EXHIBIT 10.14
GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC.
INVESTMENT MANAGEMENT AGREEMENT
-------------------------------
This Agreement is made as of the 22nd day of October, 1998, between
1. GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a corporation organized
under the laws of the State of Delaware ("Manager"); and
2. SCOTTISH ANNUITY & LIFE HOLDINGS, LIMITED, a corporation organized under the
laws of the Cayman Islands ("Client").
WHEREAS, Client desires to appoint Manager as the investment manager of that
portion of Client's assets constituting the Account (as defined below);
NOW THEREFORE, in consideration of the mutual agreements herein contained, it
is agreed as follows:
SECTION 1. THE ACCOUNT
-----------
The cash, securities and other assets placed by Client in the account to be
managed under this Agreement (the "Account") are listed on Schedule A. Assets
may be added to the Account at any time with the consent of the Manager. The
Account will include these assets and any changes in them resulting from
transactions directed by Manager, withdrawals made by Client, or dividends,
interest, stock splits and other earnings, gains or losses on the assets.
Assets placed in the Account by Client that are not to be managed by Manager
are separately identified on Schedule A ("Unmanaged Assets"). Manager will
include these assets in its periodic reports to Client, but will exclude their
value from the Account in calculating Manager's fees.
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SECTION 2. MANAGEMENT OF THE ACCOUNT
-------------------------
Manager will make all investment decisions for the Account, in Manager's sole
discretion and without first consulting or notifying Client, in accordance with
the investment restrictions and guidelines which are attached as Schedule B (the
"Investment Guidelines"). Client may change these Investment Guidelines at any
time, but Manager will be bound by the changes only after it has received and
agreed to them in writing. Other than by the Investment Guidelines and the terms
of this Agreement, the investments made by Manager on behalf of the Client will
not be restricted in any manner, except by operation of law.
Manager will have full power and authority, on behalf of Client, to instruct
any brokers, dealers or banks to buy, sell, exchange, convert or otherwise trade
in all securities, futures or other investments for the Account.
Manager will not be responsible for giving Client investment advice or taking
any other action with respect to Unmanaged Assets.
Client appoints Manager as the true and lawful attorney of the Client for and
in the name, place and stead of Client, in Manager's unrestricted discretion,
to operate and conduct the brokerage accounts of the Client and to do and
perform all and every act and thing whatsoever requisite in furtherance of this
Agreement, including the execution of all writings related to the purchase or
sale, assignments, transfers and ownership of any stocks, bonds, commodities, or
other derivatives or securities. Manager is hereby fully authorized to act and
rely on the authority vested pursuant to said power of attorney.
SECTION 3. TRANSACTIONS FOR THE ACCOUNT
----------------------------
Manager will arrange for securities transactions for the Account to be
executed through those brokers, dealers or banks that Manager believes will
provide best execution. In choosing a broker, dealer or bank, Manager will
consider the broker, dealer or bank's execution capability, reputation and
access to the markets for the securities being traded for the Account. Manager
will seek competitive commission rates, but not necessarily the lowest rates
available.
Manager may also send transactions for the Account to brokers who charge
higher commissions than other brokers, provided that Manager determines in good
faith that the amount of commissions Manager pays is reasonable in relation to
the value of the brokerage and research services provided, viewed in terms
either of that particular transaction or
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Manager's overall responsibilities with respect to all clients whose accounts
Manager manages on a discretionary basis.
If Manager decides to purchase or sell the same securities for Client and
other clients at about the same time, Manager may combine Client's order with
those of other clients if Manager reasonably believes that it will be able to
negotiate better prices or lower commission rates or transaction costs for the
combined order than for Client's order alone. Client will pay the average price
and transaction costs obtained for such combined orders. If Manager cannot
obtain execution of the combined orders at prices or for transaction costs that
Manager believes to be desirable, Manager will allocate the securities purchased
or sold as part of the combined order by following its order allocation
procedures.
