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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
For the fiscal year ended December 31, 1994 File No. 0-8841
THE PIONEER GROUP, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 13-5657669
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 State Street, Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code: (617) 742-7825
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $ .10 per share
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the incorporation by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [ ]
Based on the last sale price of the Registrant's Common Stock on the
Nasdaq National Market ($19.75) on March 15, 1995, the aggregate market value
of the shares of voting stock held by non-affiliates of the Registrant on that
date was $381,022,352.
As of March 15, 1995, 24,791,028 shares of the Registrant's Common
Stock, $ .10 par value, were outstanding.
Documents Incorporated by Reference
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(1) Portions of the 1994 Annual Report to Stockholders are incorporated by
reference into Parts I and II (as indicated in such parts).
(2) Certain information called for by Part III (as indicated therein) is
incorporated from the Registrant's definitive proxy materials for use in
connection with the 1995 Annual Meeting of Stockholders.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Financial Services. The Pioneer Group, Inc., a Delaware corporation
organized in 1956 (the "Company"), and its wholly-owned subsidiaries are
engaged in four lines of financial services in the United States: (a)
investment manager to 31 open-end U.S. registered investment companies and one
closed-end U.S. registered investment company (collectively, "mutual funds"),
including seven mutual funds sold in connection with the Pioneer Variable
Contracts Trust, which was introduced in March 1995, (b) distributor of shares
of open-ended mutual funds, (c) venture capital investor and manager, and (d)
shareholder servicing agent for mutual funds. Through its Warsaw, Poland
operations, the Company also manages and distributes units of a mutual fund and
owns 50% of a unitholder servicing agent. In addition, the Company has
invested in investment management operations in Taiwan, Russia, India and the
Czech Republic.
Other Businesses. The Company also owns 90% of Teberebie Goldfields
Limited, a gold-mining venture in the Republic of Ghana and participates in
several non-financial ventures in Russia, including a joint venture pursuing
the development of timber production, in which the Company has a 50% direct
interest and a 7.4% indirect interest.
MANAGEMENT ACTIVITIES
The Company's wholly-owned subsidiary, Pioneering Management
Corporation ("Pioneering Management"), acts as an investment manager of, or
subadvisor to, 31 domestic open-end mutual funds, consisting of 11 domestic
equity portfolios, ten fixed-income or interest-bearing securities portfolios,
five international equity portfolios, four money market portfolios and one
balanced portfolio. These portfolios include seven portfolios of Pioneer
Variable Contracts Trust which recently commenced business and Pioneer Emerging
Markets Fund and Pioneer India Fund which commenced business in 1994.
All of such open-end mutual funds (hereinafter referred to collectively
as the "Funds") are registered under the Investment Company Act of 1940, as
amended (the "Act").
On December 1, 1993, the Company acquired all of Mutual of Omaha Fund
Management Company ("FMC"), the investment management subsidiary of Mutual of
Omaha Insurance Company ("Mutual of Omaha"). The purchase price for the shares
of FMC and related consulting and non-competition agreements was $23.5 million.
In addition, the Company may be required to pay Mutual of Omaha an additional
amount of up to $3.0 million in the event that certain asset targets are met.
As a result of this acquisition, assets under management of the Company and its
subsidiaries increased by approximately $1.3 billion on December 1, 1993.
At March 3, 1995, the Funds had total net assets with a market value of
$10.4 billion. In managing such assets, Pioneering Management employs 96
persons, including 29 full-time investment analysts and support staff and 14
account managers.
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Management Contracts with the Funds. Pioneering Management manages
each Fund pursuant to management contracts. Each management contract is
renewable annually by vote of either the Fund's Board (including a majority of
members who are not "interested persons" as defined under the Act) or the
Fund's shareholders. All management contracts terminate if assigned and may be
terminated by either party without penalty on 60 days' written notice. The
management contracts for the Funds (other than the Funds which were established
in 1994 and 1995) were all renewed for an additional year in 1994. Under these
contracts, Pioneering Management is authorized in its discretion to buy and
sell securities for the accounts of the Funds, subject to certain limitations.
In addition, the management contracts between the Funds and Pioneering
Management define the ordinary operating expenses to be assumed by each.
As compensation for its management services, Pioneering Management
receives management fees from the Funds which range from 0.40% to 1.25% per
year of average daily net assets depending on the Fund and net asset value. On
an interim basis, Pioneering Management has agreed to waive management fees and
pay certain expenses of selected Funds. Pioneering Management waived, paid and
reimbursed $2.1 million pursuant to expense limitation agreements with selected
Funds during 1994.
Other Management Activities
Pioneer Winthrop Advisers. In 1993, the Company in conjunction with
Winthrop Financial Associates, A Limited Partnership ("WFA"), a Maryland
limited partnership, established Pioneer Winthrop Advisers ("PWA"), an
investment adviser registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"). PWA serves as investment manager for the Pioneer
Winthrop Real Estate Investment Fund and the Real Estate Portfolio of Pioneer
Variable Contracts Trust, open-end mutual funds (the "Real Estate Funds"). The
Real Estate Funds invest in a portfolio consisting primarily of equity real
estate investment trusts ("REITS") and other real estate related companies.
Pioneering Management and Winthrop Advisors Limited Partnership, an affiliate
of WFA, act as subadvisors in providing management services to the Real Estate
Funds. At March 3, 1995, the Real Estate Funds had total net assets with a
market value of $26 million.
Pioneer Interest Shares. Pioneering Management also acts as investment
manager to Pioneer Interest Shares, Inc., a closed-end mutual fund formerly
under management of FMC ("Pioneer Interest Shares"). At March 3, 1995, Pioneer
Interest Shares had total net assets with a market value of $95 million.
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Private Accounts. In addition, Pioneering Management acts as an
investment manager to five private institutional accounts, acts as a subadvisor
to two Luxembourg registered global funds marketed by an independent third
party, and acts as a subadvisor to one of a series of portfolios utilized as
funding vehicles for a variable life insurance fund (hereinafter referred to
collectively as the "Private Accounts"). The Private Accounts had total assets
with a market value of $0.5 billion at March 3, 1995.
Polish Fund. In early 1992, subsidiaries of the Company organized
Pioneer First Polish Trust Fund (the "Polish Fund"), the first mutual fund in
Poland, and a related joint venture unitholder services business. In July
1992, the Polish Fund began accepting unitholder applications. The Company's
wholly-owned subsidiary, Pioneer First Polish Trust Fund Joint Stock Company SA
("Pioneer First Polish") acts as an investment manager and distributor of
shares of the Polish Fund. At March 3, 1995, the Polish Fund had net assets
with a market value of approximately $418 million. See "Pioneer First Polish
Trust Fund" below.
India Fund. In 1994, subsidiaries of the Company organized Pioneer
India Fund (the "India Fund"). PMC acts as an investment manager of the India
Fund, and for such services receives a fee equal to 1.25% per annum of the
India Fund's average daily net assets. ITI Pioneer AMC Ltd., an Indian company
of which PMC owns 45% and Investment Trust of India Limited ("ITI"), an Indian
corporation, owns 54%, serves as subadvisor for the India Fund, for which it
receives fees ranging from 0.10% to 0.60% of the India Fund's average gross
assets invested in India's securities markets. At March 3, 1995, the India
Fund had net assets with a market value of approximately $15 million.
Additional Information. For more information on assets under
management and sales of mutual fund shares for the five years ended December
31, 1994 and other industry segment information for the three years ended
December 31, 1994, see "Assets Under Management," "Sales of Mutual Fund Shares"
and Note 14 -- Financial Information by Business Segment included under Notes to
Consolidated Financial Statements in the 1994 Annual Report to Stockholders
(the "1994 Annual Report"), which information is incorporated herein by
reference.
DISTRIBUTION OF FUND SHARES
The Company's indirect wholly-owned subsidiary, Pioneer Funds
Distributor, Inc. ("Pioneer Distributor"), acts as principal underwriter and
distributor of the shares of the Funds. In 1994, Pioneer Distributor sold
shares of the Funds with an aggregate offering price of $1,302 million,
including A Shares with an aggregate offering price of $1,166 million and B
Shares with an aggregate offering price of $136 million. In connection
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therewith, Pioneer Distributor received aggregate commissions of $48.1
million, of which $42.5 million was reallowed to approximately 1,600
independent broker-dealers throughout the United States and in several foreign
countries. One broker-dealer was responsible for approximately 11% of the
sales.
Underwriting Contracts. Pioneer Distributor provides its underwriting
and distribution services pursuant to underwriting contracts, which are
substantially identical, with each of the Funds. These one-year contracts are
renewable annually by vote of the Fund's Board (including a majority of those
who are not "interested persons" as defined under the Act) or shareholders.
Each contract terminates if assigned and may be terminated by either party on
60 days' written notice without penalty. The underwriting contracts for each
of the Funds (other than the Funds which were established in 1994 and 1995)
were all renewed for an additional year in 1994.
Sales Charges. Generally, purchasers of shares of the Funds
underwritten by Pioneer Distributor pay a sales charge which is the difference
between the offering price of the shares and their net asset value, and which
varies generally as a percentage of the offering price. These are referred to
as front-end load shares. Sales charges on front-end load shares range from
zero to 5.75% depending on the Fund and the amount invested. In April 1994,
the Company introduced a multi-class share structure for certain of the Funds
(the "participating Funds") pursuant to which the participating Funds offer
both the traditional front-end load shares and new back-end load shares. On
back-end load shares, the investor does not pay any sales charge unless it
redeems before the expiration of the minimum holding period, which ranges from
three to six years. The participating Funds generally limit to $250,000 an
investment by any one account in back-end load shares of a participating Fund.
With respect to sales of front-end load shares, Pioneer Distributor
may, in its discretion, pay a commission to broker-dealers who initiate and are
responsible for sales of $1 million but less than $5 million, ranging from
0.50% to 1.0%, depending on the Fund, and the amount of the sale. Certain
purchases not subject to an initial sales charge may be subject to a contingent
deferred sales charge ranging from 0.5% to 1.0%, depending on the Fund, in the
event of certain redemption transactions within one year. With respect to
sales of back-end load shares, Pioneer Distributor will pay commissions to
broker-dealers related to sales and service of such shares ranging from 2% to
4% of the sales transaction amount (including a services fee of 0.25% for the
first year).
