Forward Progressive Real Estate Fund by trendy3


									September 2008
Forward Progressive Real Estate Fund
Sub-Advised by Forward Uniplan Advisors, Inc.

 Performance as of                                                                            Since           Gross/Net
                                   3Q08          YTD        1 Year    3 Year    5 Year
 September 30, 2008                                                                         Inception*        Expenses

 Forward Progressive Real
                                  1.59%         -2.53%      -16.04%   3.59%    11.21%           11.13%       1.50%/1.50%
 Estate Fund—Investor

                                  5.55%         1.76%       -11.14%   5.57%    13.47%           13.30%
Returns for periods greater than one year are annualized.

The performance quoted represents past performance and does not guarantee future results. Current performance may be
lower or higher than the performance 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. The returns assume reinvestment of dividends and
distributions, if any. Performance does not reflect the deduction of taxes that a shareholder would pay on Fund distributions
or the redemption of Fund shares. Performance current to the most recent month-end may be obtained at or by calling (800) 999-6809.

Please excuse the delayed release of the September REIT Flash report. The post month-end market meltdown of early October created a
situation that demanded some extended, real-time commentary. The following is an attempt to put the events of the first two weeks of October
and their impact on the REIT sector in perspective for our clients.

During the month of September and throughout the third quarter, REITs clawed out a series of modest gains. It appeared that some stability
was returning to the credit markets. It seemed to be only a matter of time before a return of normal liquidity, which is the lifeblood of the
commercial real estate business. Although volatility persisted, the benchmark, the FTSE NAREIT Equity REITs Index, showed only a modest
decline for the month of September and actually posted positive quarter and year-to-date returns.

This was a genuine dichotomy when compared to the broader market, which, during the same period, was moving lower at a rapid pace. Most
major equity benchmarks were down anywhere from the high single digits to the low teens, with seemingly no place to hide. In fact, REITs
were the best-performing sector for the quarter and the year-to-date, as of September 30, according to Investors Business Daily. Then the
bottom fell out. During the first two weeks of October, REITs dropped a stunning 31% while the S&P 500 fell 19% during the same period.
This drop erased any meaningful advantage in performance the REIT sector had for the year to date.

To make matters worse, REIT volatility, as measured by the REITcafé Volatility Index, which had been running at all time high levels,
exploded to unprecedented heights.

                                                                                  Oct 17,
                                                                                 Oct 17, 2008
                                                                                                Source: Anatole Pevnev,
Since the collapse of REIT prices in the first two weeks of October, valuations have made new 10-year lows, which were tested during March
and April, but held just short of the old lows. NAVs (net asset values) now stand at 73%, an all-time low for the past 10 years. With the 10-
Year Treasury Bond yielding 3.93% and the NAREIT Equity Index yield at 7.31%, as of October 17, the current spreads of 338 bps is also a
10-year high. The S&P Utility Index tightened relative to REITs, as utility stocks declined only about half as much as REITs did over the past
two weeks. So, valuations have declined past their near-term lows of February and March to register new relative lows.

                                             10-Year            10-Year            10-Year         Current
                                              Low               Average             High         (10/17/2008)
            Market Value to
             NAV Ratio                        73%                103%              134%              73%
 Index Yield vs. 10-Year Treasury          -136 bps             99 bps             338 bps          338 bps
            Bond Yield
          Index Yield vs.                    30 bps            212 bps             465 bps         252 bps
         S&P Utility Yield
Source: Forward Uniplan Advisors, Inc., Baseline Inc., Merrill Lynch & Co., Inc.

REIT earnings reports for the third quarter are just starting and they did not start well. AMB, one of our core holdings in the industrial sector
and a REIT bellwether, lowered guidance for the second time in just three weeks, citing a rapid decline in merchant building activity, although
they missed the current quarter estimates by only 2 cents. This suggests the worst of the earnings decline is now in front of us. As mentioned in
the August flash report, there were some material misses on earnings for the second quarter, as some REITs began to show the fatigue of a
slower economic environment. Here is the important part: guidance from management during the second quarter earnings season was
decidedly less positive than the cautiously optimistic guidance of the first quarter. REITs, understandably, continue to attempt to guide
investors expectations lower in a slower growth environment but operating fundamentals seem to be decelerating at a very fast pace.

These factors have led to a reduction in earnings estimates in the last month by about 4% for the third quarter, while estimates for the current
year are now lower—on average, by 1.2% in the same period. It appears the consensus on earnings for the third quarter and the current year are
moving lower. This is also true of 2009 earnings estimates, which have continued to decline after briefly moving higher in July. More
importantly, the dispersion among all REIT earnings estimates for 2009 has widened sharply with more “winners” and “losers” defining the
tails of the distribution. The third quarter earnings reports should help clarify those trends among winners and losers and help us set our
portfolio strategy for 2009. Until then, we remain on defense, holding cash and attempting to use the current market volatility to our advantage
by judiciously deploying cash as opportunities appear.

The essence of real estate operating fundamentals is driven by supply and demand for real estate. Supply comes from new building and
vacancies, while demand comes from nominal GDP growth, household formation and job growth. The current situation shows the slowing of
nominal economic growth, increasing unemployment and reduced household formation. Continued fears over the health of the economy,
falling home prices and ongoing problems in the credit markets have all converged to keep a lid on commercial real estate operating

As previously mentioned, liquidity is the lifeblood of the real estate sector. The capital markets remain weak, with historically wide spreads and
increasing long-term rates. Our fear of a large credit default on the part of a major real estate company was well documented in prior reports.
That concern has now become reality as a major public REIT, General Growth Properties, has become the focus of the media. GGP reported
the need to increase recourse in order to access its $1.75B loan facility and disclosed that it hasn't received commitments for $1.2B of 2008
debt maturities, against the backdrop of a paralyzed credit market and a weakening economy. Needless to say, the stock price reacted poorly,
declining 86% for the year to date. This price decline triggered margin loan calls on a large group of the firm’s key executives, resulting in
additional stock liquidations of over $325M.