Manager generally will allocate securities purchased or sold as part of a
combined order to Client's Account and to accounts of other clients pro rata
--- ----
in proportion to the size of the order placed for each client. However, Manager
may increase or decrease the amounts of securities allocated to each client if
necessary to avoid having odd or small numbers of shares held for the account of
any client. Each client that participates in a combined order will receive or
pay the average share price for all transactions executed as part of the
combined order and will pay its pro rata share of the transaction costs.
--- ----
If Client directs Manager to use particular brokers, dealers or banks to
execute transactions for the Account, Manager will do so, but Manager will not
seek better execution services or prices for Client from other brokers, dealers
or banks, and Client may pay higher prices or transaction costs as a result.
Manager also may not be able to seek better execution services for Client by
combining Client's orders with those of other clients.
Client may direct all transactions for the Account to a particular broker,
dealer or bank, by writing the name and address of that broker, dealer or bank
in the space provided on Schedule A.
SECTION 4. TRANSACTION CONFIRMATIONS
-------------------------
Manager will instruct the brokers, dealers or banks who execute transactions
for the Account to send Client all transaction confirmations, unless Client
chooses not to receive confirmations. If Client does not wish to receive
---
individual confirmations, this box should be checked. [ ]
Client may elect to receive individual confirmations at any time by giving
Manager written notice.
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SECTION 5. CUSTODY OF ACCOUNT ASSETS
-------------------------
The assets in the Account will be held for Client by the custodian named on
Schedule A (the "Custodian"). Manager will not have custody of any Account
assets. Client will pay all fees of the Custodian.
Client will authorize the Custodian to follow Manager's instructions to make
and accept payments for, and to deliver or to receive, securities, cash or
other investments purchased, sold, redeemed, exchanged, pledged or loaned for
the Account. Client also will instruct the Custodian to send Client and
Manager monthly statements showing the assets in and all transactions for the
Account during the month, including any payments of Manager's fees.
Client will provide Manager with a copy of its agreement with the Custodian,
and will give Manager reasonable advance notice of any change of Custodian.
SECTION 6. REPORTS TO CLIENT
-----------------
Manager will send Client monthly written reports showing the identity, cost,
and current market value of the assets in the Account and each transaction
made for the Account during the period covered by the report. The Account's
performance will be sent quarterly.
SECTION 7. ACCOUNT VALUATION
-----------------
Manager will value the securities in the Account that are listed and traded
on a national securities exchange or on NASDAQ on the valuation date at the
closing price on the principal market where the securities are traded. Where
the market value of any security is not readily available, Client and the
Manager will each choose one broker-dealer and the market value will be deemed
to be the average of the values determined by the two broker-dealers.
SECTION 8. MANAGER'S FEES
--------------
For Manager's services, Client will pay a percentage of the value, as
determined under Section 7 of this Agreement, of all assets in the Account
(excluding Unmanaged Assets) as of the last trading day of each calendar
month. The fees are payable at the end of each calendar quarter for services
provided by Manager during the prior three months. The percentage amount of
the fees is shown on Schedule A. In any partial quarter, the fees will be
reduced pro rata based on the number of days the Account was managed.
--- ----
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Client agrees to pay Manager's fees as follows:
[_] The Custodian will deduct the fees from Client's Account and pay them to
Manager each quarter. Manager will send Client and the Custodian at the
same time a xxxx showing the amount of Manager's fees, the Account value
on which they were based and how they were calculated. The Custodian will
send Client a monthly statement showing all amounts paid from the Account,
including Manager's fees.
[_] Client will be billed directly by Manager and will pay Manager's fees
within 30 days of receiving the xxxx.
If Manager invests in securities issued by money market funds or other
investment companies for the Account, these securities will be included in the
value of the Account when Manager's fees are calculated. These same assets
will be subject to additional investment management and other fees that are
paid by the investment company but ultimately borne by its shareholders. These
additional fees are described in each investment company's prospectus.
