/01/09	GBP	$	166,165
65,000	0.030%, due 07/01/09	EUR		91,186
	CitiBank — London
37,478,000	0.030%, due 07/01/09	JPY		389,038
	JPMorgan Chase — London
49,000	0.030%, due 07/01/09	SGD		33,830
	Wells Fargo — Grand Cayman
224,000	0.030%, due 07/01/09	USD		224,000
	Total Short-Term Bank Debt Instruments (Cost $912,730)			935,466
	Total Investments: 97.19% (Cost $21,276,515)			22,008,695
	Net Other Assets and Liabilities: 2.81%			635,617
	Net Assets: 100.00%		$	22,644,312

(a) Fair valued security.

(b) Denotes an inflation-indexed security: principal and coupon indexed to the consumer price index.

(c) Securities were purchased pursuant to Regulation S under the Securities Act of 1933, which exempts form registration securities offered and sold outside of the United States. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Fund’s Board of Trustee’s. At period end, the aggregate market value of those securities was $1,916,834, representing 8.46% of net assets.

(d) Interest rate will change at a future date. Interest rate shown reflects the rate in effect at June 30, 2009.

(e) This security has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest.

Percentages are stated as a percent of net assets.

Investment Abbreviations:

Gtd. — Guaranteed

Gov’t — Government

Jr. — Junior

June 30, 2009 48 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Fixed Income Fund

Investment Abbreviations: (continued)

PIK — Payment in-kind

Sr. — Senior

Sub. — Subordinated

Unsec. — Unsecured

Unsub. — Unsubordinated

Currency Abbreviations:

AUD — Australian Dollar

BRL — Brazilian Real

CAD — Canadian Dollar

CHF — Swiss Franc

CLP — Chilean Peso

COP — Colombian Peso

DKK — Danish Krone

EUR — Euro

GBP — British Pound

HUF — Hungarian Forint

JPY — Japanese Yen

MYR — Malaysian Ringgit

MXN — Mexican Peso

MUR — Mauritian Rupee

NOK — Norwegian Krone

PEN — Peruvian New Sol

PLN — Polish Zloty

SEK — Swedish Krona

SGD — Singapore Dollar

THB — Thai Baht

TRL — Turkish Lira

USD — U.S. Dollar

ZAR — South African Rand

See Notes to Financial Statements 49 June 30, 2009

Forward International Fixed Income Fund

FORWARD FOREIGN CURRENCY CONTRACTS

At June 30, 2009, the Fund had outstanding foreign currency exchange contract, both to purchase and sell foreign currencies:

Open Forward Foreign Currency Contracts with Unrealized Gains	Purchase/Sale Contract	Contracts to Deliver/Receive	Expiration Date	Settlement Date Value		Current Value		Unrealized Gain
Brazilian Real	Purchase	73,035	09/02/09	$	35,671	$	36,797	$	1,126
British Pound	Purchase	127,000	08/19/09		189,388		208,929		19,540
British Pound	Purchase	136,476	08/19/09		209,341		224,517		15,176
British Pound	Purchase	64,918	08/19/09		98,180		106,796		8,616
British Pound	Purchase	45,000	08/19/09		67,554		74,030		6,475
British Pound	Purchase	91,000	08/19/09		145,616		149,705		4,088
British Pound	Purchase	14,500	08/19/09		21,986		23,854		1,868
British Pound	Purchase	17,000	08/19/09		27,152		27,967		815
British Pound	Purchase	26,403	08/19/09		43,395		43,435		41
Egyptian Pound	Purchase	110,000	08/13/09		19,097		19,147		50
Euro	Sale	30,650	08/19/09		43,395		42,996		399
Euro	Purchase	73,900	08/19/09		103,323		103,666		343
Hungarian Forint	Purchase	20,505,810	08/19/09		94,462		104,511		10,049
Hungarian Forint	Purchase	5,200,000	08/18/09		25,302		26,509		1,207
Indonesian Rupiah	Purchase	1,133,500,000	07/22/09		109,820		110,470		650
Indonesian Rupiah	Purchase	200,000,000	07/13/09		19,075		19,533		458
Malaysian Ringgit	Purchase	372,000	07/24/09		105,183		105,736		553
Mexican Peso	Purchase	280,000	08/18/09		21,099		21,109		10
New Russian Ruble	Purchase	1,200,000	08/06/09		35,765		38,128		2,363
Peruvian New Sol	Purchase	90,000	07/17/09		28,949		29,906		958
Polish Zloty	Purchase	82,675	08/24/09		25,214		25,950		736
Thai Bhat	Purchase	860,000	07/13/09		25,173		25,236		62
Thai Bhat	Purchase	800,000	07/02/09		23,423		23,480		58
Thai Bhat	Sale	800,000	07/02/09		23,509		23,480		29
Total Open Forward Foreign Currency Contracts with Unrealized Gains								$	75,670
Open Forward Foreign Currency Contracts with Unrealized Losses	Purchase/Sale Contract	Contracts to Deliver/Receive	Expiration Date	Settlement Value		Current Value		Unrealized Loss
British Pound	Sale	62,938	08/19/09	$	103,323	$	103,539	$	(216)
British Pound	Sale	73,550	08/19/09		120,343		120,998		(654)
Chilean Peso	Sale	35,000,000	09/09/09		61,857		65,784		(3,926)
Colombian Peso	Sale	36,828,050	08/10/09		16,279		17,063		(784)
Euro	Sale	19,415	08/19/09		27,152		27,235		(83)
Euro	Purchase	85,541	08/19/09		120,343		119,996		(347)
Euro	Sale	16,231	08/19/09		21,986		22,769		(783)
Euro	Sale	104,904	08/19/09		145,616		147,159		(1,542)
Euro	Sale	50,544	08/19/09		67,554		70,903		(3,349)
Euro	Sale	72,660	08/19/09		98,180		101,927		(3,747)
Euro	Sale	155,120	08/19/09		209,341		217,601		(8,261)
Euro	Sale	142,609	08/19/09		189,388		200,050		(10,662)
Mexican Peso	Purchase	800,000	08/18/09		61,108		60,311		(797)
Mexican Peso	Sale	1,576,140	08/18/09		117,521		118,823		(1,302)
Peruvian New Sol	Sale	37,250	07/17/09		11,901		12,378		(477)
South African Rand	Sale	418,850	09/22/09		50,627		53,411		(2,783)
Thai Bhat	Purchase	800,000	07/16/09		23,503		23,474		(30)
Turkish Lira	Sale	100,000	08/18/09		63,955		64,130		(175)
Total Open Forward Foreign Currency Contracts with Unrealized Losses								$	(39,918)

June 30, 2009 50 See Notes to Financial Statements

Forward International Fixed Income Fund

FUTURES CONTRACTS

At June 30, 2009, the Fund had outstanding futures contracts:

Description	Position	Contracts	Expiration Date	Currency	Value		Unrealized Gain/(Loss)
Euro-Bond	Short	1	09/08/09	EUR	$	(169,858)	$	126
Long Gilt Future	Long	2	09/28/09	GBP		388,530		1,662
10 Year Note	Long	1	09/21/09	USD		116,266		(1,766)
2 Year Note	Short	1	09/30/09	USD		(216,219)		547
					$	118,719	$	569

See Notes to Financial Statements 51 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Real Estate Fund^(a)

Shares		Value (Note 2)
COMMON STOCKS: 91.81%
Diversified: 3.54%
15,600	Douglas Emmett, Inc.	$	140,244
20,000	National Retail Properties, Inc.		347,000
20,000	Washington Real Estate Investment Trust		447,400
			934,644
Health Care: 11.79%
25,200	Alexandria Real Estate Equities, Inc.		901,908
1,000	Cogdell Spencer, Inc.		4,290
25,000	HCP, Inc.		529,750
17,600	Health Care REIT, Inc.		600,160
2,500	LTC Properties, Inc.		51,125
34,300	Ventas, Inc.		1,024,198
			3,111,431
Hotels: 2.43%
53,900	Hospitality Properties Trust		640,871
Industrial: 13.78%
41,000	AMB Property Corp.		771,210
30,900	Digital Realty Trust, Inc.		1,107,765
33,000	EastGroup Properties, Inc.		1,089,660
83,000	ProLogis		668,980
			3,637,615
Office: 8.60%
28,615	Boston Properties, Inc.		1,364,936
7,400	Corporate Office Properties Trust		217,042
10,000	Kilroy Realty Corp.		205,400
7,200	Liberty Property Trust		165,888
13,800	SL Green Realty Corp.		316,572
			2,269,838
Residential: 12.39%
63,425	American Campus Communities, Inc.		1,406,766
19,716	AvalonBay Communities, Inc.		1,102,913
76,000	Education Realty Trust, Inc.		326,040
19,500	Equity Residential		433,485
			3,269,204

Shares		Value (Note 2)
Retail: 27.12%
1,237	CBL & Associates Properties, Inc.	$	6,667
70,000	Cedar Shopping Centers, Inc.		316,400
7,100	Federal Realty Investment Trust		365,792
1,400	Kimco Realty Corp.		14,070
69,200	Kite Realty Group Trust		202,064
3,000	The Macerich Co.		52,830
7,300	Mack-Cali Realty Corp.		166,440
26,150	Regency Centers Corp.		912,897
53,624	Simon Property Group, Inc.		2,757,882
12,400	Tanger Factory Outlet Centers, Inc.		402,132
31,947	Vornado Realty Trust		1,438,573
36,000	Weingarten Realty Investors, Inc.		522,360
			7,158,107
Self Storage: 8.03%
32,377	Public Storage, Inc.		2,120,046
Specialized: 4.13%
22,200	Entertainment Properties Trust		457,320
9,000	Plum Creek Timber Co., Inc.		268,020
15,000	Potlatch Corp.		364,350
			1,089,690
	Total Common Stocks (Cost $27,699,413)		24,231,446
MUTUAL FUNDS: 4.82%
16,000	iShares Cohen & Steers Realty Majors Index Fund		575,040
21,600	iShares Dow Jones U.S. Real Estate Index Fund		698,544
			1,273,584
	Total Mutual Funds (Cost $1,207,104)		1,273,584

June 30, 2009 52 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Real Estate Fund^(a)

Principal Amount		Value (Note 2)
CORPORATE BONDS: 2.16%
Retail: 2.16%
$500,000	Simon Property Group LP, Sr. Unsec. Notes 10.350%, 04/01/19	$	569,017
	Total Corporate Bonds (Cost $490,147)		569,017
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 0.74%
$196,322	Wells Fargo — Grand Cayman 0.030%, due 07/01/09		196,322
	Total Short-Term Bank Debt Instruments (Cost $196,322)		196,322
	Total Investments: 99.53% (Cost $29,592,986)		26,270,369
	Net Other Assets and Liabilities: 0.47%		123,322
	Net Assets: 100.00%	$	26,393,691

(a) Prior to January 20, 2009, the Forward Real Estate Fund was known as the Forward Progressive Real Estate Fund.

Percentages are stated as a percent of net assets.

Investment Abbreviations:

Sr. — Senior

Unsec. — Unsecured

See Notes to Financial Statements 53 June 30, 2009

Statement of Assets and Liabilities (Unaudited)

	FORWARD EMERGING MARKETS FUND			FORWARD INTERNATIONAL EQUITY FUND
ASSETS:
Investments, at value	$	184,290,769		$	15,392,910
Cash		969			0
Foreign currency, at value (Cost $85 and $0, respectively)		83			0
Receivable for investments sold		838,670			6,732,144
Receivable for shares sold		668,118			518
Interest and dividends receivable		703,091			115,888
Other assets		427,468			56,635
Total Assets		186,929,168			22,298,095
LIABILITIES:
Payable to custodian		0			5,067,023
Payable for investments purchased		4,720,423			1,952,120
Payable for shares redeemed		520,850			143,187
Payable to advisor		166,987			9,460
Payable for distribution and service fees		6,482			3,933
Payable to trustees		9,270			3,906
Payable for chief compliance officer fee		2,871			578
Payable to ReFlow (Note 2)		361			2,149
Accrued expenses and other liabilities		145,320			47,504
Total Liabilities		5,572,564			7,229,860
NET ASSETS	$	181,356,604		$	15,068,235
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	213,988,691		$	49,374,636
Accumulated net investment income		1,826,852			1,582,837
Accumulated net realized loss on investments and foreign currency transactions		(57,535,098	)		(36,241,161	)
Net unrealized appreciation on investments and translation of assets and liabilities in foreign currencies		23,076,159			351,923
TOTAL NET ASSETS	$	181,356,604		$	15,068,235
INVESTMENTS, AT COST	$	161,240,437		$	15,041,383
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share		$16.15			$9.28
Net Assets	$	19,401,504		$	6,704,192
Shares of beneficial interest outstanding		1,201,115			722,209
Institutional Class:
Net Asset Value, offering and redemption price per share		$16.35			$9.30
Net Assets	$	161,955,100		$	8,364,043
Shares of beneficial interest outstanding		9,904,604			899,842

June 30, 2009 54 See Notes to Financial Statements

Statement of Assets and Liabilities (Unaudited)

	FORWARD INTERNATIONAL SMALL COMPANIES FUND			FORWARD LARGE CAP EQUITY FUND
ASSETS:
Investments, at value	$	483,985,146		$	10,192,458
Cash		92			0
Receivable for investments sold		3,461,524			0
Receivable from advisor		0			630
Receivable for shares sold		618,581			94
Interest and dividends receivable		1,595,637			7,267
Other assets		93,404			1,691
Total Assets		489,754,384			10,202,140
LIABILITIES:
Payable to sub-custodian		46,355			—
Payable for investments purchased		4,358,466			0
Payable for shares redeemed		602,580			0
Payable to advisor		398,350			0
Payable for distribution and service fees		33,596			3,876
Payable to trustees		1,637			866
Payable for chief compliance officer fee		4,032			52
Payable to ReFlow (Note 2)		6,950			1,043
Accrued expenses and other liabilities		9,705			17,743
Total Liabilities		5,461,671			23,580
NET ASSETS	$	484,292,713		$	10,178,560
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	799,627,293		$	14,778,912
Accumulated net investment income		4,301,887			50,187
Accumulated net realized loss on investments and foreign currency transactions		(295,134,881	)		(4,815,434	)
Net unrealized appreciation/(depreciation) on investments and translation of assets and liabilities in foreign currencies		(24,501,586	)		164,895
TOTAL NET ASSETS	$	484,292,713		$	10,178,560
INVESTMENTS, AT COST	$	508,500,406		$	10,027,563
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share		$10.37
Net Assets	$	107,516,324
Shares of beneficial interest outstanding		10,371,015
Institutional Class:
Net Asset Value, offering and redemption price per share		$10.40			$7.66
Net Assets	$	375,749,566		$	1,839,379
Shares of beneficial interest outstanding		36,123,671			240,172
Class A:
Net Asset Value, offering and redemption price per share		$10.37			$7.66
Net Assets	$	1,026,823		$	8,339,181
Shares of beneficial interest outstanding		98,986			1,089,282
Maximum offering price per share (NAV/0.9425, based on maximum sales charge of 5.75% of the offering price)		$11.00			$8.13

See Notes to Financial Statements 55 June 30, 2009

Statement of Assets and Liabilities (Unaudited)

	FORWARD BANKING AND FINANCE FUND			FORWARD GROWTH FUND
ASSETS:
Investments, at value	$	53,092,184		$	98,803,877
Receivable for investments sold		453,175			2,164,908
Receivable for shares sold		19,161			59,058
Interest and dividends receivable		99,696			23,744
Other assets		21,837			93,175
Total Assets		53,686,053			101,144,762
LIABILITIES:
Payable for investments purchased		33,632			2,356,409
Payable for shares redeemed		31,228			1,144
Payable to advisor		44,166			55,825
Payable for distribution and service fees		26,706			19,746
Payable to trustees		7,086			5,396
Payable for chief compliance officer fee		178			1,101
Payable to ReFlow (Note 2)		4,642			0
Accrued expenses and other liabilities		27,609			23,749
Total Liabilities		175,247			2,463,370
NET ASSETS	$	53,510,806		$	98,681,392
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	70,456,984		$	125,598,059
Accumulated net investment income/(loss)		150,710			(385,853	)
Accumulated net realized loss on investments		(14,791,771	)		(37,362,675	)
Net unrealized appreciation/(depreciation) on investments		(2,305,117	)		10,831,861
TOTAL NET ASSETS	$	53,510,806		$	98,681,392
INVESTMENTS, AT COST	$	55,397,301		$	87,972,016
PRICING OF SHARES
Institutional Class:
Net Asset Value, offering and redemption price per share					$8.55
Net Assets				$	36,520,231
Shares of beneficial interest outstanding					4,270,456
Class A:
Net Asset Value, offering and redemption price per share		$13.04			$8.52
Net Assets	$	35,601,125		$	59,905,184
Shares of beneficial interest outstanding		2,730,663			7,027,792
Maximum offering price per share (NAV/0.9425, based on maximum sales charge of 5.75% of the offering price)		$13.84			$9.04
Class C:
Net Asset Value, offering and redemption price per share		$12.26			$7.98
Net Assets	$	17,909,681		$	2,255,977
Shares of beneficial interest outstanding		1,460,776			282,694

June 30, 2009 56 See Notes to Financial Statements

Statement of Assets and Liabilities (Unaudited)

	FORWARD LEGATO FUND			FORWARD LONG/SHORT CREDIT ANALYSIS FUND
ASSETS:
Investments, at value	$	7,849,552		$	70,155,038
Receivable for shares sold		0			35,758
Interest and dividends receivable		4,120			902,065
Other assets		20,725			11,658
Total Assets		7,874,397			71,104,519
LIABILITIES:
Securities sold short (Proceeds $0 and $29,346,895, respectively)		—			28,829,627
Payable to broker for securities sold short		—			6,405,060
Payable for interest on short sales		—			177,788
Payable for investments purchased		0			247,285
Payable for shares redeemed		4,000			7,308
Payable to advisor		3,533			39,656
Payable for distribution and service fees		2,318			11,166
Payable to trustees		297			2,853
Payable for chief compliance officer fee		61			32
Accrued expenses and other liabilities		12,448			18,939
Total Liabilities		22,657			35,739,714
NET ASSETS	$	7,851,740		$	35,364,805
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	8,275,391		$	38,400,143
Accumulated net investment income/(loss)		(20,174	)		69,245
Accumulated net realized loss on investments and securities sold short		(391,698	)		(3,640,504	)
Net unrealized appreciation/(depreciation) depreciation on investments and securities sold short		(11,779	)		535,921
TOTAL NET ASSETS	$	7,851,740		$	35,364,805
INVESTMENTS, AT COST	$	7,861,331		$	70,136,385
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share		$8.52			$6.93
Net Assets	$	1,510,034		$	30,044,525
Shares of beneficial interest outstanding		177,267			4,334,317
Institutional Class:
Net Asset Value, offering and redemption price per share		$8.56			$6.90
Net Assets	$	2,285,972		$	2,452,395
Shares of beneficial interest outstanding		266,977			355,555
Class A:
Net Asset Value, offering and redemption price per share		$8.51
Net Assets	$	4,055,734
Shares of beneficial interest outstanding		476,657
Maximum offering price per share (NAV/0.9425, based on maximum sales charge of 5.75% of the offering price)		$9.03
Class C:
Net Asset Value, offering and redemption price per share					$6.94
Net Assets				$	2,867,885
Shares of beneficial interest outstanding					413,223

See Notes to Financial Statements 57 June 30, 2009

Statement of Assets and Liabilities (Unaudited)

	FORWARD INTERNATIONAL FIXED INCOME FUND			FORWARD REAL ESTATE FUND
ASSETS:
Investments, at value	$	22,008,695		$	26,270,369
Cash		710			26,851
Foreign currency, at value (Cost $99,540 and $0, respectively)		102,624			0
Due from broker for futures contracts		67,823			—
Unrealized gain on forward contracts		75,670			—
Receivable for shares sold		0			46,072
Interest and dividends receivable		435,957			95,830
Other assets		22,039			41,688
Total Assets		22,713,518			26,480,810
LIABILITIES:
Unrealized loss on forward contracts		39,918			—
Payable for investments purchased		6,939			0
Payable for shares redeemed		0			1,433
Payable to advisor		12,696			12,849
Payable for distribution and service fees		5,075			12,557
Payable to trustees		844			3,423
Payable for chief compliance officer fee		98			1,215
Payable to ReFlow (Note 2)		1,776			0
Accrued expenses and other liabilities		1,860			55,642
Total Liabilities		69,206			87,119
NET ASSETS	$	22,644,312		$	26,393,691
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	23,304,423		$	35,760,108
Accumulated net investment income/(loss)		(132,444	)		309,518
Accumulated net realized loss on investments, futures contracts and foreign currency transactions		(1,313,857	)		(6,353,318	)
Net unrealized appreciation/(depreciation) on investments, futures contracts and translation of assets and liabilities in foreign currencies		786,190			(3,322,617	)
TOTAL NET ASSETS	$	22,644,312		$	26,393,691
INVESTMENTS, AT COST	$	21,276,515		$	29,592,986
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share		$9.81			$7.11
Net Assets	$	5,585,281		$	14,784,795
Shares of beneficial interest outstanding		569,398			2,080,583
Institutional Class:
Net Asset Value, offering and redemption price per share		$9.77			$6.89
Net Assets	$	12,968,791		$	757,798
Shares of beneficial interest outstanding		1,327,982			109,967
Class A:
Net Asset Value, offering and redemption price per share					$7.10
Net Assets				$	8,455,689
Shares of beneficial interest outstanding					1,191,316
Maximum offering price per share (NAV/0.9625 based on maximum sales charge of 5.75% of the offering price)					$7.53
Class C:
Net Asset Value, offering and redemption price per share		$9.86			$7.10
Net Assets	$	4,090,240		$	2,395,409
Shares of beneficial interest outstanding		415,000			337,597

June 30, 2009 58 See Notes to Financial Statements

Statement of Operations

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD EMERGING MARKETS FUND			FORWARD INTERNATIONAL EQUITY FUND
INVESTMENT INCOME:
Interest	$	1,118		$	445
Dividends		1,563,900			618,868
Foreign taxes withheld		(113,729	)		(70,603	)
Total Investment Income		1,451,289			548,710
EXPENSES:
Investment advisory fee		631,321			93,565
Administrative fee		53,493			12,244
Custodian fee		102,220			15,245
Legal and audit fee		19,874			9,458
Transfer agent fee		23,224			0
Trustees’ fees and expenses		11,122			0
Registration/filing fees		19,817			8,688
Reports to shareholder and printing fees		19,271			3,489
Distribution and service fees
Investor Class		29,943			19,495
Institutional Class		9,433			2,743
ReFlow fees (Note 2)		361			2,149
Chief compliance officer fee		7,298			0
Other		7,232			2,870
Total expenses before waiver		934,609			169,946
Less fees waived/reimbursed by investment advisor (Note 3)		(202,314	)		(42,294	)
Total net expenses		732,295			127,652
NET INVESTMENT INCOME:		718,994			421,058
Net realized loss on investments		(5,279,130	)		(7,329,758	)
Net realized loss on foreign currency transactions		(2,775,840	)		(405,952	)
Net realized loss on option contracts		(148,461	)		—
Net change in unrealized appreciation on investments		40,364,770			8,736,315
Net change in unrealized appreciation on translation of assets and liabilities in foreign currencies		27,331			2,964
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS, OPTION CONTRACTS AND FOREIGN CURRENCY		32,188,670			1,003,569
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	32,907,664		$	1,424,627

See Notes to Financial Statements 59 June 30, 2009

Statement of Operations

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD INTERNATIONAL SMALL COMPANIES FUND			FORWARD LARGE CAP EQUITY FUND
INVESTMENT INCOME:
Interest	$	3,825		$	126
Dividends		7,768,259			122,329
Foreign taxes withheld		(685,550	)		0
Total Investment Income		7,086,534			122,455
EXPENSES:
Investment advisory fee		2,112,234			46,514
Administrative fee		178,592			7,966
Custodian fee		12,216			2,344
Legal and audit fee		9,577			14,993
Transfer agent fee		72,832			2,638
Trustees’ fees and expenses		6,201			500
Registration/filing fees		34,028			24,797
Reports to shareholder and printing fees		18,019			93
Distribution and service fees
Investor Class		174,111			—
Institutional Class		—			964
Class A		3,557			21,378
ReFlow fees (Note 2)		6,950			1,043
Chief compliance officer fee		26,460			693
Other		27,397			1,035
Total expenses before waiver		2,682,174			124,958
Less fees waived/reimbursed by investment advisor (Note 3)		—			(47,962	)
Total net expenses		2,682,174			76,996
NET INVESTMENT INCOME:		4,404,360			45,459
Net realized loss on investments		(67,901,791	)		(2,100,855	)
Net realized loss on foreign currency transactions		(9,345,012	)		—
Net change in unrealized appreciation on investments		114,207,043			2,324,378
Net change in unrealized appreciation on translation of assets and liabilities in foreign currencies		24,704			—
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY		36,984,944			223,523
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	41,389,304		$	268,982

June 30, 2009 60 See Notes to Financial Statements

Statement of Operations

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD BANKING AND FINANCE FUND			FORWARD GROWTH FUND
INVESTMENT INCOME:
Interest	$	549		$	704
Dividends		650,939			148,231
Total Investment Income		651,488			148,935
EXPENSES:
Investment advisory fee		276,994			335,807
Administrative fee		25,322			41,080
Custodian fee		3,086			3,219
Legal and audit fee		3,720			13,997
Transfer agent fee		47,299			42,600
Trustees’ fees and expenses		5,214			8,219
Registration/filing fees		10,860			9,955
Reports to shareholder and printing fees		15,316			3,363
Distribution and service fees
Institutional Class		—			642
Class A		65,554			97,505
Class C		93,241			11,220
Chief compliance officer fee		3,180			5,969
ReFlow fees (Note 2)		4,703			0
Other		1,792			3,077
Total expenses before waiver		556,281			576,653
Less fees waived/reimbursed by investment advisor (Note 3)		—			(41,865	)
Total net expenses		556,281			534,788
NET INVESTMENT INCOME/(LOSS):		95,207			(385,853	)
Net realized loss on investments		(12,034,465	)		(15,905,426	)
Net change in unrealized appreciation on investments		661,716			21,992,084
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS		(11,372,749	)		6,086,658
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	(11,277,542	)	$	5,700,805

See Notes to Financial Statements 61 June 30, 2009

Statement of Operations

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD LEGATO FUND			FORWARD LONG/SHORT CREDIT ANALYSIS FUND
INVESTMENT INCOME:
Interest	$	37		$	1,613,869
Dividends		31,747			1,891
Foreign taxes withheld		(175	)		0
Total Investment Income		31,609			1,615,760
EXPENSES:
Investment advisory fee		31,583			205,704
Interest on short sales		—			305,858
Administrative fee		6,111			13,811
Custodian fee		8,953			7,284
Legal and audit fee		5,890			10,254
Transfer agent fee		1,281			4,770
Trustees’ fees and expenses		362			3,646
Registration/filing fees		1,629			15,473
Reports to shareholder and printing fees		3,378			4,819
Distribution and service fees
Investor Class		2,066			50,494
Institutional Class		—			44
Class A		8,968			—
Chief compliance officer fee		100			1,090
Other		1,428			3,183
Total expenses before waiver		71,749			626,430
Less fees waived/reimbursed by investment advisor (Note 3)		(19,966	)		(63,810	)
Total net expenses		51,783			562,620
NET INVESTMENT INCOME/(LOSS):		(20,174	)		1,053,140
Net realized gain/(loss) on investments		(138,700	)		316,462
Net realized gain on securities sold short		—			258,957
Net change in unrealized appreciation on investments and securities sold short		794,976			3,200,164
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND SECURITIES SOLD SHORT		656,276			3,775,583
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	636,102		$	4,828,723

June 30, 2009 62 See Notes to Financial Statements

Statement of Operations

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD INTERNATIONAL FIXED INCOME FUND			FORWARD REAL ESTATE FUND
INVESTMENT INCOME:
Interest	$	700,120		$	14,129
Dividends		0			576,649
Foreign taxes withheld		(2,299	)		0
Total Investment Income		697,821			590,778
EXPENSES:
Investment advisory fee		82,375			80,326
Administrative fee		13,365			10,044
Custodian fee		135			2,323
Legal and audit fee		3,808			8,422
Transfer agent fee		2,984			12,239
Trustees’ fees and expenses		176			3,699
Registration/filing fees		6,423			12,851
Reports to shareholder and printing fees		88			8,501
Distribution and service fees
Investor Class		4,323			27,061
Class A		583			741
Class C		5,885			843
Chief compliance officer fee		367			1,914
ReFlow fees (Note 2)		1,776			0
Other		327			3,619
Total expenses before waiver		122,615			172,583
Less fees waived/reimbursed by investment advisor (Note 3)		(356	)		(6,386	)
Total net expenses		122,259			166,197
NET INVESTMENT INCOME:		575,562			424,581
Net realized loss on investments		(370,951	)		(5,909,517	)
Net realized gain on futures contracts		28,384			—
Net realized loss on foreign currency transactions		(546,362	)		—
Net realized loss on option contracts		(2,719	)		—
Net change in unrealized appreciation on investments		2,094,322			1,667,686
Net change in unrealized depreciation on futures contracts		(38,134	)		—
Net change in unrealized appreciation on translation of assets and liabilities in foreign currencies		68,258			—
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS, FUTURES CONTRACTS, OPTION CONTRACTS AND FOREIGN CURRENCY		1,232,798			(4,241,831	)
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	1,808,360		$	(3,817,250	)

See Notes to Financial Statements 63 June 30, 2009

Statement of Changes in Net Assets

	FORWARD EMERGING MARKETS FUND
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(b)
OPERATIONS:
Net investment income	$	718,994		$	1,733,991
Net realized loss on investments		(5,279,130	)		(40,161,514	)
Net realized loss on foreign currency		(2,775,840	)		(6,900,594	)
Net realized loss on option contracts		(148,461	)		(687,069	)
Net change in unrealized appreciation/(depreciation) on investments and foreign currency		40,392,101			(43,681,998	)
Net increase/(decrease) in net assets resulting from operations		32,907,664			(89,697,184	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments
Investor Class		—			(497,109	)
Institutional Class		—			(1,691,028	)
Class A		—			(51,135	)
Total distributions		—			(2,239,272	)
SHARE TRANSACTIONS:
Investor Class
Proceeds from sale of shares		5,173,265			48,077,312
Issued to shareholders in reinvestment of distributions		—			423,654
Cost of shares redeemed		(4,665,086	)		(38,542,475	)
Net increase from share transactions		508,179			9,958,491
Institutional Class
Proceeds from sale of shares		93,757,328			101,074,043
Issued to shareholders in reinvestment of distributions		—			1,629,348
Cost of shares redeemed		(9,486,734	)		(45,320,845	)
Net increase from share transactions		84,270,594			57,382,546
Class A
Proceeds from sale of shares		—			3,392,282
Issued to shareholders in reinvestment of distributions		—			23
Cost of shares redeemed		(1,963,380	)		—
Net increase/(decrease) from share transactions		(1,963,380	)		3,392,305
Net increase/(decrease) in net assets	$	115,723,057		$	(21,203,114	)
NET ASSETS:
Beginning of period		65,633,547			86,836,661
End of period (including accumulated net investment income of $1,826,852 and $1,107,858, respectively)	$	181,356,604		$	65,633,547
Other Information:
SHARE TRANSACTIONS:
Investor Class
Sold		367,845			2,398,469
Distributions reinvested		—			37,098
Redeemed		(353,698	)		(2,125,624	)
Net increase in shares outstanding		14,147			309,943
Institutional Class
Sold		6,657,438			4,471,096
Distributions reinvested		—			141,314
Redeemed		(746,381	)		(2,776,018	)
Net increase in shares outstanding		5,911,057			1,836,392
Class A
Sold		—			124,385
Distributions reinvested		—			2
Redeemed		(124,387	)		—
Net increase/(decrease) in shares outstanding		(124,387	)		124,387

(a) The Forward Emerging Markets Fund closed Class A shares on June 16, 2009.

(b) The Forward Emerging Markets Fund began offering Class A shares on May 1, 2008.

June 30, 2009 64 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD INTERNATIONAL EQUITY FUND
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	421,058		$	1,537,840
Net realized loss on investments		(7,329,758	)		(29,366,734	)
Net realized gain/(loss) on foreign currency		(405,952	)		943,460
Net change in unrealized appreciation/(depreciation) on investments and foreign currency		8,739,279			(14,946,565	)
Net increase/(decrease) in net assets resulting from operations		1,424,627			(41,831,999	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Investor Class		—			(170,234	)
Institutional Class		—			(229,473	)
From net realized gains on investments
Investor Class		—			(623,338	)
Institutional Class		—			(427,661	)
Total distributions		—			(1,450,706	)
SHARE TRANSACTIONS:
Investor Class
Proceeds from sale of shares		2,009,184			20,515,985
Issued to shareholders in reinvestment of distributions		—			731,698
Cost of shares redeemed		(8,506,602	)		(41,486,858	)
Net decrease from share transactions		(6,497,418	)		(20,239,175	)
Institutional Class
Proceeds from sale of shares		1,602,066			13,946,653
Issued to shareholders in reinvestment of distributions		—			446,724
Cost of shares redeemed		(6,991,446	)		(8,145,275	)
Net increase/(decrease) from share transactions		(5,389,380	)		6,248,102
Net decrease in net assets	$	(10,462,171	)	$	(57,273,778	)
NET ASSETS:
Beginning of period		25,530,406			82,804,184
End of period (including accumulated net investment income of $1,582,837 and $1,161,779, respectively)	$	15,068,235		$	25,530,406
Other Information:
SHARE TRANSACTIONS:
Investor Class
Sold		228,796			1,444,798
Distributions reinvested		—			90,754
Redeemed		(954,714	)		(3,165,583	)
Net decrease in shares outstanding		(725,918	)		(1,630,031	)
Institutional Class
Sold		195,199			947,387
Distributions reinvested		—			53,002
Redeemed		(807,007	)		(677,743	)
Net increase/(decrease) in shares outstanding		(611,808	)		322,646

See Notes to Financial Statements 65 June 30, 2009

Statement of Changes in Net Assets

	FORWARD INTERNATIONAL SMALL COMPANIES FUND
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	4,404,360		$	7,848,444
Net realized loss on investments		(67,901,791	)		(247,501,529	)
Net realized gain/(loss) on foreign currency		(9,345,012	)		31,692,032
Net change in unrealized appreciation/(depreciation) on investments and foreign currency		114,231,747			(202,937,591	)
Net increase/(decrease) in net assets resulting from operations		41,389,304			(410,898,644	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Investor Class		—			(1,417,012	)
Institutional Class		—			(6,145,182	)
Class A		—			(26,235	)
Total distributions		—			(7,588,429	)
SHARE TRANSACTIONS:
Investor Class
Proceeds from sale of shares		15,892,411			70,851,866
Issued to shareholders in reinvestment of distributions		—			1,366,845
Cost of shares redeemed		(25,138,912	)		(129,678,822	)
Net decrease from share transactions		(9,246,501	)		(57,460,111	)
Institutional Class
Proceeds from sale of shares		68,240,338			281,962,191
Issued to shareholders in reinvestment of distributions		—			5,136,577
Cost of shares redeemed		(55,658,177	)		(275,322,661	)
Net increase from share transactions		12,582,161			11,776,107
Class A
Proceeds from sale of shares		132,800			957,045
Issued to shareholders in reinvestment of distributions		—			14,106
Cost of shares redeemed		(1,202,104	)		(2,462,159	)
Net decrease from share transactions		(1,069,304	)		(1,491,008	)
Net increase/(decrease) in net assets	$	43,655,660		$	(465,662,085	)
NET ASSETS:
Beginning of period		440,637,053			906,299,138
End of period (including accumulated net investment income/(loss) of $4,301,887 and $(102,473), respectively)	$	484,292,713		$	440,637,053
Other Information:
SHARE TRANSACTIONS:
Investor Class
Sold		1,726,360			5,249,108
Distributions reinvested		—			142,380
Redeemed		(2,786,764	)		(9,181,238	)
Net decrease in shares outstanding		(1,060,404	)		(3,789,750	)
Institutional Class
Sold		7,557,917			20,319,993
Distributions reinvested		—			534,464
Redeemed		(6,093,336	)		(20,776,202	)
Net increase in shares outstanding		1,464,581			78,255
Class A
Sold		14,728			68,901
Distributions reinvested		—			1,469
Redeemed		(127,001	)		(171,280	)
Net decrease in shares outstanding		(112,273	)		(100,910	)

June 30, 2009 66 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD LARGE CAP EQUITY FUND
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	45,459		$	102,939
Net realized loss on investments		(2,100,855	)		(2,309,011	)
Net change in unrealized appreciation/(depreciation) on investments		2,324,378			(4,868,740	)
Net increase/(decrease) in net assets resulting from operations		268,982			(7,074,812	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Institutional Class		—			(55,347	)
Class A		—			(43,420	)
Total distributions		—			(98,767	)
SHARE TRANSACTIONS:
Institutional Class
Proceeds from sale of shares		1,136,796			1,624,583
Issued to shareholders in reinvestment of distributions		—			54,922
Cost of shares redeemed		(4,366,182	)		(693,584	)
Net increase/(decrease) from share transactions		(3,229,386	)		985,921
Class A
Proceeds from sale of shares		148,441			1,048,433
Issued to shareholders in reinvestment of distributions		—			3,391
Cost of shares redeemed		(127,685	)		(720,069	)
Net increase from share transactions		20,756			331,755
Net decrease in net assets	$	(2,939,648	)	$	(5,855,903	)
NET ASSETS:
Beginning of period		13,118,208			18,974,111
End of period (including accumulated net investment income of $50,187 and $4,728, respectively)	$	10,178,560		$	13,118,208
Other Information:
SHARE TRANSACTIONS:
Institutional Class
Sold		159,264			166,648
Distributions reinvested		—			7,483
Redeemed		(592,974	)		(73,603	)
Net increase/(decrease) in shares outstanding		(433,710	)		100,528
Class A
Sold		20,022			100,627
Distributions reinvested		—			461
Redeemed		(17,978	)		(68,513	)
Net increase in shares outstanding		2,044			32,575

See Notes to Financial Statements 67 June 30, 2009

Statement of Changes in Net Assets

	FORWARD BANKING AND FINANCE FUND
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	95,207		$	120,504
Net realized loss on investments		(12,034,465	)		(2,632,584	)
Net change in unrealized appreciation/(depreciation) on investments		661,716			(19,830,148	)
Net decrease in net assets resulting from operations		(11,277,542	)		(22,342,228	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Class A		—			(65,001	)
Total distributions		—			(65,001	)
SHARE TRANSACTIONS:
Class A
Proceeds from sale of shares		6,386,767			22,315,439
Issued to shareholders in reinvestment of distributions		—			59,837
Cost of shares redeemed		(11,628,213	)		(24,266,433	)
Net decrease from share transactions		(5,241,446	)		(1,891,157	)
Class C
Proceeds from sale of shares		1,087,021			2,349,015
Cost of shares redeemed		(3,002,521	)		(12,106,499	)
Net decrease from share transactions		(1,915,500	)		(9,757,484	)
Net decrease in net assets	$	(18,434,488	)	$	(34,055,870	)
NET ASSETS:
Beginning of period		71,945,294			106,001,164
End of period (including accumulated net investment income of $150,710 and $55,503, respectively)	$	53,510,806		$	71,945,294
Other Information:
SHARE TRANSACTIONS:
Class A
Sold		498,971			1,278,789
Distributions reinvested		—			3,973
Redeemed		(916,925	)		(1,426,050	)
Net decrease in shares outstanding		(417,954	)		(143,288	)
Class C
Sold		89,565			139,929
Redeemed		(246,352	)		(750,885	)
Net decrease in shares outstanding		(156,787	)		(610,956	)

June 30, 2009 68 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD GROWTH FUND
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)
OPERATIONS:
Net investment loss	$	(385,853	)	$	(1,376,533	)
Net realized loss on investments		(15,905,426	)		(21,273,185	)
Net change in unrealized appreciation/(depreciation) on investments		21,992,084			(40,127,748	)
Net increase/(decrease) in net assets resulting from operations		5,700,805			(62,777,466	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments
Institutional Class		—			(4,349	)
Class A		—			(475,676	)
Class C		—			(13,986	)
Total distributions		—			(494,011	)
SHARE TRANSACTIONS:
Institutional Class
Proceeds from sale of shares		37,288,713			1,019,714
Cost of shares redeemed		(3,287,004	)		43
Net increase from share transactions		34,001,709			1,019,757
Class A
Proceeds from sale of shares		2,708,537			24,360,528
Issued to shareholders in reinvestment of distributions		—			273,241
Cost of shares redeemed		(39,460,047	)		(45,006,109	)
Net decrease from share transactions		(36,751,510	)		(20,372,340	)
Class C
Proceeds from sale of shares		7,758			95,603
Issued to shareholders in reinvestment of distributions		—			12,168
Cost of shares redeemed		(483,635	)		(3,889,282	)
Net decrease from share transactions		(475,877	)		(3,781,511	)
Net increase/(decrease) in net assets	$	2,475,127		$	(86,405,571	)
NET ASSETS:
Beginning of period		96,206,265			182,611,836
End of period (including accumulated net investment income/(loss) of $(385,853) and $0, respectively)	$	98,681,392		$	96,206,265
Other Information:
SHARE TRANSACTIONS:
Institutional Class
Sold		4,600,039			113,387
Redeemed		(442,976	)		6
Net increase in shares outstanding		4,157,063			113,393
Class A
Sold		359,081			2,342,162
Distributions reinvested		—			36,287
Redeemed		(4,931,905	)		(4,447,058	)
Net decrease in shares outstanding		(4,572,824	)		(2,068,609	)
Class C
Sold		1,030			9,682
Distributions reinvested		—			1,724
Redeemed		(68,360	)		(375,915	)
Net decrease in shares outstanding		(67,330	)		(364,509	)

(a) The Forward Growth Fund began offering Institutional Class shares on October 21, 2008.