Most of the sales charge in front-end load shares is reallowed by
Pioneer Distributor to dealers through whom the shares are sold. This
reallowance varies generally as a
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percentage of the offering price on sales under $1 million. Reallowances
range from 1.0% to 5.0% depending on the Fund and the amount of the sale.
Dealer reallowances on new funds and during certain short-term promotions
may be increased to 100% or more of the sales charge.
Distribution Plans. Each of the Funds has a distribution plan(s)
pursuant to Rule 12b-1 under the Act which provide for certain payments to be
made to Pioneer Distributor. In the case of Funds which offer a single class
of shares or in the case of participating Funds with respect to Class A Shares,
the distribution plans (the "Class A Plans") provide for payments by such funds
of certain expenses up to 0.25% per annum of average daily net assets (0.15%
for money market funds). In the case of participating Funds with respect to
Class B Shares, the distribution plans (the "Class B Plans") provide for
payments by such funds of fees relating to (a) distribution services in an
amount not to exceed 0.75% per annum of the average daily net assets of the
Class B shares of the participating Fund, and (b) personal and account
maintenance services in an amount not to exceed 0.25% of the average daily net
assets of the Class B Shares of the participating Fund. In 1994, the Boards of
the Funds (other than the Funds which were established in 1994 and 1995)
renewed the Class A Plans. In addition, participating Funds began selling
Class B Shares in 1994.
Domestic Sales of Shares of the Funds. Pioneer Distributor is a
registered broker-dealer (see "Regulation" below), employing 94 full-time
personnel, including 21 regional sales representatives who are responsible for
territories comprising most of the United States and Puerto Rico and who work
with broker-dealers to promote sales of the Funds' shares in their respective
territories. Most of the Funds' shares are sold to the public by securities
sales persons registered with the National Association of Securities Dealers,
Inc. (the "NASD") who act as representatives of broker-dealer firms, which are
members of the NASD and which have signed sales agreements with Pioneer
Distributor. Shares of the Funds (except for certain of the Tax-Free Funds)
may be sold in all states, by broker-dealers and registered representatives
licensed in those states.
International Sales of Shares of the Funds. Pioneer Fonds Marketing
GmbH ("Pioneer Fonds Marketing"), a German company acquired by Pioneer
Distributor in 1990, performs marketing, sales and shareholder servicing
functions with respect to sales of shares of the Funds in Europe, primarily
Germany. Pioneer Fonds Marketing currently has 24 employees and operates from
two offices in Europe. In 1994, approximately 24% of the total sales of the
United States registered Funds' shares were sold outside of the United States.
Of such non-U.S. sales, 82% were sold in Germany.
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Pioneer International Corporation, a Delaware corporation and a
wholly-owned subsidiary of the Company ("Pioneer International"), has
contractual relationships with two foreign representatives who promote sales of
shares of the Company's Polish Fund, which is further described below.
VENTURE CAPITAL
In 1981, the Company organized a wholly-owned subsidiary, Pioneer
Capital Corporation ("Pioneer Capital"), for the purpose of making venture
capital investments and managing venture capital funds. In 1986, Pioneer
Capital organized a wholly-owned subsidiary, Pioneer SBIC Corp. ("PSBIC"),
which is the general partner of Pioneer Ventures Limited Partnership ("PVLP").
PVLP is a Small Business Investment Company ("SBIC") licensed by the U.S. Small
Business Administration (the "SBA"). PSBIC is the general partner of PVLP and
has an 89.5% interest in PVLP. The limited partnership interests in PVLP
represent an 10.5% interest in PVLP and are owned by the four officers of
Pioneer Capital (the "Pioneer Capital Principals") who are responsible for the
operations and overall success of PVLP.
At December 31, 1994, Pioneer Capital and PVLP held approximately $17.2
million of investments (at cost) in 24 privately-held companies and $1.0
million (at cost) in six publicly-held companies. The value of these
investments as of December 31, 1994 was $19.8 million. During 1994, Pioneer
Capital and PVLP had net realized and unrealized gains of $32,000 from its
venture capital investment portfolio. As of March 3, 1995, Pioneer Capital and
PVLP had a total of $4.8 million cash available for additional investments.
Additional capital for investments is available to PVLP through the sale of SBA
guaranteed debentures. Through December 31, 1994, PVLP had availed itself of a
total of $4.95 million of SBA guaranteed debentures that mature at various
times between 1998 and 2003 and bear interest rates between 6.12% and 9.8%.
In February 1995, PCC formed Pioneer Ventures Limited Partnership II
("PVLP II"), a new SBIC. Pioneer Ventures Management L.P. ("PVM") serves as
the general partner of PVLP II. PVM's general partner is Pioneer Management
SBIC Corp., a corporation the shareholders of which are the Pioneer Capital
Principals. PVM's limited partners are the Company and the Pioneer Capital
Principals. The Company holds a 16.7% limited partnership interest in PVLP II
and a 45% limited partnership interest in PVM. At March 3, 1995, PVLP II had
received funding commitments of $15.0 million from investors.
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Pioneer Capital and its subsidiaries utilize a diversified approach to
venture capital investing. Investments are in early-stage businesses seeking
initial financing as well as more mature businesses in need of capital for
expansion, acquisitions, management buyouts or recapitalizations. In general,
Pioneer Capital invests in start-up companies in the information and medical
technology areas whereas PVLP invests in more established businesses in both
technical and non-technical areas. PVLP II will follow a similar investment
strategy to PCC and PVLP.
Venture capital investment portfolio valuations are reviewed quarterly
by the Company's Board of Directors and the values of such investments are
adjusted when circumstances require. As a general rule, an investment is
adjusted up or down, as the case may be, to conform to the price paid by a
sophisticated new third-party investor in any subsequent round of financing.
An investment may also be written down if the venture company is substantially
behind its business plan and may be written up if there is some other
compelling reason for doing so. Securities which are publicly traded are
valued on a valuation date at the average of the last sales or closing price on
the valuation date and the preceding two days in the principal market in which
such securities are traded, with an appropriate discount if such securities are
restricted or thinly traded.
In January 1995, the Company's subsidiaries, with the assistance of a
placement agent, raised approximately $35 million from investors in Europe and
the United States for venture capital investments in Poland. A second closing
of investments aggregating $10 to $15 million is expected. The assets so
raised will be invested and managed by the Company's venture capital management
operation in Warsaw, Poland.
The Company also plans to sponsor a venture capital pool, in
coordination with the Overseas Private Investment Corporation ("OPIC"), a
quasi-U.S. governmental organization that facilitates investments by U.S.
companies in foreign countries. The proposed Russian pool will invest in
companies in Russia and the former Soviet Union and will be managed by a
Moscow-based joint venture investment management operation in which the Company
has 55% interest.
SHAREHOLDER SERVICES
At December 31, 1994, the Funds had nearly 929,000 active shareholder
accounts, including approximately 338,000 IRAs and other qualified retirement
accounts. Mutual fund shareholder accounts and, in particular, qualified
accounts, require an exceptional amount of shareholder communications and
transfer agency services and the mutual fund industry, as a whole, has
experienced a considerable amount of difficulty in keeping up with the
increasing demands for services in this area. In order to compete successfully
with other mutual fund complexes, the
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Company's wholly-owned subsidiary, Pioneering Services Corporation
("Pioneering Services"), assumed responsibility for shareholder services for
the Funds in 1985.
As shareholder servicing agent for the Funds, Pioneering Services has
entered into services agreements with each of them pursuant to which it
received in 1994 an annual active account fee of $20.83 for equity fund
accounts, $22.45 for fixed-income fund accounts and $27.45 for money-market
fund accounts. Such agreements are subject to annual renewals which require
the approval of the Funds' Boards, including a majority of members who are not
"interested persons," and may be cancelled by either party on 60 days' notice.
The Company acts as the trustee/custodian for accounts which are IRAs
or other qualified retirement accounts and receives an annual fee of $10 for
each such account, payable by shareholders with such accounts, up to maximum
annual fees of $20 for shareholders with multiple accounts of one plan type.
Shareholders also have the option of paying a one-time fee of $100 in lieu of
the annual account fee.
TEBEREBIE GOLDFIELDS LIMITED
Organization and Mining Lease. The Company's 90%-owned subsidiary,
Teberebie Goldfields Limited ("TGL"), is engaged in the exploration, mining,
and processing of gold ore on a mining concession located six kilometers south
of Tarkwa in the Western Region of the Republic of Ghana.
In 1986, the Company and a joint venturer organized TGL, a Republic of
Ghana corporation, for the purpose of evaluating the feasibility of mining gold
on several tracts of land in the Teberebie Concession Area in the Republic of
Ghana (the "Site"). In February 1988, TGL entered into a mining lease of the
Site with the Republic of Ghana (the "Government") pursuant to which TGL
received exclusive gold mining rights for a term of 30 years. Under this lease,
the Government receives annual royalties of between 3.0% and 12.0% of TGL
revenue, which rate will vary based on TGL's operating profit margin and its
level of capital expenditures, and is assured a continuing 10% equity interest
in TGL. In 1994, the Company paid royalties to the Government in the amount of
3.0% of TGL revenue.
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In April 1989, the Company purchased the other non-governmental joint
venturer's interest for $3.7 million, primarily in cash. The Company's 90%
interest in TGL is held by its wholly-owned subsidiary, Pioneer Goldfields
Limited, a Guernsey, Channel Islands company ("PGL").
Gold Production. TGL began shipping gold in October 1990. In the
second quarter of 1991, the mine reached then commercially feasible production
levels (about 1,000 ounces per week) and full production levels (about 2,000
ounces per week) during the fourth quarter of 1991. Management initiatives
permitting the efficient utilization of production equipment and facilities
enabled TGL to increase production to over 3,000 ounces per week in 1993.
After TGL's expansion in 1994, which is further described below, production
increased to over 5,000 ounces per week in December 1994. TGL expects to
produce approximately 265,000 ounces (almost 5,100 ounces per week) in 1995.