SECTION 9. PROXY VOTING
------------
Proxies for securities in the Account should be voted as follows:
[_] Client directs Manager not to vote proxies for securities held for the
---
Account.
[_] Client directs Manager to vote all proxies for securities held for
Client's Account in accordance with--
[_] Manager's own discretion
or
[_] Client's proxy voting guidelines attached as Schedule C.
Client will direct Custodian to send promptly all proxies and
related shareholder communications to Manager and to identify them as relating
to Client's Account. Client understands that Manager will not be able to vote
proxies if they are not received on a timely basis from the Custodian as
properly identified as relating to Client's Account.
These proxy voting instructions may be changed at any time by notifying
Manager in writing.
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SECTION 10. LEGAL PROCEEDINGS
-----------------
Manager will not advise or act for Client in any legal proceedings,
including bankruptcies or class actions, involving securities held in the
Account or issuers of those securities.
SECTION 11. RISK
----
Manager cannot guarantee the future performance of the Account, promise any
specific level of performance or promise that its investment decisions,
strategies or overall management of the Account will be successful. The
investment decisions Manager will make for Client are subject to various
market, currency, economic, political and business risks, and will not
necessarily be profitable.
SECTION 12. STANDARD OF CARE; LIMITATION OF LIABILITY
-----------------------------------------
Except as may otherwise be provided by law, Manager will not be liable to
Client for any loss (i) that Client may suffer as a result of Manager's good
faith decisions or actions where Manager exercises the degree of care, skill,
prudence and diligence that a prudent person acting in a like fiduciary
capacity would use; (ii) caused by following Client's instructions; or (iii)
caused by the Custodian, any broker, dealer or bank to which Manager directs
transactions for the Account or any other person.
Federal and state securities laws impose liabilities under certain
circumstances on persons who act in good faith, and this Agreement does not
waive or limit Client's rights under those laws.
Manager will not be responsible for Client's own compliance with the
insurance investment laws of Client's state of domicile or for Client's
compliance with applicable tax laws.
In managing the Account, Manager will not consider any other securities,
cash, or other investments or assets Client owns for diversification or other
purposes. Manager shall have no responsibility whatsoever for the management
of the Unmanaged Assets or any assets of Client other than the Account and
shall incur no liability for any loss or damage which may result from the
management of such other assets.
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SECTION 13. CLIENT DIRECTIONS
-----------------
The names and specimen signatures of each individual who is authorized
to give directions to Manager on Client's behalf under this Agreement are set
forth on Schedule D. Directions received by Manager from Client must be signed
by at least one such person. If Manager receives directions from Client which
are not signed by a person that Manager reasonably believes is authorized to do
so, Manager shall not be required to comply with such directions until it
verifies that the directions are properly authorized by Client.
Manager shall be fully protected in relying upon any direction signed or
given by a person that Manager reasonably believes is authorized to give such
directions on Client's behalf. Manager also shall be fully protected when
acting upon an instrument, certificate, or paper that Manager reasonably
believes to be genuine and to be signed or presented by any such person or
persons. Manager shall be under no duty to make any investigation or inquiry as
to any statement contained in any writing and may accept the same as conclusive
evidence of truth and accuracy of statements contained therein.
SECTION 14. CONFIDENTIALITY
---------------
Except as Client and Manager otherwise agree or as may be required by
law, all information concerning the Account and services provided under this
Agreement shall be kept confidential.
SECTION 15. NON-EXCLUSIVE AGREEMENT
-----------------------
Manager provides investment advice to other clients and may give them
advice or take actions for them, for Manager's own accounts or for accounts of
persons related to or employed by Manager, that is different from advice
provided to or actions taken for Client.
Manager is not obligated to buy, sell or recommend for Client's Account
any security or other investment that Manager may buy, sell or recommend for
other clients or for the account of Manager or its related persons or employees.
If Manager obtains material, non-public information about a security or
its issuer that manager may not lawfully use or disclose, Manager will have no
obligation to disclose the information to Client or to use it for Client's
benefit.