See Notes to Financial Statements 69 June 30, 2009

Statement of Changes in Net Assets

	FORWARD LEGATO FUND
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)
OPERATIONS:
Net investment loss	$	(20,174	)	$	(26,195	)
Net realized loss on investments		(138,700	)		(201,390	)
Net change in unrealized appreciation/(depreciation) on investments		794,976			(1,993,588	)
Net increase/(decrease) in net assets resulting from operations		636,102			(2,221,173	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments
Investor Class		—			(27,604	)
Institutional Class		—			(65,521	)
Class A		—			(56,875	)
Total distributions		—			(150,000	)
SHARE TRANSACTIONS:
Investor Class
Proceeds from sale of shares		489,545			1,014,731
Issued to shareholders in reinvestment of distributions		—			94
Cost of shares redeemed		—			(5,587	)
Net increase from share transactions		489,545			1,009,238
Institutional Class
Proceeds from sale of shares		—			3,006,694
Cost of shares redeemed		—			(250	)
Net increase from share transactions		—			3,006,444
Class A
Proceeds from sale of shares		1,628,147			347,120
Issued to shareholders in reinvestment of distributions		—			2,396
Cost of shares redeemed		(143,381	)		(4,046,811	)
Net increase/(decrease) from share transactions		1,484,766			(3,697,295	)
Net increase/(decrease) in net assets	$	2,610,413		$	(2,052,786	)
NET ASSETS:
Beginning of period		5,241,327			7,294,113
End of period (including accumulated net investment income/(loss) of $(20,174) and $0, respectively)	$	7,851,740		$	5,241,327
Other Information:
SHARE TRANSACTIONS:
Investor Class
Sold		63,983			113,951
Distributions reinvested		—			13
Redeemed		—			(680	)
Net increase in shares outstanding		63,983			113,284
Institutional Class
Sold		—			267,008
Redeemed		—			(31	)
Net increase in shares outstanding		—			266,977
Class A
Sold		220,494			44,644
Distributions reinvested		—			320
Redeemed		(18,324	)		(382,481	)
Net increase/(decrease) in shares outstanding		202,170			(337,517	)

(a) The Forward Legato Fund began offering Institutional Class shares on May 1, 2008 and began offering Investor Class shares on October 21, 2008.

June 30, 2009 70 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD LONG/SHORT CREDIT ANALYSIS FUND
	SIX MONTHS ENDED JUNE 30, 2009(b) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)
OPERATIONS:
Net investment income	$	1,053,140		$	1,102,404
Net realized gain/(loss) on investments		316,462			(2,652,881	)
Net realized gain on securities sold short		258,957			270,154
Net change in unrealized appreciation/(depreciation) on investments and securities sold short		3,200,164			(2,100,571	)
Net increase/(decrease) in net assets resulting from operations		4,828,723			(3,380,894	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Investor Class		(874,107	)		(554,885	)
Institutional Class		(61,818	)		(82,856	)
Class A		—			(624,827	)
Class C		(47,970	)		—
Total distributions		(983,895	)		(1,262,568	)
SHARE TRANSACTIONS:
Investor Class
Proceeds from sale of shares		26,780,648			14,478,375
Issued to shareholders in reinvestment of distributions		731,542			91,203
Cost of shares redeemed		(14,160,142	)		(62,953	)
Net increase from share transactions		13,352,048			14,506,625
Institutional Class
Proceeds from sale of shares		1,476,863			1,035,566
Issued to shareholders in reinvestment of distributions		31,336			—
Cost of shares redeemed		(370	)		—
Net increase from share transactions		1,507,829			1,035,566
Class A
Proceeds from sale of shares		—			4,633,524
Issued to shareholders in reinvestment of distributions		—			171,011
Cost of shares redeemed		—			(15,918,350	)
Net decrease from share transactions		—			(11,113,815	)
Class C
Proceeds from sale of shares		3,000,000			—
Net increase from share transactions		3,000,000			—
Net increase/(decrease) in net assets	$	21,704,705		$	(215,086	)
NET ASSETS:
Beginning of period		13,660,100			13,875,186
End of period (including accumulated net investment income of $69,245 and $0, respectively)	$	35,364,805		$	13,660,100
Other Information:
Investor Class
Sold		4,018,631			2,199,076
Distributions reinvested		109,451			15,698
Redeemed		(1,998,155	)		(10,384	)
Net increase in shares outstanding		2,129,927			2,204,390
Institutional Class
Sold		214,368			136,601
Distributions reinvested		4,646			—
Redeemed		(60	)		—
Net increase in shares outstanding		218,954			136,601
Class A
Sold		—			640,628
Distributions reinvested		—			24,651
Redeemed		—			(2,396,216	)
Net decrease in shares outstanding		—			(1,730,937	)
Class C
Sold		413,223			—
Net increase in shares outstanding		413,223			—

(a) The Forward Long/Short Credit Analysis Fund began offering Investor Class and Institutional Class shares on May 1, 2008. The Forward Long/Short Credit Analysis Fund closed and liquidated Class A shares effective November 21, 2008.

(b) The Forward Long/Short Credit Analysis Fund began offering Class C shares on June 3, 2009.

See Notes to Financial Statements 71 June 30, 2009

Statement of Changes in Net Assets

	FORWARD INTERNATIONAL FIXED INCOME FUND
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	575,562		$	1,070,384
Net realized loss on investments		(370,951	)		(658,858	)
Net realized gain on futures contracts		28,384			142,155
Net realized loss on foreign currency		(546,362	)		(69,841	)
Net realized loss on option contracts		(2,719	)		—
Net change in unrealized appreciation/(depreciation) on investments, futures contracts and foreign currency		2,124,446			(1,741,231	)
Net increase/(decrease) in net assets resulting from operations		1,808,360			(1,257,391	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Investor Class		(127,383	)		(205,396	)
Institutional Class		(314,829	)		(606,688	)
Class A		(46,389	)		(173,944	)
Class C		(94,032	)		(145,867	)
Total distributions		(582,633	)		(1,131,895	)
SHARE TRANSACTIONS:
Investor Class
Proceeds from sale of shares		1,571,086			1,497,538
Issued to shareholders in reinvestment of distributions		27,879			31,261
Cost of shares redeemed		(1,381,190	)		(285,167	)
Net increase from share transactions		217,775			1,243,632
Institutional Class
Proceeds from sale of shares		896			1,629
Issued to shareholders in reinvestment of distributions		220,334			427,603
Cost of shares redeemed		(4,180	)		—
Net increase from share transactions		217,050			429,232
Class A
Proceeds from sale of shares		1,203			102,954
Issued to shareholders in reinvestment of distributions		1,177			1,733
Cost of shares redeemed		(4,019,239	)		—
Net increase/(decrease) from share transactions		(4,016,859	)		104,687
Net decrease in net assets	$	(2,356,307	)	$	(611,735	)
NET ASSETS:
Beginning of period		25,000,619			25,612,354
End of period (including accumulated net investment loss of $(132,444) and $(125,373), respectively)	$	22,644,312		$	25,000,619
Other Information:
SHARE TRANSACTIONS:
Investor Class
Sold		166,775			149,769
Distributions reinvested		2,986			3,204
Redeemed		(145,643	)		(29,365	)
Net increase in shares outstanding		24,118			123,608
Institutional Class
Sold		100			163
Distributions reinvested		23,752			42,789
Redeemed		(483	)		—
Net increase in shares outstanding		23,369			42,952
Class A
Sold		134			10,540
Distributions reinvested		134			180
Redeemed		(425,988	)		—
Net increase/(decrease) in shares outstanding		(425,720	)		10,720

(a) The Forward International Fixed Income Fund closed and liquidated Class A shares effective June 9, 2009.

June 30, 2009 72 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD REAL ESTATE FUND
	SIX MONTHS ENDED JUNE 30, 2009(b) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)
OPERATIONS:
Net investment income	$	424,581		$	565,439
Net realized loss on investments		(5,909,517	)		(420,559	)
Net change in unrealized appreciation/(depreciation) on investments		1,667,686			(14,474,695	)
Net decrease in net assets resulting from operations		(3,817,250	)		(14,329,815	)
DISTRIBUTIONS TO SHAREHOLDERS:
Investor Class
From net investment income
Investor Class		(125,278	)		(459,629	)
Institutional Class		(33,871	)		(174,696	)
Class A		(23,301	)		—
Class C		(6,072	)		—
From net realized gains on investments
Investor Class		—			(231,392	)
Institutional Class		—			(41,731	)
From return of capital
Investor Class		—			(36,406	)
Institutional Class		—			(13,838	)
Total distributions		(188,522	)		(957,692	)
SHARE TRANSACTIONS:
Investor Class
Proceeds from sale of shares		2,358,431			11,475,602
Issued to shareholders in reinvestment of distributions		123,596			551,574
Cost of shares redeemed		(3,952,759	)		(19,940,706	)
Net decrease from share transactions		(1,470,732	)		(7,913,530	)
Institutional Class
Proceeds from sale of shares		5,756			7,012,311
Issued to shareholders in reinvestment of distributions		33,831			37,976
Cost of shares redeemed		(3,211,999	)		—
Acquisition (Note 11)		798,443			—
Net increase/(decrease) from share transactions		(2,373,969	)		7,050,287
Class A
Proceeds from sale of shares		178,198			—
Issued to shareholders in reinvestment of distributions		18,675			—
Cost of shares redeemed		(131,366	)		—
Acquisition (Note 11)		8,841,951			—
Net increase from share transactions		8,907,458			—
Class C
Proceeds from sale of shares		383			—
Issued to shareholders in reinvestment of distributions		5,192			—
Cost of shares redeemed		(23,640	)		—
Acquisition (Note 11)		2,543,047			—
Net increase from share transactions		2,524,982			—
Net increase/(decrease) in net assets	$	3,581,967		$	(16,150,750	)

See Notes to Financial Statements 73 June 30, 2009

Statement of Changes in Net Assets

	FORWARD REAL ESTATE FUND (continued)
	SIX MONTHS ENDED JUNE 30, 2009(b) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)
NET ASSETS:
Beginning of period	$	22,811,724		$	38,962,474
End of period (including accumulated net investment income of $309,518 and $73,459, respectively)	$	26,393,691		$	22,811,724
Other Information:
SHARE TRANSACTIONS:
Investor Class
Sold		348,155			1,054,141
Distributions reinvested		19,347			57,901
Redeemed		(571,487	)		(1,551,197	)
Net decrease in shares outstanding		(203,985	)		(439,155	)
Institutional Class
Sold		878			455,763
Distributions reinvested		5,436			4,845
Redeemed		(466,846	)		—
Acquisition (Note 11)		109,891			—
Net increase/(decrease) in shares outstanding		(350,641	)		460,608
Class A
Sold		24,880			—
Distributions reinvested		2,653			—
Redeemed		(18,960	)		—
Acquisition (Note 11)		1,182,743			—
Net increase in shares outstanding		1,191,316			—
Class C
Sold		54			—
Distributions reinvested		738			—
Redeemed		(3,366	)		—
Acquisition (Note 11)		340,171			—
Net increase in shares outstanding		337,597			—

(a) The Forward Progressive Real Estate Fund began offering Institutional Class shares on May 1, 2008.

(b) The Forward Real Estate Fund began offering Class A and Class C shares on June 12, 2009.

June 30, 2009 74 See Notes to Financial Statements

Statement of Cash Flows

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD LONG/SHORT CREDIT ANALYSIS FUND
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase resulting from operations	$	4,828,723
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities
Purchases of investment securities		(90,954,475	)
Proceeds from sale of investment securities		52,437,751
Proceeds from securities sold short transactions		21,091,476
Purchases to cover from securities sold short		(4,330,435	)
Net proceeds from short-term investment securities		(1,326,948	)
Discount and premiums amortized		(182,464	)
Net realized gain on investment securities		(316,462	)
Net realized gain on securities sold short		(258,957	)
Net change in unrealized appreciation on investments and securities sold short		(3,200,164	)
Changes in assets and liabilities:
Decrease in deposit with broker for securities sold short		454,919
Increase in receivable for fund shares sold		(35,758	)
Decrease in receivable on investments sold		290,430
Increase in interest receivable		(518,620	)
Increase in other assets		(4,019	)
Increase in payable with broker for securities sold short		6,405,060
Increase in payable for interest on short sales		104,571
Increase in payable for shares redeemed		7,308
Decrease in payable for investments purchased		(1,388,942	)
Increase in payable for advisor		28,865
Increase in payable for distribution and service fees		11,166
Increase in payable to trustees		2,550
Decrease in payable for chief compliance officer fee		(358	)
Decrease in accrued expenses and other liabilities		(21,199	)
Net cash used by operating activities		(16,875,982	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of shares		31,257,511
Cost of shares redeemed		(14,160,512	)
Cash distributions paid		(221,017	)
Net cash provided by financing activities		16,875,982
NET CHANGE IN CASH FOR THE PERIOD		—
CASH, BEGINNING OF PERIOD		—
CASH, END OF PERIOD	$	—

Non-cash financing activities not included herein consist of reinvestment of distributions of $762,878.

See Notes to Financial Statements 75 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Emerging Markets Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.28		$	28.51		$	23.08		$	18.83		$	14.21		$	11.86
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.05			0.38			0.04			0.05			0.27			0.21
Net realized and unrealized gain/(loss) on investments		3.82			(16.20	)		8.98			5.58			4.61			2.35
Total from Investment Operations		3.87			(15.82	)		9.02			5.63			4.88			2.56
LESS DISTRIBUTIONS:
From investment income		—			—			(0.05	)		(0.06	)		(0.26	)		(0.22	)
From capital gains		—			(0.41	)		(3.55	)		(1.34	)		—			—
Total Distributions		—			(0.41	)		(3.60	)		(1.40	)		(0.26	)		(0.22	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01			0.02			0.00	(c)		0.01
NET INCREASE/(DECREASE) IN NET ASSET VALUE		3.87			(16.23	)		5.43			4.25			4.62			2.35
NET ASSET VALUE, END OF PERIOD	$	16.15		$	12.28		$	28.51		$	23.08		$	18.83		$	14.21
TOTAL RETURN		31.51	%(h)		(55.38	)%		38.63	%		30.36	%		34.36	%		22.06	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	19,402		$	14,576		$	25,008		$	13,336		$	8,833		$	969
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		0.86	%(i)		1.67	%		0.17	%		0.26	%		2.57	%		(0.32	)%
Operating expenses including reimbursement/waiver		1.76	%(g)(i)		1.72	%(f)		1.69	%		1.81	%(e)		1.95	%		1.98	%(d)
Operating expenses excluding reimbursement/waiver		2.24	%(i)		2.10	%		2.09	%		2.26	%		3.04	%		3.29	%(d)
PORTFOLIO TURNOVER RATE		78	%(h)		214	%		121	%		102	%		62	%		45	%

(a) Prior to May 1, 2008, the Forward Emerging Markets Fund was known as the Forward Global Emerging Markets Fund.

(b) 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.

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

(d) 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 for the Investor Class would have been 1.95% and 3.25%, respectively.

(e) 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 1.69%.

(f) Effective May 1, 2008, the net expense limitation changed from 1.69% to 1.74%.

(g) Effective May 1, 2009, the net expense limitation changed from 1.74% to 1.79%.

(h) Not Annualized.

(i) Annualized.

June 30, 2009 76 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Emerging Markets Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.40		$	28.66		$	23.18		$	18.88		$	14.23		$	11.88
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.10	(h)		0.34			0.12			0.12			0.33			0.23
Net realized and unrealized gain/(loss) on investments		3.85			(16.19	)		9.03			5.62			4.62			2.36
Total from Investment Operations		3.95			(15.85	)		9.15			5.74			4.95			2.59
LESS DISTRIBUTIONS:
From investment income		—			—			(0.13	)		(0.12	)		(0.30	)		(0.25	)
From capital gains		—			(0.41	)		(3.55	)		(1.34	)		—			—
Total Distributions		—			(0.41	)		(3.68	)		(1.46	)		(0.30	)		(0.25	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01			0.02			0.00	(c)		0.01
NET INCREASE/(DECREASE) IN NET ASSET VALUE		3.95			(16.26	)		5.48			4.30			4.65			2.35
NET ASSET VALUE, END OF PERIOD	$	16.35		$	12.40		$	28.66		$	23.18		$	18.88		$	14.23
TOTAL RETURN		31.85	%(f)		(55.19	)%		39.00	%		30.84	%		34.79	%		22.26	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	161,955		$	49,529		$	61,829		$	42,283		$	28,765		$	18,854
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		1.54	%(g)		1.76	%		0.51	%		0.68	%		2.34	%		0.63	%
Operating expenses including reimbursement/waiver		1.39	%(g)		1.39	%		1.39	%		1.47	%(e)		1.70	%		1.70	%(d)
Operating expenses excluding reimbursement/waiver		1.78	%(g)		1.77	%		1.79	%		1.86	%		2.84	%		2.38	%(d)
PORTFOLIO TURNOVER RATE		78	%(f)		214	%		121	%		102	%		62	%		45	%

(a) Prior to May 1, 2008, the Forward Emerging Markets Fund was known as the Forward Global Emerging Markets Fund.

(b) 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.

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

(d) 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 for the Investor Class would have been 1.70% and 2.37%, respectively.

(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) Not Annualized.

(g) Annualized.

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

See Notes to Financial Statements 77 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Equity Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005(a)			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	8.63		$	19.40		$	18.23		$	15.01		$	12.78		$	11.31
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.19	(i)		0.66			0.14			0.09			0.05			(0.02	)
Net realized and unrealized gain/(loss) on investments		0.46			(11.00	)		2.32			4.99			2.19			1.49
Total from Investment Operations		0.65			(10.34	)		2.46			5.08			2.24			1.47
LESS DISTRIBUTIONS:
From investment income		—			(0.12	)		(0.13	)		(0.12	)		(0.01	)		—
From capital gains		—			(0.31	)		(1.18	)		(1.74	)		—			—
Total Distributions		—			(0.43	)		(1.31	)		(1.86	)		(0.01	)		—
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.02			0.00	(b)		0.00	(b)		0.00	(b)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.65			(10.77	)		1.17			3.22			2.23			1.47
NET ASSET VALUE, END OF PERIOD	$	9.28		$	8.63		$	19.40		$	18.23		$	15.01		$	12.78
TOTAL RETURN		7.53	%(g)		(53.22	)%		13.39	%		34.40	%		17.50	%		13.00	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	6,704		$	12,494		$	59,726		$	33,823		$	24,880		$	24,204
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		3.65	%(h)		2.32	%		0.90	%		0.53	%		0.37	%		(0.20	)%
Operating expenses including reimbursement/waiver		1.34	%(h)		1.30	%(f)		1.25	%(e)		1.42	%(d)		1.69	%		1.71	%(c)
Operating expenses excluding reimbursement/waiver		1.69	%(h)		1.70	%		1.48	%		1.80	%		2.28	%		2.09	%
PORTFOLIO TURNOVER RATE		42	%(g)		94	%		63	%		94	%		138	%		50	%

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

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

(e) Effective May 1, 2007, the net expense limitation changed from 1.29% to 1.24%.

(f) Effective May 1, 2008, the net expense limitation changed from 1.24% to 1.34%.

(g) Not Annualized.

(h) Annualized.

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

June 30, 2009 78 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Equity Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	8.62		$	19.41		$	19.99
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.18	(e)		0.43			0.09
Net realized and unrealized gain/(loss) on investments		0.50			(10.76	)		0.66
Total from Investment Operations		0.68			(10.33	)		0.75
LESS DISTRIBUTIONS:
From investment income		—			(0.15	)		(0.16	)
From capital gains		—			(0.31	)		(1.18	)
Total Distributions		—			(0.46	)		(1.34	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.68			(10.79	)		(0.58	)
NET ASSET VALUE, END OF PERIOD	$	9.30		$	8.62		$	19.41
TOTAL RETURN		7.89	%(b)		(53.12	)%		3.59	%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	8,364		$	13,036		$	23,078
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		3.99	%(c)		2.82	%		0.95	%(c)
Operating expenses including reimbursement/waiver		0.99	%(c)		0.99	%		0.99	%(c)
Operating expenses excluding reimbursement/waiver		1.40	%(c)		1.42	%		1.23	%(c)
PORTFOLIO TURNOVER RATE		42	%(b)		94	%		63	%(d)

(a) The Fund began offering Institutional Class shares on May 1, 2007.

(b) Not Annualized.

(c) Annualized.

(d) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2007.

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

See Notes to Financial Statements 79 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Small Companies Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	9.51		$	18.04		$	18.96		$	15.11		$	12.87		$	10.39
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.09			0.15			0.11			0.08			0.11	(a)		0.05	(a)
Net realized and unrealized gain/(loss) on investments		0.77			(8.56	)		0.64			4.34			3.23			2.59
Total from Investment Operations		0.86			(8.41	)		0.75			4.42			3.34			2.64
LESS DISTRIBUTIONS:
From investment income		—			(0.12	)		(0.08	)		(0.04	)		(0.08	)		(0.03	)
From capital gains		—			—			(1.60	)		(0.54	)		(1.02	)		(0.14	)
Total Distributions		—			(0.12	)		(1.68	)		(0.58	)		(1.10	)		(0.17	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01			0.01			0.00	(b)		0.01
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.86			(8.53	)		(0.92	)		3.85			2.24			2.48
NET ASSET VALUE, END OF PERIOD	$	10.37		$	9.51		$	18.04		$	18.96		$	15.11		$	12.87
TOTAL RETURN		9.04	%(g)		(46.60	)%		3.82	%		29.51	%		26.57	%		25.55	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	107,516		$	108,661		$	274,585		$	251,488		$	64,346		$	9,819
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver/ repayment of previously waived fees		1.75	%(h)		0.91	%		0.54	%		0.51	%		0.82	%		0.47	%
Operating expenses including reimbursement/waiver/repayment of previously waived fees		1.54	%(h)		1.58	%(f)		1.60	%(e)		1.56	%(d)		1.45	%		1.46	%(c)
Operating expenses excluding reimbursement/waiver		n/a			1.61	%		1.62	%		1.66	%		1.84	%		2.26	%(c)
PORTFOLIO TURNOVER RATE		61	%(g)		95	%		79	%		75	%		91	%		175	%

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

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

(c) 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 for would have been 1.45% and 2.25%, respectively.

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

(e) Effective January 2, 2007, the net expense limitation changed from 1.56% to 1.60%.

(f) Effective February 1, 2008, the Advisor had not agreed to limit the expenses.

(g) Not Annualized.

(h) Annualized.

June 30, 2009 80 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, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	9.52		$	18.10		$	19.02		$	15.15		$	12.89		$	10.40
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.10			0.18			0.14			0.09			0.16	(a)		0.08	(a)
Net realized and unrealized gain/(loss) on investments		0.78			(8.58	)		0.68			4.39			3.23			2.61
Total from Investment Operations		0.88			(8.40	)		0.82			4.48			3.39			2.69
LESS DISTRIBUTIONS:
From investment income		—			(0.18	)		(0.15	)		(0.08	)		(0.11	)		(0.07	)
From capital gains		—			—			(1.60	)		(0.54	)		(1.02	)		(0.14	)
Total Distributions		—			(0.18	)		(1.75	)		(0.62	)		(1.13	)		(0.21	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01			0.01			0.00	(b)		0.01
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.88			(8.58	)		(0.92	)		3.87			2.26			2.49
NET ASSET VALUE, END OF PERIOD	$	10.40		$	9.52		$	18.10		$	19.02		$	15.15		$	12.89
TOTAL RETURN		9.24	%(g)		(46.42	)%		4.18	%		29.91	%		26.81	%		25.99	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	375,750		$	329,966		$	626,083		$	389,983		$	144,302		$	49,068
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver/ repayment of previously waived fees		2.19	%(h)		1.26	%		0.84	%		0.77	%		1.12	%		0.75	%
Operating expenses including reimbursement/waiver/repayment of previously waived fees		1.19	%(h)		1.23	%(f)		1.25	%(e)		1.25	%(d)		1.20	%		1.21	%(c)
Operating expenses excluding reimbursement/waiver		n/a			1.26	%		1.28	%		1.28	%		1.46	%		2.12	%(c)
PORTFOLIO TURNOVER RATE		61	%(g)		95	%		79	%		75	%		91	%		175	%

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

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

(c) 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.

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

(e) Effective January 2, 2007, the net expense limitation changed from 1.26% to 1.25%.

(f) Effective February 1, 2008, the Advisor had not agreed to limit the expenses.

(g) Not Annualized.

(h) Annualized.

See Notes to Financial Statements 81 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Small Companies Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			PERIOD ENDED DECEMBER 31, 2005(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	9.51		$	18.04		$	18.95		$	15.06		$	13.13
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.23			0.18			0.03			0.18			0.13	(b)
Net realized and unrealized gain/(loss) on investments		0.63			(8.59	)		0.76			4.23			2.90
Total from Investment Operations		0.86			(8.41	)		0.79			4.41			3.03
LESS DISTRIBUTIONS:
From investment income		—			(0.12	)		(0.11	)		(0.01	)		(0.08	)
From capital gains		—			—			(1.60	)		(0.54	)		(1.02	)
Total Distributions		—			(0.12	)		(1.71	)		(0.55	)		(1.10	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01			0.03			0.00	(c)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.86			(8.53	)		(0.91	)		3.89			1.93
NET ASSET VALUE, END OF PERIOD	$	10.37		$	9.51		$	18.04		$	18.95		$	15.06
TOTAL RETURN(d)		9.04	%(e)		(46.64	)%		4.03	%		29.55	%		23.78	%(e)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	1,027		$	2,010		$	5,632		$	3,416		$	5,065
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver/ repayment of previously waived fees		1.59	%(f)		0.91	%		0.52	%		0.71	%		0.51	%(f)
Operating expenses including reimbursement/waiver/ repayment of previously waived fees		1.63	%(f)		1.61	%(j)		1.52	%(i)		1.47	%(g)		1.78	%(f)
Operating expenses excluding reimbursement/waiver		n/a			1.63	%		1.53	%		1.48	%		1.82	%(f)
PORTFOLIO TURNOVER RATE		61	%(e)		95	%		79	%		75	%		91	%(h)

(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%.

(h) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2005.

(i) Effective January 2, 2007, the net expense limitation changed from 1.56% to 1.60%.

(j) Effective February 1, 2008, the Advisor had not agreed to limit the expenses.

June 30, 2009 82 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Large Cap Equity Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	7.44		$	11.66		$	10.53
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.10			0.08			0.09
Net realized and unrealized gain/(loss) on investments		0.12			(4.22	)		1.12
Total from Investment Operations		0.22			(4.14	)		1.21
LESS DISTRIBUTIONS:
From investment income		—			(0.08	)		(0.09	)
Total Distributions		—			(0.08	)		(0.09	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.22			(4.22	)		1.13
NET ASSET VALUE, END OF PERIOD	$	7.66		$	7.44		$	11.66
TOTAL RETURN		2.96	%(b)		(35.48	)%		11.59	%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	1,839		$	5,016		$	6,683
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		1.16	%(c)		0.91	%		0.95	%(c)
Operating expenses including reimbursement/waiver		0.99	%(c)		0.99	%		0.99	%(c)
Operating expenses excluding reimbursement/waiver		1.80	%(c)		1.29	%		1.52	%(c)
PORTFOLIO TURNOVER RATE		59	%(b)		89	%		75	%(b)(d)

(a) The Fund began offering Institutional Class shares on January 31, 2007.

(b) Not Annualized.

(c) Annualized.

(d) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2007.

See Notes to Financial Statements 83 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Large Cap Equity Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			PERIOD ENDED DECEMBER 31, 2006(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	7.45		$	11.65		$	10.40		$	10.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.02			0.04			0.06			0.02
Net realized and unrealized gain/(loss) on investments		0.19			(4.20	)		1.24			0.40
Total from Investment Operations		0.21			(4.16	)		1.30			0.42
LESS DISTRIBUTIONS:
From investment income		—			(0.04	)		(0.06	)		(0.02	)
Total Distributions		—			(0.04	)		(0.06	)		(0.02	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.21			(4.20	)		1.25			0.40
NET ASSET VALUE, END OF PERIOD	$	7.66		$	7.45		$	11.65		$	10.40
TOTAL RETURN(b)		2.82	%(c)		(35.70	)%		12.58	%		4.24	%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	8,339		$	8,102		$	12,291		$	10,425
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		0.60	%(d)		0.44	%		0.52	%		1.44	%(d)
Operating expenses including reimbursement/waiver		1.49	%(d)		1.44	%(f)		1.34	%(e)		1.35	%(d)
Operating expenses excluding reimbursement/waiver		2.32	%(d)		1.73	%		1.87	%		1.84	%(d)
PORTFOLIO TURNOVER RATE		59	%(c)		89	%		75	%		0	%(c)

(a) The Fund began offering Class A shares on October 31, 2006.

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

(c) Not Annualized.

(d) Annualized.

(e) Effective January 2, 2007, the net expense limitation changed from 1.35% to 1.34%.

(f) Effective May 1, 2008, the net expense limitation changed from 1.34% to 1.49%.

June 30, 2009 84 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Banking and Finance Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005			YEAR ENDED JUNE 30, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	15.39		$	19.61		$	28.81		$	27.61		$	27.99		$	25.74		$	19.89
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.08			0.08			(0.05	)		(0.04	)		(0.01	)(b)		(0.06	)(b)		(0.03	)(b)
Net realized and unrealized gain/(loss) on investments		(2.43	)		(4.28	)		(5.86	)		2.78			1.49			3.30			6.07
Total from Investment Operations		(2.35	)		(4.20	)		(5.91	)		2.74			1.48			3.24			6.04
LESS DISTRIBUTIONS:
From net investment income		—			(0.02	)		—			—			—			—			(0.01	)
From capital gains		—			—			(3.30	)		(1.54	)		(1.86	)		(0.99	)		(0.18	)
Total Distributions		—			(0.02	)		(3.30	)		(1.54	)		(1.86	)		(0.99	)		(0.19	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01			0.00	(c)		—			—			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		(2.35	)		(4.22	)		(9.20	)		1.20			(0.38	)		2.25			5.85
NET ASSET VALUE, END OF PERIOD	$	13.04		$	15.39		$	19.61		$	28.81		$	27.61		$	27.99		$	25.74
TOTAL RETURN(d)		(15.27	)%(e)		(21.41	)%		(20.92	)%		9.94	%		5.31	%(e)		13.12	%		30.53	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	35,601		$	48,460		$	64,560		$	164,164		$	184,550		$	183,556		$	133,136
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss)		0.57	%(f)		0.36	%		(0.14	)%		(0.13	)%		(0.10	)%(f)		(0.23	)%		(0.13	)%
Operating expenses		1.79	%(f)		1.65	%		1.69	%		1.62	%		1.57	%(f)		1.80	%		1.74	%
PORTFOLIO TURNOVER RATE		26	%(e)		61	%		29	%		34	%		15	%(e)		25	%		29	%

(a) Prior to May 1, 2008, the Forward Banking and Finance Fund was known as the Forward Emerald Banking and Finance Fund.

(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 annualized.

(f) Annualized.

See Notes to Financial Statements 85 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Banking and Finance Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005			YEAR ENDED JUNE 30, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	14.52		$	18.60		$	27.71		$	26.73		$	27.23		$	25.23		$	19.62
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.06	)		(0.19	)		(0.29	)		(0.22	)		(0.10	)(b)		(0.23	)(b)		(0.18	)(b)
Net realized and unrealized gain/(loss) on investments		(2.20	)		(3.89	)		(5.53	)		2.74			1.46			3.22			5.97
Total from Investment Operations		(2.26	)		(4.08	)		(5.82	)		2.52			1.36			2.99			5.79
LESS DISTRIBUTIONS:
From capital gains		—			—			(3.30	)		(1.54	)		(1.86	)		(0.99	)		(0.18	)
Total Distributions		—			—			(3.30	)		(1.54	)		(1.86	)		(0.99	)		(0.18	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.01			0.00	(c)		—			—			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		(2.26	)		(4.08	)		(9.11	)		0.98			(0.50	)		2.00			5.61
NET ASSET VALUE, END OF PERIOD	$	12.26		$	14.52		$	18.60		$	27.71		$	26.73		$	27.23		$	25.23
TOTAL RETURN(d)		(15.56	)%(e)		(21.94	)%		(21.43	)%		9.44	%		5.01	%(e)		12.37	%		29.68	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	17,910		$	23,486		$	41,441		$	111,868		$	112,774		$	107,804		$	88,249
RATIOS TO AVERAGE NET ASSETS:
Net investment loss		(0.10	)%(f)		(0.30	)%		(0.79	)%		(0.79	)%		(0.75	)%(f)		(0.88	)%		(0.77	)%
Operating expenses		2.44	%(f)		2.30	%		2.34	%		2.27	%		2.22	%(f)		2.45	%		2.39	%
PORTFOLIO TURNOVER RATE		26	%(e)		61	%		29	%		34	%		15	%(e)		25	%		29	%

(a) Prior to May 1, 2008, the Forward Banking and Finance Fund was known as the Forward Emerald Banking and Finance Fund.

(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 Annualized.

(f) Annualized.

June 30, 2009 86 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Growth Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2008(a)(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	8.00		$	9.03
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.13	)		(0.01	)
Net realized and unrealized gain/(loss) on investments		0.68			(0.98	)
Total from Investment Operations		0.55			(0.99	)
LESS DISTRIBUTIONS:
From capital gains		—			(0.04	)
Total Distributions		—			(0.04	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.55			(1.03	)
NET ASSET VALUE, END OF PERIOD	$	8.55		$	8.00
TOTAL RETURN		6.88	%(c)		(10.95	)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	36,520		$	908
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(0.65	)%(d)		(0.45	)%(d)
Operating expenses including reimbursement/waiver		0.99	%(d)(f)		n/a
Operating expenses excluding reimbursement/waiver		1.06	%(d)		1.08	%(d)
PORTFOLIO TURNOVER RATE		53	%(c)		108	%(e)

(a) Prior to May 1, 2008, the Forward Growth Fund was known as the Forward Emerald Growth Fund.

(b) The Fund began offering Institutional Class shares on October 21, 2008.

(c) Not Annualized.

(d) Annualized.

(e) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2008.

(f) Effective January 1, 2009, the Advisor agreed to limit expenses at 0.99%.

See Notes to Financial Statements 87 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Growth Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005			YEAR ENDED JUNE 30, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	7.99		$	12.73		$	13.90		$	13.57		$	12.98		$	13.02		$	10.21
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.03	)		(0.11	)		(0.13	)		(0.14	)		(0.07	)(b)		(0.16	)(b)		(0.17	)(b)
Net realized and unrealized gain/(loss) on investments		0.56			(4.59	)		0.44			1.86			1.38			0.43			2.98
Total from Investment Operations		0.53			(4.70	)		0.31			1.72			1.31			0.27			2.81
LESS DISTRIBUTIONS:
From capital gains		—			(0.04	)		(1.48	)		(1.39	)		(0.72	)		(0.31	)		0.00
Total Distributions		—			(0.04	)		(1.48	)		(1.39	)		(0.72	)		(0.31	)		0.00
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.00	(c)		0.00	(c)		—			—			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.53			(4.74	)		(1.17	)		0.33			0.59			(0.04	)		2.81
NET ASSET VALUE, END OF PERIOD	$	8.52		$	7.99		$	12.73		$	13.90		$	13.57		$	12.98		$	13.02
TOTAL RETURN(d)		6.63	%(e)		(36.91	)%		1.97	%		12.56	%		10.21	%(e)		2.48	%		27.52	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	59,905		$	92,675		$	174,019		$	177,429		$	158,056		$	145,193		$	112,354
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(0.96	)%(f)		(0.95	)%		(0.96	)%		(1.05	)%		(1.08	)%(f)		(1.31	)%		(1.34	)%
Operating expenses including reimbursement/waiver		1.29	%(f)(g)		n/a			n/a			n/a			n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		1.40	%(f)		1.35	%		1.36	%		1.40	%		1.40	%(f)		1.63	%		1.57	%
PORTFOLIO TURNOVER RATE		53	%(e)		108	%		76	%		84	%		34	%(e)		73	%		62	%

(a) Prior to May 1, 2008, the Forward Growth Fund was known as the Forward Emerald Growth Fund.

(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 January 1, 2009, the Advisor agreed to limit expenses at 1.29%.

June 30, 2009 88 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Growth Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			SIX MONTHS ENDED DECEMBER 31, 2005			YEAR ENDED JUNE 30, 2005			YEAR ENDED JUNE 30, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	7.49		$	12.03		$	13.30		$	13.06		$	12.56		$	12.70		$	10.02
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.20	)		(0.48	)		(0.23	)		(0.24	)		(0.11	)(b)		(0.23	)(b)		(0.25	)(b)
Net realized and unrealized gain/(loss) on investments		0.69			(4.02	)		0.44			1.87			1.33			0.40			2.93
Total from Investment Operations		0.49			(4.50	)		0.21			1.63			1.22			0.17			2.68
LESS DISTRIBUTIONS:
From capital gains		—			(0.04	)		(1.48	)		(1.39	)		(0.72	)		(0.31	)		—
Total Distributions		—			(0.04	)		(1.48	)		(1.39	)		(0.72	)		(0.31	)		—
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.00	(c)		0.00	(c)		—			—			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.49			(4.54	)		(1.27	)		0.24			0.50			(0.14	)		2.68
NET ASSET VALUE, END OF PERIOD	$	7.98		$	7.49		$	12.03		$	13.30		$	13.06		$	12.56		$	12.70
TOTAL RETURN(d)		6.54	%(e)		(37.40	)%		1.31	%		12.36	%		9.82	%(e)		1.74	%		26.75	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	2,256		$	2,623		$	8,593		$	10,617		$	11,287		$	11,498		$	13,311
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(1.61	)%(f)		(1.65	)%		(1.61	)%		(1.72	)%		(1.73	)%(f)		(1.94	)%		(1.99	)%
Operating expenses including reimbursement/waiver		1.94	%(f)(g)		n/a			n/a			n/a			n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		2.05	%(f)		2.04	%		2.01	%		2.07	%		2.04	%(f)		2.28	%		2.22	%
PORTFOLIO TURNOVER RATE		53	%(e)		108	%		76	%		84	%		34	%(e)		73	%		62	%

(a) Prior to May 1, 2008, the Forward Growth Fund was known as the Forward Emerald Growth Fund.

(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 January 1, 2009, the Advisor agreed to limit expenses at 1.94%.

See Notes to Financial Statements 89 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Legato Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2008(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	8.00		$	8.92
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.03	)		(0.00	)(b)
Net realized and unrealized gain/(loss) on investments		0.55			(0.67	)
Total from Investment Operations		0.52			(0.67	)
LESS DISTRIBUTIONS:
From capital gains		—			(0.25	)
Total Distributions		—			(0.25	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.52			(0.92	)
NET ASSET VALUE, END OF PERIOD	$	8.52		$	8.00
TOTAL RETURN		6.50	%(c)		(7.38	)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	1,510		$	906
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(0.70	)%(d)		(0.30	)%(d)
Operating expenses including reimbursement/waiver		1.69	%(d)		1.69	%(d)
Operating expenses excluding reimbursement/waiver		2.31	%(d)		2.56	%(d)
PORTFOLIO TURNOVER RATE		7	%(c)		35	%(e)

(a) The Fund began offering Investor Class shares on October 21, 2008.

(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, 2008.

June 30, 2009 90 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Legato Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2008(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	8.02		$	11.27
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		(0.01	)		0.01
Net realized and unrealized gain/(loss) on investments		0.55			(3.01	)
Total from Investment Operations		0.54			(3.00	)
LESS DISTRIBUTIONS:
From capital gains		—			(0.25	)
Total Distributions		—			(0.25	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.54			(3.25	)
NET ASSET VALUE, END OF PERIOD	$	8.56		$	8.02
TOTAL RETURN		6.73	%(b)		(26.52	)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	2,286		$	2,142
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		(0.29	)%(c)		0.19	%(c)
Operating expenses including reimbursement/waiver		1.29	%(c)		1.29	%(c)
Operating expenses excluding reimbursement/waiver		1.93	%(c)		1.81	%(c)
PORTFOLIO TURNOVER RATE		7	%(b)		35	%(d)

(a) The Fund began offering Institutional Class shares on May 1, 2008.

(b) Not Annualized.

(c) Annualized.

(d) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2008.

See Notes to Financial Statements 91 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Legato Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			PERIOD ENDED DECEMBER 31, 2005(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	7.99		$	11.92		$	12.19		$	11.30		$	10.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.00	)(h)		(0.11	)		(0.10	)		(0.12	)		(0.10	)
Net realized and unrealized gain/(loss) on investments		0.52			(3.57	)		1.13			1.21			1.43
Total from Investment Operations		0.52			(3.68	)		1.03			1.09			1.33
LESS DISTRIBUTIONS:
From capital gains		—			(0.25	)		(1.30	)		(0.20	)		(0.03	)
Total Distributions		—			(0.25	)		(1.30	)		(0.20	)		(0.03	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.52			(3.93	)		(0.27	)		0.89			1.30
NET ASSET VALUE, END OF PERIOD	$	8.51		$	7.99		$	11.92		$	12.19		$	11.30
TOTAL RETURN(b)		6.51	%(c)		(30.78	)%		8.30	%		9.69	%		13.34	%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	4,056		$	2,194		$	7,294		$	8,991		$	6,876
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver		(0.83	)%(d)		(0.66	)%		(0.73	)%		(1.03	)%		(1.25	)%(d)
Operating expenses including reimbursement/waiver		1.84	%(d)		1.77	%(g)		1.69	%(f)		1.78	%(e)		1.89	%(d)
Operating expenses excluding reimbursement/waiver		2.47	%(d)		2.07	%		1.96	%		1.95	%		3.53	%(d)
PORTFOLIO TURNOVER RATE		7	%(c)		35	%		33	%		36	%		28	%(c)

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

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

(c) Not Annualized.

(d) Annualized.

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

(f) Effective January 2, 2007, the net expense limitation changed from 1.79% to 1.69%.

(g) Effective May 1, 2008, the net expense limitation changed from 1.69% to 1.84%.