With approximately $27B of outstanding debt, GGP will likely have limited options with regard to how they might salvage value for their
shareholders. However, many other public REITs have modest leverage, available capital and little or no debt maturing over the next several
years. These conservative REITs have been punished, right along with those who were less diligent about their balance sheets. This has led to
an environment where real value can be found. As we said last month, “at the moment, cash is king in the real estate world” and currently those
with capital will find opportunities.

We are in the eye of the storm. The unprecedented volatility we have seen of late will likely continue until the third quarter earnings are
complete and investors begin to focus on 2009 earnings. Those earnings estimates will be impacted by the trends in the economy, which
remain very uncertain at the moment. Should the economy continue to decelerate at a rapid rate, the REIT sector could experience another
storm of bad earning and operating news. However, values look attractive, with yields currently over 7% and NAV’s at a deep discount. We
continue to “play defense” with our portfolios, understanding we have to stay in the game. For patient investors, the dividend yield offered
allows them to be “paid to wait.” So, we believe that investors who have been under allocated to REITs should use this current weakness as an
opportunity to increase their REIT allocations toward their target levels. We will continue playing defense until we are past this period and
observe more stability in the private real estate and debt capital markets. We continue to closely monitor the trends in real estate performance
and operating earnings at the company level, and will report any meaningful data back to our investors. As a reminder, current or future
portfolio holdings are subject to risk.

—Richard Imperiale, Portfolio Manager
The FTSE NAREIT Equity REITs Index is representative of the tax-qualified REITs listed on the New York Stock Exchange, the American
Stock Exchange and the NASDAQ National Market. The index figures do not reflect any deduction for fees, expenses or taxes.

The S&P 500 Index is a capitalization-weighted index of 500 stocks traded on the NYSE, AMEX and OTC exchanges, and is comprised of
industrial, financial, transportation and utility companies.

It is not possible to invest directly in an index.

Valuation is the process of determining the value of an asset or company.

BPS (basis point) is a unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is
commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.

Gross domestic product (GDP) is the total market value of all final goods and services produced in a country in a given year, equal to total
consumer, investment and government spending, plus the value of exports, minus the value of imports.

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.

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

Forward Funds are distributed by ALPS Distributors, Inc.

Not FDIC Insured | No Bank Guarantee | May Lose Value

FWD001769 103109

As of September 30, 2008, the Fund held the following positions in the portfolio (These holdings may not reflect the current or future positions
in the portfolio. Current or future portfolio holdings are subject to risk. Portfolio holdings are subject to change.):
Forward Progressive Real Estate Fund
As of 09/30/2008
                                                              # of                                     % of Total     Currency
Security ID   Ticker Security Name                           Shares     Market Price    Market Value   Net Assets      Code

828806109     SPG    Simon Property Group, Inc.              32,500 $         97.00 $     3,152,500           8.73%         USD
015271109     ARE    Alexandria Real Estate Equities, Inc.   21,100          113.08       2,385,988           6.61%         USD
00163T109     AMB    AMB Property Corp.                      40,000           45.30       1,812,000           5.02%         USD
929042109     VNO    Vornado Realty Trust                    19,000           90.95       1,728,050           4.79%         USD
024835100     ACC    American Campus Communities, Inc.       50,000           33.88       1,694,000           4.69%         USD
743410102     PLD    ProLogis                                40,000           41.27       1,650,800           4.57%         USD
101121101     BXP    Boston Properties, Inc.                 16,500           93.66       1,545,390           4.28%         USD
49446R109     KIM    Kimco Realty Corp.                      40,000           36.94       1,477,600           4.09%         USD
277276101     EGP    EastGroup Properties, Inc.              30,000           48.54       1,456,200           4.03%         USD
758849103     REG    Regency Centers Corp.                   21,250           66.69       1,417,163           3.93%         USD
948741103     WRI    Weingarten Realty Investors, Inc.       36,000           35.67       1,284,120           3.56%         USD
91274F104     YSI    U-Store-It Trust                        90,000           12.27       1,104,300           3.06%         USD
44106M102     HPT    Hospitality Properties Trust            50,000           20.52       1,026,000           2.84%         USD
053484101     AVB    AvalonBay Communities, Inc.             10,000           98.42         984,200           2.73%         USD
150602209     CDR    Cedar Shopping Centers, Inc.            73,000           13.22         965,060           2.67%         USD
195872106     CLP    Colonial Properties Trust               49,500           18.69         925,155           2.56%         USD
28140H104     EDR    Education Realty Trust, Inc.            76,000           11.08         842,080           2.33%         USD
251591103     DDR    Developers Diversified Realty Corp.     26,000           31.69         823,940           2.28%         USD
751452202     RPT    Ramco-Gershenson Properties Trust       36,000           22.42         807,120           2.24%         USD
42217K106     HCN    Health Care REIT, Inc.                  14,900           53.23         793,127           2.20%         USD
124830100     CBL    CBL & Associates Properties, Inc.       35,450           20.08         711,836           1.98%         USD
22002T108     OFC    Corporate Office Properties Trust       16,000           40.35         645,600           1.79%         USD
529043101     LXP    Lexington Corporate Properties Trust    20,000           17.22         344,400           0.95%         USD
40426W101     HRP    HRPT Properties Trust                   23,100            6.89         159,159           0.44%         USD
                     Net Cash & Cash Equivalents                                          6,362,520          17.63%

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