INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
AND
N.M. ROTHSCHILD ASSET MANAGEMENT LIMITED
THIS AGREEMENT is made and entered into this 26th day of January, 1988, by and
between Motors Mechanical Reinsurance Company, Limited, an exempted company,
organised and existing under the laws of Barbados, with offices at Collymore
Rock, St. Michael, Barbados, W.I. (hereinafter referred to as the "Company"),
and N.M. Rothschild Asset Management Limited, a company organised and existing
under the laws of England, with its registered office at New Court, St Swithin's
Lane, London EC4P 4DU (hereinafter referred to as the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the insurance and reinsurance business of the Company in Barbados
involves the investment and reinvestment of premium and loss reserves on a
regular and continuing basis;
WHEREAS, the Investment Manager has demonstrated expertise in the field of
investment portfolio management which should allow it to realise a rate of
return on the invested reserves of the Company allowing for both Capital
appreciation and liquidity;
WHEREAS, the Company desires to appoint the Investment Manager to manage an
investment account and the Investment Manager desires to act in such capacity
under the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and of the mutual covenants
herein contained, the Company and the Investment Manager do hereby agree as
follows:
1. Investment Account. Effective as of 11th December, 1987 (the "Effective
Date"), the Company by resolution of its Board of Directors or Investment
Committee segregated certain of its assets in a separate account to be
administered and invested by the Investment Manager pursuant to the terms hereof
(the "Investment Account").
2. Appointment. Effective as of the Effective Date, the Company hereby appoints
the Investment Manager and the Investment Manager hereby accepts such
appointment to act as an Investment Manager with respect to the Investment
Account.
3. Discretionary Authority and Responsibility. Subject to written investment
guidelines established from time to time by the Company and delivered to the
Investment Manager (the "Investment Guidelines"),the Investment Manager shall be
responsible in its sole judgment and discretion for the management and
investment of the Investment Account.
Upon receipt of any amendment to the Investment Guidelines, the Investment
Manager shall follow such amended Investment Guidelines as to any transaction
thereafter and shall follow such amended Investment Guidelines with respect to
the investments existing at the time of such receipt as promptly as practicable.
In no event shall the Investment Manager follow any Investment Guideline or any
provision of this Agreement which contravenes any applicable law, rule or
regulation of any governmental authority or securities exchange applicable to
the Investment Manager or, where the Company has made the Investment Manager
aware of the same, applicable to the Company; and the Investment Manager shall
give prompt written notice to the Company of any such contravention upon
becoming aware of the same. The Investment Guidelines shall to the best of the
Company's knowledge and belief be consistent with all such applicable laws,
rules and regulations.
4. Powers of Investment Manager. The Investment Manager shall have the following
powers with respect to the management and investment of the Investment Account,
but only to the extent permitted by the Investment Guidelines as they may exist
at any given time, (Exhibit A), provided that the purchase or sale of securities
may be effected by direct communication between the Investment Manager and the
broker handling the transaction with oral followed by written confirmation to
the Company pursuant to procedures agreed to by the parties:
(a) to purchase or subscribe for any securities or other property;
(b) to sell for cash or on credit, to grant options, convert, redeem, exchange
for other securities or other property, to grant, purchase, sell, exercise,
permit to expire, permit to be held in escrow or otherwise to acquire,
dispose of, hold and generally deal in any manner with and in all forms of
options in any combination, to enter into stand-by agreements for future
investment, either with or without a stand-by fee, or otherwise to dispose
of any securities or other property at any time held in the Investment
Account;
(c) to settle, compromise or submit to arbitration any claims, debts, or
damages, due or owing to or from the Investment Account, to commence or
defend suits or legal proceedings and to represent the Company with respect
to the Investment Account in all suits or legal proceedings in any court of
law or before any other body or tribunal; provided, however, that the
Company shall retain the right, in its sole discretion and at its own
expense, to bring, join in or oppose any such suits, proceedings
settlements or arbitrations where or it may be adversely affected by the
outcome or where it is advised by counsel that such action is required on
its part by applicable law;
(d) to exercise any conversion privilege and/or subscription right available in