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

June 30, 2009 92 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Long/Short Credit Analysis Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2008(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	5.84		$	7.63
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.24			0.47
Net realized and unrealized gain/(loss) on investments		1.05			(1.68	)
Total from Investment Operations		1.29			(1.21	)
LESS DISTRIBUTIONS:
From investment income		(0.20	)		(0.58	)
Total Distributions		(0.20	)		(0.58	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.09			(1.79	)
NET ASSET VALUE, END OF PERIOD	$	6.93		$	5.84
TOTAL RETURN		22.36	%(b)		(16.59	)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	30,045		$	12,867
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income including reimbursement/waiver		9.75	%(c)		13.10	%(c)
Operating expenses including reimbursement/waiver		1.89	%(c)(e)		1.84	%(c)
Operating expenses excluding reimbursement/waiver		2.36	%(c)		2.52	%(c)
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income including reimbursement/waiver		7.65	%(c)		8.79	%(c)
Operating expenses including reimbursement/waiver		3.99	%(c)(e)		6.14	%(c)
Operating expenses excluding reimbursement/waiver		4.46	%(c)		6.82	%(c)
PORTFOLIO TURNOVER RATE		112	%(b)		311	%(d)

(a) The Fund began offering Investor Class shares on May 1, 2008.

(b) Not Annualized.

(c) Annualized.

(d) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2008.

(e) Effective May 1, 2009, the net expense limitation changed from 1.84% to 1.95%.

See Notes to Financial Statements 93 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Long/Short Credit Analysis Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2008(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	5.81		$	7.63
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.28			0.39
Net realized and unrealized gain/(loss) on investments		1.02			(1.59	)
Total from Investment Operations		1.30			(1.20	)
LESS DISTRIBUTIONS:
From investment income		(0.21	)		(0.62	)
Total Distributions		(0.21	)		(0.62	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.09			(1.82	)
NET ASSET VALUE, END OF PERIOD	$	6.90		$	5.81
TOTAL RETURN		22.65	%(b)		(16.35	)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	2,452		$	793
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income including reimbursement/waiver		10.25	%(c)		12.49	%(c)
Operating expenses including reimbursement/waiver		1.54	%(c)(e)		1.49	%(c)
Operating expenses excluding reimbursement/waiver		1.99	%(c)		2.53	%(c)
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income including reimbursement/waiver		8.13	%(c)		8.58	%(c)
Operating expenses including reimbursement/waiver		3.66	%(c)(e)		5.40	%(c)
Operating expenses excluding reimbursement/waiver		4.11	%(c)		6.44	%(c)
PORTFOLIO TURNOVER RATE		112	%(b)		311	%(d)

(a) The Fund began offering Institutional Class shares on May 1, 2008.

(b) Not Annualized.

(c) Annualized.

(d) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2008.

(e) Effective May 1, 2009, the net expense limitation changed from 1.49% to 1.60%.

June 30, 2009 94 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the period presented.

Forward Long/Short Credit Analysis Fund

	CLASS C
	PERIOD ENDED JUNE 30, 2009 (UNAUDITED)
NET ASSET VALUE, BEGINNING OF PERIOD	$	7.26
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.04
Net realized and unrealized loss on investments		(0.24	)
Total from Investment Operations		(0.20	)
LESS DISTRIBUTIONS:
From investment income		(0.12	)
Total Distributions		(0.12	)
NET DECREASE IN NET ASSET VALUE		(0.32	)
NET ASSET VALUE, END OF PERIOD	$	6.94
TOTAL RETURN(b)		(2.80	)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	2,868
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income including reimbursement/waiver		18.42	%(d)
Operating expenses including reimbursement/waiver		1.89	%(d)
Operating expenses excluding reimbursement/waiver		1.89	%(d)
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income including reimbursement/waiver		7.84	%(d)
Operating expenses including reimbursement/waiver		12.47	%(d)
Operating expenses excluding reimbursement/waiver		12.47	%(d)
PORTFOLIO TURNOVER RATE		112	%(e)

(a) The Fund began offering Class C shares on June 3, 2009.

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

(c) Not Annualized.

(d) Annualized.

(e) Portfolio turnover rate is calculated at the Fund level and represents the six months ended June 30, 2009.

See Notes to Financial Statements 95 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Fixed Income Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	9.30		$	10.19		$	10.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.22			0.40			0.08
Net realized and unrealized gain/(loss) on investments		0.52			(0.87	)		0.19
Total from Investment Operations		0.74			(0.47	)		0.27
LESS DISTRIBUTIONS:
From investment income		(0.23	)		(0.42	)		(0.08	)
Total Distributions		(0.23	)		(0.42	)		(0.08	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.51			(0.89	)		0.19
NET ASSET VALUE, END OF PERIOD	$	9.81		$	9.30		$	10.19
TOTAL RETURN		8.13	%(b)		(4.91	)%		2.71	%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	5,585		$	5,073		$	4,297
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		4.82	%(c)		4.10	%		3.57	%(c)
Operating expenses including reimbursement/waiver		1.13	%(c)(d)		1.16	%		1.24	%(c)
Operating expenses excluding reimbursement/waiver		1.13	%(c)		1.36	%		1.60	%(c)
PORTFOLIO TURNOVER RATE		22	%(b)		56	%		1	%(b)

(a) The Fund began offering Investor Class shares on October 5, 2007.

(b) Not Annualized.

(c) Annualized.

(d) Effective May 1, 2009, the net expense limitation changed from 1.24% to 1.39%.

June 30, 2009 96 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Fixed Income Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	9.27		$	10.19		$	10.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.23			0.44			0.09
Net realized and unrealized gain/(loss) on investments		0.51			(0.88	)		0.19
Total from Investment Operations		0.74			(0.44	)		0.28
LESS DISTRIBUTIONS:
From investment income		(0.24	)		(0.48	)		(0.09	)
Total Distributions		(0.24	)		(0.48	)		(0.09	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.50			(0.92	)		0.19
NET ASSET VALUE, END OF PERIOD	$	9.77		$	9.27		$	10.19
TOTAL RETURN		8.14	%(b)		(4.60	)%		2.77	%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	12,969		$	12,088		$	12,858
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		4.98	%(c)		4.27	%		3.84	%(c)
Operating expenses including reimbursement/waiver		0.96	%(c)		0.97	%		0.99	%(c)
Operating expenses excluding reimbursement/waiver		0.97	%(c)		1.35	%		1.60	%(c)
PORTFOLIO TURNOVER RATE		22	%(b)		56	%		1	%(b)

(a) The Fund began offering Institutional Class shares on October 5, 2007.

(b) Not Annualized.

(c) Annualized.

See Notes to Financial Statements 97 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Fixed Income Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	9.35		$	10.19		$	10.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.21			0.39			0.07
Net realized and unrealized gain/(loss) on investments		0.53			(0.88	)		0.19
Total from Investment Operations		0.74			(0.49	)		0.26
LESS DISTRIBUTIONS:
From investment income		(0.23	)		(0.35	)		(0.07	)
Total Distributions		(0.23	)		(0.35	)		(0.07	)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.51			(0.84	)		0.19
NET ASSET VALUE, END OF PERIOD	$	9.86		$	9.35		$	10.19
TOTAL RETURN(b)		8.03	%(c)		(5.00	)%		2.63	%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	4,090		$	3,879		$	4,229
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		4.67	%(d)		3.90	%		3.23	%(d)
Operating expenses including reimbursement/waiver		1.27	%(d)(e)		1.35	%		1.58	%(d)
Operating expenses excluding reimbursement/waiver		1.27	%(d)		1.36	%		1.60	%(d)
PORTFOLIO TURNOVER RATE		22	%(c)		56	%		1	%(c)

(a) The Fund began offering Class C shares on October 5, 2007.

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

(c) Not Annualized.

(d) Annualized.

(e) Effective May 1, 2009, the net expense limitation changed from 1.89% to 1.94%.

June 30, 2009 98 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Real Estate Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006(b)			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	8.35		$	14.30		$	20.66		$	16.69		$	16.62		$	14.01
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.16			0.22			0.30			0.13			0.33			0.34
Net realized and unrealized gain/(loss) on investments		(1.34	)		(5.88	)		(3.21	)		5.08			1.47			3.62
Total from Investment Operations		(1.18	)		(5.66	)		(2.91	)		5.21			1.80			3.96
LESS DISTRIBUTIONS:
From investment income		(0.06	)		(0.19	)		(0.27	)		(0.27	)		(0.22	)		(0.59	)
From capital gains		—			(0.09	)		(3.18	)		(0.97	)		(1.50	)		(0.76	)
Tax return of capital		—			(0.01	)		—			—			(0.01	)		—
Total Distributions		(0.06	)		(0.29	)		(3.45	)		(1.24	)		(1.73	)		(1.35	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		(1.24	)		(5.95	)		(6.36	)		3.97			0.07			2.61
NET ASSET VALUE, END OF PERIOD	$	7.11		$	8.35		$	14.30		$	20.66		$	16.69		$	16.62
TOTAL RETURN		(14.09	)%(h)		(39.88	)%		(15.30	)%		31.24	%		11.01	%		28.77	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	14,785		$	19,065		$	38,962		$	48,450		$	43,288		$	48,346
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		4.30	%(i)		1.53	%		1.22	%		0.70	%		1.98	%		2.23	%
Operating expenses including reimbursement/waiver		1.80	%(i)(g)		1.47	%		1.41	%(f)		1.35	%(d)		1.79	%		1.85	%
Operating expenses excluding reimbursement/waiver		1.87	%(i)		n/a			n/a			n/a	(e)		n/a	(e)		n/a	(e)
PORTFOLIO TURNOVER RATE		41	%(h)		7	%		40	%		19	%		21	%		32	%

(a) Prior to January 20, 2009, the Forward Real Estate Fund was known as the Forward Progressive Real Estate Fund.

(b) Prior to October 30, 2006, the Forward Progressive Real Estate Fund was known as the Forward Uniplan Real Estate Investment Fund.

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

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

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

(f) Effective January 2, 2007, the Advisor had not agreed to limit the expenses.

(g) Effective May 1, 2009, the Advisor agreed to limit expenses at 1.60%.

(h) Not Annualized.

(i) Annualized.

See Notes to Financial Statements 99 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Real Estate Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			PERIOD ENDED DECEMBER 31, 2008(a)
NET ASSET VALUE, BEGINNING OF PERIOD	$	8.13		$	15.39
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.15	(f)		0.16
Net realized and unrealized loss on investments		(1.28	)		(6.92	)
Total from Investment Operations		(1.13	)		(6.76	)
LESS DISTRIBUTIONS:
From investment income		(0.11	)		(0.38	)
From capital gains		—			(0.09	)
Tax return of capital		—			(0.03	)
Total Distributions		(0.11	)		(0.50	)
NET DECREASE IN NET ASSET VALUE		(1.24	)		(7.26	)
NET ASSET VALUE, END OF PERIOD	$	6.89		$	8.13
TOTAL RETURN		(13.83	)%(b)		(44.33	)%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	758		$	3,747
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		4.34	%(c)		2.05	%(c)
Operating expenses including reimbursement/waiver		1.43	%(c)(e)		n/a
Operating expenses excluding reimbursement/waiver		1.49	%(c)		1.26	%(c)
PORTFOLIO TURNOVER RATE		41	%(b)		7	%(d)

(a) The Fund began offering Institutional Class shares on May 1, 2008. Prior to January 20, 2009, the Forward Real Estate Fund was known as the Forward Progressive Real Estate Fund.

(b) Not Annualized.

(c) Annualized.

(d) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2008.

(e) Effective May 1, 2009, the Advisor agreed to limit expenses at 1.20%.

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

June 30, 2009 100 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the period presented.

Forward Real Estate Fund

	CLASS A
	PERIOD ENDED JUNE 30, 2009(a) (UNAUDITED)
NET ASSET VALUE, BEGINNING OF PERIOD	$	7.48
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.03
Net realized and unrealized loss on investments		(0.39	)
Total from Investment Operations		(0.36	)
LESS DISTRIBUTIONS:
From investment income		(0.02	)
Total Distributions		(0.02	)
NET DECREASE IN NET ASSET VALUE		(0.38	)
NET ASSET VALUE, END OF PERIOD	$	7.10
TOTAL RETURN(b)		(0.28	)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	8,456
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		8.23	%(d)
Operating expenses including reimbursement/waiver		1.45	%(d)
Operating expenses excluding reimbursement/waiver		1.46	%(d)
PORTFOLIO TURNOVER RATE		41	%(e)

(a) The Fund began offering Class A shares on June 12, 2009.

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

(c) Not Annualized.

(d) Annualized.

(e) Portfolio turnover rate is calculated at the Fund level and represents the six months ended June 30, 2009.

See Notes to Financial Statements 101 June 30, 2009

Financial Highlights

For a share outstanding throughout the period presented.

Forward Real Estate Fund

	CLASS C
	PERIOD ENDED JUNE 30, 2009(a) (UNAUDITED)
NET ASSET VALUE, BEGINNING OF PERIOD	$	7.48
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.03
Net realized and unrealized loss on investments		(0.39	)
Total from Investment Operations		(0.36	)
LESS DISTRIBUTIONS:
From investment income		(0.02	)
Total Distributions		(0.02	)
NET DECREASE IN NET ASSET VALUE		(0.38	)
NET ASSET VALUE, END OF PERIOD	$	7.10
TOTAL RETURN(b)		(0.31	)%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	2,395
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		7.59	%(d)
Operating expenses including reimbursement/waiver		2.05	%(d)
Operating expenses excluding reimbursement/waiver		2.06	%(d)
PORTFOLIO TURNOVER RATE		41	%(e)

(a) The Fund began offering Class C shares on June 12, 2009.

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

(c) Not Annualized.

(d) Annualized.

(e) Portfolio turnover rate is calculated at the Fund level and represents the six months ended June 30, 2009.

June 30, 2009 102 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”). As of June 30, 2009, the Trust has 34 registered funds. This semi-annual report describes 10 funds offered by the Trust (each a “Fund” and collectively, the “Funds”). The accompanying financial statements and financial highlights are those of the Forward Emerging Markets Fund (“Emerging Markets Fund”), the Forward International Equity Fund (“International Equity Fund”), the Forward International Small Companies Fund (“International Small Companies Fund”), the Forward Large Cap Equity Fund (“Large Cap Fund”), the Forward Banking and Finance Fund (“Banking and Finance Fund”), the Forward Growth Fund (“Growth Fund”), the Forward Legato Fund (“Legato Fund”), the Forward Long/Short Credit Analysis Fund (“Long/Short Credit Analysis Fund”), the Forward International Fixed Income Fund (“International Fixed Income Fund”), and the Forward Real Estate Fund (“Real Estate Fund”).

The Emerging Markets Fund seeks to achieve long-term growth of capital and invests primarily in the equity securities of emerging market countries. The International Equity Fund seeks to achieve high total return 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 Large Cap Fund seeks to achieve high total return and invests primarily in equity securities of companies that have large capitalizations. The Banking and Finance Fund seeks to achieve long-term growth through capital appreciation with income as a secondary objective. The Growth Fund seeks to achieve long-term growth of capital through capital appreciation and invests in stocks and securities convertible into stocks. The Legato Fund seeks to achieve high total returns and invest primarily in the equity securities of companies that have small market capitalization and offer future growth potential. The Long/Short Credit Analysis Fund seeks to maximize total return (capital appreciation and income) by investing primarily in a non-diversified portfolio of municipal bonds, corporate bonds, notes and other debentures, U.S. Treasury and Agency securities, sovereign debt, emerging market debt, floating rate or zero coupon securities and non-convertible preferred securities that are actively traded in the public markets. The International Fixed Income Fund seeks to offer exposure primarily to non-U.S. dollar denominated fixed income securities of non-U.S. issuers and derivatives and invests in a non-diversified portfolio of fixed income securities of companies and governments located outside the United States. The Real Estate Fund seeks income with capital appreciation as a secondary goal and invests in a non-diversified portfolio of securities of real estate companies, including real estate investment trusts (“REITs”).

The Emerging Markets Fund and the International Equity Fund offer Investor Class and Institutional Class shares; the International Small Companies Fund and the Legato Fund offer Investor Class, Institutional Class and Class A shares; the Long/Short Credit Analysis Fund and the International Fixed Income Fund offer Investor Class, Institutional Class and Class C shares; the Real Estate Fund offers Investor Class, Institutional Class, Class A and Class C shares; the Large Cap Fund offers Institutional Class and Class A shares; the Banking and Finance Fund offers Class A and Class C shares; and the Growth Fund offers Institutional Class, Class A and Class C shares.

103 June 30, 2009

Notes to Financial Statements (Unaudited)

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 of all Funds (except the International Fixed Income Fund) are subject to an initial sales charge of up to 5.75% imposed at the time of purchase. Class A Shares of the International Fixed Income Fund are subject to an initial sales charge of up to 3.75% imposed at the time of purchase. Class A Shares of the Funds 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. Effective May 1, 2009, the Class C shares of all Funds are subject to a 1.00% CDSC for redemptions made within one year of purchase, in accordance with policies established by the Board of Trustees. Prior to May 1, 2009, the Class C shares of all Funds (except the Long/Short Credit Analysis Fund) were subject to a 1.00% CDSC for redemptions made within two years of purchase; and the Long/Short Credit Analysis was subject to a 1.00% CDSC for redemptions made within eighteen months of purchase. 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 its investments in a particular sector.

2. Significant Accounting Policies

The following is a summary of significant accounting policies followed by each Fund. These policies are in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in accordance 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 during the reporting period. Management believes the estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Funds ultimately realize upon sale of the securities. The financial statements have been prepared as of the close of the New York Stock Exchange (“NYSE”) on June 30, 2009.

Portfolio Valuation: Portfolio securities or contracts that are listed or traded on a national securities exchange, contract market or over-the-counter market, and that are freely transferable, are valued at the last reported sale price or a market’s official closing price on the valuation day, or, if there have been no sales that day, at the average of the last reported bid and ask price on the valuation day for long positions or ask prices for short positions. If no bid or ask prices are quoted before closing, such securities or contracts are valued at either the last available sale price or at fair value.

Debt securities (including convertible debt) that have more than 60 days remaining until maturity or that are credit impaired for which market data is readily available are valued on the basis of the average of the latest bid and ask price. Debt securities that mature in less than 60 days and that are not credit impaired are valued at amortized cost if their original maturity was 60 days or less, or by amortizing the value as of the 61st day prior to maturity if the original term to maturity exceeds 60 days (unless the Board of Trustees determines that this method does not

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represent fair value). For most debt securities, the Funds receive pricing information from independent pricing vendors (approved by the Board of Trustees) which also use information provided by market makers or estimates of value obtained from yield data relating to securities with similar characteristics. As appropriate, quotations for high yield bonds may also take additional factors into consideration such as the activity of the underlying equity or sector movements. In the event valuation information is not available from third party pricing vendors for a security held by a Fund, such security may be valued by quotations obtained from dealers that make markets in such securities or otherwise determined based on the fair value of such securities. Because long-term bonds and lower-rated bonds tend to be less liquid, their values may be determined based on fair value more frequently than portfolio holdings that are more frequently traded or that have relatively higher credit ratings.

Futures, options on futures, and swap contracts that are listed or traded on a national securities exchange, commodities exchange, contract market or comparable over-the-counter market, and that are freely transferable, are valued at their closing settlement price on the exchange on which they are primarily traded or based upon the current settlement price for a like instrument acquired on the day on which the option is being valued. A settlement price may not be used if the market makes a limit move with respect to a particular commodity. Over-the-counter futures, options on futures and swap contracts for which market quotations are readily available are valued based on quotes received from third party pricing services or one or more dealers that make markets in such securities.

Options on securities and options on indices are valued using the last quoted sale price as of the close of the securities or commodities exchange on which they are traded. Certain investments including options may trade in the over-the-counter market and generally are valued based on quotes received from a third party pricing service or one or more dealers that make markets in such securities, or at fair value.

Portfolio securities that are primarily traded on foreign securities exchanges are valued at the preceding closing values of such securities on their respective exchanges, except when an occurrence subsequent to the time a value was so established is likely to have changed such value. In such an event, the fair value of those securities are determined in good faith through consideration of other factors in accordance with procedures established by, and under the general supervision of, the Board of Trustees.

Forward currency exchange contracts have a market value determined by the prevailing foreign currency exchange daily rates and current foreign currency exchange forward rates. The foreign currency exchange forward rates are calculated using an automated system that estimates rates on the basis of the current day foreign currency exchange rates and forward foreign currency exchange rates supplied by a pricing service. Foreign exchange rates and forward foreign currency exchange rates may generally be obtained at the close of the NYSE, normally 4:00 p.m. Eastern Time.

Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

All other securities and other assets are carried at their fair value as determined in good faith 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

105 June 30, 2009

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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. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE, normally 4:00 p.m. Eastern Time. As available and as provided by an appropriate pricing service, translation of foreign security and currency market values may also occur with the use of foreign exchange rates obtained at approximately 11:00 a.m. Eastern Time, which approximates the close of the London Stock Exchange. 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 options contracts. When a 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 that 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 affecting 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 Fund has 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. As of June 30, 2009, the Funds held no purchased or written options.

Written option activity for the six months ended June 30, 2009 was as follows:

International Fixed Income Fund
WRITTEN PUT OPTIONS	CONTRACTS		PREMIUMS
Outstanding as of December 31, 2008	0		$	0
Positions opened	3			1,500
Exercised or closed	(3	)		(1,500	)
Expired	0			0
Outstanding as of June 30, 2009	0		$	0

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 security increases between the date of the short

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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. As of June 30, 2009, the Long/Short Credit Analysis Fund held securities sold short with a market value of $28,829,627. The other Funds held no securities sold short.

Futures: The Funds (excluding the Growth Fund and the Banking and Finance Fund) may invest in futures contracts in accordance with their investment objectives. A Fund is subject to an equity price risk, interest rate risk, and foreign currency exchange risk in the normal course of business. A Fund may do so for a variety of reasons including for cash management and hedging or non-hedging purposes. A futures contract provides for the future sale by one party and purchase by another party of a specified quantity of the security or other financial instrument at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Although the value of an index might be a function of the value of certain specified securities, physical delivery of these securities is not always made. Futures transactions may result in losses in excess of the amount invested in the futures contract. There can be no guarantee that there will be a correlation between price movements in the hedging vehicle and in the portfolio securities being hedged. An incorrect correlation could result in a loss on both the hedged securities in a Fund and the hedging vehicle so that the portfolio return might have been greater had hedging not been attempted. There can be no assurance that a liquid market will exist at a time when a Fund seeks to close out a futures contract or a futures option position. Lack of a liquid market for any reason may prevent a Fund from liquidating an unfavorable position, and the Fund would remain obligated to meet margin requirements until the position is closed. In addition, a Fund could be exposed to risk if the counterparties to the contracts are unable to meet the terms of their contracts. With futures, there is minimal counterparty credit risk to the Fund since futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

When a purchase or sale of a futures contract is made by a Fund, the Fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of liquid assets (“initial margin”). The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract that is returned to a Fund upon termination of the contract, assuming all contractual obligations have been satisfied. Each day a Fund pays or receives cash, called “variation margin,” equal to the daily change in value of the futures contract. Such payments or receipts are recorded for financial statement purposes as unrealized gains or losses by a Fund. Variation margin does not represent a borrowing or loan by a Fund but is instead a settlement between a Fund and the broker of the amount one would owe the other if the futures contract expired. When the contract is closed, a Fund records a realized gain or loss equal to the difference

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between the value of the contract at the time it was opened and the value at the time it was closed. As of June 30, 2009, the International Fixed Income Fund had futures contracts outstanding with an unrealized gain of $569. The other Funds held no futures contracts.

Cash Management Transactions: The Funds may 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 the BBH Grand Cayman branch or a branch of a pre-approved, world-class commercial bank. 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: Each Fund from time to time may lend portfolio securities to broker-dealers, banks or institutional borrowers of securities. The loans are secured by collateral in the form of cash that is equal to at least 102% of the fair value of the securities loaned plus accrued interest, if any. Upon lending its securities to third parties, a Fund receives compensation in the form of income on the investment of the cash collateral. 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, and 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 the extent practicable, 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. 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 a Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. The Fund receives cash collateral which is invested in the Brown Brothers Investment Trust Securities Lending Investment Fund. 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. The Fund bears the risk of any income or gains and losses from investing and reinvesting cash pledged as collateral. During the time portfolio securities are on loan, the borrower pays the lending Fund the economic equivalent of any dividends or interest paid on such securities. 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. As of June 30, 2009, there were no Funds with securities on loan and during the six months ended June 30, 2009 there was no securities lending activity in the Funds.

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

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more volatile than those of securities of comparable U.S. issuers.

Real Estate Investment Trusts (“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.

Derivative Instruments and Hedging Activities: The Funds have adopted the provisions of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. SFAS No. 161 has established improved financial reporting about derivative instruments and hedging activities as it relates to disclosure associated with these types of investments. The following discloses the amounts related to the Funds use of derivative instruments and hedging activities.

Balance Sheet – Fair Value of Derivatives Instruments as of June 30, 2009

	ASSET DERIVATIVES			LIABILITY DERIVATIVES
DERIVATIVES NOT ACCOUNTED FOR AS HEDGING INSTRUMENTS UNDER STATEMENT 133	BALANCE SHEET LOCATION	FAIR VALUE		BALANCE SHEET LOCATION	FAIR VALUE
International Fixed Income Fund
Interest Rate Contracts	Due from broker for futures contracts	$	569			—
Foreign exchange contracts	Unrealized gain on forward contracts		75,670	Unrealized loss on forward contracts	$	(39,918	)
Total		$	76,239		$	(39,918	)

There were no other Funds that held Derivative Instruments as of June 30, 2009.

The Effect of Derivatives Instruments on the Statement of Operations for the six months ended June 30, 2009:

DERIVATIVES NOT ACCOUNTED FOR AS HEDGING INSTRUMENTS UNDER STATEMENT 133	LOCATION OF GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME	REALIZED GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME			CHANGE IN UNREALIZED GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
Emerging Markets Fund
Equity Contracts	Net realized loss on option contracts/net change in unrealized appreciation/(depreciation) on option contracts	$	(148,461	)	$	0
Total		$	(148,461	)	$	0

109 June 30, 2009

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DERIVATIVES NOT ACCOUNTED FOR AS HEDGING INSTRUMENTS UNDER STATEMENT 133	LOCATION OF GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME	REALIZED GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME			CHANGE IN UNREALIZED GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
International Fixed Income Fund
Interest Rate Contracts	Net realized gain/(loss) on futures contracts and option contracts/net change in unrealized depreciation on futures contracts and option contracts	$	25,665		$	(38,134	)
Foreign exchange contracts	Net realized loss on foreign currency transactions/change in net unrealized appreciation on translation of assets and liabilities in foreign currencies		(119,275	)		56,535
Total		$	(93,610	)	$	18,401

There were no other Funds that had Derivatives Instruments on the Statement of Operations for the six months ended June 30, 2009.

Fair Value Measurements: FASB SFAS No. 157 is effective for the Funds’ financial statements issued after December 31, 2007. SFAS No. 157 defines fair value, establishes a fair value hierarchy and specifies that a valuation technique used to measure fair value shall maximize the use of observable inputs and minimize the use of unobservable inputs. A three-tier hierarchy has been established to classify fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

Various inputs are used in determining the value of each Fund’s investments as of the reporting period end. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

Level 1—Quoted prices in active markets for identical investments

Level 2—Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3—Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

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The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2009.

INVESTMENTS IN SECURITIES	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Emerging Markets Fund
Common Stocks	$	55,890,152	$	115,244,207		—	$	171,134,359
Investment Holdings Companies		1,841,412		—		—		1,841,412
Loan Participation Notes		—		2,979,287		—		2,979,287
Preferred Stocks		1,257,711		—		—		1,257,711
Warrants		0		—		—		0
Short-Term Bank Debt Instruments		7,078,000		—		—		7,078,000
Total	$	66,067,275	$	118,223,494		—	$	184,290,769
International Equity Fund
Common Stocks	$	15,392,910		—		—	$	15,392,910
Total	$	15,392,910		—		—	$	15,392,910
International Small Companies Fund
Common Stocks	$	471,910,523		—		—	$	471,910,523
Preferred Stocks		3,231,542		—		—		3,231,542
Rights		—	$	284,081		—		284,081
Short-Term Bank Debt Instruments		8,559,000		—		—		8,559,000
Total	$	483,701,065	$	284,081		—	$	483,985,146
Large Cap Equity Fund
Common Stocks	$	10,023,931		—		—	$	10,023,931
Short-Term Bank Debt Instruments		168,527		—		—		168,527
Total	$	10,192,458		—		—	$	10,192,458
Banking and Finance Fund
Common Stocks	$	50,219,412		—		—	$	50,219,412
Short-Term Bank Debt Instruments		2,872,772		—		—		2,872,772
Total	$	53,092,184		—		—	$	53,092,184
Growth Fund
Common Stocks	$	96,382,974		—		—	$	96,382,974
Short-Term Bank Debt Instruments		2,420,903		—		—		2,420,903
Total	$	98,803,877		—		—	$	98,803,877
Legato Fund
Common Stocks	$	7,499,953		—		—	$	7,499,953
Short-Term Bank Debt Instruments		349,599		—		—		349,599
Total	$	7,849,552		—		—	$	7,849,552
Long/Short Credit Analysis Fund
Municipal Bonds		—	$	60,764,601	$	2,000,000	$	62,764,601
Corporate Bonds		—		4,744,736		—		4,744,736
Exchange Traded Funds	$	117,089		—		—		117,089
Short-Term Bank Debt Instruments		2,528,612		—		—		2,528,612
Total	$	2,645,701	$	65,509,337	$	2,000,000	$	70,155,038
International Fixed Income Fund
Foreign Government Obligations		—	$	16,130,024		—	$	16,130,024
Corporate Bonds		—		4,696,181		—		4,696,181
Credit Linked Notes		—		247,024		—		247,024
Short-Term Bank Debt Instruments	$	935,466		—		—		935,466
Total	$	935,466	$	21,073,229		—	$	22,008,695

111 June 30, 2009

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INVESTMENTS IN SECURITIES	LEVEL 1		LEVEL 2			LEVEL 3	TOTAL
Real Estate Fund
Corporate Bonds		—	$	569,017		—	$	569,017
Common Stocks	$	24,231,446		—		—		24,231,446
Mutual Funds		1,273,584		—		—		1,273,584
Short-Term Bank Debt Instruments		196,322		—		—		196,322
Total	$	25,701,352	$	569,017		—	$	26,270,369
OTHER FINANCIAL INSTRUMENTS(a)	LEVEL 1		LEVEL 2			LEVEL 3	TOTAL
Long/Short Credit Analysis Fund
Corporate Bonds		—	$	(3,284,247	)	—	$	(3,284,247	)
U.S. Government Agency		—		(25,545,380	)	—		(25,545,380	)
Total		—	$	(28,829,627	)	—	$	(28,829,627	)
International Fixed Income Fund
Futures Contracts	$	569		—		—	$	569
Forward Foreign Currency Contracts		—	$	35,752		—		35,752
Total	$	569	$	35,752		—	$	36,321

(a) Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as written options, short sales, currency contracts, futures, forward contracts and swap contracts.

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:

FUND	INVESTMENTS IN SECURITIES			OTHER FINANCIAL INSTRUMENTS(a)
International Equity
Common Stocks
Balance as of December 31, 2008	$	1,276,072			—
Realized gain/(loss)(b)		—			—
Change in unrealized appreciation/(depreciation)(b)		—			—
Net purchases/(sales)		—			—
Transfers in and/(out) of Level 3		(1,276,072	)		—
Balance as of June 30, 2009	$	0			—
LONG/SHORT CREDIT ANALYSIS	INVESTMENTS IN SECURITIES Municipal Bonds			OTHER FINANCIAL INSTRUMENTS(a) Corporate Bonds
Balance as of December 31, 2008	$	2,000,000		$	(25,333	)
Realized gain/(loss)(b)		—			—
Change in unrealized appreciation/(depreciation)(b)		—			—
Net purchases/(sales)		—			—
Transfers in and/(out) of Level 3		—			(25,333	)
Balance as of June 30, 2009	$	2,000,000		$	0

(a) There was no realized gain/(loss) earned during the six months ended June 30, 2009 for other financial instruments for the Long/Short Credit Analysis Fund.

(b) Net realized gain/(loss) and net unrealized appreciation/(depreciation) are included in the related amounts on investments in the Statement of Operations.

June 30, 2009 112

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For the six months ended June 30, 2009, the other Funds did not have significant unobservable inputs (Level 3) used in determining fair value. Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable.

Distributions to Shareholders: Dividends from net investment income, if any, are declared and paid annually for the Emerging Markets Fund, International Equity Fund, International Small Companies Fund, Large Cap Equity Fund, Banking and Finance Fund, Growth Fund and Legato Fund, quarterly for the Long/Short Credit Analysis Fund and International Fixed Income Fund, and monthly for the Real Estate Fund. Net realized capital gains, if any, are distributed 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.

The Funds recharacterize distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the recharacterization will be estimated based on available information which may include the previous year’s allocation. If new or additional information becomes available from the REITs at a later date, a recharacterization will be made in the following year. The Funds record as dividend income the amount recharacterized as ordinary income and as realized gain the amount recharacterized as long-term capital gain in the Statement of Operations, and the amount recharacterized as a return of capital as a reduction to the cost of investments in the Statement of Assets and Liabilities and in the Portfolio of Investments. These recharacterizations are reflected in the accompanying financial statements.

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

As of and during the six months ended June 30, 2009, the Funds did not have a liability for any unrecognized tax benefits in the accompanying financial statements. The Funds recognize the interest and penalties, if any, related to the unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the Funds did not incur any interest or penalties.

Each of the Funds’ federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

Expenses: Expenses that are specific to a Fund or class of shares of a Fund are charged directly to that Fund or share class. Expenses that are common to all Funds generally are allocated

113 June 30, 2009

Notes to Financial Statements (Unaudited)

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 distribution (Rule 12b-1) and/or shareholder service plans 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 in a segregated account cash or liquid securities equal to the amount of the commitment. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in value based upon changes in the value of the security or 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.

ReFlow Management Co., LLC, the entity that facilitates the day-to-day operations of ReFlow, is under common control with Forward Management, LLC (“Forward Management”), 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. ReFlow fees that were incurred by the Emerging Markets Fund, International Equity Fund, International Small Companies Fund, Large Cap Fund, Banking and Finance Fund and International Fixed Income Fund during the six months ended June 30, 2009 are recorded in the Statement of Operations. During that same period there were no ReFlow fees incurred by the other Funds.

3. Investment Management Services

The Trust has entered into an investment management agreement with Forward Management pursuant to which Forward Management provides investment management services to the

June 30, 2009 114

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Funds and is entitled to receive a fee calculated daily and payable monthly at the following annual rates, as of June 30, 2009, based on each Fund’s average daily net assets: Emerging Markets Fund, 1.25% on assets up to and including $500 million, 1.20% on assets over $500 million up to and including $1 billion, and 1.15% on assets over $1 billion; International Equity Fund, 0.85% on assets up to and including $250 million, 0.75% on assets over $250 million up to and including $1 billion, 0.65% on assets over $1 billion; International Small Companies Fund, 1.00% on assets up to and including $1 billion and 0.95% on assets over $1 billion; Large Cap Fund, 0.80% on assets up to and including $500 million, 0.725% on assets over $500 million up to and including $1 billion and 0.675% on assets over $1 billion; Banking and Finance Fund, 1.00% on assets up to and including $100 million and 0.90% on assets over $100 million; Growth Fund, 0.75% on assets up to and including $250 million, 0.65% on assets over $250 million up to and including $500 million, 0.55% on assets over $500 million up to and including $750 million and 0.45% on assets over $750 million; Legato Fund, 1.00% on assets up to and including $500 million and 0.85% on assets over $500 million; Long/Short Credit Analysis Fund, 1.50%; International Fixed Income Fund, 0.70% on assets up to and including $500 million, 0.64% on assets over $500 million up to and including $1 billion, 0.58% on assets over $1 billion up to and including $5 billion, and 0.52% on assets over $5 billion and Real Estate Fund, 0.85% on assets up to and including $100 million, 0.80% on assets over $100 million up to and including $500 million and 0.70% on assets over $500 million.

The Trust and Forward Management have entered into investment sub-advisory agreements with Pictet Asset Management Ltd (“PAM Ltd”) for Emerging Markets Fund and International Small Companies Fund; Piedmont Investment Advisors, LLP (“Piedmont”) for Large Cap Fund; Emerald Mutual Fund Advisers Trust (“Emerald”) for Banking and Finance Fund and Growth Fund; Netols Asset Management Inc. (“Netols”), Conestoga Capital Investment Advisors, LLC (“CCA”) and Riverbridge Partners, LLC (“Riverbridge”) for Legato Fund; Cedar Ridge Partners, LLC (“Cedar Ridge”) for Long/Short Credit Analysis Fund; Pictet Asset Management SA (“PAM SA”) for International Fixed Income Fund; and Forward Uniplan Advisors, Inc. (“Uniplan”) for Real Estate Fund (each a “Sub-Advisor” and collectively, the “Sub-Advisors”). 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 Legato Fund, based on the portion of the Fund that is managed by each sub-advisor of the Fund): Emerging Markets Fund, 0.80%; International Small Companies Fund, 0.65% on assets up to and including $1 billion and 0.55% on assets over $1 billion; Large Cap Fund, 0.40% on assets up to and including $500 million, 0.375% on assets over $500 million up to and including $1 billion and 0.35% on assets over $1 billion; Banking and Finance Fund, 0.65% on assets up to and including $100 million and 0.55% on assets over $100 million; Growth Fund, 0.40% on assets up to and including $250 million, 0.30% on assets over $250 million up to and including $500 million, 0.20% on assets over $500 million up to and including $750 million and 0.10% on assets over $750 million; Legato Fund, 0.60%; Long/Short Credit Analysis Fund, 1.00%; International Fixed Income Fund, 0.35% on assets up to and including $500 million, 0.32% on assets over $500 million up to and including $1 billion, 0.29% on assets over $1 billion up to and including $5 billion, and 0.26% on assets over $5 billion; and Real Estate Fund, 0.60% on assets up to and including $100 million, 0.55% on assets up to and including $500 million and 0.45% on assets over $500 million.

115 June 30, 2009

Notes to Financial Statements (Unaudited)

Expense Limitations: Forward Management has agreed to limit the total expenses of certain classes of certain 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 will reimburse Forward Management for any fee waivers and expense reimbursements made by Forward Management, provided that any such reimbursements made by a Fund to Forward Management 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. Effective February 1, 2008, all Funds have entered into an agreement to reimburse Forward Management for any fee waivers and expense reimbursements made by Forward Management pursuant to the terms described above.

FUND	INSTITUTIONAL CLASS		INVESTOR CLASS		CLASS A		CLASS C		END DATE
Emerging Markets(a)	1.39	%	1.79	%	1.94	%	2.39	%	April 30, 2010
International Equity	0.99	%	1.34	%	1.49	%	1.94	%	April 30, 2010
Large Cap	0.99	%	1.34	%	1.49	%	1.94	%	April 30, 2010
Growth	0.99	%	1.34	%	1.29	%	1.94	%	April 30, 2010
Legato	1.29	%	1.69	%	1.84	%	2.29	%	April 30, 2010
Long/Short Credit Analysis(b)	1.60	%	1.95	%	N/A		2.55	%	April 30, 2010
International Fixed Income(c)	0.99	%	1.39	%	1.44	%	1.94	%	April 30, 2010
Real Estate	1.20	%	1.60	%	1.45	%	2.20	%	June 30, 2011

(a) From January 1, 2009 to April 30, 2009, Forward Management contractually agreed to waive a portion of its fees in amounts necessary to limit the Fund’s Investor Class, Class A and Class C shares’ operating expenses to an annual rate (as a percentage of the average daily net assets) of 1.74%, 1.89% and 2.34%, respectively. Effective June 17, 2009, Class A shares of the Emerging Markets Fund were liquidated and terminated as a share class of the Fund.

(b) From January 1, 2009 to April 30, 2009, Forward Management contractually agreed to waive a portion of its fees in amounts necessary to limit the Fund’s Institutional Class, Investor Class and Class C shares’ operating expenses to an annual rate (as a percentage of the average daily net assets) of 1.49%, 1.84% and 2.44%, respectively.

(c) From January 1, 2009 to April 30, 2009, Forward Management contractually agreed to waive a portion of its fees in amounts necessary to limit the Fund’s Investor Class, Class A and Class C shares’ operating expenses to an annual rate (as a percentage of the average daily net assets) of 1.24%, 1.34% and 1.89% respectively. Effective June 9, 2009, Class A shares of the International Fixed Income Fund were liquidated and terminated as a share class of the Fund.

For the six months ended June 30, 2009, the fee waivers and/or reimbursements were as follows:

FUND	FEES WAIVED/ REIMBURSED BY ADVISOR		RECOUPMENT OF PAST WAIVED FEES BY ADVISOR		TOTAL
Emerging Markets
Investor Class	$	35,595	$	0	$	35,595
Institutional Class		165,774		0		165,774
Class A(a)		945		0		945
International Equity
Investor Class		19,529		0		19,529
Institutional Class		22,765		0		22,765
Large Cap
Institutional Class		15,556		0		15,556
Class A		32,406		0		32,406

June 30, 2009 116

Notes to Financial Statements (Unaudited)

FUND	FEES WAIVED/ REIMBURSED BY ADVISOR		RECOUPMENT OF PAST WAIVED FEES BY ADVISOR		TOTAL
Growth
Institutional Class	$	11,160	$	0	$	11,160
Class A		29,482		0		29,482
Class C		1,223		0		1,223
Legato
Investor Class		3,203		0		3,203
Institutional Class		6,466		0		6,466
Class A		10,297		0		10,297
Long/Short Credit Analysis
Investor Class		60,997		0		60,997
Institutional Class		2,813		0		2,813
International Fixed Income
Investor Class		90		0		90
Institutional Class		203		0		203
Class A(b)		0		0		0
Class C		63		0		63
Real Estate
Investor Class		5,478		0		5,478
Institutional Class		846		0		846
Class A(c)		48		0		48
Class C(c)		14		0		14

(a) Effective June 17, 2009, Class A shares of the Emerging Markets Fund were liquidated and terminated as a share class of the Fund.