TGL shipped approximately 176,000 ounces of gold in 1994, contributing
$67.6 million to the Company's revenues. In 1993 and 1992, TGL shipped
approximately 165,000 and 129,000 ounces of gold, respectively. A three-year
financial summary for the gold mining business segment is shown below:
<TABLE>
<CAPTION>
For the year
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1994 1993 1992
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(in millions)
<S> <C> <C> <C>
Revenues $67.6 $59.2 $43.8
Net Income $18.3 $10.4 $ 7.0
Total Assets $75.7 $61.9 $49.4
</TABLE>
The average realized price of gold sold by TGL during 1994, 1993 and
1992 was $383, $359 and $340 per ounce, respectively, based on the market spot
price of gold at the time of sale. Spot prices of gold fluctuate widely and
are affected by a number of factors including supply and demand, inflation
expectations, the strength of the U.S. dollar and interest rates.
At present, TGL has a gold price-floor program covering its estimated
production through December 31, 1995. Under this program, TGL is assured of
receiving no less than $310 per ounce for the gold sold by it. TGL has secured
trading facilities with two institutions and may engage in gold price hedging
activity in the future. During 1994, 1993 and 1992, TGL's total cost per ounce
of gold produced was $248, $229 and $227, respectively. The
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total cost per ounce includes $6 in each of 1994 and 1993 and $8
in 1992 for amounts expended by the Company, principally for
political risk insurance premiums.
Gold Reserves. In 1994, TGL received an independent
certification of additional gold reserves at its mining concession
in Ghana. Proven and probable reserves were established based on
mapping, sampling, drilling, assaying, and evaluation techniques
typical of those that are generally employed in the mining
industry. As of December 31, 1994, IN SITU proven and probable
reserves increased to approximately 6.7 million ounces, including
previously proven and probable reserves of 4.8 million ounces. Proven and
probable reserves comprise 6.4 million ounces of ore which will be
processed through crushing and heap leaching operations and 0.3
million ounces which will be leached directly utilizing
run-of-mine dump leaching techniques. The minimum cut-off grade
(based on a gold price of $350 per ounce) for crushed and run-of-mine
ore was approximately .022 and .011 ounces per tonne, respectively.
Based on the current technology at the mine, it is estimated that
recoverable gold from these open-pit reserves will aggregate
approximately 5.3 million ounces.
Gold occurs in quartz-pebble conglomerate and pebbly
sandstone units which form a north-northeast tending ridge that
rises approximately 100 meters above the valley floor. The
earliest known exploration on the Teberebie property was conducted
in the early 1890's when several adits were driven into the ridge.
Records indicate that approximately 15,000 tonnes of ore was
extracted from adits and drifts prior to World War II. Four of
these adits were cleared and systematically sampled. At the end
of 1992, TGL had drilled a total of 296 holes advancing 18,545
meters on the property. Holes were drilled on 74 cross-sections
perpendicular to the gold bearing ridge along a strike length of
6,050 meters, with three to five drill holes per section.
Sections were 50 to 100 meters apart, and drill hole spacing on
each section was 50 to 100 meters. In 1993, TGL drilled sixteen
in-fill ore holes advancing 930 meters on one ridge designed to
move reserves from the possible to proven and probable categories.
In 1994, TGL drilled 39 holes advancing 5,090 meters on the
property. This drilling added 1.9 million ounces to the
audited reserves. Contiguous with this, 2,551.5 meters of
exploratory drilling in 11 holes was completed.
Customers and Employees. During 1994, 100% of gold sales
represented gold shipments from TGL in Ghana to two unaffiliated
European refiners for refining and subsequent sale. Because of
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the worldwide demand for gold, the Company does not believe that
the loss of such customers would have a material adverse effect on
the Company or its subsidiaries.
At March 3, 1995, TGL had 970 employees, of which 941 are
Ghanaians. Certain of TGL's employees are represented by the
Ghana Mineworkers Union ("GMU"). In 1992, TGL entered into a
three-year union contract with respect to its GMU employees. The
union contract expires in July 1995 and TGL expects to begin
renegotiating the union contract in June. TGL experienced a
two-day work stoppage in 1994 in connection with union
negotiations. The work stoppage had no material effect on TGL's
operations and TGL continues to believe that its relations with
its employees are excellent.
Regulation and Taxation. Mining activities in the Republic
of Ghana are governed by PNDCL 153, the Minerals and Mining Law of
1986 (the "MML"). In addition, the Government is in the process
of establishing and implementing environmental regulations. TGL
was developed and currently operates pursuant to environmental
standards comparable with standards maintained in the United
States. In the opinion of TGL's management, the Government's
proposed environmental regulations, when enacted, will not adversely
affect TGL's operations.
In the first quarter of 1994, the Republic of Ghana enacted
the Minerals and Mining (Amendment) Act of 1994 which reduced the
income tax rate for mining companies from 45% to 35%. As a
result, the Company's first quarter 1994 earnings were enhanced by
90% of a $4.4 million reduction (which amounted to $0.16 per
share) in income taxes deferred since commencement of commercial
operations in April 1991.
Prior to 1994, TGL's income tax rate in Ghana was 45% and the
effective tax rate (U.S. and Ghana combined) for the Company's
gold mining business in 1993 was 48%. Pursuant to the terms of
the MML, income taxes may be deferred until recovery of capital
investment; accordingly, TGL has been accruing deferred taxes
since the commencement of commercial operations on April 1, 1991.
TGL had deferred $19.8 million in taxes through December 31, 1993.
Excluding the $4.4 million adjustment to deferred taxes recorded
in prior years, accrued income taxes were $7.8 million in 1994, of
which $6.2 million was paid to the Republic of Ghana. The
effective income tax rate in 1994 was 36%.
Financing. At December 31, 1994, direct investment in TGL
aggregated $9.6 million, representing $7.7 million of third party
debt (including debt incurred in the expansion of TGL in 1994) and
$1.9 million of Company direct investment in the form of equity.
Third party debt consisted of $1.5 million guaranteed by OPIC,
$2.1 million
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guaranteed by the Company, and $4.1 million in non-recourse
supplier financing. Capital expenditures during 1994 were $18.4
million.
Expansion. In the third quarter of 1994, TGL completed
construction of a second mine expected to increase gold production
to approximately 265,000 ounces per annum in 1995. The aggregate
cost of the expansion was approximately $23 million, most of which
was expended in 1993, funded both from operations and a $4.9
million loan guaranteed by the Swedish Export Credits Guarantee
Board. In addition, TGL has secured a commitment letter from OPIC
pursuant to which OPIC will provide loan guarantees for up to $5.0
million. The commitment terminates in December 1995. The new
mine replicates TGL's existing open pit mining and heap leaching
technology.
In mid-March of 1995, the Company decided to proceed with the
development of a third heap-leaching mine and has begun evaluating
the economic feasibility of various ore processing alternatives.
Preliminary capital cost projections for a mine expansion which
replicates TGL's existing open pit mining, crushing, and heap
leaching technology are estimated at approximately $30.0 million.
Gold production is expected to increase by at least 120,000 ounces
annually under this alternative. The Company is also examining an
in-pit crushing alternative which would further increase gold
production at an additional cost of approximately $15.0 million.
TGL estimates that the new facility, under either alternative,
will commence production in early 1997 and will reach full
production by the middle of that year. TGL expects to finance 75%
of the expansion externally from third party sources, with the
balance financed through TGL's operations.
Insurance. The Company maintains $51.2 million of "political
risk" insurance principally from OPIC covering 90% of its equity
and loan guarantees. This insurance also covers 90% of the
Company's proportionate share of TGL's cumulative retained
earnings. In addition, the Company maintains standby coverage of
$18.1 million, which can be activated semiannually, to cover
increases in the Company's proportionate share of TGL's cumulative
retained earnings.
PIONEER FIRST POLISH TRUST FUND
Organization. In early 1992, subsidiaries of the Company
organized the Polish Fund, the first mutual fund in Poland, and a
related joint venture unitholder services business, Financial
Services Limited ("FSL"). The Company's wholly-owned subsidiary,
Pioneer First Polish, acts as an investment manager and
distributor of participation units of the Polish Fund. As of
March 3, 1995, Pioneer First Polish had approximately 94
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<PAGE> 14
employees, including management and support staff. All of the
Company's interests in Pioneer First Polish and FSL are held by
its wholly-owned subsidiary, Pioneer International.
The Polish Fund began accepting unitholder applications on
July 28, 1992 and at March 3, 1994, the Polish Fund had net assets
with a market value of $1.0 billion* in Polish zlotys ("PZL").
However, by March 3, 1995, assets under management had declined to
approximately $418 million. Under the terms of the bylaws of
Pioneer First Polish and Polish law, up to 10% of the assets of
the Polish Fund may be invested outside of Poland, and 4% of the
assets are currently invested in the Company's Funds.
Management Fees and Operating Expenses. As is the practice with
many international funds, management fees on assets of the Polish
Fund are higher than those in the United States because of the
investment required to organize and capitalize the Polish
operation and the related business risks assumed by the Company.
As compensation for its management services, Pioneer First Polish
receives management fees of 2.00% per annum of average daily net
assets excluding the assets invested in the Company's Funds, which
are subject to the management fee schedules of the Funds. See
"Management of the Mutual Funds."
The Polish Fund bylaws define the ordinary operating expenses
to be assumed by each of Pioneer First Polish and the Fund, and
provide an expense limitation equal to 4% of the Polish Fund's
average daily net assets. In 1994, Pioneer First Polish assumed
no expenses in excess of such limitation.
Sales of Shares. In 1994, Pioneer First Polish sold shares
of the Polish Fund with an aggregate offering price of PZL 16.3
trillion** (approximately $734 million) and received aggregate
commissions of PZL 734 billion** (approximately $38 million), of
which PZL 589 billion** (approximately $31 million) was reallowed
to 18 distributors in Poland. Sales thus far in 1995 are
substantially below the average rate of sales experienced in 1994.
Sales charges range from 2.50% to 5.50%. The majority of the
sales charge is reallowed to dealers through whom the shares are
sold. This reallowance varies generally as a percentage of the
offering price and ranges between 4.50% on sales of less than PZL
25,000 and 2.00% on sales in excess of PZL 500,000.
