Exhibit 10.53
AMENDMENT NO.2
TO
INVESTMENT SERVICES AGREEMENT
WHEREAS, MBIA Insurance Corporation and MBIA Capital Management Corp.
(formerly known as MBIA Securities Corp.) have entered into an Investment
Services Agreement (the "Agreement"); and
WHEREAS the parties adopted Amendment No. 1 to said Agreement on December
29, 1995, and
WHEREAS, the parties have agreed to further amend said Agreement.
NOW, THEREFORE, the Agreement is hereby amended as follows effective as of
the date set forth below:
1. Exhibit B of the Agreement is replaced in is entirety by the
substitute Exhibit B attached hereto.
2. All other provisions of the Agreement shall remain unchanged.
IN WITNESS WHEREOF, the parties have caused the signatures of their duly
authorized officers to be hereto affixed this 14th day of January, 1997.
MBIA INSURANCE CORPORATION MBIA CAPITAL MANAGEMENT CORP.
By: [SIGNATURE APPEARS HERE] By: [SIGNATURE APPEARS HERE]
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Title: Chief Financial Officer Title: President
EXHIBIT B
January 1997
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MBIA Insurance Corporation
Statement of Investment Objectives & Guidelines
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Section I. Objectives
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A. Preservation of Capital in the context of maintaining triple-A ratings
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for MBIA Insurance Corporation ("MBIA Corp.") and supporting recognition
of MBIA Corp.'s financial stability and strength by insured bond
investors, municipal market intermediaries, and other municipal bond
market constituencies.
B. Subject to A. above, optimization of after-tax investment income to
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support the predictability and consistency of company earnings and cash
flow.
C. Subject to A. and B. above, optimization of long-term total returns.
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D. Maintenance of reasonable liquidity after taking into account the
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company's other sources of liquidity (including bank credit facilities
and cash flow) for potential claims-paying and other corporate needs.
Overall, these objectives call for maintenance of high quality investments,
avoidance of undue volatility in both income and returns and generally minimal
amounts of short-term investments and/or U.S. Treasury obligations for immediate
liquidity. MBIA Corp.'s investment selections will be made with a bias to hold
for the long-term, and to avoid sales or swaps in the absence of compelling
circumstances of tax credit, structural or other economic reasons, and not to
rely on short-term trading or market timing to achieve performance. The mix of
taxable and tax-exempt investments will vary from time to time with both market
conditions and company tax circumstances.
In seeking to achieve these objectives, MBIA Corp. will monitor, evaluate and
report on the performance of its investment managers and the portfolio, using
appropriate market-related benchmarks. In addition, MBIA Corp. will maintain an
awareness of and periodically report on the investment practices and results of
key competitors and comply with the constraints or limitations related to
guidelines and regulatory or rating agency considerations.
Section II. Guidelines
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The following shall constitute the Investment Guidelines for MBIA Corp., acting
through its duly authorized officers and/or through its outside investment
advisors:
A. Investments shall be made and maintained in compliance with all
applicable provisions of Article 14 of the New York Insurance Laws, as
amended.
B. Fixed Income Policy
(1) Quality: For fixed-income securities (over 1 year when purchased)
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average quality will be AA to AA-, with minimum purchase quality,
BBB. For short-term investments (less than 1 year), only
investments rated Al/P1 (or equivalent rating) or better may be
purchased.
(2) Maturity: The average duration target is a maximum of 7.5 years;
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minimum duration is 6.0 years.
(3) Maturity Distribution: Diversification in maturity to minimize
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reinvestment risk is an objective. Although this objective is not
quantified, a reasonably well-laddered portfolio over a wide range
of maturities is to be achieved.
(4) Insured Obligations: MBIA Corp. may purchase or hold obligations
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insured by MBIA Corp. or its competitors, subject to an aggregate
limit of 40% of the total investment portfolio.