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SECTION 16. TERM OF AGREEMENT
-----------------
Either Client or Manager may cancel this Agreement at any time upon 30
days written notice. This Agreement will remain in effect until terminated.
Termination of this Agreement will not affect (i) the validity of any action
that Manager or client has previously taken; (ii) the liabilities or obligations
of Manager or Client for transactions started before termination; or (iii)
Client's obligation to pay Manager's fees through the date of termination. Upon
termination, Manager will have no obligation to recommend or take any action
with regard to the securities, cash or other assets in the Account.
SECTION 17. AGREEMENT NOT ASSIGNABLE
------------------------
This Agreement may not be assigned within the meaning of the Investment
Advisers Act of 1940 (the "Advisers Act") by Manager without Client's consent.
SECTION 18. GOVERNING LAW
-------------
The internal law of Connecticut will govern this Agreement. However,
nothing in this Agreement will be construed contrary to any provision of the
Advisers Act or the rules thereunder.
SECTION 19. MISCELLANEOUS
-------------
If any provision of this Agreement is or becomes inconsistent with any
applicable law or rule, the provision will be deemed rescinded or modified to
the extent necessary to comply with such law or rule. In all other respects,
this Agreement will continue in full force and effect. This Agreement contains
the entire understanding between Manager and Client and may not be changed
except in writing signed by both parties. Failure to insist on strict compliance
with this Agreement or with any of its terms or any continued conduct will not
be considered a waiver by either party under this Agreement.
SECTION 20. NOTICES
-------
All notices and instructions with respect to the Account or other
matters covered by this Agreement may be sent by U.S. mail, overnight courier,
or facsimile transmission (with a hard copy sent by U.S. mail) to Client and to
Manager at the addresses at the end of this agreement or to another address
provided in writing.
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SECTION 21. REPRESENTATIONS OF CLIENT
-------------------------
Client represents and warrants to Manager that (a) Client is the
beneficial owner of all assets in the Account and that there are no restrictions
on transfer or sale of any of those assets; (b) this Agreement has been duly
authorized, executed, and delivered by Client and is Client's valid and binding
obligation; (c) the names of the individuals who are authorized to act under
this Agreement on behalf of Client have been given to Manager in writing; (d) no
government authorizations, approvals, consents, or filings not already obtained
are required in connection with the execution, delivery, or performance of this
Agreement by Client; and (e) Client certifies that it is not an employee benefit
plan subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or a plan subject to Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"), nor a Person acting on behalf of any such plan.
Client agrees to notify Manager in writing within five (5) days after the
occurrence of an event making the above statement no longer accurate.
Client agrees to indemnify, defend and hold harmless Manager and its
officers, directors, agents, employees, shareholders, legal representatives,
successors and assigns, from and against any and all claims, actions, suits,
damages, costs, liabilities, judgments, losses, charges, costs and expenses,
including attorneys' fees, of Manager arising from any failure by Client to
accurately disclose its status under this Section or by reason of any defect in
Client's authority to appoint Manager under this Agreement.
SECTION 22. REPRESENTATIONS OF MANAGER
--------------------------
Manager represents and warrants that this Agreement has been duly
authorized, executed and delivered by Manager and is its valid and binding
obligation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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SECTION 23. FORM ADV
--------
Client has received and reviewed a copy of Part II of Managers
Form ADV and a copy of this Agreement.
AGREED TO AND ACCEPTED BY:
GENERAL RE - NEW ENGLAND SCOTTISH ANNUITY & LIFE
ASSET MANAGEMENT, INC. HOLDINGS, LIMITED
/s/ Xxxxxx X. Xxxxxx /s/ Xxxxxxx X. Xxxxxx
----------------------- ----------------------------
By: Xxxxxx X. Xxxxxx Signature
Its Vice President
Xxxxxxx X. Xxxxxx
----------------------------
(Name)
President & CEO
----------------------------
(Title)
Pond View Corporate Center Xxxxxx House, PO Box 10657 APO
00 Xxxxxxxxx Xxxx Xxxx 000 X. Xxxxxx Xx.
Xxxxxxxxxx, Xxxxxxxxxxx 00000 Xxxxxx Town, Grand Cayman Island
Cayman Islands, BWI
(Principal Address)
NA
----------------------------
(Taxpayer Identification Number)
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SCHEDULE A
I. ACCOUNT ASSETS.
--------------
A. MANAGED ASSETS - Client has deposited the following securities, cash
--------------
and other assets with the Custodian identified below to be managed under this
Agreement.