(b) Effective June 9, 2009, Class A shares of the International Fixed Income Fund were liquidated and terminated as a share class of the Fund.

(c) The Forward Real Estate Fund began offering Class A and Class C shares on June 12, 2009.

As of June 30, 2009, the balances of recoupable expenses for each Fund were as follows:

FUND	2006		2007		2008		2009		TOTAL
Emerging Markets
Investor Class	$	54,422	$	72,745	$	95,878	$	35,595	$	258,640
Institutional Class		135,967		198,071		282,614		165,774		782,426
International Equity
Investor Class		111,342		116,191		149,085		19,529		396,147
Institutional Class		N/A		26,201		89,630		22,765		138,596
International Small Companies
Investor Class		133,151		76,542		48,814		N/A		258,507
Institutional Class		74,541		157,942		106,155		N/A		338,638
Class A		0		200		549		N/A		749
Large Cap
Institutional Class		N/A		29,915		18,130		15,556		63,601
Class A		8,369		58,060		31,102		32,406		129,937
Growth
Institutional Class		N/A		N/A		N/A		11,160		11,160
Class A		N/A		N/A		N/A		29,482		29,482
Class C		N/A		N/A		N/A		1,223		1,223

117 June 30, 2009

Notes to Financial Statements (Unaudited)

FUND	2006		2007		2008		2009		TOTAL
Legato
Investor Class		N/A		N/A	$	1,474	$	3,203	$	4,677
Institutional Class		N/A		N/A		9,179		6,466		15,645
Class A	$	11,715	$	22,913		13,320		10,297		58,245
Long/Short Credit Analysis
Investor Class		N/A		N/A		23,674		60,997		84,671
Institutional Class		N/A		N/A		6,256		2,813		9,069
International Fixed Income
Investor Class		N/A		3,497		9,773		90		13,360
Institutional Class		N/A		15,878		45,474		203		61,555
Class C		N/A		124		377		63		564
Real Estate
Investor Class		N/A		N/A		N/A		5,478		5,478
Institutional Class(a)		9		N/A		6,182		5,281		11,472
Class A(a)		2,358		N/A		66,037		35,764		104,159
Class C(a)		1,276		N/A		29,003		11,756		42,035

(a) The recoupable expense balances include recoupable expenses from the reorganization of the Kensington Real Estate Securities Fund.

4. Distribution Plans and Shareholder Services Plans

The Funds have adopted Service and Distribution Plans (the “Distribution Plans”) pursuant to Rule 12b-1 of the 1940 Act which allow each of the Funds to pay for the sale and distribution of its shares at an annual rate of up to 0.25% of the Fund’s average daily net assets attributable to Investor Class shares, up to 0.35% of the Fund’s average daily net assets attributable to Class A shares, and up to 0.75% of the Fund’s average daily net assets attributable to Class C shares.

In addition, the Funds 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 0.15% of the Fund’s average daily net assets attributable to Investor Class shares, up to 0.05% of the Fund’s average daily net assets attributable to Institutional Class shares, up to 0.20% of the Fund’s average daily net assets attributable to Class A shares, and up to 0.25% of the Fund’s average daily net assets attributable to Class C shares.

The expenses of the Distribution Plans and the Shareholder Services Plan are reflected as distribution and service fees in the Statement of Operations.

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.

ALPS Fund Services, Inc. (“AFS”) serves as the Funds’ administrator.

AFS serves as the Fund’s transfer agent and dividend paying agent.

BBH is the Funds’ custodian.

5. Trustee and Officer Fees

The Funds do not pay any compensation directly to the officers or trustees who are also trustees, officers or employees of Forward Management or its affiliates, except as noted below. As of June 30, 2009, there were four Trustees, three of whom are not “interested persons” of the Trust within the meaning of that term under the 1940 Act (each, an “Independent Trustee”). The Trust, on behalf of the Funds pays each Independent Trustee a retainer fee in the amount of $25,000 per year, $10,000 each per regular meeting for

June 30, 2009 118

Notes to Financial Statements (Unaudited)

attendance in person, $5,000 each per regular meeting for attendance by telephone, $3,000 each for attendance in person at each special meeting that is not held in conjunction with a regular meeting, and $2,250 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 $10,000 per year. In addition, reasonable expenses of the Board of Trustees are reimbursed by the Funds. The Trust receives no compensation from the Funds.

The Funds’ Chief Compliance Officer is employed by Forward Management. The Funds pay an allocated portion of the Chief Compliance Officer’s compensation and other related expenses, subject to approval by the Board of Trustees.

6. Indemnifications

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties with respect to the Funds. In addition, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with vendors and others that provide general indemnification. Each Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust and/or 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 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.

The following entities owned of record or beneficially, as of June 30, 2009, 5% or greater of any class of the Funds’ outstanding equity securities:

FUND	NAME	PERCENTAGE
Emerging Markets
Investor Class	National Financial Services, Corp.	20.12	%
	Charles Schwab & Co., Inc.	19.59	%
Emerging Markets
Institutional Class	National Financial Services, Corp.	84.85	%
	Ellard & Co.	6.07	%
International Equity
Investor Class	Charles Schwab & Co., Inc.	34.02	%
	Wend & Co.	12.62	%
	National Financial Services, Corp.	11.77	%
	Brown Brothers Harriman & Co.	8.89	%
International Equity
Institutional Class	ICMA Retirement Corp.	81.12	%
	Wells Fargo Bank NA	17.38	%
International Small Companies
Investor Class	Charles Schwab & Co., Inc.	49.48	%
	National Financial Services, Corp.	18.25	%

119 June 30, 2009

Notes to Financial Statements (Unaudited)

FUND	NAME	PERCENTAGE
International Small Companies
Institutional Class	Charles Schwab & Co., Inc.	43.57	%
	National Financial Services, Corp.	22.00	%
	SEI Private Trust Co.	8.38	%
International Small Companies
Class A	National Financial Services, Corp.	5.79	%
Large Cap
Institutional Class	National Financial Services, Corp.	89.83	%
	American Dance Festival, Inc.	7.32	%
Large Cap
Class A	Sutton Place Associates, LLC	91.80	%
Banking and Finance
Class C	Merrill Lynch Pierce Fenner & Smith	14.52	%
Growth
Institutional Class	JPMorgan Chase Bank	91.15	%
Growth
Class A	Salomon Smith Barney, Inc.	29.06	%
	ICMA Retirement Corp.	7.70	%
Growth
Class C	Merrill Lynch Pierce Fenner & Smith	11.08	%
Legato
Investor Class	Sutton Place Associates, LLC	63.24	%
	Charles Schwab & Co., Inc.	36.06	%
Legato
Institutional Class	Sutton Place Associates, LLC	99.71	%
Legato
Class A	Sutton Place Associates, LLC	46.51	%
Long/Short Credit Analysis
Investor Class	National Financial Services, Corp.	63.11	%
	Charles Schwab & Co., Inc.	23.47	%
	Ameritrade, Inc.	5.22	%
Long/Short Credit Analysis
Institutional Class	National Financial Services, Corp.	58.89	%
	Sutton Place Associates, LLC	36.86	%
Long/Short Credit Analysis
Class C	Sutton Place Associates, LLC	100.00	%
International Fixed Income
Investor Class	Sutton Place Associates, LLC	73.77	%
	LPL Financial Services	17.34	%
International Fixed Income
Institutional Class	Pictet & Cie	99.94	%

June 30, 2009 120

Notes to Financial Statements (Unaudited)

FUND	NAME	PERCENTAGE
International Fixed Income
Class C	Sutton Place Associates, LLC	100.00	%
Real Estate
Investor Class	Charles Schwab & Co., Inc.	68.16	%
	National Financial Services, Corp.	16.22	%
Real Estate
Institutional Class	Wilmington Trust Retirement and Institutional Services	89.73	%
Real Estate
Class A	LPL Financial Services	11.90	%

Sutton Place Associates, LLC is an entity under common control with Forward Management.

8. Purchases and Sales of Investments

Investment transactions for the six months ended June 30, 2009, excluding temporary short-term investments, were as follows:

FUND	COST OF INVESTMENTS PURCHASED		PROCEEDS FROM INVESTMENTS SOLD
Emerging Markets	$	157,886,350	$	78,781,632
International Equity		8,419,783		16,807,030
International Small Companies		259,476,457		255,182,064
Large Cap		6,638,409		9,867,772
Banking and Finance		14,045,415		22,448,852
Growth		47,345,322		56,518,790
Legato		2,512,174		416,421
Long/Short Credit Analysis		90,954,475		52,437,751
International Fixed Income		4,693,255		6,234,249
Real Estate		7,771,728		6,828,435

9. Tax Basis Information

Tax Basis of Investments: As of June 30, 2009, 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)
Emerging Markets	$	170,794,257	$	19,617,909	$	(6,121,397	)	$	13,496,512
International Equity		15,361,322		1,504,813		(1,473,225	)		31,588
International Small Companies		523,332,196		36,685,972		(76,033,022	)		(39,347,050	)
Large Cap		10,618,491		426,925		(852,958	)		(426,033	)
Banking and Finance		56,060,125		5,110,207		(8,078,148	)		(2,967,941	)
Growth		89,487,836		14,713,799		(5,397,758	)		9,316,041
Legato		8,027,552		978,749		(1,156,749	)		(178,000	)
Long/Short Credit Analysis		70,488,132		1,645,115		(1,978,209	)		(333,094	)
International Fixed Income		21,415,475		1,730,543		(1,137,323	)		593,220
Real Estate		32,228,026		442,944		(6,400,601	)		(5,957,657	)

121 June 30, 2009

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, 2008, the Funds elected to defer capital losses and currency losses occurring between November 1, 2008 and December 31, 2008 as follows:

FUND	CAPITAL LOSS			F/X LOSS
Emerging Markets	$	(12,165,532	)	$	(30,626	)
International Equity		(15,603,699	)		—
International Small Companies		(100,087,886	)		(67,264	)
Large Cap		(1,770,970	)		—
Growth		(7,761,931	)		—
Legato		(117,284	)		—
Long/Short Credit Analysis		(61,732	)		—
International Fixed Income		(46,950	)		(152,218	)

Capital Loss Carryforwards: As of December 31, 2008 the following Funds had available for Federal income tax purposes unused capital losses as follows:

FUND	EXPIRING IN 2009			2015			2016
Emerging Markets	$	(2,015,691	)(a)		—		$	(28,419,454	)
International Equity		—			—			(11,897,887	)
International Small Companies		—			—			(102,744,499	)
Large Cap		—		$	(46,757	)		(896,852	)
Banking and Finance		—			—			(2,636,655	)
Growth		—			—			(12,382,608	)
Long/Short Credit Analysis		—			(1,322,823	)		(2,456,907	)
International Fixed Income		—			—			(291,414	)
Real Estate		—			—			(443,801	)

(a) Subject to limitations under §382.

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 amount and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of June 30, 2009.

The tax character of distributions paid for year ended December 31, 2008 were as follows:

FUND	ORDINARY INCOME TOTAL		LONG-TERM CAPITAL TOTAL		RETURN OF CAPITAL TOTAL
Emerging Markets	$	866,132	$	1,373,140		—
International Equity		1,177,165		273,541		—
International Small Companies		7,588,429		—		—
Large Cap		98,767		—		—
Banking and Finance		65,001		—		—
Growth		—		494,011		—
Legato		—		150,000		—
Long/Short Credit Analysis		1,262,568		—		—
International Fixed Income		1,131,895		—		—
Real Estate		634,325		273,123	$	50,244

June 30, 2009 122

Notes to Financial Statements (Unaudited)

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.

11. Transactions

Reorganization of Forward Mini-Cap Fund into the Forward Small Cap Equity Fund: As of the close of business on June 26, 2009, the Forward Mini-Cap Fund was reorganized into the Forward Small Cap Equity Fund. The reorganization did not require approval by the shareholders of the Forward Mini-Cap Fund.

For additional details, please see the separate semi-annual report for the Forward Small Cap Equity Fund for the six months ended June 30, 2009.

Real Estate Fund Acquisition of Kensington Real Estate Securities Fund: On May 27, 2009, shareholders of the Kensington Real Estate Securities Fund (the “Acquired Fund”), a series of The Kensington Funds, approved the acquisition of the Kensington Real Estate Securities Fund by the Real Estate Fund (the “Acquiring Fund”). As of the close of business on June 12, 2009, the assets of the Acquired Fund were acquired by the Acquiring Fund in exchange for shares of the Acquiring Fund and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund. Upon the closing of the acquisition, the Acquiring Fund issued 109,891, 1,182,743 and 340,171 shares of Institutional Class, Class A and Class C, respectively, in exchange for net assets of the Acquired Fund valued at $798,443, $8,841,951 and $2,543,047, respectively. On June 15, 2009, the combined value of the Acquired Fund (which included accumulated realized losses of $(3,613,180) and unrealized appreciation of $661,082) and the Acquiring Fund was $34,183,441. The exchange of shares qualified as a tax-free reorganization for federal income tax purposes. The unused capital loss carryforward totaling $14,477,590 for potential utilization and is subject to tax limitations.

12. Subsequent Events

The Funds have evaluated the need for disclosures and/or adjustments resulting from subsequent events through August 25, 2009 (the date the financial statements were available to be issued). Based on this evaluation, no adjustments were required to the financial statements as of June 30, 2009. However, the following are details relating to subsequent events that have occurred since June 30, 2009 through August 25, 2009.

On June 3, 2009, the Board of Trustees approved changes to the structure of the Emerging Markets Fund. While PAM Ltd will continue to serve as sub-advisor to the majority of the Fund’s assets, Forward Management will directly manage the Fund’s cash position effective August 1, 2009.

On June 3, 2009, the Board of Trustees approved, on behalf of the Large Cap Equity Fund, the termination of the Investment Sub-Advisory Agreement among Forward Management, the Trust and Piedmont, effective as of the close of business on August 14, 2009. Effective August 15, 2009, Forward Management will directly manage the Fund.

123 June 30, 2009

Investment Advisor

Forward Management, LLC

Administrator

ALPS 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 Fund Services, Inc.

Forward Funds

Forward Funds

P.O. Box 1345

Denver, CO 80201

(800) 999-6809

www.forwardfunds.com

Emerging Markets

Forward Emerging Markets Fund

International

Forward International Equity Fund

Forward International Small Companies Fund

Core

Forward Large Cap Equity Fund

Small Cap

Forward Banking and Finance Fund

Forward Growth Fund

Forward Legato Fund

Forward Small Cap Equity Fund

Real Estate

Forward International Real Estate Fund

Forward Real Estate Fund

Forward Strategic Realty Fund

Alternative Strategies

Forward Global Infrastructure Fund

Forward International Fixed Income Fund

Forward Long/Short Credit Analysis Fund

Forward Select Income Fund

Printed on recycled paper using soy-based inks.

FWD002100 091010

FORWARD FUNDS

Semiannual Report

Forward Small Cap Equity Fund

June 30, 2009

FORWARD FUNDS: Table of Contents

Shareholder Update	2
Fund Performance	4
Disclosure of Fund Expenses	5
Summary of Portfolio Holdings	6
Portfolio of Investments	8
Statement of Assets and Liabilities	11
Statement of Operations	12
Statement of Changes in Net Assets	13
Financial Highlights	14
Notes to Financial Statements	17

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, 2009

1

Shareholder Update June 30, 2009

A MESSAGE FROM: J. Alan Reid Jr. Chief Executive Officer

Dear Shareholder:

Over the last few years, investors have faced a crisis of confidence as perceived investment wisdom has been turned on its head. Traditional asset allocation has suffered as investments that typically were not correlated became correlated during the recent market crisis, and traditional safe-haven investments like CD’s, bonds, real estate and large cap stocks also were drawn into question. In response, government officials and global central bankers provided massive capital infusions to help jump start the markets. Starting in early 2009, these support measures began to pay off as credit spreads began narrowing, and the overall outlook started to improve.

In March of this year, a recovery in the global equity markets began to signal that the worst days of this economic crisis might be behind us. During the second quarter, banks, REITs and other leveraged players around the globe began to issue equity in an effort to avoid default and strengthen their balance sheets. In addition, banks began repaying government capital infusions and were in the process of being able to function normally on their own once again.

The markets still have a way to go before we can conclude that there has been a complete recovery. There will be much need for continued strengthening in consumer, government and corporate balance sheets. Legal and regulatory structures will no doubt be overhauled, as one of the biggest lessons learned was that too much leverage is hazardous to the markets.

In reviewing the past six months, I found it interesting to note that companies and countries with less debt—like technology companies and emerging market countries—performed strongly in the rebound as they were able to bounce back more quickly. As the recovery phase unfolded, many high yielding securities enjoyed a significant improvement as the panic mentality surrounding the market began to decline. I also was intrigued to see that diversification internationally and across asset classes began to reassert itself as a powerful driver of investment returns. We have always believed that an asset allocation with non-correlated asset classes is the best way to maintain a strong portfolio.

We remain focused on asset classes that will benefit from the continued recovery, as well as overall global growth. In June 2009, we added four new funds to the Forward Funds family. These funds, formerly the Kensington Funds, add additional diversification options for our shareholders seeking exposure to global infrastructure, real estate and income-oriented portfolios:

• Forward Global Infrastructure Fund invests in a broad universe of infrastructure equities in developed and emerging markets

• Forward Select Income Fund invests in real estate preferred stocks, bonds and high-income common stocks and utilizes portfolio leverage

• Forward International Real Estate Fund invests in large, high quality international real estate equities

• Forward Strategic Realty Fund invests in a broad investment universe of real estate equities which may include foreign real estate companies and utilizes portfolio leverage

June 30, 2009 2

Our newest real estate funds offer additional alternatives for investors seeking exposure to real estate, and complement one of our flagship funds, the Forward Real Estate Fund, which was launched in 1999:

• Forward Real Estate Fund invests in U.S. real estate equities, investing primarily in REITs and REOCs

The portfolio management teams for these funds have built deep expertise investing in real estate and infrastructure, and these portfolios offer investors access to companies involved in the ownership, development, management and financing of commercial real estate and infrastructure assets throughout the world. With low valuations in real estate—and the potential for substantial yield opportunities—our newest funds offer our investors solid investment alternatives. To learn more about our newest portfolios, visit www.forwardfunds.com.

As always, we remain committed to helping our shareholders attain true portfolio diversification and achieve their long-term financial goals. We also believe that transparent practices give our investors access to the information they need to make important investment decisions. I invite you to review the information in this report and the performance of the Forward Funds in the first half of 2009, and thank you for the continued confidence that you place in our Funds.

Best regards,

J. Alan Reid, Jr.

Chief Executive Officer

Forward Management, LLC

The statements and opinions expressed herein are those of the author and should not be considered investment advice.

You should consider the investment objectives, risks, charges and expenses of the Forward Funds carefully before investing. A prospectus with this and other information may be obtained by calling (800) 999-6809 or by downloading one from www.forwardfunds.com. It should be read carefully before investing.

REIT funds will be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic sector. Risks also include declines in the value of real estate, general and economic conditions.

Foreign securities, especially emerging markets, will involve additional risks including exchange rate fluctuations, social and political instability, liquidity, greater volatility and less regulation.

Forward Global Infrastructure Fund, Forward Select Income Fund, Forward International Real Estate, Fund Forward Strategic Realty Fund and the Forward Real Estate Fund are non-diversified, meaning they may concentrate their assets in fewer individual holdings than diversified funds. Therefore, these Funds are more exposed to individual stock volatility than diversified funds.

Because the Forward Global Infrastructure Fund concentrates its investments in infrastructure-related entities, the Fund has a greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities.

Forward Select Income and Forward Strategic Realty Funds’ use of short selling involves additional risks and transaction costs, and creates leverage, which can increase the volatility of these Funds.

Certain of the Funds will invest in lower-rated debt securities and may utilize derivatives for hedging purposes.

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

J. Alan Reid, Jr. is a registered representative of ALPS Distributors, Inc.

Forward Funds are distributed by ALPS Distributors, Inc.

Not FDIC Insured | No Bank Guarantee | May Lose Value

3 June 30, 2009

Fund Performance (Unaudited)

Performance Results for Periods Ended June 30, 2009

The performance quoted represents past performance, does not guarantee future results and current performance may be lower or higher than the data quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. 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. Performance data current to the most recent month end may be obtained at www.forwardfunds.com.

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

Forward Small Cap Equity Fund^(a)

	1 YEAR	5 YEAR	10 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Investor Class	-33.15%	-2.11%	2.76%	4.77%	10/01/98
Institutional Class	-33.00%	-1.80%	N/A	2.42%	06/06/02
Class A (load adjusted)(b)	-37.06%	N/A	N/A	-4.69%	05/02/05
Class A (without load)(c)	-33.22%	N/A	N/A	-3.32%	05/02/05

(a) Prior to May 1, 2008, the Forward Small Cap Equity Fund was known as the Forward Hoover Small Cap Equity Fund.

(b) Includes the effect of the maximum 5.75% sales charge.

(c) Excludes sales charge.

June 30, 2009 4

Disclosure of Fund Expenses (Unaudited)

For the Six Months Ended June 30, 2009

As a shareholder of the Forward Funds, you incur two types of costs: (1) transaction costs, including applicable sales charges (loads); 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 Fund 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, 2009 through June 30, 2009.

Actual Expenses

The first line for each share class of the 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 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 the 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 Funds 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 Fund 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 the Fund of 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 01/01/09		ENDING ACCOUNT VALUE 06/30/09		EXPENSE RATIO(a)	EXPENSES PAID DURING PERIOD(b) 01/01/09-06/30/09
FORWARD SMALL CAP EQUITY FUND
Investor Class
Actual	$	1,000.00	$	1,026.70	1.64%	$	8.24
Hypothetical	$	1,000.00	$	1,016.66	1.64%	$	8.20
Institutional Class
Actual	$	1,000.00	$	1,027.50	1.27%	$	6.38
Hypothetical	$	1,000.00	$	1,018.50	1.27%	$	6.36
Class A
Actual	$	1,000.00	$	1,025.80	1.64%	$	8.24
Hypothetical	$	1,000.00	$	1,016.66	1.64%	$	8.20

(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.

5 June 30, 2009

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 SMALL CAP EQUITY FUND
Consumer Discretionary	25.08%	(a)
Financial Services	17.27%
Technology	16.76%
Materials & Processing	9.68%
Energy	7.16%
Health Care	7.14%
Producer Durables	6.26%
Auto & Transportation	3.88%
Consumer Staples	2.44%
Utilities	1.37%
Other	0.16%
Short-Term Bank Debt Instruments & Net Cash	2.80%
	100.00%

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

These allocations may not reflect the current or future position of the portfolio.

June 30, 2009 6

The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund Form N-Q was filed for the quarter ended March 31, 2009. The Fund 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 Fund proxy voting policies and procedures and how the Fund voted proxies relating to portfolio securities during the most recent 12 month period ended June 30, 2009 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.

7 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Small Cap Equity Fund

Shares		Value (Note 2)
COMMON STOCKS: 97.20%
Auto & Transportation: 3.88%
207,800	Cooper Tire & Rubber Co.	$	2,061,376
129,800	Forward Air Corp.		2,767,336
97,300	Landstar System, Inc.		3,494,043
92,000	Old Dominion Freight Line, Inc.(a)		3,088,440
80,300	Tidewater, Inc.		3,442,461
			14,853,656
Consumer Discretionary: 25.08%(b)
58,400	Advance Auto Parts, Inc.		2,423,016
52,000	Aeropostale, Inc.(a)		1,782,040
125,000	American Eagle Outfitters, Inc.		1,771,250
126,000	American Public Education, Inc.(a)		4,990,860
119,200	BJ’s Restaurants, Inc.(a)		2,010,904
75,200	Carter’s, Inc.(a)		1,850,672
49,400	Chipotle Mexican Grill, Inc., Class A(a)		3,952,000
137,100	Collective Brands, Inc.(a)		1,997,547
87,200	Copart, Inc.(a)		3,023,224
170,100	Corinthian Colleges, Inc.(a)		2,879,793
201,000	The Corporate Executive Board Co.		4,172,760
24,900	Deckers Outdoor Corp.(a)		1,749,723
183,300	Dick’s Sporting Goods, Inc.(a)		3,152,760
139,113	Healthcare Services Group, Inc.		2,487,340
101,100	Hibbett Sports, Inc.(a)		1,819,800
153,700	J. Crew Group, Inc.(a)		4,152,974
157,200	Jack in the Box, Inc.(a)		3,529,140
136,100	Life Time Fitness, Inc.(a)		2,723,361
114,200	LKQ Corp.(a)		1,878,590
76,300	Monro Muffler Brake, Inc.		1,961,673
99,200	P.F. Chang’s China Bistro, Inc.(a)		3,180,352
59,500	Panera Bread Co., Class A(a)		2,966,670
70,000	PetSmart, Inc.		1,502,200
35,400	Priceline.com, Inc.(a)		3,948,870
18,700	Strayer Education, Inc.		4,078,657
113,700	Sykes Enterprises, Inc.(a)		2,056,833
123,300	Tetra Tech, Inc.(a)		3,532,545
178,500	Texas Roadhouse, Inc., Class A(a)		1,947,435

Shares		Value (Note 2)
134,200	Titan Machinery, Inc.(a)	$	1,702,998
39,900	Tractor Supply Co.(a)		1,648,668
151,100	Urban Outfitters, Inc.(a)		3,153,457
357,400	ValueClick, Inc.(a)		3,759,848
104,300	VistaPrint, Ltd.(a)		4,448,395
190,700	Williams-Sonoma, Inc.		2,263,609
46,300	WMS Industries, Inc.(a)		1,458,913
			95,958,877
Consumer Staples: 2.44%
82,500	Peet’s Coffee & Tea, Inc.(a)		2,079,000
113,600	United Natural Foods, Inc.(a)		2,982,000
226,000	Whole Foods Market, Inc.(a)		4,289,480
			9,350,480
Energy: 7.16%
105,200	Atwood Oceanics, Inc.(a)		2,620,532
90,400	Bill Barrett Corp.(a)		2,482,384
79,600	Cabot Oil & Gas Corp.		2,438,944
14,100	Carrizo Oil & Gas, Inc.(a)		241,815
53,700	Comstock Resources, Inc.(a)		1,774,785
98,600	Concho Resources, Inc.(a)		2,828,834
149,400	EXCO Resources, Inc.(a)		1,930,248
93,700	Helmerich & Payne, Inc.		2,892,519
66,000	Newfield Exploration Co.(a)		2,156,220
211,800	Superior Energy Services, Inc.(a)		3,657,786
90,200	Unit Corp.(a)		2,486,814
52,500	Walter Energy, Inc.		1,902,600
			27,413,481
Financial Services: 17.27%
115,200	Advent Software, Inc.(a)		3,777,408
69,500	Affiliated Managers Group, Inc.(a)		4,044,205
87,900	Corporate Office Properties Trust		2,578,107
74,900	Digital Realty Trust, Inc.		2,685,165
103,200	Eaton Vance Corp.		2,760,600
190,100	eHealth, Inc.(a)		3,357,166
42,000	Essex Property Trust, Inc.		2,613,660

June 30, 2009 8 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Small Cap Equity Fund

Shares		Value (Note 2)
Financial Services (continued): 17.27%
65,700	FactSet Research Systems, Inc.	$	3,276,459
147,500	Federated Investors, Inc., Class B		3,553,275
153,400	KBW, Inc.(a)		4,411,784
18,600	Mobile Mini, Inc.(a)		272,862
102,000	Morningstar, Inc.(a)		4,205,460
162,200	MSCI, Inc., Class A(a)		3,964,168
254,000	optionsXpress Holdings, Inc.		3,944,620
53,900	Piper Jaffray Cos., Inc.(a)		2,353,813
97,500	Prosperity Bancshares, Inc.		2,908,425
170,100	Raymond James Financial, Inc.		2,927,421
72,000	Signature Bank(a)		1,952,640
55,200	Stifel Financial Corp.(a)		2,654,568
57,700	Tanger Factory Outlet Centers, Inc.		1,871,211
226,200	Waddell & Reed Financial, Inc., Class A		5,964,894
			66,077,911
Health Care: 7.14%
10,900	Air Methods Corp.(a)		298,224
313,300	Allscripts-Misys Healthcare Solutions, Inc.(a)		4,968,938
51,200	athenahealth, Inc.(a)		1,894,912
74,900	Catalyst Health Solutions, Inc.(a)		1,868,006
54,500	HMS Holdings Corp.(a)		2,219,240
101,000	ICU Medical, Inc.(a)		4,156,150
117,700	Inverness Medical Innovations, Inc.(a)		4,187,766
148,500	IPC The Hospitalist Co., Inc.(a)		3,963,465
4,000	Luminex Corp.(a)		74,160
43,100	MEDNAX, Inc.(a)		1,815,803
131,800	PAREXEL International Corp.(a)		1,895,284
			27,341,948
Materials & Processing: 9.68%
120,500	Aecom Technology Corp.(a)		3,856,000
93,600	General Cable Corp.(a)		3,517,488
43,700	Granite Construction, Inc.		1,454,336
110,700	Jones Lang LaSalle, Inc.		3,623,211
109,800	Kaydon Corp.		3,575,088
193,300	McDermott International, Inc.(a)		3,925,923

Shares		Value (Note 2)
243,300	Orion Marine Group, Inc.(a)	$	4,622,700
90,800	Reliance Steel & Aluminum Co.		3,485,812
80,700	URS Corp.(a)		3,996,264
41,200	Valmont Industries, Inc.		2,969,696
89,500	The Valspar Corp.		2,016,435
			37,042,953
Other: 0.16%
25,300	Foster Wheeler, Ltd.(a)		600,875
Producer Durables: 6.26%
8,000	Cubic Corp.		286,320
47,300	Darling International, Inc.(a)		312,180
73,600	Esterline Technologies Corp.(a)		1,992,352
58,900	FEI Co.(a)		1,348,810
49,500	Flowserve Corp.		3,455,595
58,900	Gardner Denver, Inc.(a)		1,482,513
89,700	Kennametal, Inc.		1,720,446
105,100	Moog, Inc., Class A(a)		2,712,631
168,700	Orbital Sciences Corp.(a)		2,559,179
99,900	Pentair, Inc.		2,559,438
95,800	Powell Industries, Inc.(a)		3,551,306
101,700	Robbins & Myers, Inc.		1,957,725
			23,938,495
Technology: 16.76%
31,800	American Science & Engineering, Inc.		2,198,016
45,700	Anixter International, Inc.(a)		1,717,863
127,400	ANSYS, Inc.(a)		3,969,784
141,300	Blue Coat Systems, Inc.(a)		2,337,102
353,900	Ciena Corp.(a)		3,662,865
115,100	Comtech Telecommunications Corp.(a)		3,669,388
485,000	Cypress Semiconductor Corp.(a)		4,462,000
79,500	Digital River, Inc.(a)		2,887,440
92,600	F5 Networks, Inc.(a)		3,203,034
116,200	GeoEye, Inc.(a)		2,737,672
165,400	Macrovision Solutions Corp.(a)		3,607,374
144,500	MICROS Systems, Inc.(a)		3,658,740

See Notes to Financial Statements 9 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Small Cap Equity Fund

Shares		Value (Note 2)
Technology (continued): 16.76%
314,900	NCR Corp.(a)	$	3,725,267
195,100	Polycom, Inc.(a)		3,954,677
356,400	RightNow Technologies, Inc.(a)		4,205,520
143,900	Semtech Corp.(a)		2,289,449
80,000	Silicon Laboratories, Inc.(a)		3,035,200
61,100	Stanley, Inc.(a)		2,008,968
109,200	SunPower Corp., Class B(a)		2,615,340
92,400	SXC Health Solutions Corp.(a)		2,348,808
320,700	Tellabs, Inc.(a)		1,837,611
			64,132,118
Utilities: 1.37%
177,400	Neutral Tandem, Inc.(a)		5,236,848
	Total Common Stocks (Cost $309,403,818)		371,947,642

Par Value		Value (Note 2)
SHORT-TERM BANK DEBT INSTRUMENTS: 4.66%
$17,816,176	Wells Fargo — Grand Cayman 0.030%, due 07/01/09	$	17,816,176
	Total Short-Term Bank Debt Instruments (Cost $17,816,176)		17,816,176
	Total Investments: 101.86% (Cost $327,219,994)		389,763,818
	Net Other Assets and Liabilities: (1.86)%		(7,109,325	)
	Net Assets: 100.00%	$	382,654,493

(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.

June 30, 2009 10 See Notes to Financial Statements

Statement of Assets and Liabilities (Unaudited)

	FORWARD SMALL CAP EQUITY FUND
ASSETS:
Investments, at value	$	389,763,818
Receivable for investments sold		7,842,974
Receivable for shares sold		824,002
Interest and dividends receivable		179,698
Other assets		46,949
Total Assets		398,657,441
LIABILITIES:
Payable to custodian		146,914
Payable for investments purchased		14,784,876
Payable for shares redeemed		662,950
Payable to advisor		336,485
Payable for distribution and service fees		59,889
Payable to trustees		6,965
Payable for chief compliance officer fee		2,149
Payable to ReFlow (Note 2)		448
Accrued expenses and other liabilities		2,272
Total Liabilities		16,002,948
NET ASSETS	$	382,654,493
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	530,710,590
Accumulated net investment loss		(1,116,998	)
Accumulated net realized loss on investments		(209,482,923	)
Net unrealized appreciation on investments		62,543,824
TOTAL NET ASSETS	$	382,654,493
INVESTMENTS, AT COST	$	327,219,994
PRICING OF SHARES
Investor Class:
Net Asset Value, offering and redemption price per share		$12.30
Net Assets	$	199,819,137
Shares of beneficial interest outstanding		16,251,223
Institutional Class:
Net Asset Value, offering and redemption price per share		$12.71
Net Assets	$	179,725,835
Shares of beneficial interest outstanding		14,138,055
Class A:
Net Asset Value, offering and redemption price per share		$12.32
Net Assets	$	3,109,521
Shares of beneficial interest outstanding		252,295
Maximum offering price per share (NAV/0.9425, based on maximum sales charge of 5.75% of the offering price)		$13.07

See Notes to Financial Statements 11 June 30, 2009

Statement of Operations

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD SMALL CAP EQUITY FUND
INVESTMENT INCOME:
Interest	$	3,604
Dividends		1,270,669
Foreign taxes withheld		(1,662	)
Total Investment Income		1,272,611
EXPENSES:
Investment advisory fee		1,736,069
Administrative fee		143,941
Custodian fee		15,248
Legal and audit fee		10,491
Transfer agent fee		88,438
Trustees’ fees and expenses		1,500
Registration/filing fees		11,222
Reports to shareholder and printing fees		17,296
Distribution and service fees
Investor Class		323,981
Class A		7,020
ReFlow fees (Note 2)		710
Chief compliance officer fee		18,658
Other		15,035
Total expenses		2,389,609
NET INVESTMENT LOSS:		(1,116,998	)
Net realized loss on investments		(40,397,541	)
Net change in unrealized appreciation on investments		49,218,263
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS		8,820,722
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	7,703,724

June 30, 2009 12 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD SMALL CAP EQUITY FUND
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment loss	$	(1,116,998	)	$	(2,334,230	)
Net realized loss on investments		(40,397,541	)		(159,629,883	)
Net change in unrealized appreciation/(depreciation) on investments		49,218,263			(64,887,240	)
Net increase/(decrease) in net assets resulting from operations		7,703,724			(226,851,353	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Investor Class		—			(658,693	)
Institutional Class		—			(445,669	)
Class A		—			(14,937	)
Total distributions		—			(1,119,299	)
SHARE TRANSACTIONS:
Investor Class
Proceeds from sale of shares		31,135,150			95,030,108
Issued to shareholders in reinvestment of distributions		—			577,403
Cost of shares redeemed		(42,328,027	)		(139,931,255	)
Acquisition (Note 11)		4,839,602			—
Net decrease from share transactions		(6,353,275	)		(44,323,744	)
Institutional Class
Proceeds from sale of shares		40,967,713			113,576,735
Issued to shareholders in reinvestment of distributions		—			440,730
Cost of shares redeemed		(25,790,495	)		(65,974,983	)
Acquisition (Note 11)		18,778,096			—
Net increase from share transactions		33,955,314			48,042,482
Class A
Proceeds from sale of shares		595,818			4,225,380
Issued to shareholders in reinvestment of distributions		—			9,119
Cost of shares redeemed		(2,200,186	)		(7,154,591	)
Net decrease from share transactions		(1,604,368	)		(2,920,092	)
Net increase/(decrease) in net assets	$	33,701,395		$	(227,172,006	)
NET ASSETS:
Beginning of period		348,953,098			576,125,104
End of period (including accumulated net investment income/(loss) of $(1,116,998) and $0, respectively)	$	382,654,493		$	348,953,098
Other Information:
SHARE TRANSACTIONS:
Investor Class
Sold		2,732,425			5,911,298
Distributions reinvested		—			49,435
Redeemed		(3,812,429	)		(8,631,923	)
Acquisition (Note 11)		393,713			—
Net decrease in shares outstanding		(686,291	)		(2,671,190	)
Institutional Class
Sold		3,501,829			7,017,362
Distributions reinvested		—			36,575
Redeemed		(2,278,146	)		(4,434,797	)
Acquisition (Note 11)		1,477,010			—
Net increase in shares outstanding		2,700,693			2,619,140
Class A
Sold		53,539			246,334
Distributions reinvested		—			779
Redeemed		(187,344	)		(414,557	)
Net decrease in shares outstanding		(133,805	)		(167,444	)

See Notes to Financial Statements 13 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Small Cap Equity Fund

	INVESTOR CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	11.98		$	19.71		$	20.47		$	19.40		$	18.45		$	16.17
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.05	)		(0.11	)		(0.22	)		(0.16	)		(0.14	)		(0.17	)
Net realized and unrealized gain/(loss) on investments		0.37			(7.58	)		1.76			1.96			1.91			3.86
Total from Investment Operations		0.32			(7.69	)		1.54			1.80			1.77			3.69
LESS DISTRIBUTIONS:
From investment income		—			(0.04	)		—			—			—			—
From capital gains		—			—			(2.30	)		(0.75	)		(0.82	)		(1.41	)
Total Distributions		—			(0.04	)		(2.30	)		(0.75	)		(0.82	)		(1.41	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.00	(b)		0.02			0.00	(b)		0.00	(b)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.32			(7.73	)		(0.76	)		1.07			0.95			2.28
NET ASSET VALUE, END OF PERIOD	$	12.30		$	11.98		$	19.71		$	20.47		$	19.40		$	18.45
TOTAL RETURN		2.67	%(e)		(39.02	)%		7.36	%		9.34	%		9.63	%		22.77	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	199,819		$	202,874		$	386,404		$	407,848		$	323,125		$	187,230
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver/repayment of previously waived fees		(0.87	)%(f)		(0.60	)%		(1.05	)%		(0.79	)%		(0.96	)%		(1.21	)%
Operating expenses including reimbursement/waiver/repayment of previously waived fees		1.64	%(f)		1.65	%		1.71	%(d)		1.69	%		1.73	%(c)		1.78	%
Operating expenses excluding reimbursement/waiver		n/a			n/a			n/a			1.71	%		1.98	%		1.80	%
PORTFOLIO TURNOVER RATE		122	%(e)		313	%		232	%		210	%		181	%		207	%

(a) Prior to May 1, 2008, the Forward Small Cap Equity Fund was known as the Forward Hoover Small Cap Equity Fund.

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

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

(d) Effective January 2, 2007, the Advisor had not agreed to limit the expenses.

(e) Not Annualized.

(f) Annualized.

June 30, 2009 14 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Small Cap Equity Fund

	INSTITUTIONAL CLASS
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.37		$	20.27		$	20.93		$	19.77		$	18.71		$	16.31
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.05	)		(0.07	)		(0.16	)		(0.05	)		(0.08	)		(0.07	)
Net realized and unrealized gain/(loss) on investments		0.39			(7.79	)		1.80			1.95			1.96			3.88
Total from Investment Operations		0.34			(7.86	)		1.64			1.90			1.88			3.81
LESS DISTRIBUTIONS:
From investment income		—			(0.04	)		—			—			—			—
From capital gains		—			—			(2.30	)		(0.75	)		(0.82	)		(1.41	)
Total Distributions		—			(0.04	)		(2.30	)		(0.75	)		(0.82	)		(1.41	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.00	(b)		0.01			0.00	(b)		0.00	(b)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.34			(7.90	)		(0.66	)		1.16			1.06			2.40
NET ASSET VALUE, END OF PERIOD	$	12.71		$	12.37		$	20.27		$	20.93		$	19.77		$	18.71
TOTAL RETURN		2.75	%(d)		(38.78	)%		7.67	%		9.63	%		10.08	%		23.31	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	179,726		$	141,442		$	178,787		$	139,716		$	34,442		$	10,491
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver/repayment of previously waived fees		(0.51	)%(e)		(0.25	)%		(0.70	)%		(0.47	)%		(0.53	)%		(0.76	)%
Operating expenses including reimbursement/waiver/repayment of previously waived fees		1.27	%(e)		1.30	%		1.37	%(c)		1.34	%		1.34	%		1.34	%
Operating expenses excluding reimbursement/waiver		n/a			n/a			n/a			1.39	%		1.66	%		1.48	%
PORTFOLIO TURNOVER RATE		122	%(d)		313	%		232	%		210	%		181	%		207	%

(a) Prior to May 1, 2008, the Forward Small Cap Equity Fund was known as the Forward Hoover Small Cap Equity Fund.

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

(c) Effective January 2, 2007, the Advisor had not agreed to limit the expenses.

(d) Not Annualized.

(e) Annualized.