Limitations Per Insurer:
MBIA 50%
FGIC 50%
AMBAC 50%
FSA/Capital Guaranty 40%
CapMAC 25%
Asset Guaranty 10%
(5) Other: Securities may be purchased in both public and private
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markets, subject to the maintenance of an appropriate level of
overall portfolio liquidity and to all other objectives/guidelines.
C. Equity Policy
MBIA Corp. holds interests in certain equity-oriented investments
in limited amounts. It is MBIA Corp.'s current policy not to
purchase equity oriented securities.
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D. Further Restrictions
(1) At the time of purchase, no investment may be in default as to principal
or interest payments and all shall be rated "investment grade" by at
least one nationally-recognized domestic rating agency.
(2) Only U.S. dollar denominated securities may be purchased, except those
required for MBIA Corp.'s foreign operations.
(3) No investment shall be made in futures or options on futures.
(4) All investments shall be held by a third-party custodian (or via book
entry at the Depository Trust Company or a similarly qualified clearing
corporation), as prescribed in approved custody agreements, or in other
customary forms of safekeeping.
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E. Fixed income investments are further limited to the following types and
amounts (with the term "assets" defined by the New York statutes):
Type of Obligation Limitation Basis
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(i) Backed by full faith and credit of the Unlimited In Aggregate
United States, including Government Unlimited Per Issuer or
National Mortgage Association direct Mortgage Pool
obligations and guaranteed mortgage-
backed securities.
(ii) Federal National Mortgage Association 10% of Assets In Aggregate
direct obligations and guaranteed 2% of Assets Per Mortgage Pool
mortgage-backed securities.
(iii) Federal Home Loan Mortgage 10% of Assets In Aggregate
Corporation direct obligations and 2% of Assets Per Mortgage Pool
guaranteed mortgage-backed
securities.
(iv) Bonds which have been fully Unlimited In Aggregate
collateralized by direct U.S.
government obligations (i.e., pre-
refunded or escrowed-to-maturity) and
upgraded to triple-A by at least one
nationally-recognized domestic rating
agency.
(v) Obligations not included in Section (iv)
above and backed by full faith and
credit of:
(a) Any state government. 5% of Assets Per State
(b) Any political subdivision 2% of Assets Per Issuer
of a State or any
municipality within the
United States.
(vi) Obligations not included in Section (iv) 2% of Assets Per Issuer
above and backed by revenue or other
income sources of a single facility or
system.
(vii) Pools of assets rated AAA by at least 5% of Assets In Aggregate
one nationally recognized domestic 0.5% of Assets Per Single Issue
rating agency (excluding assets
otherwise permitted under this
agreement).
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Type of Obligation Limitation Basis
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(viii) Securities backed by pools of assets 3% of Assets In Aggregate
rated single-A and double-A by at 0.5% of Assets Per Single Issue
least one nationally recognized
domestic rating agency (examples
may include, but are not limited to,
commercial or residential mortgages,
automobile loans).
(ix) Investments in any entity, obligations 1% of Assets Per Issuer
of which are insured by MBIA Corp.,
(and which are identified on a list
furnished by MBIA Corp. to its
advisors from time-to-time) with the
exception of United States
municipalities rated AA or better by at
least on nationally-recognized
domestic rating agency.
(x) Backed by full faith and credit of a 2% of Assets Per Issuer
non-public corporate entity, whether
foreign or domestic.
(xi) Backed by full faith and credit of 10% of Assets In Aggregate
Canada, its Provinces and other 10% of Assets For Federal Govt.
political subdivisions. 2% of Assets Per all Other
Issuers
(xii) Backed by full faith and credit of 10% of Assets In Aggregate
OECD foreign governments other than 1% of Assets Per Country
in Canada.
(xiii) Repurchase agreements with a bank 2% of Assets In Aggregate
or registered broker-dealer, provided 1% of Assets Per Bank or
that all securities underlying such Broker-Dealer
agreements:
(a) Would be eligible
investments under
these Guidelines; and,
(b) Have maturities of one
year or less and the
agreement is fully
collateralized and
marked to market daily.