connection with any securities or other property held in the Investment
Account or permit the same to lapse; to oppose or to consent to the
reorganisation, consolidation, merger, or readjustment of the finances of
any corporation, company or association, or to the sale, mortgage, pledge
or lease of the property of any corporation, company or association any of
the securities of which are held in the Investment Account and to do any
act with reference thereto, including the exercise or non exercise of
options, the making of agreements or subscriptions and the payment of
expenses, assessments or subscriptions, which may be necessary or advisable
in connection therewith, and to hold and retain any securities or other
property in the Investment Account which it may so acquire; and to deposit
any property with any protective, reorganisation or similar committee, and
to pay or agree to pay part of the expenses and compensation of any such
committee and any assessments levied with respect to property so deposited;
(e) to exercise any right, including the right to vote if so directed by the
Company, appurtenant to any securities or other property held in the
Investment Account;
(f) to hold part or all of the Investment Account in an interest bearing
deposit account from time to time, i.e. uninvested in securities;
(g) to purchase, enter, sell, hold and generally deal in any manner in and with
contracts for the immediate or future delivery of financial instruments of
any issuer or of any other property;
(h) to delegate to one or more agents any of its duties hereunder and in its
discretion to provide such information on the composition of the Investment
Account as may prove necessary to such agents; and
(i) to convert monies received with respect to assets in the Investment Account
into U.S. dollars or other currencies through the Investment Manager's
customary channels, including without limitation, the effecting of such
conversions through one of its affiliates.
The words "securities or other property" as used in subparagraph "(a)" shall be
deemed to refer to any intangible personal property or part interest therein,
wherever situate, including but without being limited to governmental, corporate
or personal obligations, trust and participation certificates, certificates of
deposit, notes or other evidences of indebtedness or ownership, secured or
unsecured, common and preferred stocks and options thereon and any other
evidences of indebtedness or ownership, when and if permitted under the
Investment Guidelines.
5. Reports, Valuations, Certificates, Meetings. The Company shall certify the
appointment of the Investment Manager and the amount of the Investment Account
and the Investment Manager shall provide the Company with a certificate
evidencing the Investment Manager's duly authorised representatives for
communications with the Company.
The Investment Manager shall deliver to the Company or its designee monthly
statements indicating all investments in the Investment Account and their market
values as of the close of business on the last business day of each month
together with performance tabulations, a schedule of purchases and sales
including brokerage commissions or other fees, if any, and such other reports as
shall be reasonably requested from time to time by the Company.
The Investment Manager shall, upon the request of the Company, attend meetings
with representatives of the Company to discuss the investment of the Investment
Account assets or shall submit its views in writing as the Company may request
from time to time.
The Company shall from time to time provide the Investment Manager with
Certificates containing the names and specimen signatures of the individuals who
are authorised to act on behalf of the Company. Persons authorised to act on
behalf of the Company may delegate various duties under this Agreement provided
that the power to act on behalf of the Company to amend this Agreement, to
change the amount of the Investment Account, to terminate this Agreement or to
amend the Investment Guidelines may not be delegated. The Investment Manager
shall be fully protected in relying upon any written notice, instruction,
direction or communication that the Investment Manger reasonably believes (based
upon the then current Certificate of the Company) to have been executed by an
individual who is authorised to act on behalf of the Company as the case may be.
6. Custody of Assets. The Investment Manager shall establish custody
arrangements for the physical possession and retention in safe custody to the
order of the Company of all of the assets of the Investment Account and shall be
responsible for the collection of all income due thereon.
7. Brokerage. The Investment Manager will endeavor to secure the best execution
and terms reasonably obtainable in all transactions effected on behalf of the
Company. Except as otherwise specifically directed by the Company, the
Investment Manager shall have complete discretion to select any broker or dealer
(including affiliates of the Investment Manager) to effect such transactions.