See Notes to Financial Statements 15 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Small Cap Equity Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008(a)			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			PERIOD ENDED DECEMBER 31, 2005(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.01		$	19.75		$	20.49		$	19.41		$	17.13
INCOME/(LOSS) FROM OPERATIONS:
Net investment loss		(0.23	)		(0.22	)		(0.28	)		(0.22	)		(0.10	)
Net realized and unrealized gain/(loss) on investments		0.54			(7.48	)		1.84			2.02			3.20
Total from Investment Operations		0.31			(7.70	)		1.56			1.80			3.10
LESS DISTRIBUTIONS:
From investment income		—			(0.04	)		—			—			—
From capital gains		—			—			(2.30	)		(0.75	)		(0.82	)
Total Distributions		—			(0.04	)		(2.30	)		(0.75	)		(0.82	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		—			—			0.00	(c)		0.03			0.00	(c)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.31			(7.74	)		(0.74	)		1.08			2.28
NET ASSET VALUE, END OF PERIOD	$	12.32		$	12.01		$	19.75		$	20.49		$	19.41
TOTAL RETURN(d)		2.58	%(e)		(38.99	)%		7.45	%		9.39	%		18.13	%(e)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	3,110		$	4,637		$	10,934		$	14,379		$	23,090
RATIOS TO AVERAGE NET ASSETS:
Net investment loss including reimbursement/waiver/repayment of previously waived fees		(0.86	)%(f)		(0.60	)%		(0.96	)%		(0.71	)%		(0.82	)%(f)
Operating expenses including reimbursement/waiver/repayment of previously waived fees		1.64	%(f)		1.61	%		1.62	%(i)		1.59	%		1.69	%(f)(g)
Operating expenses excluding reimbursement/waiver		n/a			n/a			n/a			1.59	%		1.92	%(f)
PORTFOLIO TURNOVER RATE		122	%(e)		313	%		232	%		210	%		181	%(h)

(a) Prior to May 1, 2008, the Forward Small Cap Equity Fund was known as the Forward Hoover Small Cap Equity Fund.

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

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

(h) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2005.

(i) Effective January 2, 2007, the Advisor had not agreed to limit the expenses.

June 30, 2009 16 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”). As of June 30, 2009, the Trust has 34 registered funds. This semi-annual report describes one fund offered by the Trust. The accompanying financial statements and financial highlights are those of the Forward Small Cap Equity Fund (the “Fund”). The Fund seeks to achieve high total returns and invest primarily in the equity securities of companies that have small market capitalization and offer future growth potential.

The Fund offers Investor Class, Institutional Class and Class A 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 5.75% imposed at the time of purchase. Class A Shares of the Fund 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 policies established by the Board of Trustees. 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.

The Fund may invest a high percentage of its 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 Fund’s net asset value and may cause its shares to fluctuate more than if the Fund did not concentrate its investments in a particular sector.

2. Significant Accounting Policies

The following is a summary of significant accounting policies followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in accordance 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 during the reporting period. Management believes the estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Fund ultimately realizes upon sale of the securities. The financial statements have been prepared as of the close of the New York Stock Exchange (“NYSE”) on June 30, 2009.

Portfolio Valuation: Portfolio securities or contracts that are listed or traded on a national securities exchange, contract market or over-the-counter market, and that are freely transferable, are valued at the last reported sale price or a market’s official closing price on the valuation day, or, if there have been no sales that day, at the average of the last reported bid and ask price on the valuation day for long positions or ask prices for short positions. If no bid or ask prices are quoted before closing, such securities or contracts are valued at either the last available sale price or at fair value.

Portfolio securities that are primarily traded on foreign securities exchanges are valued at the preceding closing values of such securities on their respective exchanges, except when an occurrence subsequent to the time a value was so established is likely to have changed such value. In such an event, the fair value of those securities are determined in good faith through consideration of other factors in accordance with

17 June 30, 2009

Notes to Financial Statements (Unaudited)

procedures established by, and under the general supervision of, the Board of Trustees.

Forward currency exchange contracts have a market value determined by the prevailing foreign currency exchange daily rates and current foreign currency exchange forward rates. The foreign currency exchange forward rates are calculated using an automated system that estimates rates on the basis of the current day foreign currency exchange rates and forward foreign currency exchange rates supplied by a pricing service. Foreign exchange rates and forward foreign currency exchange rates may generally be obtained at the close of the NYSE, normally 4:00 p.m. Eastern Time.

Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

All other securities and other assets are carried at their fair value as determined in good faith 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 the Fund is informed of such dividends in the exercise of reasonable diligence.

Foreign Currency Translation: The books and records of the Fund 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. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE, normally 4:00 p.m. Eastern Time. As available and as provided by an appropriate pricing service, translation of foreign security and currency market values may also occur with the use of foreign exchange rates obtained at approximately 11:00 a.m. Eastern Time, which approximates the close of the London Stock Exchange. The portion of unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed.

Cash Management Transactions: The Fund subscribes to the Brown Brothers Harriman & Co. (“BBH”) Cash Management Service (“CMS”). The BBH CMS is an investment product that automatically sweeps the Fund’s cash balances into overnight offshore time deposits with either the BBH Grand Cayman branch or a branch of a pre-approved, world class commercial bank. This fully automated program allows the Fund 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 Fund bears the risk associated with the repayment of principal and payment of interest on such instruments by the institution with which the deposit is

June 30, 2009 18

Notes to Financial Statements (Unaudited)

ultimately placed. Balances in the CMS are accounted for on a cost basis.

Lending of Portfolio Securities: The Fund from time to time may lend portfolio securities to broker-dealers, banks or institutional borrowers of securities. The loans are secured by collateral in the form of cash that is equal to at least 102% of the fair value of the securities loaned plus accrued interest, if any. Upon lending its securities to third parties, the Fund receives compensation in the form of income on the investment of the cash collateral. 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, and 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 the extent practicable, 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. 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. The Fund receives cash collateral which is invested in the Brown Brothers Investment Trust Securities Lending Investment Fund. 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. The Fund bears the risk of any income or gains and losses from investing and reinvesting cash pledged as collateral. During the time portfolio securities are on loan, the borrower pays the lending Fund the economic equivalent of any dividends or interest paid on such securities. 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. As of June 30, 2009, the Fund had no securities on loan and during the six months ended June 30, 2009 there was no securities lending activity in the Fund.

Foreign Securities: The 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.

Fair Value Measurements: Financial Accounting Standards Board Statement of Financial Accounting Standards (“SFAS”) No. 157 is effective for the Fund’s financial statements issued after December 31, 2007. SFAS No. 157 defines fair value, establishes a fair value hierarchy and specifies that a valuation technique used to measure fair value shall maximize the use of observable inputs and minimize the use of unobservable inputs. A three-tier hierarchy has been established to classify fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants

19 June 30, 2009

Notes to Financial Statements (Unaudited)

would use in pricing the asset or liability that are developed based on the best information available.

Various inputs are used in determining the value of the Fund’s investments as of the reporting period end. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

Level 1—Quoted prices in active markets for identical investments

Level 2—Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3—Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2009.

	LEVEL 1		LEVEL 2	LEVEL 3	TOTAL
Common Stocks	$	371,947,642	—	—	$	371,947,642
Short-Term Bank Debt Instruments		17,816,176	—	—		17,816,176
Total	$	389,763,818	—	—	$	389,763,818

For the six months ended June 30, 2009, the Fund did not have significant unobservable inputs (Level 3) used in determining fair value. Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable.

Distributions to Shareholders: Dividends from net investment income, if any, are declared and paid annually for the Fund. Net realized capital gains, if any, are distributed 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 Fund’s 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.

The Fund recharacterizes distributions received from Real Estate Investment Trust (“REITs”) investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the recharacterization will be estimated based on available information which may include the previous year’s allocation. If new or additional information becomes available from the REITs at a later date, a recharacterization will be made in the following year. The Fund records as dividend income the amount recharacterized as ordinary income and as realized gain the amount recharacterized as long-term capital gain in the Statement of Operations, and the amount recharacterized as a return of capital as a reduction to the cost of investments in the Statement of Assets and Liabilities and in the Portfolio of Investments. These recharacterizations are reflected in the accompanying financial statements.

Federal Income Taxes: The Trust treats the Fund as a separate entity for Federal income tax purposes. The 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, the Fund will not be subject to

June 30, 2009 20

Notes to Financial Statements (Unaudited)

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, the Fund will not be subject to a Federal excise tax. Therefore, no provision is made by the Fund for Federal income or excise taxes. Withholding taxes on foreign dividends are paid or provided for in accordance with the applicable country’s tax rules and rates.

As of and during the six months ended June 30, 2009, the Fund did not have a liability for any unrecognized tax benefits in the accompanying financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the Fund did not incur any interest or penalties.

The Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.

Expenses: Expenses that are specific to the Fund or class of shares of the Fund are charged directly to the Fund or share class. Expenses that are common to all Funds in the Trust generally are allocated among the Funds in the Trust by proportion to their average daily net assets. The Fund offers multiple share classes and 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 distribution (Rule 12b-1) and/or shareholder service plans for a particular class of the Fund are charged to the operations of such class.

When-Issued and Delayed-Delivery Transactions: The Fund may purchase securities on a when-issued or delayed-delivery basis. The 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. The Fund will not pay for such securities or start earning interest on them until they are received. When the Fund agrees to purchase securities on a when-issued basis, the custodian will set aside in a segregated account cash or liquid securities equal to the amount of the commitment. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in value based upon changes in the value of the security or general level of interest rates. In when-issued and delayed-delivery transactions, the Fund relies on the seller to complete the transaction; the seller’s failure to do so may cause the Fund to miss an advantageous price or yield.

ReFlow Transactions: The Fund 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

21 June 30, 2009

Notes to Financial Statements (Unaudited)

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 the Fund.

ReFlow Management Co., LLC, the entity that facilitates the day-to-day operations of ReFlow, is under common control with Forward Management, LLC (“Forward Management”), the investment advisor to the Fund. In light of this, the Board of Trustees has adopted certain procedures to govern the Fund’s participation in ReFlow. ReFlow fees that were incurred by the Fund during the six months ended June 30, 2009 are recorded in the Statement of Operations.

3. Investment Management Services

The Trust has entered into an investment management agreement with Forward Management pursuant to which Forward Management provides investment management services to the Fund and is entitled to receive a fee calculated daily and payable monthly at the following annual rates, as of June 30, 2009, based on the Fund’s average daily net assets: 1.05% on assets up to and including $500 million and 1.00% on assets over $500 million.

The Trust and Forward Management have entered into an investment sub-advisory agreement with Hoover Investment Management Co., LLC (“Hoover” or the “Sub-Advisor”) for the Fund. Pursuant to this agreement, the Sub-Advisor provides investment sub-advisory services to the Fund and is entitled to receive a fee from Forward Management calculated daily and payable monthly at the following annual rates based on the Fund’s average daily net assets of 0.70% on assets up to and including $100 million and 0.55% on assets over $100 million.

Expense Limitations In previous years, Forward Management had agreed to limit the total expenses of the classes of the Fund, exclusive of brokerage costs, interest, taxes, dividends and extraordinary expenses. Pursuant to these agreements, the Fund would reimburse Forward Management for any fee waivers made by Forward Management, provided that any such reimbursements made by the Fund to Forward Management would 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 was made within three years after the expenses were incurred. During the six months ended June 30, 2009, Forward Management had not agreed to limit the expenses of the Fund.

For the six months ended June 30, 2009, there were no fee waivers and recoupment of previously waived fees for the Fund.

As of June 30, 2009, the balance of recoupable expenses for the Fund, amounts include recoupable expenses from the reorganization of the Forward Mini-Cap Fund into the Fund, were as follows:

CLASS	2006		2007		2008		2009		TOTAL
Investor Class	$	90,966	$	8,745	$	17,208	$	6,652	$	123,571
Institutional Class		94,232		109,803		170,351		28,313		402,699
Class A		744		N/A		N/A		N/A		744

4. Distribution Plans and Shareholder Services Plans

The Fund has adopted Service and Distribution Plans (the “Distribution Plans”) pursuant to Rule 12b-1 under the 1940 which allow the Fund to pay for the sale and distribution of its shares at an annual rate of up to 0.25% of the Fund’s

June 30, 2009 22

Notes to Financial Statements (Unaudited)

average daily net assets attributable to Investor Class shares and up to 0.35% of the Fund’s average daily net assets attributable to Class A shares.

In addition, the Fund has adopted a shareholder services plan (the “Shareholder Services Plan”) for Investor Class, Institutional Class and Class A shares that may be used to pay shareholder servicing fees at an annual rate of up to 0.15% of the Fund’s average daily net assets attributable to Investor Class shares, up to 0.05% of the Fund’s average daily net assets attributable to Institutional Class shares, and up to 0.20% of the Fund’s average daily net assets attributable to Class A shares.

The expenses of the Distribution Plans and Shareholder Services Plan are reflected as distribution and service fees in the Statement of Operations.

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

ALPS Fund Services, Inc. (“AFS”) serves as the Fund’s administrator.

AFS serves as the Fund’s transfer agent and dividend paying agent.

BBH is the Fund’s custodian.

5. Trustee and Officer Fees

The Fund does not pay any compensation directly to the officers or trustees who are also trustees, officers or employees of Forward Management or its affiliates, except as noted below. As of June 30, 2009, there were four Trustees, three of whom are not “interested persons” of the Trust within the meaning of that term under the 1940 Act, (each, an “Independent Trustee”). The Trust, on behalf of the Fund, pays each Independent Trustee a retainer fee in the amount of $25,000 per year, $10,000 each per regular meeting for attendance in person, $5,000 each per regular meeting for attendance by telephone, $3,000 each for attendance in person at each special meeting that is not held in conjunction with a regular meeting, and $2,250 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 $10,000 per year. In addition, reasonable expenses of the Board of Trustees are reimbursed by the Fund. The Trust receives no compensation from the Fund.

The Fund’s Chief Compliance Officer is employed by Forward Management. The Fund pays an allocated portion of the Chief Compliance Officer’s compensation and other related expenses, subject to approval by the Board of Trustees.

6. Indemnifications

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties with respect to the Fund. In addition, in the normal course of business, the Trust, on behalf of the Fund, enters into contracts with vendors and others that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust and/or the Fund. Based on experience, however, the Fund expects 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 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.

23 June 30, 2009

Notes to Financial Statements (Unaudited)

The following entities owned of record or beneficially, as of June 30, 2009, 5% or greater of any class of the Fund’s outstanding equity securities:

CLASS	NAME	PERCENTAGE
Investor Class	Charles Schwab & Co., Inc.	28.45	%
	National Financial Services, Corp.	14.73	%
	New York Life Trust Co.	9.53	%
	SEI Private Trust Co.	7.77	%
Institutional Class	Prudential Investment Management	58.28	%
	Charles Schwab & Co., Inc.	12.63	%
	Patterson & Co.	9.07	%
	National Financial Services, Corp.	5.65	%
Class A	JPMorgan Chase Bank	31.97	%
	Wilmington Trust Retirement and Institutional Services	21.65	%

8. Purchases and Sales of Investments

Purchases and sales of investment securities, excluding temporary short-term securities, were $404,200,139 and $402,940,410, respectively, during the six months ended June 30, 2009.

9. Tax Basis Information

Tax Basis of Investments: As of June 30, 2009, the aggregate cost of investments, gross unrealized appreciation/ (depreciation) and net unrealized appreciation/ (depreciation) for Federal tax purposes were as follows:

Cost of Investments	$	336,883,305
Gross Unrealized Appreciation	$	57,337,934
Gross Unrealized Depreciation		(4,457,421	)
Net Unrealized Appreciation	$	52,880,513

Post October Loss: Under the current tax law, capital 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, 2008, the Fund elected to defer capital losses occurring between November 1, 2008 and December 31, 2008 in the amount of $67,868,898.

Capital Loss Carryforwards: As of December 31, 2008, the Fund had available for Federal income tax purposes unused capital losses of $88,793,562, which expire December 31, 2016.

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 amount and characteristics of tax basis distributions and composition of distributable earnings/ (accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of June 30, 2009.

The tax character of distributions paid during the year ended December 31, 2008, was characterized as follows:

Ordinary Income	$	1,119,299
Long-Term Capital Gain		0

June 30, 2009 24

Notes to Financial Statements (Unaudited)

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 the Fund.

11. Reorganization of Forward Mini-Cap Fund into the Fund

On April 29, 2009, the Board of Trustees, including all of the Independent Trustees, approved a reorganization of the Forward Mini-Cap Fund (the “Acquired Fund”) into the Fund. The reorganization did not require approval by the shareholders of the Acquired Fund.

As of the close of business on June 26, 2009, the assets of the Acquired Fund were acquired by the Fund in exchange for shares of the Fund and the assumption by the Fund of the liabilities of the Acquired Fund. Upon the closing of the reorganization, the Fund issued 1,477,010 and 393,713 shares of Institutional Class and Investor Class, respectively, in exchange for net assets of the Acquired Fund valued at $18,778,096 and $4,839,602, respectively. On June 29, 2009, the combined value of the Acquired Fund (which included accumulated realized losses of $(1,919,025) and unrealized appreciation of $3,715,628) and the Fund was $382,213,035. The exchange of shares qualified as a tax-free reorganization for federal income tax purposes. The unused capital loss carryforward totaling $26,181,640 for potential utilization and is subject to tax limitations.

12. Subsequent Events

The Fund has evaluated the need for disclosures and/or adjustments resulting from subsequent events through August 25, 2009 (the date the financial statements were available to be issued). This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments.

25 June 30, 2009

Investment Advisor

Forward Management, LLC

Administrator

ALPS 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 Fund Services, Inc.

FORWARD FUNDS

Forward Funds

P.O. Box 1345

Denver, CO 80201

(800) 999-6809

www.forwardfunds.com

Emerging Markets

Forward Emerging Markets Fund

International

Forward International Equity Fund

Forward International Small Companies Fund

Core

Forward Large Cap Equity Fund

Small Cap

Forward Banking and Finance Fund

Forward Growth Fund

Forward Legato Fund

Forward Small Cap Equity Fund

Real Estate

Forward International Real Estate Fund

Forward Real Estate Fund

Forward Strategic Realty Fund

Alternative Strategies

Forward Global Infrastructure Fund

Forward International Fixed Income Fund

Forward Long/Short Credit Analysis Fund

Forward Select Income Fund

Printed on recycled paper using soy-based inks.

FWD002098 091010

FORWARD FUNDS

Semiannual Report

Forward Global Infrastructure Fund

Forward International Real Estate Fund

Forward Select Income Fund

Forward Strategic Realty Fund

June 30, 2009

FORWARD FUNDS: Table of Contents

Shareholder Update	2
Fund Performance	4
Disclosure of Fund Expenses	6
Summary of Portfolio Holdings	9
Portfolio of Investments	11
Statement of Assets and Liabilities	21
Statement of Operations	23
Statement of Changes in Net Assets	25
Statement of Cash Flows	33
Financial Highlights	34
Notes to Financial Statements	50
Approval of the Investment Advisory Agreement	67
Shareholder Voting Results	71

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, 2009

1

Shareholder Update June 30, 2009

A MESSAGE FROM: J. Alan Reid, Jr. Chief Executive Officer

Dear Shareholder:

Over the last few years, investors have faced a crisis of confidence as perceived investment wisdom has been turned on its head. Traditional asset allocation has suffered as investments that typically were not correlated became correlated during the recent market crisis, and traditional safe-haven investments like CD’s, bonds, real estate and large cap stocks also were drawn into question. In response, government officials and global central bankers provided massive capital infusions to help jump start the markets. Starting in early 2009, these support measures began to pay off as credit spreads began narrowing, and the overall outlook started to improve.

In March of this year, a recovery in the global equity markets began to signal that the worst days of this economic crisis might be behind us. During the second quarter, banks, REITs and other leveraged players around the globe began to issue equity in an effort to avoid default and strengthen their balance sheets. In addition, banks began repaying government capital infusions and were in the process of being able to function normally on their own once again.

The markets still have a way to go before we can conclude that there has been a complete recovery. There will be much need for continued strengthening in consumer, government and corporate balance sheets. Legal and regulatory structures will no doubt be overhauled, as one of the biggest lessons learned was that too much leverage is hazardous to the markets.

In reviewing the past six months, I found it interesting to note that companies and countries with less debt—like technology companies and emerging market countries—performed strongly in the rebound as they were able to bounce back more quickly. As the recovery phase unfolded, many high yielding securities enjoyed a significant improvement as the panic mentality surrounding the market began to decline. I also was intrigued to see that diversification internationally and across asset classes began to reassert itself as a powerful driver of investment returns. We have always believed that an asset allocation with non-correlated asset classes is the best way to maintain a strong portfolio.

We remain focused on asset classes that will benefit from the continued recovery, as well as overall global growth. In June 2009, we added four new funds to the Forward Funds family. These funds, formerly the Kensington Funds, add additional diversification options for our shareholders seeking exposure to global infrastructure, real estate and income-oriented portfolios:

• Forward Global Infrastructure Fund invests in a broad universe of infrastructure equities in developed and emerging markets

• Forward Select Income Fund invests in real estate preferred stocks, bonds and high-income common stocks and utilizes portfolio leverage

• Forward International Real Estate Fund invests in large, high quality international real estate equities

• Forward Strategic Realty Fund invests in a broad investment universe of real estate equities which may include foreign real estate companies and utilizes portfolio leverage

June 30, 2009 2

Our newest real estate funds offer additional alternatives for investors seeking exposure to real estate, and complement one of our flagship funds, the Forward Real Estate Fund, which was launched in 1999:

• Forward Real Estate Fund invests in U.S. real estate equities, investing primarily in REITs and REOCs

The portfolio management teams for these funds have built deep expertise investing in real estate and infrastructure, and these portfolios offer investors access to companies involved in the ownership, development, management and financing of commercial real estate and infrastructure assets throughout the world. With low valuations in real estate—and the potential for substantial yield opportunities—our newest funds offer our investors solid investment alternatives. To learn more about our newest portfolios, visit www.forwardfunds.com.

As always, we remain committed to helping our shareholders attain true portfolio diversification and achieve their long-term financial goals. We also believe that transparent practices give our investors access to the information they need to make important investment decisions. I invite you to review the information in this report and the performance of the Forward Funds in the first half of 2009, and thank you for the continued confidence that you place in our Funds.

Best regards,

J. Alan Reid, Jr.

Chief Executive Officer

Forward Management, LLC

The statements and opinions expressed herein are those of the author and should not be considered investment advice.

You should consider the investment objectives, risks, charges and expenses of the Forward Funds carefully before investing. A prospectus with this and other information may be obtained by calling (800) 999-6809 or by downloading one from www.forwardfunds.com. It should be read carefully before investing.

REIT funds will be subject to a higher degree of market risk because of concentration in a specific industry, sector or geographic sector. Risks also include declines in the value of real estate, general and economic conditions.

Foreign securities, especially emerging markets, will involve additional risks including exchange rate fluctuations, social and political instability, liquidity, greater volatility and less regulation.

Forward Global Infrastructure Fund, Forward Select Income Fund, Forward International Real Estate, Fund Forward Strategic Realty Fund and the Forward Real Estate Fund are non-diversified, meaning they may concentrate their assets in fewer individual holdings than diversified funds. Therefore, these Funds are more exposed to individual stock volatility than diversified funds.

Because the Forward Global Infrastructure Fund concentrates its investments in infrastructure-related entities, the Fund has a greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities.

Forward Select Income and Forward Strategic Realty Funds’ use of short selling involves additional risks and transaction costs, and creates leverage, which can increase the volatility of these Funds.

Certain of the Funds will invest in lower-rated debt securities and may utilize derivatives for hedging purposes.

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

J. Alan Reid, Jr. is a registered representative of ALPS Distributors, Inc.

Forward Funds are distributed by ALPS Distributors, Inc.

Not FDIC Insured  |  No Bank Guarantee  |  May Lose Value

3 June 30, 2009

Fund Performance (Unaudited)

Performance Results for Periods Ended June 30, 2009

The performance quoted represents past performance, does not guarantee future results and current performance may be lower or higher than the data quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. 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. Performance data current to the most recent month end may be obtained at www.forwardfunds.com.

Forward Global Infrastructure Fund^(g)

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Institutional Class	-32.40%	-17.11%	06/29/07
Class A (load adjusted)(a)	-36.49%	-19.79%	06/29/07
Class A (without load)(b)	-32.62%	-17.38%	06/29/07
Class B (with CDSC)(c)	-36.42%	-19.22%	06/29/07
Class B (without CDSC)(d)	-33.14%	-18.02%	06/29/07
Class C (with CDSC)(e)	-33.77%	-18.00%	06/29/07
Class C (without CDSC)(f)	-33.11%	-18.00%	06/29/07

Forward International Real Estate Fund^(h)

	1 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Institutional Class	-32.12%	-12.78%	04/28/06
Class A (load adjusted)(a)	-36.20%	-14.61%	04/28/06
Class A (without load)(b)	-32.32%	-12.99%	04/28/06
Class B (with CDSC)(c)	-36.16%	-14.40%	04/28/06
Class B (without CDSC)(d)	-32.85%	-13.66%	04/28/06
Class C (with CDSC)(e)	-33.56%	-13.67%	04/28/06
Class C (without CDSC)(f)	-32.90%	-13.67%	04/28/06

Forward Select Income Fund^{(i )}

	1 YEAR	5 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Institutional Class	-24.82%	N/A	-12.81%	04/28/06
Class A (load adjusted)(a)	-29.46%	-7.17%	2.92%	03/30/01
Class A (without load)(b)	-25.17%	-6.06%	3.67%	03/30/01
Class B (with CDSC)(c)(k)	-29.01%	-7.03%	2.87%	03/30/01
Class B (without CDSC)(d)(k)	-25.82%	-6.80%	2.87%	03/30/01
Class C (with CDSC)(e)(k)	-26.46%	-6.81%	2.86%	03/30/01
Class C (without CDSC)(f)(k)	-25.83%	-6.81%	2.86%	03/30/01

June 30, 2009 4

Fund Performance (Unaudited)

Performance Results for Periods Ended June 30, 2009

Forward Strategic Realty Fund^(j)

	1 YEAR	5 YEAR	SINCE INCEPTION	INCEPTION DATE
Average Annual Total Return
Institutional Class	-51.36%	N/A	-23.81%	04/28/06
Class A (load adjusted)(a)	-55.35%	-11.31%	4.57%	09/15/99
Class A (without load)(b)	-52.62%	-10.25%	5.21%	09/15/99
Class B (with CDSC)(c)	-55.06%	-11.11%	4.43%	09/15/99
Class B (without CDSC)(d)	-52.96%	-10.92%	4.43%	09/15/99
Class C (with CDSC)(e)	-53.39%	-10.93%	4.42%	09/15/99
Class C (without CDSC)(f)	-52.97%	-10.93%	4.42%	09/15/99

(a) Includes the effect of the maximum 5.75% sales charge.

(b) Excludes sales charge.

(c) Includes the contingent deferred sales charge (“CDSC”), which declines from 5% beginning at time of purchase to 0% at the beginning of the seventh year.

(d) Excludes the contingent deferred sales charge (“CDSC”), which declines from 5% beginning at time of purchase to 0% at the beginning of the seventh year.

(e) Includes the 1.00% contingent deferred sales charge (“CDSC”).

(f) Excludes the 1.00% contingent deferred sales charge (“CDSC”).

(g) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(h) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

(i) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(j) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

(k) While Class B and Class C shares were initially offered for purchase effective March 30, 2001, no shareholder activity occurred until April 13, 2001.

Because the Forward Global Infrastructure Fund concentrates its investments in infrastructure-related entities, the Fund has greater exposure to the potential adverse economic, regulatory, political and other changes affecting such entities. The Fund is nondiversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. The Fund also invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods.

Investors in the Forward International Real Estate Fund should be aware of the risks involved with investing in a non-diversified fund concentrating in real estate securities, such as declines in the value of real estate and increased susceptibility to adverse economic or regulatory developments. These risks are discussed in the Fund’s prospectus. By itself the Fund does not constitute a complete investment plan and should be considered a long-term investment for investors who can afford to weather changes in the value of their investments. There is no guarantee that the investment objective will be achieved. Investments in foreign securities involve additional risks such as greater volatility and political, economic and currency risks and differences in accounting methods.

The Forward Select Income Fund will invest in lower-rated debt securities and may utilize derivatives for hedging purposes. The Fund’s use of short selling involves additional risks and transaction costs, and creates leverage, which can increase the volatility of the Fund. The Fund may invest a larger percentage of its assets in the securities of a smaller number of issuers, since it is a “non-diversified” mutual fund.

The Forward Strategic Realty Fund will invest in lower-rated debt securities and may utilize derivatives for hedging purposes. The Fund’s use of short selling involves additional risks and transaction costs, and creates leverage, which can increase the volatility of the Fund. The Fund may invest a larger percentage of its assets in the securities of a smaller number of issuers, since it is a “non-diversified” mutual fund.

5 June 30, 2009

Disclosure of Fund Expenses (Unaudited)

For the Six Months Ended June 30, 2009

As a shareholder of the Forward Funds, you incur two types of costs: (1) transaction costs, including applicable sales charges (loads); 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, 2009 through June 30, 2009.

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 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 of 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 01/01/09		ENDING ACCOUNT VALUE 06/30/09		EXPENSE RATIO(a)	EXPENSES PAID DURING PERIOD(b) 01/01/09-06/30/09
FORWARD GLOBAL INFRASTRUCTURE FUND(d)
Institutional Class
Actual	$	1,000.00	$	1,085.00	1.25%	$	6.47
Hypothetical	$	1,000.00	$	1,018.59	1.25%	$	6.26
Class A
Actual	$	1,000.00	$	1,083.30	1.50%	$	7.74
Hypothetical	$	1,000.00	$	1,017.36	1.50%	$	7.50
Class B
Actual	$	1,000.00	$	1,079.30	2.25%	$	11.60
Hypothetical	$	1,000.00	$	1,013.64	2.25%	$	11.23

June 30, 2009 6

Disclosure of Fund Expenses (Unaudited)

For the Six Months Ended June 30, 2009

	BEGINNING ACCOUNT VALUE 01/01/09		ENDING ACCOUNT VALUE 06/30/09		EXPENSE RATIO(a)		EXPENSES PAID DURING PERIOD(b) 01/01/09-06/30/09
FORWARD GLOBAL INFRASTRUCTURE FUND(d)
Class C
Actual	$	1,000.00	$	1,079.80	2.25%		$	11.59
Hypothetical	$	1,000.00	$	1,013.64	2.25%		$	11.23
FORWARD INTERNATIONAL REAL ESTATE FUND(e)
Institutional Class
Actual	$	1,000.00	$	1,119.50	1.39%		$	7.30
Hypothetical	$	1,000.00	$	1,018.20	1.39%		$	6.96
Class A
Actual	$	1,000.00	$	1,117.80	1.63%		$	8.56
Hypothetical	$	1,000.00	$	1,016.99	1.63%		$	8.15
Class B
Actual	$	1,000.00	$	1,113.60	2.33%		$	12.21
Hypothetical	$	1,000.00	$	1,013.46	2.33%		$	11.63
Class C
Actual	$	1,000.00	$	1,112.70	2.34%		$	12.26
Hypothetical	$	1,000.00	$	1,013.41	2.34%		$	11.68
FORWARD SELECT INCOME FUND(f)
Institutional Class
Actual	$	1,000.00	$	1,275.40	1.33%		$	7.50
Hypothetical	$	1,000.00	$	1,018.20	1.33%		$	6.66
Class A
Actual	$	1,000.00	$	1,269.60	1.58%		$	8.89
Hypothetical	$	1,000.00	$	1,016.96	1.58%		$	7.90
Class B
Actual	$	1,000.00	$	1,264.30	2.33%		$	13.08
Hypothetical	$	1,000.00	$	1,013.24	2.33%		$	11.63
Class C
Actual	$	1,000.00	$	1,263.90	2.33%		$	13.08
Hypothetical	$	1,000.00	$	1,013.24	2.33%		$	11.63
FORWARD STRATEGIC REALTY FUND(g)
Institutional Class
Actual	$	1,000.00	$	1,058.00	1.29%	(c)	$	6.58
Hypothetical	$	1,000.00	$	1,018.40	1.29%	(c)	$	6.46

7 June 30, 2009

Disclosure of Fund Expenses (Unaudited)

For the Six Months Ended June 30, 2009

	BEGINNING ACCOUNT VALUE 01/01/09		ENDING ACCOUNT VALUE 06/30/09		EXPENSE RATIO(a)		EXPENSES PAID DURING PERIOD(b) 01/01/09-06/30/09
FORWARD STRATEGIC REALTY FUND(g)
Class A
Actual	$	1,000.00	$	1,056.70	1.54%	(c)	$	7.85
Hypothetical	$	1,000.00	$	1,017.16	1.54%	(c)	$	7.70
Class B
Actual	$	1,000.00	$	1,052.60	2.29%	(c)	$	11.65
Hypothetical	$	1,000.00	$	1,013.44	2.29%	(c)	$	11.43
Class C
Actual	$	1,000.00	$	1,052.40	2.29%	(c)	$	11.65
Hypothetical	$	1,000.00	$	1,013.44	2.29%	(c)	$	11.43

(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.

(c) Expenses are based on estimated amounts for the most recent fiscal half year due to the reorganization of the Forward Strategic Realty Fund prior to the close of business on June 12, 2009. The above expense ratios reflect the expenses that a shareholder would see if those changes had been in place throughout the most recent fiscal half-year. Actual expenses for the period for the Institutional Class, Class A, Class B and Class C were -0.38%, -0.11%, 0.63% and 0.62%, respectively.

(d) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(e) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

(f) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(g) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

June 30, 2009 8

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 GLOBAL INFRASTRUCTURE FUND(a)
United States	24.46%
France	12.31%
Spain	10.35%
Germany	9.52%
Canada	8.88%
Italy	5.50%
United Kingdom	4.47%
China	4.47%
Japan	4.01%
Netherlands	2.90%
Singapore	2.50%
Russia	1.16%
Hong Kong	1.09%
Bermuda	1.08%
Switzerland	1.07%
Australia	0.73%
Mexico	0.56%
Brazil	0.29%
Short-Term Bank Debt Instruments & Net Cash	4.65%
	100.00%
FORWARD INTERNATIONAL REAL ESTATE FUND(b)
Hong Kong	30.34%
Japan	21.43%
Australia	11.95%
United Kingdom	8.25%
France	7.61%
Singapore	4.86%
Canada	4.11%
Netherlands	2.35%
China	2.21%
Norway	1.19%
Finland	1.04%
Sweden	0.86%
Switzerland	0.71%

United States	0.01%
Short-Term Bank Debt Instruments & Net Cash	3.08%
	100.00%
FORWARD SELECT INCOME FUND(c)
Retail REITs	26.83%
Office REITs	25.56%
Specialized REITs	24.28%
Residential REITs	15.32%
Industrial REITs	11.23%
Diversified REITs	8.12%
Mortgage REITs	1.53%
Short-Term Bank Debt Instruments & Net Cash	-12.87%
	100.00%
FORWARD STRATEGIC REALTY FUND(d)
Office REITs	26.52%
Retail REITs	20.23%
Specialized REITs	15.60%
Mortgage REITs	7.54%
Residential REITs	6.67%
Exchange-Traded Funds	6.53%
Diversified REITs	5.44%
Industrial REITs	4.17%
Real Estate Operating Companies	0.96%
Short-Term Bank Debt Instruments & Net Cash	6.34%
	100.00%

(a) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(b) Prior to close the of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

(c) Prior to close of the business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(d) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

9 June 30, 2009

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 quarters ended March 31, 2009. 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, 2009 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.

June 30, 2009 10

Portfolio of Investments (Note 10) (Unaudited)

Forward Global Infrastructure Fund^(a)

Shares		Value (Note 2)
COMMON STOCKS: 95.35%
Australia: 0.73%
75,000	DUET Group(b)	$	93,028
275,000	Transurban Group(b)		923,987
			1,017,015
Bermuda: 1.08%
136,900	Ship Finance International, Ltd.		1,510,007
Brazil: 0.29%
13,487	Companhia de Saneamento Basico do Estado de Sao Paulo, Sponsored ADR(c)		404,475
Canada: 8.88%
107,000	Enbridge, Inc.		3,712,780
6,000	Potash Corp. of Saskatchewan, Inc.		558,300
301,000	TransCanada Corp.		8,104,991
			12,376,071
China: 4.47%
3,418,000	Dalian Port (PDA) Co., Ltd.(b)		1,375,791
1,070,000	Jiangsu Expressway Co., Ltd.(b)		782,186
1,982,000	Shenzhen Expressway Co., Ltd.(b)		940,587
4,250,000	Sichuan Expressway Co., Ltd.(b)(d)		1,747,534
1,750,100	Zhejiang Expressway Co., Ltd.(b)		1,381,712
			6,227,810
France: 12.31%
22,500	Aeroports de Paris(b)		1,654,204
175,000	GDF Suez(b)		6,550,637
75,000	Suez Environnement SA(b)		1,314,318
60,000	Veolia Environnement(b)		1,773,999
130,000	Vinci SA(b)		5,866,149
			17,159,307
Germany: 9.52%
198,500	E.ON AG(b)		7,049,127
35,000	RWE AG(b)		2,770,422
50,000	Siemens AG(b)		3,462,551
			13,282,100
Hong Kong: 1.09%
3,098,000	Guangdong Investment, Ltd.(b)		1,520,928

Shares		Value (Note 2)
Italy: 5.50%
350,000	Atlantia SpA(b)	$	7,089,117
118,982	Enel SpA(b)		580,847
			7,669,964
Japan: 4.01%
260	Central Japan Railway Co.(b)		1,598,346
27,000	East Japan Railway Co.(b)		1,625,559
280,300	Kamigumi Co., Ltd.(b)		2,368,959
			5,592,864
Mexico: 0.56%
20,000	Grupo Aeroportuario del Sureste SAB de CV, ADR(c)		780,000
Netherlands: 2.90%
65,000	Koninklijke Vopak NV(b)(d)		3,256,209
13,344	Smit Internationale NV(b)		792,076
			4,048,285
Russia: 1.16%
80,000	Gazprom OAO, Sponsored ADR(b)(c)		1,624,496
Singapore: 2.50%
1,500,000	SMRT Corp., Ltd.(b)		1,747,204
1,450,000	Straits Asia Resources, Ltd.(b)		1,739,519
			3,486,723
Spain: 10.35%
421,600	Abertis Infraestructuras SA(b)		7,961,742
300,000	Iberdrola Renovables SA(b)(d)		1,375,363
625,000	Iberdrola SA(b)		5,096,587
			14,433,692
Switzerland: 1.07%
20,000	Transocean, Ltd.(d)		1,485,800
United Kingdom: 4.47%
525,000	Centrica Plc(b)		1,930,433
275,000	National Grid Plc(b)		2,481,483
97,100	Scottish & Southern Energy Plc(b)		1,826,853
			6,238,769
United States: 24.46%
57,200	American Electric Power Co., Inc.		1,652,509

See Notes to Financial Statements 11 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Global Infrastructure Fund^(a)

Shares		Value (Note 2)
United States (continued): 24.46%
20,000	Diamond Offshore Drilling, Inc.	$	1,661,000
480,000	El Paso Corp.		4,430,400
73,000	Energy Transfer Partners, LP		2,955,770
15,025	Entergy Corp.		1,164,738
70,000	Exelon Corp.		3,584,700
25,000	Foster Wheeler AG(d)		593,750
60,000	FPL Group, Inc.		3,411,600
20,000	KBR, Inc.		368,800
8,500	Monsanto Co.		631,890
22,500	Plains All American Pipeline, LP		957,375
45,900	Public Service Enterprise Group, Inc.		1,497,717
18,000	Schlumberger, Ltd.		973,980
17,000	The Shaw Group, Inc.(d)		465,970
625,000	The Williams Cos., Inc.		9,756,249
			34,106,448
	Total Common Stocks (Cost $168,421,113)		132,964,754

Par Value		Value (Note 2)
SHORT-TERM BANK DEBT INSTRUMENTS: 1.97%
$2,748,495	Wells Fargo — Grand Cayman 0.030%, due 07/01/09	$	2,748,495
	Total Short-Term Bank Debt Instruments (Cost $2,748,495)		2,748,495
	Total Investments: 97.32% (Cost $171,169,608)		135,713,249
	Net Other Assets and Liabilities: 2.68%		3,738,433
	Net Assets: 100.00%	$	139,451,682

(a) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(b) Fair valued security.

(c) ADR — American Depositary Receipt.

(d) Non-income producing security.

Percentages are stated as a percent of net assets.

