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Exhibit 10.3.1
LOGO
GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC.
Investment Management Agreement
This Agreement is made as of the 1st day of July, 2004, between
1. GENERAL RE - NEW ENGLAND ASSET MANAGEMENT, INC., a
corporation
organized under the laws of the State of Delaware ("Manager");
and
2. ALLEGHANY CORPORATION, a corporation organized under the laws
of
the State of Delaware and its affiliates listed on Schedule E- l
and signatories
hereto (collectively, the "Client").
WHEREAS, Client desires to appoint Manager as the investment
manager
of that portion of Client's assets constituting the Account (as
defined below)
for fees agreed upon in Schedule A.III.;
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 Section I.A. of Schedule A. Assets may be added to the
Account at any
time. Client will provide notification to the Manager of any such
additions. The
Account will include these assets and any changes in them resulting
from
transactions directed by Manager, withdrawals and additions made by
Client, or
dividends, interest, stock splits and other earnings, gains or
losses on the
assets,
Assets of the Client that are not to be managed by Manager are
separately identified on Schedule A ("Unmanaged Assets"). Manager
may include
these assets in its periodic reports to Client, but will exclude
their value
when calculating Manager's asset management fees.
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").
If Manager manages only a portion of Client's portfolio, unless
otherwise
specified by Client in writing, Investment Guidelines' restrictions
relate
specifically to the assets managed by Manager. 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.
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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.
Effective as of January 1, 2004, and until further notice,
Manager
will provide investment accounting services for Client, and will
assist Client
in preparing Client's statutory Schedule D, if applicable. Client
acknowledges
that Manager will provide accounting data according to Manager's
standard
interpretation of accounting principles, unless expressly
instructed otherwise
by Client's prior written notice.
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 Manager's
overall
responsibilities with respect to all clients whose accounts Manager
manages on a
discretionary basis.
Portfolio transactions for each client account generally are
completed
independently. However, 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, Manager generally will allocate securities
purchased or sold as
part of a combined order to Client's Account and to accounts of
other clients
according to the size of the order placed for each client.
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If Manager cannot obtain execution for the total amount of the
securities in the combined orders, adjustments to the allocation
will be made on
a random number generator methodology. 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 and/or transactions costs for all transactions executed as
part of the
combined order.
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.
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. Client Reports and Electronically Available
"CARA(TM)"
Toolset and Information. Both Parties agree that the Web Access
Addendum
attached as Schedule F hereto shall govern the Manager's provisions
and Client's
use of the electronically available CARA(TM) toolset and
information.
Manager shall prepare 1) Quarterly investment guideline
compliance
status report; 2) monthly appraisal reports and detailed holdings
reports,
showing current
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book values, securities valuations, unrealized gains and losses,
book yields and
average life; and 3) quality and maturity distribution reports.
Additionally, investment accounting reports generally include
the
following:
-
Investment Income Earned
-
Securities on Deposit - By State
- Summary
of General Ledger Journal Entries
- Trial
Balance
- Schedule
D data, including NAIC Rating information
Client agrees to obtain its appraisals and investment
accounting
reports via Manager's website, GRNEAM.com. Reports shall be
available no later
than five (5) business days after month-end. However, both Parties
agree that
the Client has the right to receive hard copies and that upon
Client's written
request, Manager will send Client hard copies of the appraisals
and/or
investment accounting reports, via email, facsimile or overnight
mail.
The Account's performance will be sent monthly, quarterly or
annually
upon Client request. Ad hoc reports and presentation materials are
prepared as
reasonably directed by clients.
Manager is responsible for the accuracy and completeness of
Client
Account information and reports.
Manager shall provide Client with a copy of Report on Controls
Placed
in Operation and Tests of Operating Effectiveness (SAS70 Report),
as well as
future updates