8. Representations, Standard of Conduct. The Investment Manager represents and
warrants that it has completed, obtained or performed all registrations,
filings, approvals, authorisations, consents or examinations required of it by
any government governmental authority for the performance of the acts
contemplated by this Agreement, and will maintain such status during the term of
this Agreement.
The Investment Manager acknowledges that it is familiar with and will comply
with the responsibilities demanded of a prudent investment manager in the
performance of its obligations hereunder. The Investment Manager shall, subject
always to the Investment Guidelines, discharge such obligations solely in the
interest of the Company and (i) for the exclusive purpose of providing benefits
to the Company and defraying reasonable expenses of administering the Investment
Account; (ii) with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims by diversifying the investments in the Investment
Account so as to minimize the risk of large losses; and (iii) in accordance with
the provisions of applicable law, as the same may from time to time be amended.
The Investment Manager will not be liable for any errors of fact or judgment or
for any action lawfully taken or omitted to be taken by it or any agent or
representative designated by it, unless such error, act or omission is
attributable to negligence or willful misconduct in which event Investment
Manager shall indemnify and hold the Company harmless from and against any and
all losses and expenses incurred by the Company as a result thereof. The
Investment Manager will neither be responsible for any loss of opportunity
whereby the value of the Investment Account could have been increased nor for
any decline in the value of the Investment Account or other assets of the
Company nor for any loss of cash deposited or advanced by the Investment Manger,
unless such decline or loss is a direct result of the failure of the Investment
Manager or any of its agents to comply with the Company's instructions in which
event Investment Manager shall indemnify the Company as aforesaid.
9. Compensation for Services hereunder as Investment Manager. As compensation
for services rendered hereunder, the Investment Manager shall be paid a fee
equal to 0.225% per annum on the first US$20 million of funds under management,
0.20% per annum on the next $20 million of funds under management and 0.15% per
annum of the balance of funds under management in excess of US$40 million where
the applicable rate is applied to the market value of the portfolio, as adjusted
for capital injections and withdrawals, at each calendar quarter end or the date
of termination of this Agreement. During the initial funding period, fees shall
be prorated to reflect the actual number of days assets were being managed.
Quarterly statements detailing the investment portfolio and fees shall be
rendered to the Company and charged against the Investment Account. No other fee
or transaction charge shall be imposed on the Investment Account or payable
hereunder.
10. Services to Other Clients. The services of the Investment Manger to the
Company are not to be deemed exclusive, it being understood that the Investment
Manager performs investment advisory and management services for various other
clients. The Investment Manager may give advice and take action with respect to
any of its other clients which may differ from advice given or from the timing
or nature of actions taken with respect to the Investment Account.
11. Bonding. The Investment Manager will procure and maintain at its own expense
fidelity bonding in an amount not less than US$50m (fifty million) or such other
amount as may be agreed between the parties from time to time. A letter
confirming such coverage shall be delivered to the Company by the insurers of
the Investment Manager.
12. Assignment of Agreement. The Investment Manager hereby agrees that it shall
not assign or transfer this Agreement without the prior written consent of the
Company.
13. Termination. This Agreement shall continue in effect until terminated by
either the Investment Manager or the Company by giving at least thirty (30) days
prior written notice to the other; except that at the request of the Company,
the Investment Manager shall remain as Investment Manager hereunder until the
Company selects and appoints a successor.
14. Applicable Law. This Agreement shall be construed, administered and enforced
according to the laws of England.
15. Notices. All notices or instructions hereunder shall be in writing and shall
be sent by registered or certified air mail, telex or other means providing for
acknowledgment of receipt addressed to the offices indicated in the preamble
hereof or to such other addresses as the parties may from time to time direct.
In the event the Investment Manager in its absolute discretion accepts oral
instructions from the Company, such instructions shall be confirmed in writing
within a reasonable time thereafter.