June 30, 2009 12 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward International Real Estate Fund^(a)

Shares		Value (Note 2)
COMMON STOCKS: 96.92%
Australia: 11.95%
533,700	CFS Retail Property Trust(b)	$	707,013
400,000	Commonwealth Property Office Fund(b)		267,107
424,697	Dexus Property Group(b)		255,503
380,000	Mirvac Group(b)		329,262
198,017	Stockland(b)		510,775
521,436	Westfield Group(b)		4,772,337
			6,841,997
Canada: 4.11%
10,500	Boardwalk Real Estate Investment Trust		295,190
57,150	Brookfield Properties Corp.		455,486
50,200	Calloway Real Estate Investment Trust		554,157
11,800	Canadian Real Estate Investment Trust		249,564
61,000	RioCan Real Estate Investment Trust		801,340
			2,355,737
China: 2.21%
174,000	Agile Property Holdings, Ltd.(b)		247,898
15,000	E-House (China) Holdings, Ltd, ADR(c)(d)		231,600
260,000	Shui On Land, Ltd.(b)		176,809
175,000	Sino-Ocean Land Holdings, Ltd.(b)		198,713
668,000	Soho China, Ltd.(b)		411,261
			1,266,281
Finland: 1.04%
227,321	Citycon Oyj(b)		593,631
France: 7.61%
14,902	Societe Immobiliere de Location pour l’Industrie et le Commerce(b)		1,318,368
20,338	Unibail-Rodamco SE(b)		3,040,820
			4,359,188
Hong Kong: 30.34%
1,710,000	Champion Real Estate Investment Trust(b)		559,199
950,000	China Overseas Land & Investment, Ltd.(b)		2,192,586
447,000	China Resources Land, Ltd.(b)		984,576
270,000	Franshion Properties China, Ltd.(b)		91,820
141,000	Great Eagle Holdings, Ltd.(b)		294,896
730,800	Hang Lung Properties, Ltd.(b)		2,406,542

Shares		Value (Note 2)
369,700	Henderson Land Development Co., Ltd.(b)	$	2,109,590
224,000	Hongkong Land Holdings, Ltd.(b)		788,906
90,000	Hopson Development Holdings, Ltd.(b)		138,080
429,000	The Link REIT(b)		911,755
1,050,000	New World China Land, Ltd.(b)		580,504
445,000	New World Development Co., Ltd.(b)		801,012
263,000	Shimao Property Holdings, Ltd.(b)		507,064
403,100	Sun Hung Kai Properties, Ltd.(b)		5,005,612
			17,372,142
Japan: 21.43%
22,000	Aeon Mall Co., Ltd.(b)		417,507
85	Japan Real Estate Investment Corp.(b)		705,069
30	Japan Retail Fund Investment Corp.(b)		138,399
241,000	Mitsubishi Estate Co., Ltd.(b)		4,001,004
230,800	Mitsui Fudosan Co., Ltd.(b)		4,003,033
157	Nippon Building Fund, Inc.(b)		1,342,031
350	NTT Urban Development Corp.(b)		337,394
120	Orix JREIT, Inc.(b)		549,445
104	Tokyu REIT, Inc.(b)		562,110
50	United Urban Investment Corp.(b)		214,131
			12,270,123
Netherlands: 2.35%
27,600	Corio NV(b)		1,346,047
Norway: 1.19%
767,445	Norwegian Property ASA(b)(c)		681,948
Singapore: 4.86%
961,900	CapitaCommercial Trust(b)		541,849
502,500	CapitaLand, Ltd.(b)		1,277,622
550,000	CapitaMall Trust(b)		528,963
365,000	Suntec Real Estate Investment Trust(b)		216,142
140,000	Yanlord Land Group, Ltd.(b)		219,482
			2,784,058

Sweden: 0.86%
78,700	Hufvudstaden AB, Class A(b)	489,649

See Notes to Financial Statements 13 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward International Real Estate Fund^(a)

Shares		Value (Note 2)
Switzerland: 0.71%
8,500	PSP Swiss Property AG(b)(c)	$	406,109
United Kingdom: 8.25%
137,256	British Land Co. Plc(b)		864,277
23,008	Derwent London Plc(b)		354,385
73,800	Great Portland Estates Plc(b)		267,442
183,101	Hammerson Plc(b)		928,443
117,700	Helical Bar Plc(b)		638,856
109,809	Land Securities Group Plc(b)		853,932
95,000	London & Stamford Property, Ltd.(b)		184,583
877,600	Segro Plc(b)		350,849
48,660	Shaftesbury Plc(b)		242,111
175,000	Workspace Group Plc(b)		40,336
			4,725,214
United States: 0.01%
40	Simon Property Group, Inc.		2,057
22	Vornado Realty Trust		991
			3,048
	Total Common Stocks (Cost $61,909,118)		55,495,172

Par Value		Value (Note 2)
SHORT-TERM BANK DEBT INSTRUMENTS: 2.43%
$1,394,831	Wells Fargo — Grand Cayman 0.030%, due 07/01/09	$	1,394,831
	Total Short-Term Bank Debt Instruments (Cost $1,394,831)		1,394,831
	Total Investments: 99.35% (Cost $63,303,949)		56,890,003
	Net Other Assets and Liabilities: 0.65%		369,353
	Net Assets: 100.00%	$	57,259,356

(a) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

(b) Fair valued security.

(c) Non-income producing security.

(d) ADR — American Depositary Receipt.

Percentages stated as a percent of net assets.

June 30, 2009 14 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Select Income Fund^(a)

Shares		Value (Note 2)
COMMON STOCKS: 7.81%
Diversified REITs: 0.72%
190,000	Liberty Property Trust	$	4,377,600
Industrial REITs: 1.07%
345,381	AMB Property Corp.		6,496,617
Mortgage REITs: 0.33%
288,486	MFA Financial, Inc.		1,996,323
Office REITs: 1.78%
472,701	Mack-Cali Realty Corp.		10,777,583
Residential REITs: 3.78%
118,500	AvalonBay Communities, Inc.		6,628,890
730,000	Equity Residential		16,227,900
			22,856,790
Retail REITs: 0.13%
28,800	Taubman Centers, Inc.		773,568
	Total Common Stocks (Cost $48,528,508)		47,278,481
CONVERTIBLE PREFERRED STOCKS: 0.21%
Specialized REITs: 0.21%
	FelCor Lodging Trust, Inc.
221,810	Series A, 1.950%		1,264,317
	Total Convertible Preferred Stocks (Cost $4,807,542)		1,264,317
PREFERRED STOCKS: 100.29%
Diversified REITs: 6.98%
	CapLease, Inc.
478,000	Series A, 8.125%		8,828,660
	Colonial Properties Trust
97,817	Series D, 8.125%		1,809,615
	Cousins Properties, Inc.
191,389	Series B, 7.500%		2,819,160
	PS Business Parks, Inc.
122,532	Series H, 7.000%		2,260,715
157,100	Series K, 7.950%		3,236,260
468,400	Series L, 7.600%		9,269,635
77,400	Series O, 7.375%		1,479,114
274,300	Series P, 6.700%		4,813,965

Shares		Value (Note 2)
	Vornado Realty Trust
22,100	Series E, 7.000%	$	429,845
200	Series F, 6.750%		3,750
83,300	Series G, 6.625%		1,528,555
2,600	Series H, 6.750%		47,918
310,599	Series I, 6.625%		5,736,764
			42,263,956
Industrial REITs: 8.59%
	AMB Property Corp.
239,400	Series M, 6.750%		4,343,913
324,169	Series O, 7.000%		6,178,661
279,830	Series P, 6.850%		5,157,267
	First Industrial Realty Trust, Inc.
352,500	Series J, 7.250%		4,032,600
	Monmouth Real Estate Investment Corp.
232,050	Series A, 7.625%		4,030,709
	ProLogis
406,380	Series C, 8.540%(b)(c)		16,655,565
420,770	Series F, 6.750%		6,732,320
294,317	Series G, 6.750%		4,826,799
			51,957,834
Mortgage REITs: 1.20%
	iStar Financial, Inc.
50,000	Series D, 8.000%		360,000
462,400	Series E, 7.875%		3,306,160
272,500	Series F, 7.800%		1,937,475
210,700	Series G, 7.650%		1,495,970
25,000	Series I, 7.500%		167,500
			7,267,105
Office REITs: 23.49%
	Alexandria Real Estate Equities, Inc.
498,194	Series C, 8.375%		10,237,887
	BioMed Realty Trust, Inc.
1,194,500	Series A, 7.375%		20,808,189

See Notes to Financial Statements 15 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Select Income Fund^(a)

Shares		Value (Note 2)
Office REITs (continued): 23.49%
	Brandywine Realty Trust
49,450	Series C, 7.500%	$	800,101
54,300	Series D, 7.375%		874,230
	Corporate Office Properties Trust
633,125	Series G, 8.000%		13,599,525
15,300	Series H, 7.500%		308,448
99,100	Series J, 7.625%		1,996,865
	Digital Realty Trust, Inc.
881,440	Series A, 8.500%		19,391,679
	Duke Realty Corp.
370,300	Series L, 6.600%		4,943,505
274,773	Series N, 7.250%		3,978,713
800,162	Series O, 8.375%		14,050,845
	Highwoods Properties, Inc.
224,243	Series B, 8.000%		4,765,164
	HRPT Properties Trust
418,314	Series B, 8.340%		7,496,187
300,000	Series C, 7.125%		4,518,000
485,800	Series D, 6.500%		6,247,388
	Kilroy Realty Corp.
61,689	Series E, 7.800%		1,175,792
142,718	Series F, 7.500%		2,618,875
	Lexington Realty Trust
433,100	Series B, 8.050%		5,457,060
155,428	Series C, 6.500%		3,108,560
33,741	Series D, 7.550%		401,518
	Parkway Properties, Inc.
412,100	Series D, 8.000%		7,778,388
	SL Green Realty Corp.
344,163	Series C, 7.625%		5,678,690
112,375	Series D, 7.875%		1,907,004
			142,142,613
Residential REITs: 11.54%
	Apartment Investment & Management Co.
86,854	Series G, 9.375%		1,777,033
334,790	Series T, 8.000%		5,858,825

Shares		Value (Note 2)
628,000	Series U, 7.750%	$	10,493,880
	Associated Estates Realty Corp.
296,434	Series B2, 8.700%		5,365,455
	BRE Properties, Inc.
225,544	Series C, 6.750%		4,089,113
433,000	Series D, 6.750%		7,794,000
	Equity Residential
211,200	Series K, 8.290%(c)		10,038,611
73,200	Series N, 6.480%		1,365,912
	Mid-America Apartment Communities, Inc.
836,041	Series H, 8.300%		19,061,734
	UDR, Inc.
219,988	Series G, 6.750%		3,959,784
			69,804,347
Retail REITs: 24.72%
	CBL & Associates Properties, Inc.
474,830	Series C, 7.750%		6,766,328
233,979	Series D, 7.375%		3,193,813
	Developers Diversified Realty Corp.
250,700	Series G, 8.000%		3,008,400
607,100	Series H, 7.375%		6,769,165
27,700	Series I, 7.500%		310,794
	Glimcher Realty Trust
698,408	Series F, 8.750%		7,720,900
127,998	Series G, 8.125%		1,373,419
	Kimco Realty Corp.
9,100	Series F, 6.650%		162,435
1,259,000	Series G, 7.750%		25,998,351
	National Retail Properties, Inc.
145,200	Series C, 7.375%		2,904,000
	Realty Income Corp.
21,000	Series E, 6.750%		442,680
	Regency Centers Corp.
139,525	Series C, 7.450%		2,757,014
174,188	Series D, 7.250%		3,320,023

June 30, 2009 16 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Select Income Fund^(a)

Shares		Value (Note 2)
Retail REITs (continued): 24.72%
	Saul Centers, Inc.
512,698	Series A, 8.000%	$	10,305,230
606,400	Series B, 9.000%		13,383,248
	Simon Property Group, Inc.
15,000	Series J, 8.375%		783,300
	Tanger Factory Outlet Centers, Inc.
291,595	Series C, 7.500%		5,808,572
	Taubman Centers, Inc.
680,166	Series G, 8.000%		13,025,179
92,566	Series H, 7.625%		1,712,471
	Urstadt Biddle Properties, Inc.
77,800	Series C, 8.500%		6,768,989
481,400	Series D, 7.500%		9,315,090
	Weingarten Realty Investors
1,518,568	Series F, 6.500%		23,735,218
			149,564,619
Specialized REITs: 23.77%
	Ashford Hospitality Trust, Inc.
200,000	Series A, 8.550%		2,294,000
720,000	Series D, 8.450%		8,136,000
	Eagle Hospitality Properties Trust, Inc.
641,300	Series A, 8.250%(c)		149,102
	Entertainment Properties Trust
64,858	Series D, 7.375%		839,263
249,273	Series E, 9.000%		3,888,659
	FelCor Lodging Trust, Inc.
200,000	Series C, 8.000%		1,156,000
	HCP, Inc.
10,400	Series E, 7.250%		197,600
522,180	Series F, 7.100%		9,790,875
	Health Care REIT, Inc.
184,550	Series D, 7.875%		4,156,066
369,910	Series F, 7.625%		7,971,561
	Hersha Hospitality Trust
198,200	Series A, 8.000%		2,626,150

Shares		Value (Note 2)
	Hospitality Properties Trust
407,729	Series C, 7.000%	$	6,319,800
	Host Hotels & Resorts, Inc.
813,200	Series E, 8.875%		16,772,250
	LaSalle Hotel Properties
266,700	Series E, 8.000%		4,915,281
150,800	Series G, 7.250%		2,360,020
	LTC Properties, Inc.
1,266,508	Series F, 8.000%		28,749,731
	Omega Healthcare Investors, Inc.
1,050,000	Series D, 8.375%		22,575,000
	Public Storage
296,893	Series L, 6.750%		5,967,549
195,493	Series M, 6.625%		3,903,995
	Strategic Hotels & Resorts, Inc.
144,800	Series B, 8.250%		912,240
374,989	Series C, 8.250%		2,369,930
	Sunstone Hotel Investors, Inc.
516,515	Series A, 8.000%		7,773,551
			143,824,623
	Total Preferred Stocks (Cost $751,349,213)		606,825,097
Principal
CORPORATE BONDS: 4.56%
Diversified REITs: 0.42%
	Liberty Property LP, Sr. Unsec. Notes
$  3,000,000	6.625%, 10/01/17		2,549,631
Industrial REITs: 1.57%
	First Industrial LP, Sr. Unsec. Notes
10,549,000	5.750%, 01/15/16		6,423,623
1,750,000	7.500%, 12/01/17		1,017,702
3,000,000	7.600%, 07/15/28		1,687,743
	ProLogis, Sr. Unsec. Notes
500,000	6.625%, 05/15/18		394,315
			9,523,383

See Notes to Financial Statements 17 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Select Income Fund^(a)

Principal		Value (Note 2)
Office REITs: 0.29%
	Brandywine Operating Partnership LP, Gtd. Notes
$  2,370,000	6.000%, 04/01/16	$	1,751,530
Retail REITs: 1.98%
	National Retail Properties, Inc., Sr. Unsec. Notes
14,000,000	6.875%, 10/15/17		11,964,568
Specialized REITs: 0.30%
	Ventas Realty LP/Ventas Capital Corp.
2,000,000	6.500%, 06/01/16		1,802,500
	Total Corporate Bonds (Cost $24,456,511)		27,591,612
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 3.90%
$23,621,708	Wells Fargo — Grand Cayman 0.030%, due 07/01/09		23,621,708
	Total Short-Term Bank Debt Instruments (Cost $23,621,708)		23,621,708
	Total Investments: 116.77%(d)(Cost $852,763,482)		706,581,215
	Net Other Assets and Liabilities: (16.77)%		(101,498,109	)
	Net Assets: 100.00%	$	605,083,106

(a) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(b) Fair valued security.

(c) Security determined to be illiquid under the procedures approved by the Fund’s Board of Trustees.

(d) Securities or portion of securities are being held as collateral for the letter of credit. At period end, the aggregate market value of those securities was $519,503,394.

Percentages are stated as a percent of net assets.

Investment Abbreviations:

Gtd. — Guaranteed

REITs — Real Estate Investment Trusts

Sr. — Senior

Unsec. — Unsecured

Securities determined to be illiquid under procedures approved by the Fund’s Board of Trustees.

Information related to the illiquid securities is as follows:

Date(s) of Purchase	Security	Cost		Market Value		% of Net Assets
03/27/08	Eagle Hospitality Properties Trust, Inc. Series A, 8.250%	$	16,007,750	$	149,102	0.02%
08/21/08 - 01/06/09	Equity Residential Series K, 8.290%		10,463,405		10,038,611	1.66%
08/27/08 - 09/19/08	ProLogis, Series C, 8.540%(b)		19,654,168		16,655,565	2.75%

June 30, 2009 18 See Notes to Financial Statements

Portfolio of Investments (Note 10) (Unaudited)

Forward Strategic Realty Fund^(a)

Shares		Value (Note 2)
COMMON STOCKS: 58.05%
Diversified REITs: 4.44%
65,556	Vornado Realty Trust	$	2,951,987
Industrial REITs: 3.31%
115,700	DCT Industrial Trust, Inc.		472,056
215,078	ProLogis		1,733,529
			2,205,585
Mortgage REITs: 7.54%
181,300	Annaly Capital Management, Inc.		2,744,882
188,600	Chimera Investment Corp.		658,214
45,000	Hatteras Financial Corp.		1,286,550
46,900	MFA Financial, Inc.		324,548
			5,014,194
Office REITs: 11.61%
50,830	Boston Properties, Inc.		2,424,590
110,000	Brandywine Realty Trust		819,500
26,000	Corporate Office Properties Trust		762,580
40,400	Digital Realty Trust, Inc.		1,448,340
31,400	Kilroy Realty Corp.		644,956
70,800	SL Green Realty Corp.		1,624,152
			7,724,118
Real Estate Operating Companies: 0.96%
80,000	Brookfield Properties Corp.		637,600
Residential REITs: 6.21%
35,000	AvalonBay Communities, Inc.		1,957,900
50,200	Equity Residential		1,115,946
10,000	Essex Property Trust, Inc.		622,300
42,408	UDR, Inc.		438,075
			4,134,221
Retail REITs: 12.99%
72,400	Kimco Realty Corp.		727,620
114,971	Simon Property Group, Inc.		5,912,958
61,600	Tanger Factory Outlet Centers, Inc.		1,997,688
			8,638,266
Specialized REITs: 10.99%
86,800	HCP, Inc.		1,839,292

Shares		Value (Note 2)
12,300	Health Care REIT, Inc.	$	419,430
105,000	LaSalle Hotel Properties		1,295,700
35,000	Public Storage		2,291,800
49,000	Ventas, Inc.		1,463,140
			7,309,362
	Total Common Stocks (Cost $37,706,356)		38,615,333
EXCHANGE TRADED FUNDS: 6.53%
72,500	iShares Dow Jones U.S. Real Estate Index Fund		2,344,650
561,900	Ultra Real Estate ProShares		2,000,364
	Total Exchange Traded Funds (Cost $4,065,105)		4,345,014
PREFERRED STOCKS: 27.57%
Diversified REITs: 1.00%
	PS Business Parks, Inc.
37,850	Series P, 6.700%		664,268
Industrial REITs: 0.86%
	First Industrial Realty Trust, Inc.
50,000	Series J, 7.250%		572,000
Office REITs: 14.91%
	Alexandria Real Estate Equities, Inc.
62,946	Series C, 8.375%		1,293,540
	BioMed Realty Trust, Inc.
133,828	Series A, 7.375%		2,331,283
	Corporate Office Properties Trust
49,700	Series G, 8.000%		1,067,556
	Duke Realty Corp.
13,400	Series J, 6.625%		179,158
15,800	Series K, 6.500%		211,720
3,997	Series N, 7.250%		57,877
	Lexington Realty Trust
141,520	Series D, 7.550%		1,684,088
	SL Green Realty Corp.
108,977	Series C, 7.625%		1,798,121

See Notes to Financial Statements 19 June 30, 2009

Portfolio of Investments (Note 10) (Unaudited)

Forward Strategic Realty Fund^(a)

Shares		Value (Note 2)
Office REITs (continued): 14.91%
76,200	Series D, 7.875%	$	1,293,114
			9,916,457
Residential REITs: 0.46%
	Apartment Investment & Management Co.
14,900	Series G, 9.375%		304,854
Retail REITs: 5.73%
	CBL & Associates Properties, Inc.
183,850	Series C, 7.750%		2,619,862
87,330	Series D, 7.375%		1,192,055
			3,811,917
Specialized REITs: 4.61%
	HCP, Inc.
25,498	Series F, 7.100%		478,088
	LaSalle Hotel Properties
116,160	Series E, 8.000%		2,140,828
	Public Storage
22,277	Series L, 6.750%		447,768
			3,066,684
	Total Preferred Stocks (Cost $21,242,213)		18,336,180

Principal Amount		Value (Note 2)
CORPORATE BONDS: 1.51%
Retail REITs: 1.51%
	Simon Property Group, Inc., Notes
$  880,000	10.350%, 04/01/19	$	1,001,469
	Total Corporate Bonds (Cost $893,102)		1,001,469
Par Value
SHORT-TERM BANK DEBT INSTRUMENTS: 2.82%
$1,876,760	JPMorgan Chase — London 0.030%, due 07/01/09		1,876,760
	Total Short-Term Bank Debt Instruments (Cost $1,876,760)		1,876,760
	Total Investments: 96.48% (Cost $65,783,536)		64,174,756
	Net Other Assets and Liabilities: 3.52%		2,340,955
	Net Assets: 100.00%	$	66,515,711

(a) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

Percentages are stated as a percent of net assets.

June 30, 2009 20 See Notes to Financial Statements

Statement of Assets and Liabilities (Unaudited)

	FORWARD GLOBAL INFRASTRUCTURE FUND(a)			FORWARD INTERNATIONAL REAL ESTATE FUND(b)
ASSETS:
Investments, at value	$	135,713,249		$	56,890,003
Cash		85,458			9,622
Foreign currency, at value (Cost $4,298,433 and $614,527, respectively)		4,331,373			614,598
Receivable for shares sold		63,985			19,285
Interest and dividends receivable		529,887			207,008
Other assets		61,567			58,654
Total Assets		140,785,519			57,799,170
LIABILITIES:
Payable for investments purchased		417,476			225,425
Payable for shares redeemed		660,144			116,781
Payable to advisor		95,535			26,154
Payable for administrative services plan fees		21,510			18,640
Payable for distribution and service fees		30,673			19,985
Payable to trustees		0			1,059
Payable for chief compliance officer fee		384			160
Accrued expenses and other liabilities		108,115			131,610
Total Liabilities		1,333,837			539,814
NET ASSETS	$	139,451,682		$	57,259,356
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	230,688,110		$	194,962,649
Accumulated net investment income/(loss)		67,721			(1,002,516	)
Accumulated net realized loss on investments, option contracts and foreign currency transactions		(55,872,362	)		(130,288,214	)
Net unrealized depreciation on investments, option contracts and translation of assets and liabilities in foreign currencies		(35,431,787	)		(6,412,563	)
TOTAL NET ASSETS	$	139,451,682		$	57,259,356
INVESTMENTS, AT COST	$	171,169,608		$	63,303,949
PRICING OF SHARES
Institutional Class:
Net Asset Value, offering and redemption price per share		$16.38			$14.23
Net Assets	$	51,422,669		$	3,788,045
Shares of beneficial interest outstanding		3,139,981			266,265
Class A:
Net Asset Value, offering and redemption price per share		$16.35			$14.23
Net Assets	$	68,465,993		$	39,259,653
Shares of beneficial interest outstanding		4,186,794			2,759,211
Maximum offering price per share (NAV/0.9425, based on maximum sales charge of 5.75% of the offering price)		$17.35			$15.10
Class B:
Net Asset Value, offering and redemption price per share		$16.29			$14.21
Net Assets	$	3,947,768		$	2,081,362
Shares of beneficial interest outstanding		242,354			146,460
Class C:
Net Asset Value, offering and redemption price per share		$16.32			$14.19
Net Assets	$	15,615,252		$	12,130,296
Shares of beneficial interest outstanding		957,075			854,844

(a) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(b) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

See Notes to Financial Statements 21 June 30, 2009

Statement of Assets and Liabilities (Unaudited)

	FORWARD SELECT INCOME FUND(a)			FORWARD STRATEGIC REALTY FUND(b)
ASSETS:
Investments, at value	$	706,581,215		$	64,174,756
Cash		4,597,378			256,097
Receivable for investments sold		58,952,832			1,620,666
Receivable for shares sold		570,951			125
Interest and dividends receivable		10,401,593			556,559
Other assets		269,342			113,178
Total Assets		781,373,311			66,721,381
LIABILITIES:
Payable on loan		153,585,536			—
Payable on interest due on loan		12,876			—
Payable for investments purchased		20,330,878			0
Payable for shares redeemed		1,400,209			22,799
Payable to advisor		492,662			20,750
Payable for administrative services plan fees		57,583			23,007
Payable for distribution and service fees		208,704			43,564
Payable to trustees		1,673			702
Payable for chief compliance officer fee		2,616			192
Accrued expenses and other liabilities		197,468			94,656
Total Liabilities		176,290,205			205,670
NET ASSETS	$	605,083,106		$	66,515,711
NET ASSETS CONSIST OF:
Paid-in capital (Note 7)	$	958,058,261		$	280,967,271
Accumulated net investment income/(loss)		(168,678	)		688,917
Accumulated net realized loss on investments, securities sold short, option contracts and foreign currency transactions		(206,624,210	)		(213,531,697	)
Net unrealized depreciation on investments, securities sold short, option contracts and translation of assets and liabilities in foreign currencies		(146,182,267	)		(1,608,780	)
TOTAL NET ASSETS	$	605,083,106		$	66,515,711
INVESTMENTS, AT COST	$	852,763,482		$	65,783,536
PRICING OF SHARES
Institutional Class:
Net Asset Value, offering and redemption price per share		$15.45			$13.49
Net Assets	$	108,402,418		$	577,206
Shares of beneficial interest outstanding		7,015,246			42,790
Class A:
Net Asset Value, offering and redemption price per share		$15.44			$13.14
Net Assets	$	321,018,059		$	38,820,347
Shares of beneficial interest outstanding		20,786,391			2,954,660
Maximum offering price per share (NAV/0.9425, based on maximum sales charge of 5.75% of the offering price)		$16.38			$13.94
Class B:
Net Asset Value, offering and redemption price per share		$15.21			$12.97
Net Assets	$	26,000,617		$	8,222,852
Shares of beneficial interest outstanding		1,709,258			634,188
Class C:
Net Asset Value, offering and redemption price per share		$15.16			$12.97
Net Assets	$	149,662,012		$	18,895,306
Shares of beneficial interest outstanding		9,869,395			1,456,994

(a) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(b) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

June 30, 2009 22 See Notes to Financial Statements

Statement of Operations

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD GLOBAL INFRASTRUCTURE FUND(a)			FORWARD INTERNATIONAL REAL ESTATE FUND(b)
INVESTMENT INCOME:
Interest	$	51,287		$	7,275
Dividends		3,569,241			1,245,718
Foreign taxes withheld		(344,146	)		(89,934	)
Total Investment Income		3,276,382			1,163,059
EXPENSES:
Investment advisory fee		557,502			244,819
Administrative fee		3,822			1,738
Previous Administration, fund accounting and transfer agent fees (Note 4)		65,307			26,136
Custodian fee		21,085			17,535
Legal and audit fee		62,222			46,707
Transfer agent fee		5,696			5,680
Trustees’ fees and expenses		8,118			3,787
Registration/filing fees		39,260			14,630
Reports to shareholder and printing fees		23,776			23,675
Administrative services plan fees		56,545			40,737
Distribution and service fees
Class A		76,934			42,455
Class B		17,627			7,502
Class C		70,498			48,304
Chief compliance officer fee		12,299			4,711
Other		5,145			9,258
Total expenses before waiver		1,025,836			537,674
Less fees waived/reimbursed by investment advisor (Note 3)		(88,139	)		(95,689	)
Total net expenses		937,697			441,985
NET INVESTMENT INCOME:		2,338,685			721,074
Net realized loss on investments		(9,438,976	)		(26,815,968	)
Net realized gain/(loss) on foreign currency transactions		(57,169	)		286,398
Net realized gain on option contracts		68,933			0
Net change in unrealized appreciation on investments		17,101,608			28,235,071
Net change in unrealized depreciation on option contracts		(10,899	)		0
Net change in unrealized appreciation on translation of assets and liabilities in foreign currencies		50,949			1,627
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS, OPTION CONTRACTS AND FOREIGN CURRENCY		7,714,446			1,707,128
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	10,053,131		$	2,428,202

(a) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(b) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

See Notes to Financial Statements 23 June 30, 2009

Statement of Operations

For the Six Months Ended June 30, 2009 (Unaudited)

	FORWARD SELECT INCOME FUND(a)			FORWARD STRATEGIC REALTY FUND(b)
INVESTMENT INCOME:
Interest	$	1,399,429		$	8,959
Dividends		40,215,720			3,098,572
Foreign taxes withheld		(26,776	)		(1,728	)
Total Investment Income		41,588,373			3,105,803
EXPENSES:
Interest on loan		418,732			—
Investment advisory fee		2,307,799			(312,549	)
Administrative fee		15,464			1,971
Previous Administration, fund accounting and transfer agent fees (Note 4)		264,013			33,350
Custodian fee		42,275	��		7,995
Legal and audit fee		165,686			45,764
Transfer agent fee		18,032			5,536
Trustees’ fees and expenses		33,570			4,534
Registration/filing fees		36,300			19,380
Reports to shareholder and printing fees		65,400			25,235
Administrative services plan fees		143,921			40,068
Distribution and service fees
Class A		307,438			45,005
Class B		110,750			38,169
Class C		572,953			90,060
Chief compliance officer fee		45,138			6,075
Other		49,878			7,807
Total expenses before waiver		4,597,349			58,400
Less fees waived/reimbursed by investment advisor (Note 3)		(90,206	)		0
Total net expenses		4,507,143			58,400
NET INVESTMENT INCOME:		37,081,230			3,047,403
Net realized loss on investments		(23,607,253	)		(12,624,213	)
Net realized loss on securities sold short		0			(316,404	)
Net realized gain on foreign currency transactions		0			873
Net realized gain on option contracts		0			152,584
Net change in unrealized appreciation on investments		108,800,612			11,396,877
Net change in unrealized appreciation on securities sold short		0			70,528
Net change in unrealized depreciation on option contracts		0			(90,079	)
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS, SECURITIES SOLD SHORT, OPTION CONTRACTS AND FOREIGN CURRENCY		85,193,359			(1,409,834	)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	122,274,589		$	1,637,569

(a) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(b) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

June 30, 2009 24 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD GLOBAL INFRASTRUCTURE FUND(a)
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	2,338,685		$	3,035,387
Net realized loss on investments		(9,438,976	)		(46,071,896	)
Net realized loss on foreign currency		(57,169	)		(205,405	)
Net realized gain on option contracts		68,933			—
Net change in unrealized appreciation/(depreciation) on investments, foreign currency and option contracts		17,141,658			(56,054,981	)
Net increase/(decrease) in net assets resulting from operations		10,053,131			(99,296,895	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Institutional Class		(923,996	)		(1,002,695	)
Class A		(1,162,323	)		(1,418,372	)
Class B		(54,137	)		(42,716	)
Class C		(212,286	)		(196,055	)
From net realized gains on investments
Institutional Class		—			(85,331	)
Class A		—			(161,269	)
Class B		—			(9,476	)
Class C		—			(39,766	)
From return of capital
Institutional Class		—			(6,278	)
Class A		—			(8,880	)
Class B		—			(267	)
Class C		—			(1,227	)
Total distributions		(2,352,742	)		(2,972,332	)
SHARE TRANSACTIONS:
Institutional Class
Proceeds from sale of shares		22,034,527			67,945,095
Issued to shareholders in reinvestment of distributions		897,111			1,038,745
Cost of shares redeemed, net of redemption fees (Note 7)		(7,114,626	)		(22,218,692	)
Net increase from share transactions		15,817,012			46,765,148
Class A
Proceeds from sale of shares		16,991,238			94,166,659
Issued to shareholders in reinvestment of distributions		1,038,872			1,395,226
Cost of shares redeemed, net of redemption fees (Note 7)		(16,221,594	)		(50,323,628	)
Net increase from share transactions		1,808,516			45,238,257
Class B
Proceeds from sale of shares		389,270			2,941,381
Issued to shareholders in reinvestment of distributions		34,128			36,141
Cost of shares redeemed, net of redemption fees (Note 7)		(403,200	)		(1,457,555	)
Net increase from share transactions		20,198			1,519,967

See Notes to Financial Statements 25 June 30, 2009

Statement of Changes in Net Assets

	FORWARD GLOBAL INFRASTRUCTURE FUND(a) (Continued)
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
Class C
Proceeds from sale of shares		1,585,246			14,510,153
Issued to shareholders in reinvestment of distributions		176,001			193,274
Cost of shares redeemed, net of redemption fees (Note 7)		(2,313,865	)		(8,849,329	)
Net increase/(decrease) from share transactions		(552,618	)		5,854,098
Net increase/(decrease) in net assets	$	24,793,497		$	(2,891,757	)
NET ASSETS:
Beginning of period		114,658,185			117,549,942
End of period (including accumulated net investment income of $67,721 and $81,778, respectively)	$	139,451,682		$	114,658,185
Other Information:
SHARE TRANSACTIONS:
Institutional Class
Sold		1,473,257			2,632,027
Distributions reinvested		54,469			51,454
Redeemed		(513,517	)		(1,253,640	)
Net increase in shares outstanding		1,014,209			1,429,841
Class A
Sold		1,150,475			4,116,500
Distributions reinvested		63,192			70,970
Redeemed		(1,125,876	)		(2,686,270	)
Net increase in shares outstanding		87,791			1,501,200
Class B
Sold		27,835			141,736
Distributions reinvested		2,083			1,821
Redeemed		(29,846	)		(76,656	)
Net increase in shares outstanding		72			66,901
Class C
Sold		109,805			614,575
Distributions reinvested		10,732			9,315
Redeemed		(166,367	)		(492,018	)
Net increase/(decrease) in shares outstanding		(45,830	)		131,872

(a) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

June 30, 2009 26 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD INTERNATIONAL REAL ESTATE FUND(a)
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	721,074		$	2,836,777
Net realized loss on investments		(26,815,968	)		(93,177,498	)
Net realized gain on foreign currency		286,398			1,602,392
Net change in unrealized appreciation/(depreciation) on investments and foreign currency		28,236,698			(26,729,550	)
Net increase/(decrease) in net assets resulting from operations		2,428,202			(115,467,879	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Institutional Class		(50,085	)		(10,151	)
Class A		(442,635	)		(67,349	)
Class B		(14,355	)		(1,310	)
Class C		(86,876	)		(9,433	)
From return of capital
Institutional Class		—			(265,418	)
Class A		—			(1,760,981	)
Class B		—			(34,249	)
Class C		—			(246,643	)
Total distributions		(593,951	)		(2,395,534	)
SHARE TRANSACTIONS:
Institutional Class
Proceeds from sale of shares		144,479			4,076,371
Issued to shareholders in reinvestment of distributions		47,566			258,032
Cost of shares redeemed, net of redemption fees (Note 7)		(1,927,477	)		(10,953,262	)
Acquisition (Note 11)		220,810			—
Net decrease from share transactions		(1,514,622	)		(6,618,859	)
Class A
Proceeds from sale of shares		2,097,218			30,250,995
Issued to shareholders in reinvestment of distributions		374,766			1,529,775
Cost of shares redeemed, net of redemption fees (Note 7)		(12,452,159	)		(101,959,557	)
Acquisition (Note 11)		4,296,974			—
Net decrease from share transactions		(5,683,201	)		(70,178,787	)
Class B
Proceeds from sale of shares		37,972			267,147
Issued to shareholders in reinvestment of distributions		10,959			28,543
Cost of shares redeemed, net of redemption fees (Note 7)		(480,283	)		(2,751,842	)
Acquisition (Note 11)		597,649			—
Net increase/(decrease) from share transactions		166,297			(2,456,152	)
Class C
Proceeds from sale of shares		105,338			3,036,778
Issued to shareholders in reinvestment of distributions		79,300			229,058
Cost of shares redeemed, net of redemption fees (Note 7)		(4,151,752	)		(20,243,282	)
Acquisition (Note 11)		2,919,185			—
Net decrease from share transactions		(1,047,929	)		(16,977,446	)
Net decrease in net assets	$	(6,245,204	)	$	(214,094,657	)
NET ASSETS:
Beginning of period		63,504,560			277,599,217
End of period (including accumulated net investment loss of $(1,002,516) and $(1,129,639), respectively)	$	57,259,356		$	63,504,560

See Notes to Financial Statements 27 June 30, 2009

Statement of Changes in Net Assets

	FORWARD INTERNATIONAL REAL ESTATE FUND(a) (Continued)
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)		YEAR ENDED DECEMBER 31, 2008
Other Information:
SHARE TRANSACTIONS:
Institutional Class
Sold	11,898		193,098
Distributions reinvested	3,359		14,040
Redeemed	(184,839	)	(605,933	)
Acquisition (Note 11)	15,309		—
Net decrease in shares outstanding	(154,273	)	(398,795	)
Class A
Sold	169,623		1,350,164
Distributions reinvested	26,467		84,260
Redeemed	(1,095,500	)	(5,274,514	)
Acquisition (Note 11)	297,843		—
Net decrease in shares outstanding	(601,567	)	(3,840,090	)
Class B
Sold	3,140		12,108
Distributions reinvested	775		1,517
Redeemed	(41,626	)	(155,969	)
Acquisition (Note 11)	41,462		—
Net increase/(decrease) in shares outstanding	3,751		(142,344	)
Class C
Sold	8,857		134,365
Distributions reinvested	5,607		12,580
Redeemed	(367,779	)	(1,062,950	)
Acquisition (Note 11)	202,743		—
Net decrease in shares outstanding	(150,572	)	(916,005	)

(a) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

June 30, 2009 28 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD SELECT INCOME FUND(a)
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	37,081,230		$	53,513,686
Net realized loss on investments		(23,607,253	)		(187,262,181	)
Net increase from payment by affiliate for net losses realized on investments not meeting investment restrictions		—			1,500,000
Net realized gain on securities sold short		0			2,141,979
Net change in unrealized appreciation/(depreciation) on investments		108,800,612			(96,116,769	)
Net increase/(decrease) in net assets resulting from operations		122,274,589			(226,223,285	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Institutional Class		(6,582,367	)		(5,593,876	)
Class A		(19,976,661	)		(21,527,616	)
Class B		(1,675,572	)		(2,447,992	)
Class C		(9,015,308	)		(10,106,271	)
From return of capital
Institutional Class		—			(2,264,158	)
Class A		—			(8,713,441	)
Class B		—			(990,841	)
Class C		—			(4,090,579	)
Total distributions		(37,249,908	)		(55,734,774	)
SHARE TRANSACTIONS:
Institutional Class
Proceeds from sale of shares		54,117,008			87,672,775
Issued to shareholders in reinvestment of distributions		5,633,269			6,878,014
Cost of shares redeemed, net of redemption fees (Note 7)		(38,176,711	)		(22,903,399	)
Net increase from share transactions		21,573,566			71,647,390
Class A
Proceeds from sale of shares		101,369,496			267,666,808
Issued to shareholders in reinvestment of distributions		14,188,897			20,929,871
Cost of shares redeemed, net of redemption fees (Note 7)		(47,867,704	)		(171,661,797	)
Net increase from share transactions		67,690,689			116,934,882
Class B
Proceeds from sale of shares		2,127,691			8,596,432
Issued to shareholders in reinvestment of distributions		963,389			2,093,950
Cost of shares redeemed, net of redemption fees (Note 7)		(2,459,007	)		(9,291,945	)
Net increase from share transactions		632,073			1,398,437
Class C
Proceeds from sale of shares		29,454,299			69,780,743
Issued to shareholders in reinvestment of distributions		5,556,427			9,340,401
Cost of shares redeemed, net of redemption fees (Note 7)		(8,870,115	)		(37,728,782	)
Net increase from share transactions		26,140,611			41,392,362
Net increase/(decrease) in net assets	$	201,061,620		$	(50,584,988	)

See Notes to Financial Statements 29 June 30, 2009

Statement of Changes in Net Assets

	FORWARD SELECT INCOME FUND(a) (Continued)
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
NET ASSETS:
Beginning of period		404,021,486			454,606,474
End of period (including accumulated net investment income/(loss) of $(168,678) and $0, respectively)	$	605,083,106		$	404,021,486
Other Information:
SHARE TRANSACTIONS:
Institutional Class
Sold		3,993,306			4,831,802
Distributions reinvested		424,803			399,741
Redeemed		(2,876,478	)		(1,174,619	)
Net increase in shares outstanding		1,541,631			4,056,924
Class A
Sold		7,656,520			13,076,948
Distributions reinvested		1,083,023			1,175,209
Redeemed		(3,780,117	)		(8,250,874	)
Net increase in shares outstanding		4,959,426			6,001,283
Class B
Sold		176,286			475,943
Distributions reinvested		75,879			114,307
Redeemed		(192,895	)		(463,760	)
Net increase in shares outstanding		59,270			126,490
Class C
Sold		2,271,034			3,931,829
Distributions reinvested		434,673			526,487
Redeemed		(723,318	)		(1,979,077	)
Net increase in shares outstanding		1,982,389			2,479,239

(a) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

June 30, 2009 30 See Notes to Financial Statements

Statement of Changes in Net Assets

	FORWARD STRATEGIC REALTY FUND(a)
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
OPERATIONS:
Net investment income	$	3,047,403		$	14,506,956
Net realized loss on investments		(12,624,213	)		(173,047,086	)
Net realized gain/(loss) on securities sold short		(316,404	)		6,754,014
Net realized gain/(loss) on foreign currency		873			(84,659	)
Net realized gain on option contracts		152,584			411,369
Net change in unrealized appreciation on investments, securities sold short and option contracts		11,377,326			4,959,608
Net increase/(decrease) in net assets resulting from operations		1,637,569			(146,499,798	)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Institutional Class		(22,727	)		(76,092	)
Class A		(1,458,925	)		(7,008,355	)
Class B		(269,914	)		(1,180,175	)
Class C		(631,370	)		(2,776,328	)
From net realized gains on investments
Institutional Class		—			(4,303	)
Class A		—			(329,484	)
Class B		—			(72,154	)
Class C		—			(173,818	)
From return of capital
Institutional Class		—			(15,415	)
Class A		—			(1,419,830	)
Class B		—			(239,093	)
Class C		—			(562,459	)
Total distributions		(2,382,936	)		(13,857,506	)
SHARE TRANSACTIONS:
Institutional Class
Proceeds from sale of shares		0			331,349
Issued to shareholders in reinvestment of distributions		22,148			93,511
Cost of shares redeemed, net of redemption fees (Note 7)		(146,702	)		(1,242,203	)
Net decrease from share transactions		(124,554	)		(817,343	)
Class A
Proceeds from sale of shares		2,140,405			13,106,327
Issued to shareholders in reinvestment of distributions		1,064,059			6,248,451
Cost of shares redeemed, net of redemption fees (Note 7)		(7,811,226	)		(85,907,014	)
Net decrease from share transactions		(4,606,762	)		(66,552,236	)
Class B
Proceeds from sale of shares		164,603			768,293
Issued to shareholders in reinvestment of distributions		214,923			1,205,539
Cost of shares redeemed, net of redemption fees (Note 7)		(1,657,046	)		(11,426,322	)
Net decrease from share transactions		(1,277,520	)		(9,452,490	)

See Notes to Financial Statements 31 June 30, 2009

Statement of Changes in Net Assets

	FORWARD STRATEGIC REALTY FUND(a) (Continued)
	SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008
Class C
Proceeds from sale of shares		878,196			3,266,151
Issued to shareholders in reinvestment of distributions		518,684			2,875,650
Cost of shares redeemed, net of redemption fees (Note 7)		(4,810,502	)		(30,936,394	)
Net decrease from share transactions		(3,413,622	)		(24,794,593	)
Net decrease in net assets	$	(10,167,825	)	$	(261,973,966	)
NET ASSETS:
Beginning of period		76,683,536			338,657,502
End of period (including accumulated net investment income of $688,917 and $24,450, respectively)	$	66,515,711		$	76,683,536
Other Information:
SHARE TRANSACTIONS:
Institutional Class
Sold		0			19,107
Distributions reinvested		2,077			4,540
Redeemed		(12,541	)		(43,478	)
Net decrease in shares outstanding		(10,464	)		(19,831	)
Class A
Sold		181,083			472,600
Distributions reinvested		102,533			291,800
Redeemed		(686,821	)		(3,373,433	)
Net decrease in shares outstanding		(403,205	)		(2,609,033	)
Class B
Sold		15,267			32,670
Distributions reinvested		21,420			60,641
Redeemed		(150,238	)		(434,006	)
Net decrease in shares outstanding		(113,551	)		(340,695	)
Class C
Sold		77,821			143,945
Distributions reinvested		51,691			146,289
Redeemed		(437,716	)		(1,155,062	)
Net decrease in shares outstanding		(308,204	)		(864,828	)

(a) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

June 30, 2009 32 See Notes to Financial Statements

Statement of Cash Flows (Unaudited)

For the Six Months Ended June 30, 2009

	FORWARD SELECT INCOME FUND(a)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase resulting from operations	$	122,274,589
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities
Purchases of investment securities		(592,702,030	)
Proceeds from sale of investment securities		431,998,793
Net proceeds from short-term investment securities		(23,609,808	)
Discount and premiums amortized		(308,190	)
Net realized loss on investment securities		23,607,253
Net change in unrealized appreciation on investments		(108,800,612	)
Changes in assets and liabilities:
Decrease in receivable for fund shares sold		4,481,550
Increase in receivable on investments sold		(20,046,127	)
Increase in interest receivable		(912,357	)
Decrease in other assets		1,242,027
Decrease in payable for interest payable		(51,881	)
Decrease in payable for shares redeemed		(137,598	)
Increase in payable for investments purchased		17,469,865
Increase in payable for advisor		198,692
Increase in payable for administrative service plan fee		6,591
Decrease in payable for distribution to shareholders		(1,376	)
Increase in payable for distribution and service fees		77,392
Increase in payable to trustees		1,673
Increase in payable for chief compliance officer fee		2,616
Decrease in accrued expenses and other liabilities		(63,859	)
Net cash used by operating activities		(145,272,797	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash provided by loan		71,083,144
Proceeds from sale of shares		187,068,494
Cost of shares redeemed		(97,373,537	)
Cash distributions paid		(10,907,926	)
Net cash provided by financing activities		149,870,175
NET CHANGE IN CASH FOR THE PERIOD		4,597,378
CASH, BEGINNING OF PERIOD		—
CASH, END OF PERIOD	$	4,597,378

Non-cash financing activities not included herein consist of reinvestment of distributions of $26,341,982. Cash paid for interest during the period $470,613.