B. UNMANAGED ASSETS - Client also deposited with the Custodian the
----------------
following assets which are not to be managed under this Agreement:
________________________________________________________________________________
II. CUSTODY OF ACCOUNT ASSETS. The assets to be managed under this Agreement and
-------------------------
any Unmanaged Assets will be held by:
_____________________________ Custodial Account Number:______________
(Name)
_____________________________
(Address)
_____________________________
________________________________________________________________________________
III. FEES. Manager's fees for services provided under this Agreement shall be as
----
follows: If assets under management are less than $150,000,000, then following
fee schedule applies: Annual fee of .20% (20 hundredths of one percent) on the
first $50 million; .15% (15 hundredths of one percent) on next $50 million and
.12% (12 hundredths of one percent) on market value of remaining assets under
management. If assets under management are in excess of $150,000,000, the
annual fee will be .12% (12 hundredths of one percent) on the market value of
assets under management.
________________________________________________________________________________
IV. BROKERAGE DIRECTION. Client directs Manager to cause all transactions for
-------------------
the Account to be executed through the following broker, dealer or bank:
________________________________________________________________________________
Client has read, understands and accepts the limitations that this direction
will place on Manager's ability to seek best execution for the Account. This
direction may be changed by Client at any time by notifying Manager in writing.
________________________________________________________________________________
V. NAME OF CLIENT: VI. DATE:
SCOTTISH ANNUITY & LIFE HOLDINGS, LIMITED ________________________________
By:______________________________________
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October 26, 1998
SCOTTISH ANNUITY & LIFE HOLDINGS, LTD.
Investment Policy and Guidelines
MAP
GENERAL RE LOGO
NEW ENGLAND ASSET MANAGEMENT, INC./TM/
SCOTTISH ANNUITY & LIFE HOLDINGS, LTD. INVESTMENT POLICY
INVESTMENT PHILOSOPHY
Insurance and investment risk are inextricably linked. Consequently, the
assumption of risk in either area has significant impact on the company's
ability to assume risk in the other. It is imperative, therefore, that the
investment policy provide a framework to manage and adjust investment portfolio
risk profiles to accommodate present and future corporate insurance risk
preferences.
INVESTMENT POLICY
The company will manage its total investments so that at all times there are
fixed income securities which are adequate in amount and duration to meet the
cash requirements of current operations as well as longer term liabilities. To
the extent that there are funds available for investment beyond these
requirements, the investment objective for such funds will be to maximize total
return within a prudent level of risk, taking into account the potential impact
on the volatility of reported earnings and reserves, as well as the importance
of maintaining the company's A.M. Best rating.
INVESTMENT OBJECTIVE
Scottish Annuity & Life Holding's assets shall be invested to achieve the
following objectives:
. Meet insurance regulatory requirements with respect to investments under
pertinent insurance laws and regulation.
. Maintain an appropriate level of liquidity to satisfy the cash requirements
of current operations and longer term obligations.
. Adjust investment risk to offset or complement insurance risks based on total
corporate risk tolerance.
. Subject to the foregoing objectives and specific guidelines set forth below,
maximize total return on an after-tax basis, taking into account the net
operating losses carried forward for Federal income tax purposes.
-------------------------General Re [LOGO]
New England Asset Management, Inc.(TM)
SCOTTISH ANNUITY & LIFE HOLDINGS, LTD. INVESTMENT POLICY
PORTFOLIO CHARACTERISTICS
. Target duration will be related to the duration of the company's liabilities.