______________________
* On January 1, 1995, zlotys were redenominated so that 10,000 old
zlotys now have a value of one new zloty.
** Amounts do not reflect the redenomination of zlotys on January 1, 1995.
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<PAGE> 15
As of March 3, 1995, 18 financial institutions in Poland had
signed sales agreements with Pioneer First Polish. At that time,
approximately 608 branches owned by these institutions were
available to sell shares of the Fund.
Financial Services Limited. In January 1992, the Company's
subsidiary, Pioneer International, established FSL, which is 50%
owned by Pioneer International and 50% owned by Bank Polska Kasa
Opieki, S.A. in Poland. FSL was established as the unitholder
servicing agent for the Polish Fund. Under the terms of the
agreement between FSL and the Fund, FSL will receive annual fees
equal to the PZL equivalent of $12.00 per account. In 1994, such
fees aggregated PZL 114.3 billion (approximately $5.0 million).
At March 3, 1995, FSL serviced approximately 237,000 unitholder
accounts and employed approximately 140 persons.
COMPETITION
Management and Distribution Services. The mutual fund
industry is intensely competitive. Many organizations in this
industry are attempting to sell and service the same clients and
customers, not only with mutual fund investments but with other
financial products. Some of the Company's competitors have more
products and product lines and substantially greater assets under
management and financial resources. The Company believes it is
competitive in terms of price and performance with other firms
providing similar advisory services to investment companies and to
pension plans and endowment funds and with firms engaged in
distributing investment company shares.
The distribution of mutual fund shares has been significantly
affected by the growth of no-load funds whose shares are sold
primarily through direct sales approaches without any sales
charge, by the evolution of service fees payable to broker-dealers
that provide continuous services to their clients in connection
with their investments in a mutual fund and by the development and
implementation of complex distribution systems employing classes
of shares and master-feeder fund structures.
Typically, the underwriter or distributor that pays a service
fee is reimbursed by the mutual fund under a plan of distribution
pursuant to Rule 12b-1 under the Act ("Rule 12b-1 Plan"). All of
the Funds distributed by Pioneer Distributor now pay such service
fees to broker-dealers in amounts not exceeding 0.25% of the value
of their clients' accounts in the Funds. See "Distribution of
Fund Shares - Distribution Plans" above.
For certain of the Funds (the "participating Funds"), in
April 1994, the Company introduced a multi-class share structure.
Under such structure, which has been approved by the Boards of
such Funds, the participating Funds offer both the
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<PAGE> 16
traditional front-end load shares and new back-end load shares. On
back-end load shares, Pioneer Distributor pays a commission on the sale,
typically equal to 4% of the offering price but the investor does not pay
any sales charge unless it redeems before the expiration of the minimum
holding period, which ranges from three to six years. Pioneer
Distributor's cash flow may be adversely affected by vigorous sales of
back-end load shares because its recovery of the cost of commissions paid
up front to dealers is spread over a period of years. Pioneer Distributors
is reimbursed for such commissions from payments by the Funds under Rule
12b-1 Plans (that are subject to annual renewals by the disinterested
trustees of the Funds) and from back-end sales charges paid by redeeming
investors before the expiration of the holding periods.
Success in the investment advisory and mutual fund share
distribution businesses is substantially dependent on the Funds'
investment performance. Good performance stimulates sales of the
Funds' shares and tends to keep redemptions low. Sales of Funds'
shares generate higher distribution revenues and management fees
(which are based on assets of the Funds). Good performance also
attracts private institutional accounts to Pioneering Management.
Conversely, relatively poor performance results in decreased sales
and increased redemptions of the Funds' shares and the loss of
private accounts, with corresponding decreases in revenues to the
Company. In 1994, the performance of the Funds managed by
Pioneering Management, was generally competitive with comparable
mutual funds offered by others and with relevant indices and
benchmarks approved by the Fund's Boards.
Venture Capital. The venture capital industry is also
extremely competitive. In the process of investing and attempting
to raise funds from entities other than the Company, Pioneer
Capital must compete with a large number of venture capital firms,
many of which have substantially larger staffs and more capital to
invest.
Shareholder Services. The shareholder services industry is
extremely competitive. Pioneering Services believes that it is
providing high quality shareholder services for the Funds and
their shareholders at rates that are competitive in the industry.
The Company believes that effective shareholder services are vital
to success in this industry. While these services have
historically been provided by banks and other institutions with
greater resources than Pioneering Services, the Company believes
that Pioneering Services generally outperforms such competitors
because it is dedicated exclusively to the provision of such
services to the Funds and their shareholders, rather than to a
number of different customers.
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<PAGE> 17
REGULATION
Pioneer Distributor, as a registered broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), is
required, among other things, to maintain certain records, file
reports with the Securities and Exchange Commission (the "SEC"),
supervise employees and deal fairly with customers, all in
accordance with the 1934 Act and the rules and regulations
promulgated thereunder.
Pioneer Distributor is also a member of the NASD, a
securities industry self-regulatory body which is itself regulated
by the SEC under the 1934 Act. As a member of the NASD, the
Company is required to abide by the standards, including pricing
practices, set forth in the Articles of Incorporation, the By-Laws
and the Rules of Fair Practice of the NASD.
Pioneering Management, as investment manager of the Funds and
adviser to the Private Accounts, is registered pursuant to the
Advisers Act and as such is subject to certain recordkeeping,
compensation and supervisory rules and regulations.
Pioneering Services Corporation as transfer agent for the
Funds is registered pursuant to the 1934 Act and as such is
subject to recordkeeping requirements and certain other rules and
regulations.
The SEC has jurisdiction over registered investment advisers,
registered investment companies and transfer agents and, in the
event of a violation of applicable rules or regulations, may take
action which could have a serious effect on Pioneering
Management's, Pioneer Distributors' or Pioneering Services'
businesses. The violation of any of the applicable laws, rules or
regulations to which Pioneer Distributor is subject could have an
adverse effect upon the Company with respect to transactions by
those broker-dealers.
Mining activities in the Republic of Ghana are governed by
PNDCL 153, the Minerals and Mining Law of 1986. See "Teberebie
Goldfields Limited" above.
Pioneer First Polish was established under, and is regulated
by, the Public Trading in Securities and Trust Funds Act of March
22, 1991.
RELATIONSHIP WITH THE FUNDS
The businesses of the Company, Pioneering Management, Pioneer
Distributor, Pioneering Services, Pioneer First Polish and FSL are
dependent upon their associations and contractual relationships
with the Funds with which they have contractual relationships. In
the event any of the management contracts, underwriting contracts
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<PAGE> 18
or service agreements were cancelled or not renewed pursuant to
the terms thereof, the Company may be substantially adversely
affected. The Company, Pioneering Management, Pioneer
Distributor, Pioneering Services, Pioneer First Polish and FSL
consider their respective relationships with such funds to be good
and they have no reason to believe that their management,
underwriting and service contracts will not be negotiated on a
reasonable basis in the future; however, there is no assurance
that such funds will continue these relationships.
RELATIONSHIP WITH THE PRIVATE INSTITUTIONAL ACCOUNTS
Pioneering Management's agreements with the eight Private
Accounts are all terminable on short notice. The trustees or
corporate officials who control such accounts are usually free to
change investment advisers without cumbersome legal procedures.
In the past, private accounts have terminated their agreements
with Pioneering Management for various reasons such as
performance, business combinations which result in the merging of
accounts advised by Pioneering Management into accounts managed by
other investment advisers, or changes in the structure or funding
of pension plans.
NEW BUSINESS DEVELOPMENTS
Taiwan and India. Pioneering Management is a minority
participant (10% ownership) in a joint venture in Taiwan, which
was organized to manage and distribute investments in Taiwanese
investment companies. Pioneering Management is a participant
(45%) in a joint venture in India, which was organized to provide
financial services in the Indian market, including mutual fund
management. See "Management Activities - Other Management
Activities - India Fund."
Russia. The Company is currently engaged in several ventures
in Russia. Since 1991, a subsidiary of the Company, Pioneer
Metals and Technology, Inc. ("PMT"), has been involved in a
development-stage business in Russia through its subsidiary, for
the production and sale of powdered metals, permanent magnets and
various trading endeavors. The Company has also formed a Moscow-
based joint venture with three Russian organizations that will
provide investment management and venture capital services to
Russian and non-Russian clients. The Company will be the majority
owner and manager of this operation.
Forest Starma. One of the Company's Russian ventures, Forest
Starma, in which the Company has a 50% direct interest and a 7.4%
indirect interest, is pursuing the development of timber
production under a 50-year lease of 33,000 hectares (82,000 acres)
with annual cutting rights of 130,000 cubic meters awarded to the
venture in the Khabarovsk Territory of Russia. The venture also
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<PAGE> 19
expects to acquire a lease of additional forest land. Forest
Starma is developing a site, including the construction of a
jetty, from which its timber production would be exported
primarily to the Japanese market. Timber production is planned to
commence by the end of the first quarter of 1995 and it is
expected that shipments will commence in the second quarter of
1995 and would approximate 95,000 cubic meters and 70,000 cubic
meters, respectively, in 1995. Capital required by this venture
is now projected at approximately $20.6 million (net of an assumed
Value Added Tax ("VAT") recovery on imports), of which $9.3
million would be financed pursuant to a conditional loan
commitment already in place. The loan, which initially would be
guaranteed by the Company, would cease to be guaranteed when the
project meets certain production and cash flow tests. The Company
expects to provide financing of $11.3 million in the form of
equity and subordinated debt. Investments by the Company in the
venture totaled $18.9 million at March 3, 1995, some of which is
considered bridge financing by the Company. Other joint ventures
of the Company are pursuing additional substantial leases of
forest land in the Khabarovsk Territory.
Czech Republic. The Company has organized a financial
services company in the Czech Republic. The new company, based in
Prague, will provide investment advice and other financial
services to a new fund that it is sponsoring for distribution in
the Czech Republic.