(a) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

See Notes to Financial Statements 33 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Global Infrastructure Fund

	INSTITUTIONAL CLASS(a)
	SIX MONTHS ENDED JUNE 30, 2009(b) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(c)
NET ASSET VALUE, BEGINNING OF PERIOD	$	15.37		$	27.11		$	25.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.32			0.47	(d)		0.24	(d)
Net realized and unrealized gain/(loss) on investments		0.99			(11.80	)		2.06
Total from Investment Operations		1.31			(11.33	)		2.30
LESS DISTRIBUTIONS:
From investment income		(0.30	)		(0.39	)		(0.12	)
From capital gains		—			(0.04	)		(0.07	)
Tax return of capital		—			(0.00	)(e)		—
Total Distributions		(0.30	)		(0.43	)		(0.19	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(e)		0.02			0.00	(e)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.01			(11.74	)		2.11
NET ASSET VALUE, END OF PERIOD	$	16.38		$	15.37		$	27.11
TOTAL RETURN		8.50	%(f)		(42.05	)%		9.20	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	51,423		$	32,664		$	18,870
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		4.07	%(g)		2.24	%		1.78	%(g)
Operating expenses including reimbursement/waiver		1.25	%(g)		1.26	%		1.24	%(g)
Operating expenses excluding reimbursement/waiver		1.39	%(g)		1.44	%		1.56	%(g)
PORTFOLIO TURNOVER RATE		21	%(f)		123	%		42	%(f)

(a) Prior to the close of business on June 12, 2009, the Institutional Class was know as Class Y.

(b) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(c) From commencement of operations on June 29, 2007.

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

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

(f) Not Annualized.

(g) Annualized.

June 30, 2009 34 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Global Infrastructure Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	15.35		$	27.10		$	25.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.27			0.44	(c)		0.20	(c)
Net realized and unrealized gain/(loss) on investments		1.01			(11.82	)		2.08
Total from Investment Operations		1.28			(11.38	)		2.28
LESS DISTRIBUTIONS:
From investment income		(0.28	)		(0.33	)		(0.11	)
From capital gains		—			(0.04	)		(0.07	)
Tax return of capital		—			(0.00	)(d)		—
Total Distributions		(0.28	)		(0.37	)		(0.18	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(d)		0.00	(d)		0.00	(d)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.00			(11.75	)		2.10
NET ASSET VALUE, END OF PERIOD	$	16.35		$	15.35		$	27.10
TOTAL RETURN(e)		8.33	%(f)		(42.28	)%		9.12	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	68,466		$	62,918		$	70,389
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		3.78	%(g)		1.99	%		1.53	%(g)
Operating expenses including reimbursement/waiver		1.50	%(g)		1.51	%		1.49	%(g)
Operating expenses excluding reimbursement/waiver		1.64	%(g)		1.69	%		1.81	%(g)
PORTFOLIO TURNOVER RATE		21	%(f)		123	%		42	%(f)

(a) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(b) From commencement of operations on June 29, 2007.

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

(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.

See Notes to Financial Statements 35 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Global Infrastructure Fund

	CLASS B
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	15.30		$	27.04		$	25.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.23			0.27	(c)		0.10	(c)
Net realized and unrealized gain/(loss) on investments		0.99			(11.78	)		2.08
Total from Investment Operations		1.22			(11.51	)		2.18
LESS DISTRIBUTIONS:
From investment income		(0.23	)		(0.19	)		(0.07	)
From capital gains		—			(0.04	)		(0.07	)
Tax return of capital		—			(0.00	)(d)		—
Total Distributions		(0.23	)		(0.23	)		(0.14	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(d)		0.00	(d)		0.00	(d)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.99			(11.74	)		2.04
NET ASSET VALUE, END OF PERIOD	$	16.29		$	15.30		$	27.04
TOTAL RETURN(e)		7.93	%(f)		(42.73	)%		8.68	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	3,948		$	3,708		$	4,741
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		3.05	%(g)		1.24	%		0.78	%(g)
Operating expenses including reimbursement/waiver		2.25	%(g)		2.26	%		2.24	%(g)
Operating expenses excluding reimbursement/waiver		2.39	%(g)		2.44	%		2.56	%(g)
PORTFOLIO TURNOVER RATE		21	%(f)		123	%		42	%(f)

(a) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(b) From commencement of operations on June 29, 2007.

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

(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.

June 30, 2009 36 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Global Infrastructure Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			PERIOD ENDED DECEMBER 31, 2007(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	15.32		$	27.04		$	25.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.22			0.27	(c)		0.10	(c)
Net realized and unrealized gain/(loss) on investments		1.00			(11.78	)		2.08
Total from Investment Operations		1.22			(11.51	)		2.18
LESS DISTRIBUTIONS:
From investment income		(0.22	)		(0.17	)		(0.07	)
From capital gains		—			(0.04	)		(0.07	)
Tax return of capital		—			(0.00	)(d)		—
Total Distributions		(0.22	)		(0.21	)		(0.14	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(d)		0.00	(d)		0.00	(d)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.00			(11.72	)		2.04
NET ASSET VALUE, END OF PERIOD	$	16.32		$	15.32		$	27.04
TOTAL RETURN(e)		7.98	%(f)		(42.76	)%		8.72	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	15,615		$	15,369		$	23,550
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		2.98	%(g)		1.24	%		0.78	%(g)
Operating expenses including reimbursement/waiver		2.25	%(g)		2.26	%		2.24	%(g)
Operating expenses excluding reimbursement/waiver		2.39	%(g)		2.44	%		2.56	%(g)
PORTFOLIO TURNOVER RATE		21	%(f)		123	%		42	%(f)

(a) Prior to the close of business on June 12, 2009, the Forward Global Infrastructure Fund was known as the Kensington Global Infrastructure Fund.

(b) From commencement of operations on June 29, 2007.

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

(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.

See Notes to Financial Statements 37 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Real Estate Fund

	INSTITUTIONAL CLASS(a)
	SIX MONTHS ENDED JUNE 30, 2009(b) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			PERIOD ENDED DECEMBER 31, 2006(c)
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.89		$	27.20		$	30.03		$	25.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.22			0.43	(d)		0.20	(d)		0.26	(d)
Net realized and unrealized gain/(loss) on investments		1.32			(14.32	)		(1.25	)		5.57
Total from Investment Operations		1.54			(13.89	)		(1.05	)		5.83
LESS DISTRIBUTIONS:
From investment income		(0.20	)		(0.02	)		(1.70	)		(0.73	)
From capital gains		—			—			(0.08	)		(0.07	)
Tax return of capital		—			(0.40	)		—			—
Total Distributions		(0.20	)		(0.42	)		(1.78	)		(0.80	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(e)		0.00	(e)		0.00	(e)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.34			(14.31	)		(2.83	)		5.03
NET ASSET VALUE, END OF PERIOD	$	14.23		$	12.89		$	27.20		$	30.03
TOTAL RETURN		11.95	%(f)		(51.44	)%		(3.39	)%		23.38	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	3,788		$	5,420		$	22,283		$	12,797
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		3.29	%(g)		1.97	%		0.65	%		1.58	%(g)
Operating expenses including reimbursement/waiver		1.39	%(g)		1.41	%		1.41	%		1.60	%(g)
Operating expenses excluding reimbursement/waiver		1.82	%(g)		1.50	%		1.37	%		1.60	%(g)
PORTFOLIO TURNOVER RATE		45	%(f)		110	%		90	%		60	%(f)

(a) Prior to the close of business on June 12, 2009, the Institutional Class was know as Class Y.

(b) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

(c) From commencement of operations on April 28, 2006.

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

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

(f) Not Annualized.

(g) Annualized.

June 30, 2009 38 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Real Estate Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			PERIOD ENDED DECEMBER 31, 2006(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.89		$	27.17		$	30.00		$	25.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.16			0.37	(c)		0.12	(c)		0.21	(c)
Net realized and unrealized gain/(loss) on investments		1.36			(14.29	)		(1.23	)		5.57
Total from Investment Operations		1.52			(13.92	)		(1.11	)		5.78
LESS DISTRIBUTIONS:
From investment income		(0.18	)		(0.02	)		(1.64	)		(0.71	)
From capital gains		—			—			(0.08	)		(0.07	)
Tax return of capital		—			(0.34	)		—			—
Total Distributions		(0.18	)		(0.36	)		(1.72	)		(0.78	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(d)		0.00	(d)		0.00	(d)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.34			(14.28	)		(2.83	)		5.00
NET ASSET VALUE, END OF PERIOD	$	14.23		$	12.89		$	27.17		$	30.00
TOTAL RETURN(e)		11.78	%(f)		(51.56	)%		(3.59	)%		23.18	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	39,260		$	43,311		$	195,641		$	85,573
RATIOS TO AVERAGE NET ASSETS:
Net investment income including reimbursement/waiver		3.06	%(g)		1.72	%		0.40	%		1.33	%(g)
Operating expenses including reimbursement/waiver		1.63	%(g)		1.66	%		1.66	%		1.85	%(g)
Operating expenses excluding reimbursement/waiver		2.01	%(g)		1.75	%		1.62	%		1.85	%(g)
PORTFOLIO TURNOVER RATE		45	%(f)		110	%		90	%		60	%(f)

(a) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

(b) From commencement of operations on April 28, 2006.

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

(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.

See Notes to Financial Statements 39 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Real Estate Fund

	CLASS B
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			PERIOD ENDED DECEMBER 31, 2006(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.88		$	27.05		$	29.92		$	25.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.16			0.21	(c)		(0.11	)(c)		0.09	(c)
Net realized and unrealized gain/(loss) on investments		1.30			(14.21	)		(1.23	)		5.55
Total from Investment Operations		1.46			(14.00	)		(1.34	)		5.64
LESS DISTRIBUTIONS:
From investment income		(0.13	)		—			(1.45	)		(0.65	)
From capital gains		—			—			(0.08	)		(0.07	)
Tax return of capital		—			(0.17	)		—			—
Total Distributions		(0.13	)		(0.17	)		(1.53	)		(0.72	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(d)		0.00	(d)		0.00	(d)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.33			(14.17	)		(2.87	)		4.92
NET ASSET VALUE, END OF PERIOD	$	14.21		$	12.88		$	27.05		$	29.92
TOTAL RETURN(e)		11.36	%(f)		(51.94	)%		(4.36	)%		22.61	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	2,081		$	1,838		$	7,711		$	3,127
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		2.33	%(g)		0.97	%		(0.35	)%		0.59	%(g)
Operating expenses including reimbursement/waiver		2.33	%(g)		2.41	%		2.41	%		2.60	%(g)
Operating expenses excluding reimbursement/waiver		2.70	%(g)		2.50	%		2.37	%		2.60	%(g)
PORTFOLIO TURNOVER RATE		45	%(f)		110	%		90	%		60	%(f)

(a) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

(b) From commencement of operations on April 28, 2006.

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

(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.

June 30, 2009 40 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward International Real Estate Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			PERIOD ENDED DECEMBER 31, 2006(b)
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.87		$	27.04		$	29.91		$	25.00
INCOME/(LOSS) FROM OPERATIONS:
Net investment income/(loss)		0.12			0.21	(c)		(0.11	)(c)		0.09	(c)
Net realized and unrealized gain/(loss) on investments		1.33			(14.20	)		(1.23	)		5.55
Total from Investment Operations		1.45			(13.99	)		(1.34	)		5.64
LESS DISTRIBUTIONS:
From investment income		(0.13	)		—			(1.45	)		(0.66	)
From capital gains		—			—			(0.08	)		(0.07	)
Tax return of capital		—			(0.18	)		—			—
Total Distributions		(0.13	)		(0.18	)		(1.53	)		(0.73	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(d)		0.00	(d)		0.00	(d)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		1.32			(14.17	)		(2.87	)		4.91
NET ASSET VALUE, END OF PERIOD	$	14.19		$	12.87		$	27.04		$	29.91
TOTAL RETURN(e)		11.27	%(f)		(51.92	)%		(4.36	)%		22.61	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	12,130		$	12,935		$	51,964		$	21,499
RATIOS TO AVERAGE NET ASSETS:
Net investment income/(loss) including reimbursement/waiver		2.32	%(g)		0.97	%		(0.35	)%		0.59	%(g)
Operating expenses including reimbursement/waiver		2.34	%(g)		2.41	%		2.41	%		2.60	%(g)
Operating expenses excluding reimbursement/waiver		2.73	%(g)		2.50	%		2.37	%		2.60	%(g)
PORTFOLIO TURNOVER RATE		45	%(f)		110	%		90	%		60	%(f)

(a) Prior to the close of business on June 12, 2009, the Forward International Real Estate Fund was known as the Kensington International Real Estate Fund.

(b) From commencement of operations on April 28, 2006.

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

(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.

See Notes to Financial Statements 41 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Select Income Fund

	INSTITUTIONAL CLASS(a)
	SIX MONTHS ENDED JUNE 30, 2009(b) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			PERIOD ENDED DECEMBER 31, 2006(c)
NET ASSET VALUE, BEGINNING OF PERIOD	$	13.14		$	25.13		$	35.87		$	34.14
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		1.13			2.38	(d)		2.41	(d)		1.75	(d)
Net realized and unrealized gain/(loss) on investments		2.25			(11.90	)		(10.62	)		2.27
Total from Investment Operations		3.38			(9.52	)		(8.21	)		4.02
LESS DISTRIBUTIONS:
From investment income		(1.08	)		(1.77	)		(1.90	)		(1.75	)
From capital gains		—			—			—			(0.37	)
Tax return of capital		—			(0.71	)		(0.63	)		(0.17	)
Total Distributions		(1.08	)		(2.48	)		(2.53	)		(2.29	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.01			0.01			0.00	(e)		0.00	(e)
NET INCREASE/(DECREASE) IN NET ASSET VALUE		2.31			(11.99	)		(10.74	)		1.73
NET ASSET VALUE, END OF PERIOD	$	15.45		$	13.14		$	25.13		$	35.87
TOTAL RETURN		27.54	%(i)		(40.43	)%(f)(g)		(24.02	)%(h)		12.16	%(i)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	108,402		$	71,934		$	35,609		$	21,367
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income including reimbursement/waiver		16.43	%(j)		12.54	%		8.10	%		7.52	%(j)
Operating expenses including reimbursement/waiver		1.33	%(j)		n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		1.37	%(j)		1.33	%		1.25	%		1.23	%(j)
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income including reimbursement/waiver		16.25	%(j)		11.76	%		7.45	%		6.56	%
Operating expenses including reimbursement/waiver		1.51	%(j)		n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		1.55	%(j)		2.11	%		1.90	%		2.19	%(j)
PORTFOLIO TURNOVER RATE		80	%(i)		66	%		88	%		21	%(k)

(a) Prior to the close of business on June 12, 2009, the Institutional Class was know as Class Y.

(b) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(c) From commencement of operations on April 28, 2006.

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

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

(f) Total return includes an increase from payment by affiliates for net losses realized on investments not meeting investment restrictions. Excluding such item, the total return would have been decreased by 0.38%.

(g) Includes the effects of certain excess investments made by the Fund in the shares of other investment companies in the amount of $(0.02) per share.

(h) Includes the effects of certain excess investments made by the Fund in the shares of other investment companies in the amount of $(0.22) per share.

(i) Not Annualized.

(j) Annualized.

(k) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2006.

June 30, 2009 42 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Select Income Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	13.17		$	25.14		$	35.90		$	33.69		$	37.07		$	36.76
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.97			2.42	(b)		2.40	(b)		2.19	(b)		2.41	(b)		2.04
Net realized and unrealized gain/(loss) on investments		2.35			(12.02	)		(10.70	)		2.87			(3.09	)		1.92
Total from Investment Operations		3.32			(9.60	)		(8.30	)		5.06			(0.68	)		3.96
LESS DISTRIBUTIONS:
From investment income		(1.06	)		(1.70	)		(1.83	)		(2.31	)		(2.50	)		(1.95	)
From capital gains		—			—			—			(0.37	)		(0.19	)		(1.70	)
Tax return of capital		—			(0.71	)		(0.63	)		(0.17	)		(0.01	)		—
Total Distributions		(1.06	)		(2.41	)		(2.46	)		(2.85	)		(2.70	)		(3.65	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.01			0.04			0.00	(c)		0.00	(c)		0.00	(c)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		2.27			(11.97	)		(10.76	)		2.21			(3.38	)		0.31
NET ASSET VALUE, END OF PERIOD	$	15.44		$	13.17		$	25.14		$	35.90		$	33.69		$	37.07
TOTAL RETURN( d)		26.96	%(h)		(40.49	)%(e)(f)		(24.21	)%(g)		15.61	%		(1.99	)%		11.30	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	321,018		$	208,502		$	246,986		$	484,186		$	444,576		$	534,973
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income including reimbursement/waiver		16.25	%(i)		12.28	%		7.85	%		7.27	%		7.32	%		8.21	%
Operating expenses including reimbursement/waiver		1.58	%(i)		n/a			n/a			n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		1.62	%(i)		1.58	%		1.50	%		1.48	%		1.47	%		1.60	%
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income including reimbursement/waiver		16.07	%(i)		11.50	%		7.20	%		6.31	%		6.66	%		7.49	%
Operating expenses including reimbursement/waiver		1.77	%(i)		n/a			n/a			n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		1.80	%(i)		2.36	%		2.15	%		2.44	%		2.13	%		2.32	%
PORTFOLIO TURNOVER RATE		80	%(h)		66	%		88	%		21	%		36	%		38	%

(a) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(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) Total return includes an increase from payment by affiliates for net losses realized on investments not meeting investment restrictions. Excluding such item, the total return would have been decreased by 0.30%.

(f) Includes the effects of certain excess investments made by the Fund in the shares of other investment companies in the amount of $(0.02) per share.

(g) Includes the effects of certain excess investments made by the Fund in the shares of other investment companies in the amount of $(0.22) per share.

(h) Not Annualized.

(i) Annualized.

See Notes to Financial Statements 43 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Select Income Fund

	CLASS B
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.98		$	24.86		$	35.60		$	33.44		$	36.84		$	36.57
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		1.02			2.28	(b)		2.13	(b)		1.92	(b)		2.12	(b)		1.80
Net realized and unrealized gain/(loss) on investments		2.19			(11.90	)		(10.59	)		2.83			(3.07	)		1.85
Total from Investment Operations		3.21			(9.62	)		(8.46	)		4.75			(0.95	)		3.65
LESS DISTRIBUTIONS:
From investment income		(0.99	)		(1.62	)		(1.65	)		(2.05	)		(2.25	)		(1.74	)
From capital gains		—			—			—			(0.37	)		(0.19	)		(1.64	)
Tax return of capital		—			(0.64	)		(0.63	)		(0.17	)		(0.01	)		—
Total Distributions		(0.99	)		(2.26	)		(2.28	)		(2.59	)		(2.45	)		(3.38	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.01			0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		2.23			(11.88	)		(10.74	)		2.16			(3.40	)		0.27
NET ASSET VALUE, END OF PERIOD	$	15.21		$	12.98		$	24.86		$	35.60		$	33.44		$	36.84
TOTAL RETURN( d)		26.43	%(h)		(41.01	)%(e)(f)		(24.78	)%(g)		14.72	%		(2.73	)%		10.45	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	26,001		$	21,423		$	37,874		$	69,867		$	74,926		$	83,185
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income including reimbursement/waiver		15.31	%(i)		11.53	%		7.10	%		6.52	%		6.61	%		7.45	%
Operating expenses including reimbursement/waiver		2.33	%(i)		n/a			n/a			n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		2.37	%(i)		2.33	%		2.25	%		2.23	%		2.22	%		2.35	%
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income including reimbursement/waiver		15.31	%(i)		10.75	%		6.45	%		5.56	%		5.95	%		6.73	%
Operating expenses including reimbursement/waiver		2.51	%(i)		n/a			n/a			n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		2.56	%(i)		3.11	%		2.90	%		3.19	%		2.88	%		3.07	%
PORTFOLIO TURNOVER RATE		80	%(h)		66	%		88	%		21	%		36	%		38	%

(a) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(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) Total return includes an increase from payment by affiliates for net losses realized on investments not meeting investment restrictions. Excluding such item, the total return would have been decreased by 0.31%.

(f) Includes the effects of certain excess investments made by the Fund in the shares of other investment companies in the amount of $(0.02) per share.

(g) Includes the effects of certain excess investments made by the Fund in the shares of other investment companies in the amount of $(0.22) per share.

(h) Not Annualized.

(i) Annualized.

June 30, 2009 44 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Select Income Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.95		$	24.80		$	35.53		$	33.38		$	36.77		$	36.51
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		1.08			2.22	(b)		2.11	(b)		1.91	(b)		2.12	(b)		1.82
Net realized and unrealized gain/(loss) on investments		2.12			(11.81	)		(10.56	)		2.83			(3.06	)		1.82
Total from Investment Operations		3.20			(9.59	)		(8.45	)		4.74			(0.94	)		3.64
LESS DISTRIBUTIONS:
From investment income		(1.00	)		(1.62	)		(1.65	)		(2.05	)		(2.25	)		(1.74	)
From capital gains		—			—			—			(0.37	)		(0.19	)		(1.64	)
Tax return of capital		—			(0.64	)		(0.63	)		(0.17	)		(0.01	)		—
Total Distributions		(1.00	)		(2.26	)		(2.28	)		(2.59	)		(2.45	)		(3.38	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.01			0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)		—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		2.21			(11.85	)		(10.73	)		2.15			(3.39	)		0.26
NET ASSET VALUE, END OF PERIOD	$	15.16		$	12.95		$	24.80		$	35.53		$	33.38		$	36.77
TOTAL RETURN( d)		26.39	%(h)		(40.99	)%(e)(f)		(24.80	)%(g)		14.72	%		(2.71	)%		10.43	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	149,662		$	102,163		$	134,139		$	223,325		$	220,262		$	237,965
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income including reimbursement/waiver		15.62	%(i)		11.53	%		7.10	%		6.52	%		6.62	%		7.45	%
Operating expenses including reimbursement/waiver		2.33	%(i)		n/a			n/a			n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		2.37	%(i)		2.33	%		2.25	%		2.23	%		2.22	%		2.35	%
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income including reimbursement/waiver		15.44	%(i)		10.75	%		6.45	%		5.56	%		5.96	%		6.73	%
Operating expenses including reimbursement/waiver		2.51	%(i)		n/a			n/a			n/a			n/a			n/a
Operating expenses excluding reimbursement/waiver		2.55	%(i)		3.11	%		2.90	%		3.19	%		2.88	%		3.07	%
PORTFOLIO TURNOVER RATE		80	%(h)		66	%		88	%		21	%		36	%		38	%

(a) Prior to the close of business on June 12, 2009, the Forward Select Income Fund was known as the Kensington Select Income Fund.

(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) Total return includes an increase from payment by affiliates for net losses realized on investments not meeting investment restrictions. Excluding such item, the total return would have been decreased by 0.31%.

(f) Includes the effects of certain excess investments made by the Fund in the shares of other investment companies in the amount of $(0.02) per share.

(g) Includes the effects of certain excess investments made by the Fund in the shares of other investment companies in the amount of $(0.22) per share.

(h) Not Annualized.

(i) Annualized.

See Notes to Financial Statements 45 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Strategic Realty Fund

	INSTITUTIONAL CLASS(a)
	SIX MONTHS ENDED JUNE 30, 2009(b) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			PERIOD ENDED DECEMBER 31, 2006(c)
NET ASSET VALUE, BEGINNING OF PERIOD	$	13.35		$	34.89		$	54.19		$	49.83
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.71			1.95	(d)		1.76	(d)		1.49	(d)
Net realized and unrealized gain/(loss) on investments		(0.08	)		(21.42	)		(12.99	)		8.36
Total from Investment Operations		0.63			(19.47	)		(11.23	)		9.85
LESS DISTRIBUTIONS:
From investment income		(0.49	)		(1.64	)		(2.00	)		(1.76	)
From capital gains		—			(0.10	)		(6.12	)		(3.73	)
Tax return of capital		—			(0.33	)		—			—
Total Distributions		(0.49	)		(2.07	)		(8.12	)		(5.49	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(e)		0.00	(e)		0.05			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.14			(21.54	)		(19.30	)		4.36
NET ASSET VALUE, END OF PERIOD	$	13.49		$	13.35		$	34.89		$	54.19
TOTAL RETURN		5.80	%(f)		(57.68	)%		(21.55	)%		20.14	%(f)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	577		$	711		$	2,550		$	1,397
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income		10.42	%(g)		7.77	%		4.90	%		4.58	%(g)
Operating expenses		(0.38	)%(g)		0.46	%		1.30	%		1.15	%(g)
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income		n/a			6.68	%		3.39	%		2.91	%(g)
Operating expenses		n/a			1.55	%		2.81	%		2.82	%(g)
PORTFOLIO TURNOVER RATE		227	%(f)		189	%		222	%		152	%(h)

(a) Prior to the close of business on June 12, 2009, the Institutional Class was know as Class Y.

(b) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

(c) From commencement of operations on April 28, 2006.

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

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

(f) Not Annualized.

(g) Annualized.

(h) Portfolio turnover rate is calculated at the Fund level and represents the year ended December 31, 2006.

June 30, 2009 46 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Strategic Realty Fund

	CLASS A
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	13.02		$	34.88		$	54.22		$	46.47		$	51.06		$	45.34
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.69			1.92	(b)		1.63	(b)		1.38	(b)		1.44	(b)		2.21	(b)
Net realized and unrealized gain/(loss) on investments		(0.09	)		(21.78	)		(12.98	)		12.28			0.98			9.73
Total from Investment Operations		0.60			(19.86	)		(11.35	)		13.66			2.42			11.94
LESS DISTRIBUTIONS:
From investment income		(0.48	)		(1.58	)		(1.87	)		(2.18	)		(2.16	)		(2.39	)
From capital gains		—			(0.10	)		(6.12	)		(3.73	)		(4.84	)		(3.83	)
Tax return of capital		—			(0.32	)		—			—			(0.07	)		—
Total Distributions		(0.48	)		(2.00	)		(7.99	)		(5.91	)		(7.07	)		(6.22	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)		—
REPAYMENT OF ADVISORY FEES		—			—			—			—			0.06			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.12			(21.86	)		(19.34	)		7.75			(4.59	)		5.72
NET ASSET VALUE, END OF PERIOD	$	13.14		$	13.02		$	34.88		$	54.22		$	46.47		$	51.06
TOTAL RETURN( d)		5.67	%(f)		(58.78	)%		(21.81	)%		30.16	%		4.76	%(e)		27.63	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	38,820		$	43,718		$	208,147		$	473,172		$	392,881		$	401,565
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income		10.13	%(g)		7.52	%		4.65	%		4.33	%		4.53	%		5.97	%
Operating expenses		(0.11	)%(g)		0.71	%		1.55	%		1.40	%		1.96	%		1.27	%
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income		n/a			6.43	%		3.14	%		2.66	%		2.87	%		4.75	%
Operating expenses		n/a			1.80	%		3.06	%		3.07	%		3.62	%		2.49	%
PORTFOLIO TURNOVER RATE		227	%(f)		189	%		222	%		152	%		206	%		173	%

(a) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

(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) In 2005, the return excludes a reimbursement by the adviser for advisory fee correction. Including such item, the total return would have increased by 0.13%.

(f) Not Annualized.

(g) Annualized.

See Notes to Financial Statements 47 June 30, 2009

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Strategic Realty Fund

	CLASS B
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.83		$	34.42		$	53.60		$	46.00		$	50.63		$	45.02
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.39			1.64	(b)		1.22	(b)		0.98	(b)		1.04	(b)		1.83	(b)
Net realized and unrealized gain/(loss) on investments		0.16			(21.44	)		(12.79	)		12.14			0.97			9.66
Total from Investment Operations		0.55			(19.80	)		(11.57	)		13.12			2.01			11.49
LESS DISTRIBUTIONS:
From investment income		(0.41	)		(1.40	)		(1.49	)		(1.79	)		(1.79	)		(2.05	)
From capital gains		—			(0.10	)		(6.12	)		(3.73	)		(4.84	)		(3.83	)
Tax return of capital		—			(0.29	)		—			—			(0.07	)		—
Total Distributions		(0.41	)		(1.79	)		(7.61	)		(5.52	)		(6.70	)		(5.88	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)		—
REPAYMENT OF ADVISORY FEES		—			—			—			—			0.06			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.14			(21.59	)		(19.18	)		7.60			(4.63	)		5.61
NET ASSET VALUE, END OF PERIOD	$	12.97		$	12.83		$	34.42		$	53.60		$	46.00		$	50.63
TOTAL RETURN( d)		5.26	%(f)		(59.07	)%		(22.38	)%		29.18	%		3.96	%(e)		26.67	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	8,223		$	9,597		$	37,461		$	67,851		$	57,629		$	59,943
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income		9.34	%(g)		6.77	%		3.91	%		3.58	%		3.76	%		5.22	%
Operating expenses		0.63	%(g)		1.46	%		2.29	%		2.15	%		2.71	%		2.02	%
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income		n/a			5.68	%		2.39	%		1.91	%		2.10	%		4.00	%
Operating expenses		n/a			2.55	%		3.81	%		3.82	%		4.37	%		3.24	%
PORTFOLIO TURNOVER RATE		227	%(f)		189	%		222	%		152	%		206	%		173	%

(a) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

(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) In 2005, the return excludes a reimbursement by the adviser for advisory fee correction. Including such item, the total return would have increased by 0.13%.

(f) Not Annualized.

(g) Annualized.

June 30, 2009 48 See Notes to Financial Statements

Financial Highlights

For a share outstanding throughout the periods presented.

Forward Strategic Realty Fund

	CLASS C
	SIX MONTHS ENDED JUNE 30, 2009(a) (UNAUDITED)			YEAR ENDED DECEMBER 31, 2008			YEAR ENDED DECEMBER 31, 2007			YEAR ENDED DECEMBER 31, 2006			YEAR ENDED DECEMBER 31, 2005			YEAR ENDED DECEMBER 31, 2004
NET ASSET VALUE, BEGINNING OF PERIOD	$	12.84		$	34.41		$	53.56		$	45.97		$	50.60		$	44.99
INCOME/(LOSS) FROM OPERATIONS:
Net investment income		0.39			1.64	(b)		1.22	(b)		0.98	(b)		1.04	(b)		1.84	(b)
Net realized and unrealized gain/(loss) on investments		0.15			(21.43	)		(12.78	)		12.13			0.97			9.65
Total from Investment Operations		0.54			(19.79	)		(11.56	)		13.11			2.01			11.49
LESS DISTRIBUTIONS:
From investment income		(0.41	)		(1.39	)		(1.47	)		(1.79	)		(1.79	)		(2.05	)
From capital gains		—			(0.10	)		(6.12	)		(3.73	)		(4.84	)		(3.83	)
Tax return of capital		—			(0.29	)		—			—			(0.07	)		—
Total Distributions		(0.41	)		(1.78	)		(7.59	)		(5.52	)		(6.70	)		(5.88	)
REDEMPTION FEES ADDED TO PAID IN CAPITAL		0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)		0.00	(c)		—
REPAYMENT OF ADVISORY FEES		—			—			—			—			0.06			—
NET INCREASE/(DECREASE) IN NET ASSET VALUE		0.13			(21.57	)		(19.15	)		7.59			(4.63	)		5.61
NET ASSET VALUE, END OF PERIOD	$	12.97		$	12.84		$	34.41		$	53.56		$	45.97		$	50.60
TOTAL RETURN(d)		5.24	%(f)		(59.08	)%		(22.36	)%		29.18	%		3.97	%(e)		26.69	%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (in 000s)	$	18,895		$	22,658		$	90,500		$	183,049		$	148,222		$	146,183
RATIOS TO AVERAGE NET ASSETS (excluding interest expense):
Net investment income		9.32	%(g)		6.77	%		3.90	%		3.58	%		3.76	%		5.22	%
Operating expenses		0.62	%(g)		1.46	%		2.30	%		2.15	%		2.71	%		2.02	%
RATIOS TO AVERAGE NET ASSETS (including interest expense):
Net investment income		n/a			5.68	%		2.39	%		1.91	%		2.10	%		4.00	%
Operating expenses		n/a			2.55	%		3.81	%		3.82	%		4.37	%		3.24	%
PORTFOLIO TURNOVER RATE		227	%(f)		189	%		222	%		152	%		206	%		173	%

(a) Prior to the close of business on June 12, 2009, the Forward Strategic Realty Fund was known as the Kensington Strategic Realty Fund.

(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) In 2005, the return excludes a reimbursement by the adviser for advisory fee correction. Including such item, the total return would have increased by 0.13%.

(f) Not Annualized.

(g) Annualized.

See Notes to Financial Statements 49 June 30, 2009

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”). As of June 30, 2009, the Trust has 34 registered funds. This semi-annual report describes 4 funds offered by the Trust (each a “Fund” and collectively, the “Funds”). Each of the Funds are successors to previously operational funds which were series of The Kensington Funds, a Delaware statutory trust, and were reorganized into series of the Trust effective as of the close of business on June 12, 2009. The accompanying financial statements and financial highlights are those of the Forward Global Infrastructure Fund (prior to the close of business on June 12, 2009, known as the Kensington Global Infrastructure Fund) (“Global Infrastructure Fund”), the Forward International Real Estate Fund (prior to the close of business on June 12, 2009, known as the Kensington International Real Estate Fund) (“International Real Estate Fund”), the Forward Select Income Fund (prior to the close of business on June 12, 2009, known as the Kensington Select Income Fund) (“Select Income Fund”), and the Forward Strategic Realty Fund (prior to the close of business on June 12, 2009, known as the Kensington Strategic Realty Fund) (“Strategic Realty Fund”).

The Global Infrastructure Fund seeks to achieve total return through capital appreciation and current income through investing primarily in global infrastructure-related securities. The International Real Estate Fund seeks to achieve total return from both capital appreciation and current income through investing primarily in a portfolio of non-U.S. real estate securities. The Select Income Fund seeks high current income and potential for modest long-term growth of capital. The Strategic Realty Fund seeks total return through a combination of high current income relative to equity investment alternatives, plus long-term growth of capital.

The Funds offer Institutional Class (prior to the close of business on June 12, 2009, known as Class Y shares), Class A, Class B and Class C shares.

Effective May 1, 2009, the Funds no longer offer for sale Class B Shares of the Funds and shareholders are no longer able to make new or additional investments in Class B shares. As of May 1, 2009, the current holders of Class B shares of the Fund will continue to be permitted to: hold their Class B shares until they are converted to Class A shares; exchange their Class B shares for Class B shares of another Fund; automatically reinvest dividends in Class B shares; and make additional investments in other share classes of the Funds, subject to pricing and eligibility requirements of those other classes.

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 of all Funds are subject to an initial sales charge of up to 5.75% imposed at the time of purchase. Class A shares of the Funds 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 policies established by the Board of Trustees. Class B shares of all Funds are subject to a 5.00% CDSC for redemptions made within one year of purchase, in accordance with policies established by the Board of Trustees. Class C shares of all Funds are subject to a 1.00% CDSC for redemptions made within one year of purchase, in accordance with policies established by the Board of Trustees. 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.

The Funds invest a substantial portion of assets in the equity securities of issuers engaged in the

June 30, 2009 50

Notes to Financial Statements (Unaudited)

real estate industry, including Real Estate Investment Trusts (“REITs”). As a result, the Funds may be more affected by economic and regulatory developments in the real estate industry than would an equity fund not concentrating its investments in a particular industry.

2. Significant Accounting Policies

The following is a summary of significant accounting policies followed by each Fund. These policies are in conformity with accounting principles generally accepted in the United States of America. The preparation of financial statements in accordance 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 during the reporting period. Management believes the estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Funds ultimately realize upon sale of the securities. The financial statements have been prepared as of the close of the New York Stock Exchange (“NYSE”) on June 30, 2009.

Prior year information has been changed to reflect current presentation.

Portfolio Valuation: Portfolio securities or contracts that are listed or traded on a national securities exchange, contract market or over-the-counter market, and that are freely transferable, are valued at the last reported sale price or a market’s official closing price on the valuation day, or, if there have been no sales that day, at the average of the last reported bid and ask price on the valuation day for long positions or ask prices for short positions. If no bid or ask prices are quoted before closing, such securities or contracts are valued at either the last available sale price or at fair value.

Debt securities (including convertible debt) that have more than 60 days remaining until maturity or that are credit impaired for which market data is readily available are valued on the basis of the average of the latest bid and ask price. Debt securities that mature in less than 60 days and that are not credit impaired are valued at amortized cost if their original maturity was 60 days or less, or by amortizing the value as of the 61st day prior to maturity if the original term to maturity exceeds 60 days (unless the Board of Trustees determines that this method does not represent fair value). For most debt securities, the Funds receive pricing information from independent pricing vendors (approved by the Board of Trustees) which also use information provided by market makers or estimates of value obtained from yield data relating to securities with similar characteristics. As appropriate, quotations for high yield bonds may also take additional factors into consideration such as the activity of the underlying equity or sector movements. In the event valuation information is not available from third party pricing vendors for a security held by a Fund, such security may be valued by quotations obtained from dealers that make markets in such securities or otherwise determined based on the fair value of such securities. Because long-term bonds and lower-rated bonds tend to be less liquid, their values may be determined based on fair value more frequently than portfolio holdings that are more frequently traded or that have relatively higher credit ratings.

Futures, options on futures, and swap contracts that are listed or traded on a national securities exchange, commodities exchange, contract market or comparable over-the-counter market, and that are freely transferable, are valued at their closing settlement price on the exchange on which they are primarily traded or based upon the current settlement price for a like instrument acquired on the day on which the option is being

51 June 30, 2009

Notes to Financial Statements (Unaudited)

valued. A settlement price may not be used if the market makes a limit move with respect to a particular commodity. Over-the-counter futures, options on futures and swap contracts for which market quotations are readily available are valued based on quotes received from third party pricing services or one or more dealers that make markets in such securities.

Options on securities and options on indices are valued using the last quoted sale price as of the close of the securities or commodities exchange on which they are traded. Certain investments including options may trade in the over-the-counter market and generally are valued based on quotes received from a third party pricing service or one or more dealers that make markets in such securities, or at fair value.

Portfolio securities that are primarily traded on foreign securities exchanges are valued at the preceding closing values of such securities on their respective exchanges, except when an occurrence subsequent to the time a value was so established is likely to have changed such value. In such an event, the fair value of those securities are determined in good faith through consideration of other factors in accordance with procedures established by, and under the general supervision of, the Board of Trustees.

Forward currency exchange contracts have a market value determined by the prevailing foreign currency exchange daily rates and current foreign currency exchange forward rates. The foreign currency exchange forward rates are calculated using an automated system that estimates rates on the basis of the current day foreign currency exchange rates and forward foreign currency exchange rates supplied by a pricing service. Foreign exchange rates and forward foreign currency exchange rates may generally be obtained at the close of the NYSE, normally 4:00 p.m. Eastern Time.

Redeemable securities issued by open-end registered investment companies are valued at the investment company’s applicable net asset value, with the exception of exchange-traded open-end investment companies, which are priced as equity securities.