16. Acknowledgment for Jurisdiction. The Investment Manager and Company agree
that all claims arising out of this Agreement shall be litigated in a court of
appropriate jurisdiction located in England.
17. Entire Agreement. This Agreement embodies the entire understanding of the
parties, supersedes any prior agreements or understandings with respect to the
subject matter hereof and cannot be altered, amended, supplemented or any
provisions waived, except by written agreement of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first set forth above.
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
By: ____________________________ By: ______________________________
Title: ____________________________ Title: ______________________________
N.M. ROTHSCHILD ASSET MANAGEMENT LIMITED
By: ____________________________ By: ______________________________
Title: ____________________________ Title: ______________________________
INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
AND
ROTHSCHILD ASSET MANAGEMENT LIMITED
EXHIBIT A
INVESTMENT GUIDELINES
Portfolio Objectives
The primary investment objectives of the Company are to preserve its real
capital base and maintain liquidity needed for claim settlements through a
conservative program of investment in high-quality fixed income securities as
defined in this statement of guidelines. To achieve these objectives, Investment
Manager's strategy and operating practice shall be consistent with the
following:
I. Investment Instruments
Only U.S. dollar denominated fixed income and money market instruments may
be utilised, provided that up to 30% of the portfolio may be invested in
non-U.S. dollar denominated foreign government bonds. Use of these
instruments would be restricted as follows:
(A) No investment may be held at a domestic branch of a U.S. bank,
however, deposits may be held at foreign branches or subsidiaries of
U.S. banks.
(B) No investment may be made in issues which have been registered with
the S.E.C.
(C) No investment may be made in instruments which, at the time of
purchase, will prospectively be subject to non-reclaimable withholding
tax.
(D) No investment may be convertible in nature nor have warrants attaching
thereto.
(E) Time deposits and CD's held at any one bank may not exceed 15 percent
of the portfolio at any point in time.
(F) No investment may be in General Motors Corporation or any of its
affiliates or subsidiaries.
(G) All non-U.S. dollar denominated investments must be fully
currency-hedged into U.S. dollars.
II. Portfolio Diversification
The Investment Manager shall develop guidelines governing the maximum
investment in the securities of any single issuer or guarantor so as to
provide reasonable diversity among the assets which comprise the Investment
Account. A copy of the guidelines in effect at any point in time shall be
provided to the Company, which reserves the right to modify them at its
discretion.
III. Investment Maturity
"The duration of the total portfolio shall be kept within a range of + or -
25% of the duration of the benchmark index."
No investment may have a maturity (or redemption at the holder's option) in
excess of 10 years.
Floating rate notes will be deemed to have a duration determined by the
date of the next coupon change. However, no floating rate note shall be
held whose final maturity or first redemption at holder's option (whichever
is sooner) is greater than ten (10) years.
IV. Investment Quality
Except for interim capital amounts held by the Investment Manager in its
own account all investments must meet one of the following criteria in
order to qualify for inclusion in the portfolio:
(A) The investment must be issued or unconditionally guaranteed by
Organization for Economic Cooperation and Development (OECD)
governments and, in the opinion of the Investment Manager, such
securities are at least equivalent to the minimum quality requirement
set forth below.
(B) The investment must have at least a Moody's rating of Aa3 or S&P of
AA- or the equivalent or A1P1 for maturities under 1 year.
(C) Investments specifically approved in writing by MMRC and Citibank, or
(D) The investment must be unconditionally guaranteed by a company or
entity, satisfying IV(B) above.
V. Investment Performance
Investment performance will be measured against the (new) Salomon Brothers
Eurodollar bond Index (maturities greater than 1 year, excluding issues
rates below Aa3/AA-)
MOTORS MECHANICAL REINSURANCE COMPANY, LIMITED
By: ........................... By: ..........................
Title: Title:
Date: ........................... Date: ..........................