Ireland. The Company has organized Pioneer Management
(Ireland) Limited, a Dublin-based Irish subsidiary that will provide
financial services to new mutual funds being organized in Ireland,
shares of which will be sold primarily in Germany but eventually in
other foreign markets. Three such funds are currently in
registration and are expected to commence operations in the second
quarter of 1995.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company and its subsidiaries conduct their principal
operations from leased premises with approximately 110,000 square
feet at 60 State Street, Boston, Massachusetts, under two leases.
The first to expire of these leases (which covers substantially
all of the space) expires in 2002, with two five-year renewal
options. The rent expense for these premises was approximately
$2.4 million in 1994. The Company believes that its facilities
are adequate for its current needs and that additional space will
be available as needed.
The Company's subsidiary, Teberebie Goldfields Limited,
conducts mining operations in Tarkwa, Ghana. The Republic of
Ghana has granted TGL land concessions of approximately 42 square
kilometers. The mining facilities included on the Site (including
the expansion project completed in 1994) include approximately 48
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<PAGE> 20
housing and office buildings, two four-stage crushing plants, heap
leaching facilities and ponds, two processing plants and
refineries, a clinic, a laboratory and an eight-bay maintenance
shop for heavy equipment. TGL believes that its facilities on the
Site are generally in a state of good repair and adequate for its
current needs and that additional facilities will be constructed
as needed.
In December 1992, Pioneer First Polish purchased a 38-year
capital lease, convertible to perpetual use, on a two-year-old,
373-square-meter office building in Wilanow, Warsaw. Pioneer
First Polish is currently subleasing the property to an
unaffiliated corporation for a three-year term that commenced on
March 1, 1995. Through March 1995, Pioneer First Polish had
leased approximately 1,200 square meters of office space in
downtown Warsaw for fund management and distribution operations.
FSL also leases approximately 1,400 square meters of office space
and 502 square meters of storage space in Warsaw. The terms of
the leases range from one to five years.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of the executive
officers of the Registrant, and a description of the positions and
offices each holds with the Company and its significant
subsidiaries.
<TABLE>
<CAPTION>
Positions with the
Company and its
Name Age Significant Subsidiaries
---- --- ------------------------
<S> <C> <C>
John F. Cogan, Jr. 68 Chairman of the Board, Director
and President of the Company
since 1962. Chairman,
President and Trustee or
Director of each of the
registered investment companies
in the Pioneer mutual funds.
Chairman and Director of Pioneering
Management since 1962 and President of
Pioneering Management from 1962
</TABLE>
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<PAGE> 21
<TABLE>
<S> <C> <C>
to 1993. Chairman and Director
of Pioneer Distributor since
1989. Chairman and Director of
TGL, Joint Stock Company
Pioneer Metals International and
Joint Stock Company Forest
Starma. Director of Pioneering
Services, Pioneer Capital and
Joint Stock Company Pioneer
Investments. President of
Pioneer International. Member
of Supervisory Board of Pioneer
First Polish. Chairman of the
Supervisory Board of Pioneer
Fonds Marketing. Chairman and
Senior Partner of the Boston
law firm, Hale and Dorr,
counsel to the Company.
David D. Tripple 51 Director and Executive Vice
President of the Company since
1986. Executive Vice President
and Trustee or Director of each
of the Pioneer mutual funds.
President of Pioneering
Management since 1993. Chief
Investment Officer and Director
of Pioneering Management since
1986. Director of Pioneer
Distributor since 1989, Pioneer
International since 1991 and
Joint Stock Company Pioneer
Investments since 1993. Member
of Supervisory Board of Pioneer
First Polish. Director of
Pioneer Capital.
Robert L. Butler 54 Executive Vice President of the
Company since 1985. Director
of the Company since February
1988. President and Director
of Pioneer Distributor since
1989. Director of Pioneering
Management since 1988,
Pioneering Services since 1985,
and Pioneer International since
1991. Member of Supervisory
Board of Pioneer First Polish.
Vice Chairman of the
Supervisory Board of Pioneer
Fonds Marketing. Previously
Vice President of the NASD.
</TABLE>
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<PAGE> 22
<TABLE>
<S> <C> <C>
William H. Keough 57 Senior Vice President and Chief
Financial Officer of the
Company since 1986. Treasurer
of the Company, Pioneer
Distributor, Pioneering
Management, Pioneering
Services, Pioneer Capital and
Pioneer International.
Treasurer of each of the
Pioneer mutual funds. Prior to
1986, Senior Vice President,
Chief Financial Officer and
Treasurer of Charles River
Laboratories, Inc.
Alicja K. Malecka 48 Vice President of the Company
and Pioneer International, and
President of Pioneer First
Polish, the Polish Fund and
Pioneer Investment Poland,
Sp.zo.o.
Frank M. Polestra 69 Vice President of the Company
since 1975. President and
Director of Pioneer Capital
since 1981. President and
Director of PSBIC.
Joseph P. Barri 48 Secretary of the Company since
1978. Secretary of each of the
Pioneer mutual funds,
Pioneering Management, Pioneer
Capital, Pioneer Distributor,
Pioneering Services and Pioneer
International. Senior Partner
of the Boston law firm, Hale
and Dorr, counsel to the
Company.
William H. Smith, Jr. 59 Vice President of the Company
and President and Director of
Pioneering Services Corporation
beginning in 1985. Vice
President and Director of
Pioneer International.
Previously President of
Securities Fund Services, Inc.
between 1981 and 1985.
</TABLE>
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<PAGE> 23
<TABLE>
<S> <C> <C>
John F. Lawlor 61 Vice President of the Company
and Pioneering Management.
Director of TGL, Pioneer
Goldfields Limited, Joint Stock
Company Pioneer Metals
International, and Joint Stock
Company Forest Starma.
Lucien Girard 61 Vice President of the Company.
Director and Managing Director
of TGL and Pioneer Goldfields
Limited. Director of Pioneer
Metals and Technology, Inc.
</TABLE>
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<PAGE> 24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Incorporated by reference from the 1994 Annual Report under the
captions "Information Relating to Shares," "Dividends on Common Stock" and
"Price Range of Common Stock."
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from the 1994 Annual Report under the caption
"Five Year Summary of Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
Incorporated by reference from the 1994 Annual Report under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operation."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated by reference from the 1994 Annual Report under the caption
"Consolidated Financial Statements and Notes to Consolidated Financial
Statements" and "Report of Independent Public Accountants."
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
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<PAGE> 25
PART III
ITEMS 10-13.
The information required for Part III in this Annual Report on Form
10-K is incorporated by reference from the Company's definitive proxy statement
for the Company's 1995 Annual Meeting of Stockholders. Such information will
be contained in the sections of such proxy statement captioned "Voting
Securities and Certain Holders Thereof," "Election of Directors," "Committee
Meetings," "Directors' Meetings and Fees," "Executive Compensation," "Report of
the Compensation Committee of the Board on Executive Compensation," "Option
Grants and Exercises" and "Certain Transactions." Information regarding
executive officers of the Company is also furnished in Part I of this Annual
Report on Form 10-K under the heading "Executive Officers of the Registrant".
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<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following documents are included as part of this Annual Report
on Form 10-K.
1. Financial Statements:
Report of Independent Public Accountants 15*
Consolidated Statement of Income for the
Three years Ended December 31, 1994 16*
Consolidated Balance Sheet as of
December 31, 1994 and 1993 17*
Consolidated Statement of Changes in
Stockholders' Equity for the
Three Years Ended December 31, 1994 18*
Consolidated Statement of Cash Flows
for the Three Years Ended December 31, 1994 19*
Notes to Consolidated Financial Statements 20*
----------------
* Refers to page number in 1994 Annual Report to Stockholders. Each such
financial statement or report is hereby incorporated herein by
reference to the 1994 Annual Report to Stockholders which is filed
as an exhibit to this report.
2. Financial Statement Schedules:
Schedule I: Condensed Financial Information
All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or the
Notes thereto.
3. Exhibits:
The exhibits filed with or incorporated into this report are listed on
the "Index to Exhibits" below.
(b) Reports on Form 8-K:
None.
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<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE PIONEER GROUP, INC.
By: /s/ John F. Cogan, Jr.,
-----------------------------
John F. Cogan, Jr., President
March 29, 1995
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<PAGE> 28
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
/s/ John F. Cogan, Jr.
----------------------------- March 29, 1995
John F. Cogan, Jr., Principal
Executive Officer and Director
/s/ William H. Keough
----------------------------- March 29, 1995
William H. Keough, Principal
Financial Officer and
Principal Accounting Officer
/s/ David D. Tripple
----------------------------- March 29, 1995
David D. Tripple, Director
/s/ Robert L. Butler
----------------------------- March 29, 1995
Robert L. Butler, Director
/s/ Philip L. Carret
----------------------------- March 29, 1995
Philip L. Carret, Director
----------------------------- March , 1995
Maurice Engleman, Director
----------------------------- March , 1995
John H. Valentine, Director
----------------------------- March , 1995
Jaskaran S. Teja, Director
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<PAGE> 29
Index to Exhibits
-----------------
<TABLE>
<CAPTION>
Exhibit Sequential
Exhibits No. Page No.
-------- ------- ----------
<S> <C> <C>
Certificate of Incorporation, as amended 3.1
By-laws, as amended(2) 3.2 N.A.
Form of Management Contracts with Pioneer
Funds(1)(2) 10.1 N.A.
Form of Investment Company Service Agreements with
Pioneer Funds(2) 10.2 N.A.
Retirement Benefit Plan and Trust(2)(9) 10.3 N.A.
1988 Stock Option Plan, as amended(6)(9) 10.4 N.A.
Lease, dated as of July 3, 1991, between the
Trustees of 60 State Street and the Company(6) 10.5 N.A.
Form of Employment Agreements with Regional
Vice Presidents(3) 10.6 N.A.
Finance Agreement between Teberebie Goldfields
Limited and Overseas Private Investment
Corporation ("OPIC")(4) 10.7 N.A.
Revised Form of Underwriting Contract with
Pioneer Funds(4) 10.8 N.A.
1990 Restricted Stock Plan(4)(9) 10.9 N.A.
Form of Management Contract with Pioneer U.S.
Government Trust(5) 10.10 N.A.
Form of Management Contract with Pioneer Money
Market Trust(5) 10.11 N.A.