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Type of Obligation Limitation Basis
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(xiv) Investments of one year or 10% of Assets In Aggregate
less in term which are either 1% of Assets Per Bank
direct obligations of or
supported by letters of credit
from banks rated in the
highest short-term category by
at least one nationally-
recognized domestic rating
agency (or judged to be of
equivalent quality).
(xv) Mutual funds or other such 5% of Assets In Aggregate
investment conduits registered
with the SEC under the
Investment Company Act of
1940, as amended (provided
that all investments within
each fund would be eligible
under the Guidelines).
Investments may be made in
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mutual funds where the
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Advisor has entered into
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arrangements to act as a
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selling dealer and servicing
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agent any may receive
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compensation for its services.
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Such investments will be
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permitted provided that MBIA
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Corp. pays no commissions in
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connection with the purchase
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of the mutual fund shares and
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the Advisor has determined in
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good faith that the investment
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provides MBIA Corp. with a
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rate of return comparable to
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similar investments.
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(xvi) Equity-linked debt instruments $100 million In Aggregate
rated A or better by at least
one nationally recognized
domestic rating agency with a
maturity no greater than 10
years or equity-index
investments. Equity index
must be nationally recognized,
such as the S&P 500.
(xvii) Reverse repurchase 5% of Assets In Aggregate
agreements with a bank or (greater amount
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registered broker-dealer. permitted with written
authorization from
(a) Maximum term of one MBIA Corp.)
year.
3% of Assets Per Bank or
(b) For liquidity purposes and Broker-Dealer
not for yield
enhancement.
(c) May be executed only
with primary dealers rated
Al/Pi or better.
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Type of Obligation Limitation Basis
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(d) PSA Master Repurchase
Agreement must be
executed prior to any
transaction.
(e) Transaction must be
executed using the Fed
wire-book entry system.
(xviii) Repurchase and/or reverse Subject to New Statutory admitted
repurchase agreements with York Insurance assets.
MBIA affiliated entities. Department
restrictions and
(a) Maximum term of one approved operating
year. procedures.
b) PSA Master Repurchase
Agreement must be
executed prior to any
transaction.
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This Statement of investment Objective & Guidelines shall remain in effect until
revised or amended by action of the MBIA Corp. Board of Directors, in accordance
with its by-laws.
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Section III. Specific Instructions for Taxable Fixed-Income Investments
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In the context of Sections I. and II. above as applicable, the following shall
constitute the specific instructions for taxable fixed-term investments made by
MBIA Corp., acting through MBIA Securities Corp., its investment advisor; it
being understood that these instructions set forth in this Section III. are to
be adhered to notwithstanding any less restrictive provisions in Sections I. and
II.
A. Maturity
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The maximum allowable average duration is 7.5 years; minimum duration is
5.0 years.
B. Quality
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Minimum average quality of total portfolio, "A."
Minimum purchase quality, "BBB+."
Maximum of investments held rated less than "A-," 4 percent.
Minimum holding quality, "BBB-."
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Section IV. Specific Instructions for Tax-Exempt Fixed-Income Investments
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In the context of Sections I. and II. above as applicable, the following shall
constitute the specific instructions for tax-exempt fixed-term investments made
by MBIA Corp., acting through MBIA Securities Corp., its investment advisor; it
being understood that the instructions set forth in this Section IV. are to be
adhered to notwithstanding any less restrictive provisions in Sections I. and
II.
Minimum average quality for the tax-exempt portfolio is "AA."
Minimum purchase quality for the tax-exempt portfolio is "BBB."
Minimum holding quality for the taxable portfolio is investment grade,
unless specific waiver of this limit is obtained from MBIA Corp.
Maximum of investments held rated less than A-, 10 percent, unless
specific waiver of this limit is obtained from MBIA Corp.
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