All other securities and other assets are carried at their fair value as determined in good faith 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. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE, normally 4:00 p.m. Eastern Time. As available and as provided by an appropriate pricing service, translation of foreign security and currency market values may also

June 30, 2009 52

Notes to Financial Statements (Unaudited)

occur with the use of foreign exchange rates obtained at approximately 11:00 a.m. Eastern Time, which approximates the close of the London Stock Exchange. 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 may write or purchase options contracts. When a 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 that 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 affecting 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 Fund has 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. As of June 30, 2009, the Funds held no purchased or written options.

Written option activity for the six months ended June 30, 2009 was as follows:

Global Infrastructure Fund
WRITTEN PUT OPTIONS	CONTRACTS		PREMIUMS
Outstanding as of December 31, 2008	1,290		$	104,079
Positions opened	130			12,704
Exercised or closed	(750	)		(47,850	)
Expired	(670	)		(68,933	)
Outstanding as of June 30, 2009	0		$	0

Strategic Realty Fund
WRITTEN PUT OPTIONS	CONTRACTS		PREMIUMS
Outstanding as of December 31, 2008	100		$	90,579
Positions opened	400			67,273
Exercised or closed	(101	)		(21,283	)
Expired	(399	)		(136,569	)
Outstanding as of June 30, 2009	0		$	0

Short Sales: The Funds 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 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. As of June 30, 2009 the Funds held no securities sold short.

Cash Management Transactions: The Funds may 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 the BBH Grand Cayman branch or a branch of a pre-approved, world-class commercial bank. This fully automated program allows the Funds to earn interest on cash balances while remaining diversified. Excess cash invested with

53 June 30, 2009

Notes to Financial Statements (Unaudited)

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: Each Fund from time to time may lend portfolio securities to broker-dealers, banks or institutional borrowers of securities. The loans are secured by collateral in the form of cash that is equal to at least 102% of the fair value of the securities loaned plus accrued interest, if any. Upon lending its securities to third parties, a Fund receives compensation in the form of income on the investment of the cash collateral. 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, and 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 the extent practicable, 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. 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 a Fund of securities lending are that the borrower may not provide additional collateral when required or return the securities when due. The Fund receives cash collateral which is invested in the Brown Brothers Investment Trust Securities Lending Investment Fund. 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. The Fund bears the risk of any income or gains and losses from investing and reinvesting cash pledged as collateral. During the time portfolio securities are on loan, the borrower pays the lending Fund the economic equivalent of any dividends or interest paid on such securities. 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. As of June 30, 2009, there were no Funds with securities on loan.

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.

Real Estate Investment Trusts (“REITs”): Each 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.

June 30, 2009 54

Notes to Financial Statements (Unaudited)

Derivative Instruments and Hedging Activities: The Funds have adopted the provisions of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. SFAS No. 161 has been established to improve financial reporting for derivative instruments and hedging activities as it relates to disclosure associated with these types of investments. The following discloses the amounts related to the Funds use of derivative instruments and hedging activities. There were no Funds that held Derivative Instruments as of June 30, 2009.

The Effect of Derivatives Instruments on the Statement of Operations for the six months ended June 30, 2009:

DERIVATIVES NOT ACCOUNTED FOR AS HEDGING INSTRUMENTS UNDER STATEMENT 133	LOCATION OF GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME	REALIZED GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME		CHANGE IN UNREALIZED GAIN/(LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
Global Infrastructure Fund
Equity Contracts	Net realized gain on option contracts/net change in unrealized depreciation on option contracts	$	68,933	$	(10,899	)
Total		$	68,933	$	(10,899	)
Strategic Realty Fund
Equity Contracts	Net realized gain on option contracts/net change in unrealized depreciation on option contracts	$	152,584	$	(90,079	)
Total		$	152,584	$	(90,079	)

Leverage: The Select Income Fund and the Strategic Realty Fund can purchase securities with borrowed money including bank overdrafts (a form of leverage). Each Fund may borrow amounts up to one-third of the value of its assets. Leverage exaggerates the effect on the net asset value of any increase or decrease in the market value of the Fund’s portfolio securities. These borrowings will be subject to interest costs, which may or may not be recovered by appreciation of the securities purchased; in certain cases, interest costs may exceed the return received on the securities purchased.

Effective June 16, 2009, the Select Income Fund maintains a line of credit with BNP Paribas (acting through its New York Branch). Borrowing under this arrangement pays interest of 1.20% above the one-month LIBOR rate. The Fund paid an arrangement fee of $187,500 to be expensed over the next three years. The Fund has pledged a portion of its investment securities as the collateral for this line of credit. As of June 30, 2009, the market value of the investment securities pledged as collateral totaled $519,503,394. As of June 30, 2009, the Fund has drawn down $153,585,536 from the line of credit.

Prior to June 16, 2009, the Select Income Fund maintained a line of credit with JP Morgan Chase up to a maximum of $100,000,000. Borrowing under this arrangement paid interest of 0.75% above the Fed Funds rate.

The average interest rate charged and the average outstanding demand loan payable for the six months ended June 30, 2009 was as follows:

	AVERAGE INTEREST RATE		AVERAGE OUTSTANDING DEMAND LOAN PAYABLE
Select Income Fund	1.057	%	$	76,405,637
Strategic Realty Fund	0.812	%		896,553

55 June 30, 2009

Notes to Financial Statements (Unaudited)

Fair Value Measurements: FASB SFAS No. 157 is effective for the Funds’ financial statements issued after December 31, 2007. SFAS No. 157 defines fair value, establishes a fair value hierarchy and specifies that a valuation technique used to measure fair value shall maximize the use of observable inputs and minimize the use of unobservable inputs. A three-tier hierarchy has been established to classify fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.

Various inputs are used in determining the value of each Fund’s investments as of the reporting period end. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

Level 1—Quoted prices in active markets for identical investments

Level 2—Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3—Significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2009.

INVESTMENTS IN SECURITIES	LEVEL 1		LEVEL 2		LEVEL 3		TOTAL
Global Infrastructure Fund
Common Stocks	$	50,662,801	$	82,301,953		—	$	132,964,754
Short-Term Bank Debt Instruments		2,748,495		—		—		2,748,495
Total	$	53,411,296	$	82,301,953		—	$	135,713,249
International Real Estate Fund
Common Stocks	$	2,590,386	$	52,904,786		—	$	55,495,172
Short-Term Bank Debt Instruments		1,394,831		—		—		1,394,831
Total	$	3,985,217	$	52,904,786		—	$	56,890,003
Select Income Fund
Common Stocks	$	47,278,481		—		—	$	47,278,481
Convertible Preferred Stocks		1,264,317		—		—		1,264,317
Preferred Stocks		579,981,818	$	10,187,713	$	16,655,566		606,825,097
Corporate Bonds		—		27,591,612		—		27,591,612
Short-Term Bank Debt Instruments		23,621,708		—		—		23,621,708
Total	$	652,146,324	$	37,779,325	$	16,655,566	$	706,581,215
Strategic Realty Fund
Common Stocks	$	38,615,333		—		—	$	38,615,333
Exchange Traded Funds		4,345,014		—		—		4,345,014
Preferred Stocks		18,336,180		—		—		18,336,180
Corporate Bonds		—	$	1,001,469		—		1,001,469
Short-Term Bank Debt Instruments		1,876,760		—		—		1,876,760
Total	$	63,173,287	$	1,001,469		—	$	64,174,756

June 30, 2009 56

Notes to Financial Statements (Unaudited)

As of June 30, 2009, there were no other financial instruments in the Funds. Other financial instruments are derivative instruments not reflected in the Portfolio of Investments, such as written options, short sales, currency contracts, futures, forward contracts and swap contracts.

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:

	INVESTMENTS IN SECURITIES			OTHER FINANCIAL INSTRUMENTS(a)
Select Income Fund
Common Stocks
Balance as of 12/31/08	$	3,514,324		—
Realized gain/(loss)(b)		—		—
Change in unrealized appreciation/(depreciation)(b)		(2,601,755	)	—
Net purchases/(sales)		—		—
Transfers in and/(out) of Level 3		15,742,997		—
Balance as of 6/30/09	$	16,655,566		—

(a) There was no realized gain/(loss) earned during the six months ended June 30, 2009 for other financial instruments for the Select Income Fund.

(b) Net realized gain/(loss) and net unrealized appreciation/(depreciation) are included in the related amounts on investments in the Statement of Operations.

For the six months ended June 30, 2009, the other Funds did not have significant unobservable inputs (Level 3) used in determining fair value. Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable.

Distributions to Shareholders: Dividends from net investment income, if any, are declared and paid semi-annually for the International Real Estate Fund and Global Infrastructure Fund and quarterly for the Select Income Fund and Strategic Realty Fund. Net realized capital gains, if any, are distributed 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.

The Funds recharacterize distributions received from REIT investments based on information provided by the REITs into the following categories: ordinary income, long-term capital gains, and return of capital. If information is not available on a timely basis from the REITs, the recharacterization will be estimated based on available information which may include the previous year’s allocation. If new or additional information becomes available from the REITs at a later date, a recharacterization will be made in the following year. The Funds record as dividend income the amount recharacterized as ordinary income and as realized gain the amount recharacterized as long-term capital gain in the Statement of Operations, and the amount recharacterized as a return of capital as a reduction to the cost of investments in the Statement of Assets and Liabilities and in the Portfolio of Investments. These recharacterizations are reflected in the accompanying financial statements.

Federal Income Taxes: The Trust treats each Fund as a separate entity for Federal income tax purposes. Each Fund intends to continue to

57 June 30, 2009

Notes to Financial Statements (Unaudited)

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

As of and during the six months ended June 30, 2009, the Funds did not have a liability for any unrecognized tax benefits in the accompanying financial statements. The Funds recognize the interest and penalties, if any, related to the unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the Funds did not incur any interest or penalties.

Each of the Funds’ federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

Expenses: Expenses that are specific to a Fund or class of shares of a Fund are charged directly to that Fund or share class. 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 distribution (Rule 12b-1) and/or shareholder service plans 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 in a segregated account cash or liquid securities equal to the amount of the commitment. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in value based upon changes in the value of the security or 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

June 30, 2009 58

Notes to Financial Statements (Unaudited)

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.

ReFlow Management Co., LLC, the entity that facilitates the day-to-day operations of ReFlow, is under common control with Forward Management, LLC (“Forward Management”), 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, 2009, there were no ReFlow fees incurred by the Funds.

3. Investment Management Services

The Trust has entered into an investment management agreement with Forward Management 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, 2009, based on each Fund’s average daily net assets: Global Infrastructure Fund, 0.90%; International Real Estate Fund, 1.00%; Select Income Fund, 1.00%; and Strategic Realty Fund, 1.00%.

Related Party Transactions: Prior to the close of business on June 12, 2009, investment advisory services were provided to the Funds by the Kensington Investment Group, Inc (the “Previous Advisor”), which received investment management fees for their services pursuant to the terms of the investment advisory agreements for each of the Funds. The investment advisory fees, which were computed daily and paid monthly, were payable at the following annual rates for the Funds, calculated as a percentage of each particular Fund’s average daily net assets: Global Infrastructure Fund, 0.90%; International Real Estate Fund, 1.00%; and Select Income Fund 1.00%. The investment advisory fee for the Strategic Realty Fund is described more fully immediately below.

Prior to the close of business on June 12, 2009, pursuant to the investment advisory agreement for the Strategic Realty Fund, the Fund paid the Previous Advisor a monthly advisory fee with two components, a base component and a performance-based component, so that if the Fund’s investment performance were greater than the investment record of the Fund’s benchmark index, the FTSE NAREIT Composite Index, the Previous Advisor earned more, and if it were less than that of the index, the Previous Advisor earned less. The first component of the Strategic Realty Fund’s advisory fee was a “base fee,” paid monthly, equal to a monthly rate based on an annual percentage rate of 1.50% of daily net assets averaged over the most recent month (i.e., the current month for which the fee is being calculated). The second component was a performance adjustment that either increased or decreased the base fee, depending on how the Fund performed (calculated on Class A share performance for these purposes) relative to its benchmark index over a rolling 12-month period ending on the end of the most recent month (the “performance period”). The performance adjustment, which was equal, on an averaged monthly basis, to 1/12th of 15% of the difference between the performance of the Fund and the investment record of the benchmark (rounded to the third decimal place), was calculated on the Strategic Realty Fund’s net assets averaged over the performance period. The performance adjustment reached a maximum positive or negative average monthly adjustment of 1/12th of 1.00% of the Fund’s daily net assets averaged over the performance period if the Fund outperformed, or underperformed, the investment record of the

59 June 30, 2009

Notes to Financial Statements (Unaudited)

benchmark by 6.667 percentage points or more over the performance period. As the base fee and the performance adjustment were accrued daily (and not monthly), actual rates varied monthly based upon the number of days in a particular month, but, on a monthly basis, equaled, on average, 1/12th of an annual rate.

Expense Limitations: Forward Management has agreed to limit the total expenses of certain classes of certain 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 will reimburse Forward Management for any fee waivers and expense reimbursements made by Forward Management, provided that any such reimbursements made by a Fund to Forward Management 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.

FUND	INSTITUTIONAL CLASS		INVESTOR CLASS		CLASS A		CLASS B		CLASS C		END DATE
Global Infrastructure(a)	1.25	%	1.65	%	1.50	%	2.25	%	2.25	%	June 30, 2011
International Real Estate(b)	1.40	%	1.80	%	1.65	%	2.40	%	2.40	%	June 30, 2011
Select Income(c)	1.35	%	1.75	%	1.60	%	2.35	%	2.35	%	June 30, 2011
Strategic Realty (d)	1.90	%	2.30	%	2.15	%	2.90	%	2.90	%	June 30, 2011

(a) From January 1, 2009 to the close of business on June 12, 2009, the Previous Advisor contractually agreed, until December 31, 2010, to waive a portion of its fees in amounts necessary to limit the Fund’s Institutional Class, Class A, Class B and Class C shares operating expenses to an annual rate (as a percentage of the average daily net assets) of 1.25%, 1.50%, 2.25% and 2.25% respectively.

(b) From January 1, 2009 to the close of business on June 12, 2009, the Previous Advisor contractually, until December 31, 2010, agreed to waive a portion of its fees in amounts necessary to limit the Fund’s Institutional Class, Class A, Class B and Class C shares operating expenses to an annual rate (as a percentage of the average daily net assets) of 1.40%, 1.65%, 2.40% and 2.40% respectively.

(c) From January 1, 2009 to the close of business on June 12, 2009, the Previous Advisor contractually agreed, until December 31, 2010, to waive a portion of its fees in amounts necessary to limit the Fund’s Institutional Class, Class A, Class B and Class C shares operating expenses to an annual rate (as a percentage of the average daily net assets) of 1.35%, 1.60%, 2.35% and 2.35% respectively.

(d) From January 1, 2009 to the close of business on June 12, 2009, the Previous Advisor contractually agreed, until December 31, 2010, to waive a portion of its fees in amounts necessary to limit the Fund’s Institutional Class, Class A, Class B and Class C shares operating expenses to an annual rate (as a percentage of the average daily net assets) of 2.00%, 2.25%, 3.00% and 3.00% respectively.

For the six months ended June 30, 2009, the fee waivers and/or reimbursements were as follows:

FUND	FEES WAIVED/ REIMBURSED BY ADVISOR		RECOUPMENT OF PAST WAIVED FEES BY ADVISOR		TOTAL
Global Infrastructure
Institutional Class	$	31,576	$	0	$	31,576
Class A		43,923		0		43,923
Class B		2,518		0		2,518
Class C		10,122		0		10,122

June 30, 2009 60

Notes to Financial Statements (Unaudited)

FUND	FEES WAIVED/ REIMBURSED BY ADVISOR		RECOUPMENT OF PAST WAIVED FEES BY ADVISOR		TOTAL
International Real Estate
Institutional Class	$	8,238	$	0	$	8,238
Class A		65,386		0		65,386
Class B		2,878		0		2,878
Class C		19,187		0		19,187
Select Income
Institutional Class		15,179		0		15,179
Class A		47,442		0		47,442
Class B		4,506		0		4,506
Class C		23,079		0		23,079

As of June 30, 2009, the balances of recoupable expenses for each Fund were as follows:

FUND	2006	2007		2008		2009		TOTAL
Global Infrastructure
Institutional Class	N/A	$	9,398	$	77,499	$	31,576	$	118,473
Class A	N/A		43,735		166,617		43,923		254,275
Class B	N/A		3,081		8,690		2,518		14,289
Class C	N/A		14,096		47,012		10,122		71,230
International Real Estate
Institutional Class(a)	N/A		3,566		19,662		9,743		32,971
Class A(a)	N/A		107,651		239,464		107,784		454,899
Class B(a)	N/A		12,239		17,689		7,117		37,045
Class C(a)	N/A		62,254		101,777		41,112		205,143
Select Income
Institutional Class	N/A		—		—		15,179		15,179
Class A	N/A		—		—		47,442		47,442
Class B	N/A		—		—		4,506		4,506
Class C	N/A		—		—		23,079		23,079

(a) The recoupable expense balances include recoupable expenses from the reorganization of the Kensington Global Real Estate Fund.

4. Distribution Plans and Shareholder Services Plans

The Funds have adopted Service and Distribution Plans (the “Distribution Plans”) pursuant to Rule 12b-1 of the 1940 Act which allow each of the Funds to pay for the sale and distribution of its shares at an annual rate of up to 0.35% of the Fund’s average daily net assets attributable to Class A shares and up to 0.75% of the Fund’s average daily net assets attributable to Class B and Class C shares.

Prior to the close of business on June 12, 2009, each Fund had adopted a Service and Distribution Plan (the “Prior Distribution Plans”) pursuant to Rule 12b-1 under the 1940 Act. Under the terms of the Prior Distribution Plans, the Funds compensated Quasar Distributors, LLC, the Funds’ prior distributor, for services provided and expenses incurred in connection with the distribution and marketing of shares of each Fund and servicing of each Fund’s shareholders. The prior distributor was compensated 0.25% per annum of the Class A shares average daily net assets and 1.00% per annum of the Class B and Class C shares average daily net assets.

In addition, the Funds have a shareholder services plan (the “Shareholder Services Plan”) that may be used to pay shareholder servicing fees at

61 June 30, 2009

Notes to Financial Statements (Unaudited)

an annual rate of up to 0.05% of the Fund’s average daily net assets attributable to Institutional Class shares, up to 0.20% of the Fund’s average daily net assets attributable to Class A shares, and up to 0.25% of the Fund’s average daily net assets attributable to Class B and Class C shares.

The expenses of the Distribution Plans and the Shareholder Services Plan are reflected as distribution and service fees in the Statement of Operations.

Administrative Services Plan: Prior to the close of business on June 12, 2009, the Funds had adopted an Administrative Services Plan pursuant to which each Fund (or Class of shares thereof) was authorized to make payments to certain entities which may include banks, broker-dealers and other types of service providers for providing administrative services with respect to shares of the Funds attributable to or held in the name of the service provider for its clients or customers with whom they had a servicing relationship. Under the terms of Administrative Services Plan, each Fund (or Class of shares thereof) was authorized to make payments up to a maximum rate of 0.25% of the average daily net assets of the Fund attributable to, or held in the name of, the service provider for providing the types of applicable administrative services covered under the terms of the Administrative Service Plan. This Administrative Services Plan has been terminated as of the close of business on June 12, 2009 in connection with reorganization of the Funds into series of the Trust. The expenses of the Administrative Services Plan are reflected as administrative services plan fees in the Statement of Operations.

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.

ALPS Fund Services, Inc. (“AFS”) serves as the Funds’ administrator. Prior to June 1, 2009, US Bancorp Fund Services, LLC (“USBFS”) served as the Funds’ administrator and fund accountant.

AFS serves as the Fund’s transfer agent and dividend paying agent.

Prior to the close of business on June 12, 2009, USBFS served as the Funds’ transfer agent and Quasar Distributors, LLC, an affiliate of USBFS, served as the Fund’s distributor and principal underwriter.

BBH is the Funds’ custodian. Prior to June 17, 2009, Custodial Trust Company was the Funds’ custodian.

5. Trustee and Officer Fees

The Funds do not pay any compensation directly to the officers or trustees who are also trustees, officers or employees of Forward Management or its affiliates, except as noted below. As of June 30, 2009, there were four Trustees, three of whom are not “interested persons” of the Trust within the meaning of that term under the 1940 Act, (each, an “Independent Trustee”). The Trust, on behalf of the Funds, pays each Independent Trustee a retainer fee in the amount of $25,000 per year, $10,000 each per regular meeting for attendance in person, $5,000 each per regular meeting for attendance by telephone, $3,000 each for attendance in person at each special meeting that is not held in conjunction with a regular meeting, and $2,250 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 $10,000 per year. In addition, reasonable expenses of the Board of Trustees are reimbursed by the Funds. The Trust receives no compensation from the Funds.

June 30, 2009 62

Notes to Financial Statements (Unaudited)

The Funds’ Chief Compliance Officer is employed by Forward Management. The Funds pay an allocated portion of the Chief Compliance Officer’s compensation and other related expenses, subject to approval by the Board of Trustees.

As mentioned above, each of the Funds are successors to previously operational funds which were series of The Kensington Funds, a Delaware statutory trust. Prior to close of business on June 12, 2009, certain officers and trustees of The Kensington Funds were affiliated with the Previous Advisor. Such officers and trustees received no compensation from The Kensington Funds for serving in their respective roles. An officer of the Previous Advisor and The Kensington Funds served as The Kensington Funds’ Chief Compliance Officer and received an annual compensation of $150,000 from The Kensington Funds. Each of the independent trustees of The Kensington Funds received a $3,500 fee for each board meeting attended and any travel expenses incurred, which was allocated amongst the Funds. Each of the independent trustees of The Kensington Funds also received a $16,000 annual retainer. The chairman of the audit committee received $750 for each board meeting attended and an annual retainer of $8,000. The trustees of The Kensington Funds were also reimbursed for expenses related to their service to the Funds.

6. Indemnifications

Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties with respect to the Funds. In addition, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with vendors and others that provide general indemnification. Each Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust and/or 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 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. Prior to the close of business on June 12, 2009, the Funds imposed a short-term redemption fee on shares purchased and held less than 75 days. The fee was 1% of the redemption value and is deducted from the redemption proceeds. Such redemptions are reflected as “cost of shares redeemed” in the Statement of Changes in Net Assets. The redemption fees that were charged for the period of January 1, 2009 through the close of business on June 12, 2009 for the Global Infrastructure Fund, the International Real Estate Fund, the Select Income Fund and the Strategic Realty Fund were $33,732, $4,251, $343,903 and $820, respectively.

63 June 30, 2009

Notes to Financial Statements (Unaudited)

The following entities owned of record or beneficially, as of June 30, 2009, 5% or greater of any class of the Funds’ outstanding equity securities:

FUND	NAME	PERCENTAGE
Global Infrastructure
Institutional Class	Charles Schwab & Co., Inc.	30.58	%
Global Infrastructure
Class A	LPL Financial Services	16.94	%
	Charles Schwab & Co., Inc.	15.70	%
International Real Estate
Institutional Class	Pershing LLC	19.01	%
	Saxon & Co.	5.74	%
International Real Estate
Class A	LPL Financial Services	11.87	%
	Charles Schwab & Co., Inc.	7.81	%
Select Income
Institutional Class	Pershing LLC	11.64	%
	Charles Schwab & Co., Inc.	6.92	%
	LPL Financial Services	5.70	%
Select Income
Class A	LPL Financial Services	14.23	%
	Charles Schwab & Co., Inc.	6.47	%
Strategic Realty
Institutional Class	Pershing LLC	55.35	%
	Heritage Bank of Commerce FBO the Kramer Revocable Trust	12.20	%
	Paul Gray	5.42	%
Strategic Realty
Class A	LPL Financial Services	8.32	%

8. Purchases and Sales of Investments

Investment transactions for the six months ended June 30, 2009, excluding temporary short-term investments, were as follows:

FUND	COST OF INVESTMENTS PURCHASED		PROCEEDS FROM INVESTMENTS SOLD
Global Infrastructure	$	44,121,637	$	24,789,883
International Real Estate		21,973,529		36,739,863
Select Income		592,702,030		431,998,793
Strategic Realty		142,603,862		148,350,976

June 30, 2009 64

Notes to Financial Statements (Unaudited)

9. Tax Basis Information

Tax Basis of Investments: As of June 30, 2009, 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)
Global Infrastructure	$	182,288,755	$	6,649,765	$	(53,225,271	)	$	(46,575,506	)
International Real Estate		72,354,105		4,517,977		(19,982,079	)		(15,464,102	)
Select Income		856,397,477		27,710,070		(177,526,332	)		(149,816,262	)
Strategic Realty		78,657,201		6,878,123		(21,360,568	)		(14,482,445	)

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, 2008, the Funds elected to defer capital losses and currency losses occurring between November 1, 2008 and December 31, 2008 as follows:

FUND	CAPITAL LOSS
Global Infrastructure	$	12,009,595
International Real Estate		20,494,957
Select Income		10,442,861
Strategic Realty		89,957,216

Capital Loss Carryforwards: As of December 31, 2008 the following Funds had available for Federal income tax purposes unused capital losses as follows:

FUND	EXPIRING IN 2015		2016
Global Infrastructure		—	$	22,944,101
International Real Estate	$	2,652,205		64,908,383
Select Income		12,192,886		157,405,438
Strategic Realty		—		94,169,609

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 amount and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of June 30, 2009.

The tax character of distributions paid for the year ended December 31, 2008 were as follows:

FUND	ORDINARY INCOME TOTAL		LONG-TERM CAPITAL TOTAL		FOREIGN TAXES PASSED THROUGH TOTAL		RETURN OF CAPITAL TOTAL
Global Infrastructure	$	2,953,837		—	$	467,495	$	18,494
International Real Estate		88,243		—		—		2,307,291
Select Income		39,675,756		—		—		16,059,018
Strategic Realty		11,059,449	$	557,512		—		2,240,545

65 June 30, 2009

Notes to Financial Statements (Unaudited)

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.

11. International Real Estate Fund Acquisition of Kensington Global Real Estate Fund: On May 27, 2009, shareholders of the Kensington Global Real Estate Fund (the “Acquired Fund”), a series of The Kensington Funds, approved the acquisition of the Acquired Fund by the International Real Estate Fund (prior to the close of business on June 12, 2009, known as the Kensington International Real Estate Fund, a separate series of The Kensington Funds) (the “Acquiring Fund”). Immediately prior to the close of business on June 12, 2009, the assets of the Acquired Fund were acquired by the Acquiring Fund in exchange for shares of the Acquiring Fund and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund. Upon the closing of the acquisition, the Acquiring Fund issued 15,309, 297,843, 41,462 and 202,743 shares of Institutional Class, Class A, Class B and Class C, respectively, in exchange for net assets of the Acquired Fund valued at $220,810, $4,296,974, $597,649 and $2,919,185, respectively. On June 15, 2009, the combined value of the Acquired Fund (which included accumulated realized losses of $(4,847,329) and unrealized depreciation of $(960,928)) and the Acquiring Fund was $58,920,332. The exchange of shares qualified as a tax-free reorganization for federal income tax purposes. The unused capital loss carryforward totaling $18,159,349 for potential utilization and is subject to tax limitations.

12. Subsequent Events

The Funds have evaluated the need for disclosures and/or adjustments resulting from subsequent events through August 25, 2009 (the date the financial statements were available to be issued). This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments.

June 30, 2009 66

Approval of the Investment Advisory Agreement (Unaudited)

The Board of Trustees (the “Board”) of the Trust oversees the management of each Series of the Trust and, as required by law, initially approves, and determines annually whether to renew, the investment advisory agreement and sub-advisory agreements, as applicable for management of the series of the Trust.

At an in-person meeting of the Board held on January 7, 2009, the Board, including a majority of the Trustees who are not “interested persons” of the Trust (as defined in the 1940 Act) (the “Independent Trustees”) approved the Amended and Restated Investment Management Agreement between Forward Management and the Trust on behalf of the Forward Global Infrastructure Fund, Forward International Real Estate Fund and Forward Select Income Fund (the “Agreement”).

In addition at an in-person meeting of the Board held on March 4, 2009, the Board, including a majority of Independent Trustees, approved the Amended and Restated Investment Management Agreement between Forward Management and the Trust on behalf of the Forward Strategic Realty Fund (together with the Forward Global Infrastructure Fund, Forward International Real Estate Fund and Forward Select Income Fund, the “New Series”) (collectively with the Agreement, the “Advisory Agreement”).

Effective June 12, 2009 each of the New Series acquired all of the assets and liabilities of the corresponding series of The Kensington Funds (the “Predecessor Company”) and commenced operations.

In connection with the meetings, the Board, through counsel to the Trust and Independent Trustees and through the administrator of the New Series, requested information to enable the Trustees to evaluate the terms of the Advisory Agreement. In response, Forward Management provided materials to the Board for its evaluation. In considering whether to approve the Advisory Agreement, the Board also reviewed supplementary information, including: information relating to performance of the Predecessor Company; advisory fee and expense comparisons; financial information regarding Forward Management; descriptions of Forward Management’s compliance program; portfolio trading practices; information about the personnel to provide investment management and administrative services to the New Series; and information regarding the nature of services to be provided under the Advisory Agreement.

Discussed below are the factors the Board considered in approving the Advisory Agreement. This discussion is not intended to be all-inclusive. The Board reviewed a variety of factors and considered a significant amount of information, including information received on an ongoing basis at Board and committee meetings. The approval determinations were made on the basis of each Board member’s business judgment after consideration of all of the information taken as a whole. Individual Board members may have given different weights to certain factors and assigned various degrees of materiality to information in connection with the approval process.

In evaluating the Advisory Agreement, the Board, including the Independent Trustees, principally considered the following factors, among others: (i) the nature, extent and quality of the services expected to be provided by Forward Management; (ii) where applicable, the investment performance of the Predecessor Company and Forward Management; (iii) the reasonableness of investment advisory compensation to be paid and a comparative analysis of expense ratios of, and advisory fees paid by, similar Funds; (iv) the expected profits to be realized by Forward Management from its relationships with the New Series; (v) the extent to which the fees to be paid to Forward Management reflect economies of scale; and (vi) if

67 June 30, 2009

Approval of the Investment Advisory Agreement (Unaudited)

applicable, any benefits derived or to be derived by Forward Management from its relationship with the New Series, such as soft dollar arrangements. The Board considered the ability of Forward Management to provide an appropriate level of support and resources to the New Series and whether Forward Management has sufficiently qualified personnel. The Board also considered the overall financial soundness of Forward Management as it relates to its ability to provide services to the New Series.

Additional discussion of certain of these factors follows:

Nature, extent and quality of the services

The Board considered the nature of the services to be provided under the Advisory Agreement. The Board considered the ability of Forward Management to provide an appropriate level of investment management, support, and resources to the New Series and whether Forward Management has sufficiently qualified personnel. The Board noted the background and experience of Forward Management’s senior management and investment personnel. The Board also noted Forward Management’s representation that it intended to hire key employees, including portfolio management personnel, from the Predecessor Company’s investment manager to continue their responsibilities in connection with the New Series. The Board considered Forward Management’s ability to attract and retain qualified business professionals. The Board also determined that Forward Management has made a commitment to the recruitment and retention of high quality personnel, and maintains the financial and operational resources reasonably necessary to manage the New Series. The Board also favorably considered Forward Management’s entrepreneurial commitment to the management and success of the New Series, which entails a substantial financial and professional commitment.

The Board considered Forward Management’s compliance operations with respect to the New Series, including measures taken by Forward Management to assist the New Series in complying with Rule 38a-1 under the 1940 Act, and other issues related to the integration of the New Series into the Trust’s compliance program. The Board noted that personnel at Forward Management represented that the firm had no significant compliance or administrative problems over the past year and that no deficiencies were found by any independent audit. The Board concluded that it was satisfied with the nature, extent and quality of the services expected to be provided by Forward Management under the Advisory Agreement.

Investment performance

The Board considered peer group reports prepared by Lipper, Inc., that showed performance and expense information of the Predecessor Company relative to other comparable funds for certain periods, noting that, although the Predecessor Company was not managed by Forward Management, the investment strategies of the New Series will be substantially similar to those which were pursued by the Predecessor Company and Forward Management will retain key personnel from the Predecessor Company in connection with the management of the New Series.

The Board concluded that Forward Management has the ability to provide high quality investment management services to the New Series over the long-term, subject to ongoing review of Forward Management’s performance by the Board.

Profitability and reasonableness of advisory compensation

The Board considered the costs of services to be provided and expected profits to be realized by Forward Management from its relationship with

June 30, 2009 68

Approval of the Investment Advisory Agreement (Unaudited)

the New Series, including the overall financial soundness of Forward Management. The Board considered financial information previously provided by Forward Management, which showed a strong balance sheet with an operating loss for more recent periods. The Board noted that Forward Management has been responsive to inquiries over time regarding the firm’s financial resources and ability to serve as the investment advisor to the New Series, and the Board has been satisfied with this information. The Board noted that it generally is difficult to estimate or evaluate the expected profitability of new funds created in connection with a fund reorganization.

The Board also considered information regarding the investment management fees to be charged to the New Series by Forward Management and those Forward Management charges to other series of the Trust. The Trustees also reviewed a comparison of the estimated investment management fees and operating expenses for the New Series with those of comparable mutual funds, noting that the proposed investment management fees for the New Series were within the range of investment management fees charged to such other comparable mutual funds presented to the Board.

The Board noted that Forward Management’s business currently consists primarily of managing the series of the Trust, and that Forward Management does not currently manage a significant amount of investment accounts other than the series of the Trust, and so it is not possible to compare the advisory fees to be charged to the New Series with fees charged to other non-investment company clients of Forward Management because relevant comparisons are not available.

The Board concluded that Forward Management’s expected profitability with respect to each New Series would not be excessive and that the advisory fees to be charged are reasonable in light of the services to be provided to each New Series.

Economies of scale

The Board considered the potential of Forward Management and the New Series to experience economies of scale as the New Series grow in size. The Board noted that it was difficult to identify economies of scale prior to the completion of the reorganization of the Predecessor Company into the Trust. The Board concluded that, considering the fee and financial information, the current fee structure reflected in the Advisory Agreement is appropriate. The Board also noted that it would have the opportunity to periodically re-examine whether the New Series had achieved economies of scale and the appropriateness of management fees payable to Forward Management in the future.

Any additional benefits and other considerations

The Board considered ancillary benefits to be received by Forward Management as a result of Forward Management’s relationship with the New Series, including the fees to be paid by the New Series to ReFlow Management Co., LLC, a company that is affiliated with Forward Management, for the New Series’ participation in ReFlow, a program designed to provide an alternative liquidity source for mutual funds experiencing redemptions of their shares. The Board also considered the benefits to Forward Management of the potential for larger assets under management and reputational benefits. The Board concluded that any potential benefits to be derived by Forward Management from its relationship with the New Series were consistent with those generally derived by advisors or sub-advisors to mutual funds.

Based on the Trustees’ deliberations and their evaluation of the information described above,

69 June 30, 2009

Approval of the Investment Advisory Agreement (Unaudited)

the Board, including all of the Independent Trustees, found that: (i) the compensation payable under the Advisory Agreement is fair and bears a reasonable relationship to the services to be rendered; and (ii) the approval of the Advisory Agreement is in the best interests of each New Series and its respective shareholders. Based on the Trustees’ deliberations and their evaluation of the information described above, the Trustees, including all of the Independent Trustees, unanimously approved the Advisory Agreement with respect to each New Series.

June 30, 2009 70

Shareholder Voting Results (Unaudited)

The Kensington Funds

Special Meeting of Shareholders

May 27, 2009

Ballot

The undersigned holder of capital stock of each Fund of The Kensington Funds, or duly authorized proxy or proxies for a holder or holders of said stock (as evidenced by an executed proxy delivered to the Inspector of Election), hereby votes:

For approval of an Agreement and Plan of Reorganization as follows:

Kensington Real Estate Securities Fund

246,567 Votes in favor

12,444 Votes against

18,744 Votes abstained

Votes in favor represented 88.77% of total votes

Kensington Strategic Realty Fund

1,999,734 Votes in favor

81,013 Votes against

82,044 Votes abstained

Votes in favor represented 92.46% of total votes

Kensington International Real Estate Fund

1,175,493 Votes in favor

48,853 Votes against

64,652 Votes abstained

Votes in favor represented 91.19% of total votes

Kensington Global Real Estate Fund

287,346 Votes in favor

3,663 Votes against

13,500 Votes abstained

Votes in favor represented 94.36% of total votes

Kensington Global Infrastructure Fund

2,767,873 Votes in favor

59,881 Votes against

148,055 Votes abstained

Votes in favor represented 93.01% of total votes

Kensington Select Income Fund

13,615,883 Votes in favor

374,335 Votes against

510,228 Votes abstained

Votes in favor represented 93.90% of total votes

71 June 30, 2009

Shareholder Voting Results (Unaudited)

The Kensington Funds

Special Meeting of Shareholders

May 27, 2009

Board of Inspector of Election

To the Secretary of the Special Meeting of Shareholders of The Kensington Funds: I, the undersigned Inspector of Election, having been duly authorized and qualified, do report and certify as to the Special Meeting of Shareholders of The Kensington Funds held at 4 Orinda Way, Suite 200C, Orinda, California 94563 on May 27, 2009 at 11:00 a.m., Pacific Time, that:

Kensington Real Estate Securities Fund

1. Out of 757,123 shares of Common Stock of the Kensington Real Estate Securities Fund outstanding and entitled to vote at said meeting, a total of 277,755 shares of said stock were represented either in person or by proxy.

2. Upon a vote by holders of the shares of Common Stock of the Kensington Real Estate Securities Fund, an Agreement and Plan of Reorganization between the Kensington Real Estate Securities Fund and the Forward Real Estate Fund, a series of Forward Funds, be, and is hereby, approved. The following votes were cast:

FOR 246,567

AGAINST 12,444

ABSTAINED 18,744

Kensington Strategic Realty Fund

1. Out of 5,413,484 shares of Common Stock of the Kensington Strategic Realty Fund outstanding and entitled to vote at said meeting, a total of 2,162,791 shares of said stock were represented either in person or by proxy.

2. Upon a vote by holders of the shares of Common Stock of the Kensington Strategic Realty Fund, an Agreement and Plan of Reorganization between the Kensington Strategic Realty Fund and the Forward Strategic Realty Fund, a series of Forward Funds, be, and is hereby, approved. The following votes were cast:

FOR 1,999,734

AGAINST 81,013

ABSTAINED 82,044

Kensington International Real Estate Fund

1. Out of 3,614,208 shares of Common Stock of the Kensington International Real Estate Fund outstanding and entitled to vote at said meeting, a total of 1,288,998 shares of said stock were represented either in person or by proxy.

2. Upon a vote by holders of the shares of Common Stock of the Kensington International Real Estate Fund, an Agreement and Plan of Reorganization between the Kensington International Real Estate Fund and the Forward International Real Estate Fund, a series of Forward Funds, be, and is hereby, approved. The following votes were cast:

FOR 1,175,493

AGAINST 48,853

ABSTAINED 64,652

June 30, 2009 72

Shareholder Voting Results (Unaudited)

Kensington Global Real Estate Fund

1. Out of 810,187 shares of Common Stock of the Kensington Global Real Estate Fund outstanding and entitled to vote at said meeting, a total of 304,509 shares of said stock were represented either in person or by proxy.

2. Upon a vote by holders of the shares of Common Stock of the Kensington Global Real Estate Fund, an Agreement and Plan of Reorganization between the Kensington Global Real Estate Fund and the Forward International Real Estate Fund, a series of Forward Funds, be, and is hereby, approved. The following votes were cast:

FOR 287,346

AGAINST 3,663

ABSTAINED 13,500

Kensington Global Infrastructure Fund

1. Out of 8,481,155 shares of Common Stock of the Kensington Global Infrastructure Fund outstanding and entitled to vote at said meeting, a total of 2,975,809 shares of said stock were represented either in person or by proxy.

2. Upon a vote by holders of the shares of Common Stock of the Kensington Global Infrastructure Fund, an Agreement and Plan of Reorganization between the Kensington Global Infrastructure Fund and the Forward Global Infrastructure Fund, a series of Forward Funds, be, and is hereby, approved. The following votes were cast:

FOR 2,767,873

AGAINST 59,881

ABSTAINED 148,055

Kensington Select Income Fund

1. Out of 35,431,477 shares of Common Stock of the Kensington Select Income Fund outstanding and entitled to vote at said meeting, a total of 14,500,446 shares of said stock were represented either in person or by proxy.

2. Upon a vote by holders of the shares of Common Stock of the Kensington Select Income Fund, an Agreement and Plan of Reorganization between the Kensington Select Income Fund and the Forward Select Income Fund, a series of Forward Funds, be, and is hereby, approved. The following votes were cast:

FOR 13,615,883

AGAINST 374,335

ABSTAINED 510,228

73 June 30, 2009

Investment Advisor

Forward Management, LLC

Administrator

ALPS 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 Fund Services, Inc.

FORWARD FUNDS

Forward Funds

P.O. Box 1345

Denver, CO 80201

(800) 999-6809

www.forwardfunds.com

Emerging Markets

Forward Emerging Markets Fund

International

Forward International Equity Fund

Forward International Small Companies Fund

Core

Forward Large Cap Equity Fund

Small Cap

Forward Banking and Finance Fund

Forward Growth Fund

Forward Legato Fund

Forward Small Cap Equity Fund

Real Estate

Forward International Real Estate Fund

Forward Real Estate Fund

Forward Strategic Realty Fund

Alternative Strategies

Forward Global Infrastructure Fund

Forward International Fixed Income Fund

Forward Long/Short Credit Analysis Fund

Forward Select Income Fund

Printed on recycled paper using soy-based inks.

FWD002099 091010

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. 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.

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

Not applicable.

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

No material changes to the procedures by which the shareholders may recommend nominees to the registrant’s Board of Trustees have been implemented after the registrant’s last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) 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) 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)) 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.

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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 1, 2009

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 1, 2009

By:	/s/ Barbara Tolle
	Barbara Tolle
	Treasurer
Date:	September 1, 2009

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