Deed of Warranty, dated December 3, 1987,
between the Government of the Republic
of Ghana, Teberebie Goldfields Limited
and The Pioneer Group, Inc.(5) 10.12 N.A.
Lease, dated February 2, 1988, between the
Government of the Republic of Ghana and
Teberebie Goldfields Limited(5) 10.13 N.A.
</TABLE>
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<PAGE> 30
<TABLE>
<S> <C> <C>
Foreign Exchange Retention Agreement, dated
September 4, 1990, by and among Teberebie
Goldfields Limited, the Republic of Ghana,
Ghana Commercial Bank, Bank of Ghana,
The Pioneer Group, Inc., OPIC and The
Chase Manhattan Bank, N.A.(5) 10.14 N.A.
First Amended Finance Agreement, dated May 25, 1989,
as amended September 4, 1990, between Teberebie
Goldfields Limited and OPIC(5) 10.15 N.A.
Gold Refining and Purchasing Agreements
Acknowledgment executed by Teberebie Goldfields
Limited, the Republic of Ghana, Ghana Commercial
Bank, Bank of Ghana, The Pioneer Group, Inc.,
Overseas Private Investment Corporation, and
The Chase Manhattan Bank, N.A.(5) 10.16 N.A.
Map of Mining Operations in Tarkwa, Ghana(5) 10.17 N.A.
Collective Agreement between Teberebie Goldfields
Limited and the Ghana MineWorkers Union of
T.U.C.(7) 10.18 N.A.
Agreement, dated March 1, 1992, between Teberebie
Goldfields Limited and Johnson Matthey
Chemicals(7) 10.19 N.A.
Amendment, dated as of March 10, 1993, to Contract
dated March 1, 1992, between Teberebie Goldfields
Limited and Johnson Matthey Chemicals(7) 10.20 N.A.
Amendment, dated as of March 9, 1994, to contract
between Teberebie Goldfields Limited and Johnson
Matthey Chemicals(8) 10.21 N.A.
Refining Agreement, dated as of August 23, 1993,
between Teberebie Goldfields Limited and
Metalor(8) 10.22 N.A.
OPIC Contract of Insurance Against Inconvertibility,
Expropriation and Political Violence between
OPIC and Pioneer Goldfields Limited, dated
August 12, 1993(8) 10.23 N.A.
Master Gold Trading and Hedging Services Agreement,
dated as of January 10, 1993 between Teberebie
Goldfields Ltd. and Billiten Marketing and
Trading B.V.(8) 10.24 N.A.
</TABLE>
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<PAGE> 31
<TABLE>
<S> <C> <C>
Agreement, dated as of September 29, 1993, between
the Chase Manhattan Bank, N.A. and Teberebie
Goldfields Ltd.(8) 10.25 N.A.
Letter Agreement, dated as of September 17, 1993,
between OPIC and Teberebie Goldfields Ltd.(8) 10.26 N.A.
Credit Agreement, dated as of June 1, 1993,
between Teberebie Goldfields Limited and
Skandinaviska Enskilda Banken(8) 10.27 N.A.
Agreement, dated May 10, 1994, between Teberebie
Goldfields Limited and Johnson Matthey PLC 10.28
Contract, dated May 30, 1994, among Timber
Harvesting Equipment Sales, Inc., Joint-Stock
Company "Forest-Starma" and the Company 10.29
Contract, dated August 4, 1994, among Morbark
Northwest, Inc., Joint-Stock Company
"Forest-Starma" and the Company 10.30
Contract, dated May 25, 1994, among Caterpillar
Overseas S.A., Joint-Stock Company "Forest
Starma" and the Company 10.31
OPIC Commitment to Guarantee Loans to Forest
Starma, among OPIC, Forest Starma, Starma
Holding Company and the Company 10.32
OPIC Contract of Insurance Against Business
Income Loss between OPIC and the Company,
effective September 30, 1992, as amended
(No. D581) 10.33
OPIC Contract of Insurance Against Business
Income Loss between OPIC and the Company,
effective September 30, 1992, as amended
(No. D582) 10.34
OPIC Contract of Insurance Against Inconvertibility,
Expropriation and Political Violence between
OPIC and the Company, effective September 30, 1992
as amended (No. D547) 10.35
OPIC Contract of Insurance Against Inconvertibility,
Expropriation and Political Violence between OPIC
and the Company, effective September 30, 1992
(No. D545) 10.36
</TABLE>
-31-
<PAGE> 32
<TABLE>
<S> <C>
Consulting Agreement, dated as of January 2,
1995, between the Company and Pioneer
First Polish Trust Fund Joint Stock Company
("Pioneer Poland") 10.37
Services Contract, dated January 1, 1994,
between Pioneering Services Corporation
and Financial Services Limited 10.38
Agreement, dated June 25, 1992, between
Pioneer Poland and Bank Polska Kasa
Opieka S.A. ("Bank Pekao") 10.39
Agreement, dated as of June 25, 1992, between
Bank Pekao and Pioneer International
Corporation 10.40
Agreement, dated June 25, 1992, between
Bank Pekao and Pioneer Poland 10.41
Agreement, dated September 24, 1992, between
Pioneer Poland and Financial Services
Limited 10.42
Letter Agreement dated February 28, 1995 between
the Company and The First National Bank of Boston 10.43
Computation of Earnings Per Share 11
Annual Report to Stockholders (which is not deemed
"filed" except with respect to the portions
specifically incorporated herein by reference) 13
Subsidiaries 21
Consent of Arthur Andersen LLP 23
Financial Data Schedule 27
-------------------
</TABLE>
-32-
<PAGE> 33
(1) Except Pioneer U.S. Government Trust and the three series of
Pioneer Money Market Trust, the Tax-Free Funds and Pioneer International Growth
Fund.
(2) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1986.
(3) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for year ended December 31, 1988.
(4) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for year ended December 31, 1989.
(5) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for year ended December 31, 1990.
(6) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991.
(7) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992.
(8) Incorporated herein by reference to the exhibits to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
(9) Management contract or compensatory plan or arrangement filed as
an exhibit to this Form pursuant to Items 14(a) and 14(c) of Form 10-K.
-33-
<PAGE> 34
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of The Pioneer Group, Inc.:
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in The Pioneer Group, Inc.'s
annual report to stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated March 10, 1995. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule listed in the index on page 26 is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
March 10, 1995
-34-
<PAGE> 35
SCHEDULE I
THE PIONEER GROUP, INC.
<TABLE>
Condensed Financial Information
Year ended December 31, 1994, 1993, and 1992
(DOLLARS IN THOUSANDS)
<CAPTION>
Cash Dividends Paid
Year Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash Dividend paid by Pioneer First Polish Trust Fund JSC, S.A.
to Pioneer International Corporation $1,945 $0 $0
Cash Dividend paid by Pioneer Investments Corporation to
The Pioneer Group, Inc. $0 $2,110 $0
</TABLE>
<PAGE> 1
RESTATED
CERTIFICATE OF INCORPORATION
OF
FUND RESEARCH AND MANAGEMENT, INC.
Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware.
The Corporation was organized as Fund Research and Sales, Inc.
on October 3, 1956. By amendment filed on January 14, 1957, its
name was changed to Fund Research and Management, Inc. This
Restated Certificate of Incorporation has been duly adopted by the
stockholders of the Corporation in accordance with the provisions
of Section 245 of the General Corporation Law of the State of
Delaware.
FIRST. The name of the Corporation is The Pioneer Group Inc.
SECOND. The address of its registered office in the State of
Delaware is No. 100 West Tenth Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted is as follows:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which the Corporation shall
have authority to issue is 3,000,000. Each of such shares shall have a par
value of $.10. All such shares are of one class and are shares of common
stock. The 2,000 shares of Class A Common Stock outstanding prior to the
filing of this Restated Certificate of Incorporation are hereby converted into
2,079,277 shares of Common Stock, $.10 par value, of the Corporation.
FIFTH. In furtherance of and not in limitation of powers
conferred by statute, it is further provided:
1. Election of directors need not be by written ballot.
2. The Board of Directors is expressly
authorized to adopt, amend or repeal the By-laws of the Corporation.
SIXTH. Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them
<PAGE> 2
and/or between this Corporation and its stockholders or any
class of them, any court of equitable jurisdiction within the State
of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or
of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order
a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization shall, if sanctioned by the court to which
the said application has been made, be binding on all the creditors
or class of creditors, and/or on all the stockholders or class of
stock- holders, of this Corporation, as the case may be, and also
on this Corporation.
SEVENTH: The Corporation shall, to the fullest extent permitted
by Section 145 of the General Corporation Law of Delaware, as that
Section may be amended and supplemented from time to time,
indemnify any director or officer which it shall have power to
indemnify under that Section against any expenses, liabilities or
other matters referred to in or covered by that Section. The
indemnification provided for in this Article (i) shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any by-law, agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in their
official capacities and as to action in another capacity while
holding such office, (ii) shall continue as to a person who has
ceased to be a director or officer and (iii) shall inure to the
benefit of the heirs, executors and administrators of such a
person. To assure indemnification under this Article of all such
persons who are determined by the Corporation or otherwise to be or
to have been "fiduciaries" of any employee benefit plan of the
Corporation which may exist from time to time and which is governed
by the Act of Congress entitled "Employee Retirement Income
Security Act of 1974" as amended from time to time, such Section
145 shall for the purposes of this Article, be inter- preted as
follows: an "other enterprise" shall be deemed to include such an
employee benefit plan; the Corporation shall be deemed to have
requested a person to serve an employee benefit
-2-
<PAGE> 3
plan where the performance by such person of his duties to the
Corporation also imposes duties on, or otherwise involves ser-
vices by, such person to the plan or participants or benefici-
aries of the plan; excise taxes assessed on a person with respect
to an employee benefit plan pursuant to such Act of Congress shall
be deemed "fines"; and action taken or omitted by a person with
respect to an employee benefit plan in the performance of such
person's duties for a purpose reasonably believed by such person to
be in the interest of the participants and beneficiaries of the
plan shall be deemed to be for a purpose which is not opposed to
the best interests of the Corporation.
EIGHTH: Any director or the entire Board of Directors of the
Corporation may be removed, with or without cause, by the holders
of not less than two-thirds of the shares then entitled to vote at
elections of directors of the Corporation.
NINTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
EXECUTED at Boston, Massachusetts, on December 15, 1978.
ATTEST:
/s/ Joseph P. Barri /s/ John F. Cogan, Jr.
-------------------------- --------------------------
Joseph P. Barri John F. Cogan, Jr.
Secretary President
<PAGE> 4
[State of Delaware emblem]
State
of
Delaware
Office of SECRETARY OF STATE
I, Glenn C. Kenton Secretary of State of the State of Delaware, do
hereby certify that the above and foregoing is a true and correct copy of
Restated Certificate of Incorporation of the "FUND RESEARCH AND
MANAGEMENT, INC.", as received and filed in this office the twenty-second
day of December, A.D. 1978, at 10 o'clock A.M.
In Testimony Whereof, I have hereunto set
my hand and official seal at Dover this twenty-
second day of December in the year of our Lord
one thousand nine hundred and seventy-eight.
Glenn C. Kenton
-----------------------------------
Glenn C. Kenton, Secretary of State
(Illegible signature)
-----------------------------------
Assistant Secretary of State
<PAGE> 5
FUND RESEARCH AND MANAGEMENT
<PAGE> 6
State of Delaware
[State of Delaware emblem]
Office of Secretary of State
_________________________
I, GLENN C. KENTON, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF THE PIONEER GROUP, INC. FILED IN THIS OFFICE ON THE FOURTH DAY
OF MAY, A.D. 1984, AT 10 O'CLOCK A.M.
| | | | | | | | | |
/s/ Glenn C. Kenton
-----------------------------------
Glenn C. Kenton, Secretary of State
AUTHENTICATION: 0240686
DATE: 05/05/1984
<PAGE> 7
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
THE PIONEER GROUP, INC.
THE PIONEER GROUP, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: At a meeting of the Board of Directors of the
Corporation a resolution was duly adopted, pursuant to Section 242
of the General Corporation Law of the State of Delaware, setting
forth an amendment to the Restated Certificate of Incorporation of
the Corporation and declaring said amendment to be advisable. The
stockholders of the Corporation have duly approved said amendment
by the required vote of such stockholders, adopted by the consent
of the holders of a majority of the outstanding shares of the
Corporation's Common Stock in accordance with Section 242 of the
General Corporation Law of the State of Delaware. The resolution
setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Restated Certificate of
-------- Incorporation of the Corporation be and hereby is
amended to read in its entirety as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 10,000,000. Each of
such shares shall have a par value of $.10. All such shares are of
one class and are shares of common stock."
<PAGE> 8
IN WITNESS WHEREOF, THE PIONEER GROUP, INC. has caused its
corporate seal to be affixed hereto and this Certificate of
Amendment of the Restated Certificate of Incorporation of the
Corporation to be signed by its President and attested by its
Secretary this 3rd day of May, 1984.
THE PIONEER GROUP, INC.
By: (Illegible Signature)
---------------------
Vice President
ATTEST: /s/ Joseph P. Barri
-------------------
Joseph P. Barri
Secretary
<PAGE> 9
State of Delaware
[State of Delaware emblem]
Office of Secretary of State
______________________
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF THE PIONEER GROUP, INC. FILED IN THIS OFFICE ON THE THIRTEENTH
DAY OF MAY, A.D. 1986, AT 10 O'CLOCK A.M.
| | | | | | | | | |
[Department of State Office
of the Secretary of State Seal] /s/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 0818794
DATE: 05/13/1986
<PAGE> 10
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
THE PIONEER GROUP, INC.
Pursuant to Section 242
of the Corporation Law of the
State of Delaware
-----------------------------
THE PIONEER GROUP, INC. (hereinafter called the
"Corporation"), organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: At a meeting of the Board of Directors of the
Corporation held on February 1, 1986, a resolution was duly
adopted, pursuant to Section 242 of the General Corporation Law of
the State of Delaware, setting forth an amendment to the Restated
Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and submitting said amendment to the
stockholders of the Corporation for consideration thereof. A
majority of the stockholders of the Corporation approved said
proposed amendment, at a meeting held on May 6, 1986, in accordance
with Section 242 of the General Corporation Law of the State of
Delaware. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Corporation's Restated
-------- Certificate of Incorporation be and it hereby is
deleted in its entirety and the following paragraph is
inserted in lieu thereof:
"FOURTH: The total number of shares of stock
which the Corporation shall have authority to issue
is 15,000,000. Each of such shares shall have a
par value of $.10. All such shares are of one
class and are shares of common stock."
<PAGE> 11
SECOND: The capital of the Corporation will not be reduced
under or by reason of the amendment herein certified.
IN WITNESS WHEREOF, the Corporation has caused its corporate
seal to be hereto affixed and this Certificate of Amendment of the
Restated Certificate of Incorporation to be signed by its President
and attested by its Secretary this 6th day of May, 1986.
THE PIONEER GROUP, INC.
By: /s/ John F. Cogan
-----------------------
John F. Cogan, Jr.
President
Corporate Seal
Attest: /s/ Joseph P. Barri
----------------------
Joseph P. Barri
Secretary
<PAGE> 12
State of Delaware
[State of Delaware emblem]
Office of Secretary of State
_______________________
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF THE PIONEER GROUP, INC. FILED IN THIS OFFICE ON THE TWELFTH DAY OF
JUNE, A.D.A 1987, AT 9 O'CLOCK A.M.
| | | | | | | | | |
/s/ Michael Harkins
-----------------------------------
[Department of State Office Michael Harkins, Secretary of State
of the Secretary of State Seal]
AUTHENTICATION: 1306178
DATE: 07/08/1987
<PAGE> 13
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE PIONEER GROUP, INC.
Pursuant to Section 242 of the
Corporation Law of the State of Delaware
THE PIONEER GROUP, INC. (the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:
That at a meeting of the Board of Directors of the Corporation
held on February 8, 1987, resolutions were duly adopted, pursuant
to Section 242 of the General Corporation Law of the State of
Delaware, setting forth proposed amendments to the Certificate of
Incorporation of the Corporation and declaring said amendments to
be advisable. Thereafter, the stockholders of the Corporation
duly approved said proposed amendments at a meeting on May 12, 1987
in accordance with Sections 211 and 242 of the General Corporation
Law of the State of Delaware.
The effect of the amendments is to delete Article SEVENTH of
the Certificate of Incorporation of the Corporation and to
substitute the following language such that Article SEVENTH shall
read in its entirety as follows:
"SEVENTH (Part I): Except to the extent that the General
Corporation Law of the State of Delaware prohibits the
elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the Corporation
shall be liable for any breach of fiduciary duty. No
amendment to or repeal of this provision shall apply to or
have any effect on the liability or alleged liability of any
<PAGE> 14
director of the Corporation for or with respect to any acts
or omissions of such director occurring prior to such amendment.
(Part II): The following provisions relate to indemnification by
the corporation:
1. ACTIONS, SUITS OR PROCEEDINGS OTHER THAN BY OR IN THE RIGHT
OF THE CORPORATION. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of
the fact that he is or was or has agreed to become a director or
officer of the Corporation, or is or was serving or has agreed to
serve at the request of the Corporation as a director, officer,
employee or trustee of another corporation, partnership, joint
venture, trust or other enterprise (all such persons being referred
to hereafter as an "Indemnitee"), or by reason of any action
alleged to have been taken or omitted in such capacity, against
costs, charges, expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action,
suit or proceeding and any appeal therefrom, if he acted in good
faith and in a manner he reasonably believed to be, or not opposed
to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of NOLO CONTENDERE or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in, or not opposed
to, the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that
his conduct was unlawful. Notwithstanding anything to the contrary
in this Article, except as set forth in Section 5, the Corporation
shall not indemnify an Indemnitee seeking indemnification in
connection with a proceeding (or part thereof) initiated by the
Indemnitee unless the initiation thereof was approved by the Board
of Directors of the Corporation.
2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or
was or has agreed to become a director or officer of the Corporation
or by reason of any action alleged to have been taken or omitted in
such capacity, against costs, charges and expenses (including
-2-
<PAGE> 15
attorneys' fees) actually and reasonably incurred by him or
on his behalf in connection with the defense or settlement of such
action or suit and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the Corporation unless
and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of such liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such costs, charges and expenses
which the Court of Chancery or such other court shall deem proper.
3. INDEMNIFICATION FOR COSTS, CHARGES AND EXPENSES OF SUCCESSFUL
PARTY. Notwithstanding the other provisions of this Article, to
the extent that an Indemnitee has been successful, on the merits or
otherwise, including, without limitation, the dismissal of an
action without prejudice or the settlement of an action without
admission of liability, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in
defense of any claim, issue or matter therein, or on appeal from
any such action, suit or proceeding, he shall be indemnified
against all costs, charges and expense (including attorneys' fees)
actually and reasonably incurred by him or on his behalf in
connection therewith.
4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent
to his right to be indemnified, the Indemnitee must give to the
Corporation notice in writing as soon as practicable of any action,
suit, proceeding or investigation involving him for which indemnity
will or could be sought. With respect to an action, suit,
proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein
at its own expense and/or to assume the defense thereof at its own
expense, with legal counsel reasonably acceptable to such
Indemnitee. After notice from the Corporation to the Indemnitee of
its election so to assume such defense, the Corporation shall not
be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with such
claim, other than as provided below in this Section. The
Indemnitee shall have the right to employ his own counsel in
connection with such claim, but the fees and expenses of such
counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the
Indemnitee unless (i) the employment of counsel by the Indemnitee
has been authorized by the Corporation, (ii) counsel to the
Indemnitee shall have reasonably concluded that there may be a
conflict of interest or position on any significant issue between
the Corporation and
-3-
<PAGE> 16
the Indemnitee in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees
and expenses of counsel for the Indemnitee shall be at the expense
of the Corporation, except as otherwise expressly provided by this
Article. The Corporation shall not be entitled to assume the
defense of any claim brought by or on behalf of the Corporation or
as to which counsel for the Indemnitee shall have reasonably made
the conclusion provided for in (ii) above.