Currently neutral duration is 5.0 years. Active management will permit a
maximum duration for the portfolio of 6.0 years and a minimum of 3.0 years.
. Average quality will be "A" or better.
. Securities lending is allowed with appropriate collateralization.
PERMITTED INVESTMENTS
% OF INVESTED ASSETS (1) (6)
MIN MAX NOTES
--- --- -----
Governments 0 100
Agencies 0 100
Corporates 0 60
MBS 0 35 (2)
CMO's 0 15
ABS 0 20
Foreign 0 15 (4) (5)
Equities 0 0
Notes
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(1) Aggregate limit of 20% on Private Placements (144A-20%; privates - 10%)
(2) Per Issue limit - agency MBS 5.0%
(3) U.S. and Canadian denominated
(4) Non-dollar denominated - prior approval with exception of assets supporting
non-dollar liabilities
(5) Other securities including Schedule BA items, Real Estate and Mortgage Loans
need prior approval of Investment Committee
(6) No equity and emerging markets debt allowed
-------------------------General Re [LOGO]
New England Asset Management, Inc.(TM)
SCOTTISH ANNUITY & LIFE HOLDINGS, LTD. INVESTMENT POLICY
Diversification Limitation on the amount of securities owned of any
--------------- one issuer (except governments and agencies) is as
follows:
Rating Agency/
NAIC Limit Per Issuer Limit By Rating
-------------- ---------------- ---------------
AAA/1 3% of Assets None
AA/1 2% of Assets None
A/1 1.5% of Assets None
BBB/2 1.5% of Assets 20% of Assets
BB .5% of Assets 5.0% of Assets
B .3% of Assets 5.0% of Assets
Performance Benchmark Xxxxxx Aggregate Bond Index
(1) Investments carried at market value.
(2) Investments carried at amortized cost.
------------------------ GENERAL RE [LOGO] NEW ENGLAND ASSET MANAGEMENT,
INC.(TM)
SCHEDULE B
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INVESTMENT GUIDELINES: The investment guidelines to be followed by Manager in
---------------------
managing Client's Account are set forth below:
--------------------------------------------------------------------------------
NAME OF CLIENT: DATE:
SCOTTISH ANNUITY & LIFE HOLDINGS, LIMITED
By:_________________________ By: _________________________
--------------------------------------------------------------------------------
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SCHEDULE C
PROXY VOTING GUIDELINES: The proxy voting guidelines to be followed by Manager
-----------------------
in voting securites held in the Account are set forth below:
(If none, check here [ ].)
NAME OF CLIENT: DATE:
SCOTTISH ANNUITY & LIFE HOLDINGS, LIMITED
By:
------------------------- ------------------
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SCHEDULE D
SECRETARY'S CERTIFICATE
-----------------------
I, _________________________________, the Secretary of SCOTTISH ANNUITY
& LIFE HOLDINGS, LIMITED (the "Corporation"), a Corporation organized and
existing under the laws of the Cayman Islands, hereby certify that each of the
following officers of the Corporation, acting singly, is authorized in the name
and on behalf of the Corporation, to give instructions to General Re-New England
Asset Management, Inc. ("Manager") with respect to any and all matters,
including investment and reinvestment of securities, pertaining to the
Investment Management Agreement between the Corporation and Manager, and to
execute and deliver any and all documents and to take any and all other action
to carry out the purposes of said Investment Management Agreement. I further
certify that the specimen signature set forth next to the names of such
officers, is the true and genuine signature of such persons.
Name of Officer Title Signature
______________________ _____________________ ___________________
______________________ _____________________ ___________________
______________________ _____________________ ___________________
This Certificate shall be in effect from the date hereof until written
notice is given on behalf of the Corporation to terminate or revise it.
IN WITNESS WHEREOF, I set my hand and seal of the Corporation.
_____________________ ___________________
(Corporate Seal) Secretary Date
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