5. ADVANCES OF COSTS, CHARGES AND EXPENSES. In the event that
the Company does not assume the defense pursuant to Section 4 of
this Article of any action, suit, proceeding or investigation about
which the Corporation receives notice under this Article, any
costs, charges and expenses (including attorneys' fees) incurred by
an Indemnitee in defending a civil or criminal action, suit,
proceeding or investigation or any appeal therefrom shall be paid
by the Corporation in advance of the final disposition of such
matter, PROVIDED, HOWEVER, that the payment of such costs, charges
and expenses incurred by an Indemnitee in advance of the final
disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined
that such Indemnitee is not entitled to be indemnified by the
Corporation as authorized in this Article.
6. PROCEDURE FOR INDEMNIFICATION. Any indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this
Article shall be made promptly, and in any event within 60 days
after receipt by the Corporation of the written request of the
Indemnitee, unless with respect to requests under Section 1 or 2, a
determination is made within such 60-day period by the Board of
Directors of the Corporation by a majority vote of a quorum of
disinterested directors that such Indemnitee did not meet the
applicable standard of conduct set forth in Section 1 or Section 2,
as the case may be. In the event no quorum of disinterested
directors is obtainable, the Board of Directors shall promptly
direct that independent legal counsel shall determine, based on
facts known to such counsel at such time, whether such Indemnitee
met the applicable standard of conduct set forth in such Sections;
and, in such event, indemnification shall be made to the Indemnitee
unless within 60 days after receipt by the Corporation of the
request by such Indemnitee for indemnification, such independent
legal counsel in a written opinion determines that the Indemnitee
has not met the applicable standard of conduct. The right to
indemnification or advances as granted by this Article shall be
enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within the
-4-
<PAGE> 17
60-day period referred to above. Such Indemnitee's costs and
expenses incurred in connection with successfully establishing his
right to indemnification, in whole or in part, in any such
proceeding shall also be indemnified by the Corporation.
7. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of
this Article or of relevant provisions of the Delaware General
Corporation Law or any other applicable laws shall affect or
diminish in any way the rights of any Indemnitee to indemnification
under the provisions hereof with respect to any action, suit,
proceeding or investigation arising out of, or relating to any
actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
8. OTHER RIGHTS. The indemnification provided by this Article
shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification may be entitled under any law
(common or statutory), agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while
holding office for the Corporation, and shall continue as to a
person who has ceased to be a director or officer, and shall inure
to the benefit of the estate, heirs, executors and administrators
of such person. Nothing contained in this Article shall be deemed
to prohibit, and the Corporation is specifically authorized to
enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set
forth herein. In addition, the Corporation, acting through its
Board of Directors, may grant indemnification rights to other
employees or agents of the Corporation and such rights may be
equivalent to or greater or less than those set forth in this
Article.
9. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under
any provision of this Article to indemnification by the Corporation
for some or a portion of the costs, charges, expenses, judgments or
fines actually and reasonably incurred by him in the investigation,
defense, appeal or settlement of any proceeding but not, however,
for the total amount thereof, the Corporation shall nevertheless
indemnify the Indemnitee for the portion of such costs, charges,
expenses, judgments or fines to which such Indemnitee is entitled.
10. INSURANCE. The Corporation may purchase and maintain
insurance, at its expense, to protect itself and any director,
officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss incurred by him in any such
capacity, or arising out of his
-5-
<PAGE> 18
status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
11. MERGER, CONSOLIDATION, ETC. If the Corporation is merged into
or consolidated with another corporation and the Corporation is not the
surviving corporation, or if substantially all of the assets or stock of the
Corporation is acquired by any other corporation, or in the event of any other
similar reorganization involving the Corporation, the Board of Directors of
the Corporation or the board of directors of any corporation assuming the
obligations of the Corporation shall assume the obligations of the Corporation
under this Article, with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger, consolidation, acquisition or
reorganization.
12. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any costs,
charges, expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement with respect to any action, suit, proceeding or
investigation, whether civil, criminal or administrative, including an action
by or in the right of the Corporation, to the full extent permitted by any
applicable portion of this Article that shall not have been invalidated and to
the full extent permitted by applicable law.
13. DEFINITIONS. Terms used herein and defined in Section 145(h) and
Section 145(i) of the Delaware General Corporation Law shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
14. SUBSEQUENT LEGISLATION. If the Delaware General Corporation Law
is amended after adoption of this Article to further expand the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the Delaware General Corporation Law, as so
amended."
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by John F. Cogan, Jr., its President, and
-6-
<PAGE> 19
attested by Joseph P. Barri, its Secretary, this 2nd day of
June, 1987.
THE PIONEER GROUP, INC.
By: /s/ John F. Cogan, Jr.
----------------------
President
ATTEST:
/s/ Joseph P. Barri
---------------------------
Secretary
<PAGE> 20
PAGE 1
State Of Delaware
Office Of The Secretary Of State
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "THE PIONEER GROUP, INC.", FILED IN THIS OFFICE ON THE TENTH DAY
OF MAY, A.D. 1994, AT 11:30 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
[Department of State Office /s/ William T. Quillen
of the Secretary of State Seal] --------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: 7114551
DATE: 05-10-94
<PAGE> 21
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
THE PIONEER GROUP, INC.
Pursuant to Section 242
of the Corporation Law of the
State of Delaware
-----------------------------
THE PIONEER GROUP, INC. (hereinafter called the "Corporation"),
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, does hereby certify:
FIRST: At a meeting of the Board of Directors of the Corporation
held on February 3, 1994, a resolution was duly adopted, pursuant to Section
242 of the General Corporation Law of the State of Delaware, setting forth an
amendment to the Restated Certificate of Incorporation of the Corporation,
declaring said amendment to be advisable and submitting said amendment to the
stockholders of the Corporation for consideration thereof. A majority of the
stockholders of the Corporation approved said proposed amendment, at a meeting
held on May 5, 1994, in accordance with Section 242 of the General Corporation
Law of the State of Delaware. The resolution setting forth the amendment is as
follows:
<PAGE> 22
RESOLVED: That Article FOURTH of the Corporation's Restated
Certificate of Incorporation be and it hereby is
deleted in its entirety and the following paragraph is
inserted in lieu thereof:
"FOURTH: The total number of shares of stock which
the Corporation shall have authority to issue is
33,000,000. Each of such shares shall have a par
value of $.10. All such shares are of one class
and are shares of common stock."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereto affixed and this Certificate of Amendment of Restated Certificate of
Incorporation to be signed by its President and attested by its Secretary this
5th day of May, 1994.
THE PIONEER GROUP
By: /s/ John F. Cogan
-----------------------------
John F. Cogan, Jr.
President
Corporate Seal
Attest: /s/ Joseph P. Barri
---------------------
Joseph P. Barri
Secretary
-2-
<PAGE> 1
JOHNSON MATTHEY
CHEMICALS
MATERIALS TECHNOLOGY DIVISION
Orchard Road Royston Hertfordshire SG8 5HE England
Telephone (0763) 253000 Telex 817351 JMC HQ G Telefax (0763) 253390
Contract No: 1080-94 10th May 1994
This agreement is made between:
Johnson Matthey PLC
Materials Technology Division
Orchard Road
Royston
Herts SG8 5HE
(Hereinafter referred to as the 'Refiner')
and Teberebie Goldfields Limited
PO Box 6
Tarkwa, Wassa
Ghana
(Hereinafter referred to as the 'Supplier')
1. MATERIAL AND QUALITY
--------------------
Dore bullion in the form of ingots having the following typical analysis:
Gold ..................... 90%
Silver ..................... 2%
Copper ..................... Balance
2. QUANTITY
--------
Approximately 125,000 ozs of fine gold per annum contained in dore as
described above.
3. PACKING
-------
The ingots shall be packed in boxes suitable for air transport, securely
strapped and sealed.
4. DELIVERY
--------
a) Subject to all the provisions of Section 6, the Supplier is
responsible for ensuring that each shipment is delivered FOB and stowed
onto the International aircraft at Kotoka Airport, Accra using the
agreed security procedures.
<PAGE> 2
b) The Refiner or the Supplier will arrange freight from Accra
International Airport to London Airport via KLM Airlines or British
Airways. Prior to dispatch of the ingot shipment from Ghana, the
Suppliers will advise the Refiners of the following, by telex:
i) Total gross weight of shipment
ii) Number of packages or boxes
iii) Total nett weight of ingots
iv) Estimated fine gold and silver contents in troy ounces and
estimated value.
v) Date of arrival at Accra International airport.
c) The Suppliers shall ensure that a Pro~Forma invoice accompanies the
shipment detailing the following:
i) Total gross weight of shipment
ii) Estimated value
iii) Description of goods (gold dore for refining)
iv) Nett weight of ingots
d) On arrival of material at London Airport, Refiner will arrange for
customs clearance and transportation to the Refinery using Refiner's own
security vehicles or security vehicles of Brinks Mat.
e) Refiner shall notify the Supplier by telex of the receipt of each
consignment at the Refinery.
5. INSURANCE
---------
Refiner will insure the material at 110% of Supplier's estimated valuation
of each shipment from the time the material is loaded onto the
Supplier's armoured vehicle (or aircraft if the shipment is being delivered
by air to Kotoka Airport) and the doors closed, at the mine site.
Refiners will charge Suppliers for insurance at 0.1% of the insured amount
of each shipment.
Charge to be based on London gold spot fixing (pm) in USD and London Spot
fixing silver on the day of despatch from the mine site, or next market day
if the day of despatch is a non market day.
In case of loss, any proceeds received from the Insurance referred to in
this Section 5 shall be used to reimburse the Supplier for the value
of the insured shipment.
<PAGE> 3
6. RISK OF LOSS
------------
Risk of loss in the material shall remain with Supplier at all times until
the material is loaded onto Supplier's armoured vehicle (or aircraft if the
shipment is being delivered by air to Kotoka Airport, Accra) and the doors
closed, at the mine site (in accordance with the agreed security
procedures, see appendix 1) whereupon the risk of loss shall pass to and
remain with Refiner.
7. METAL RECOVERY
--------------
Gold Assay Metal recovery
---------- --------------
Greater than 75% 99.9%
Silver Assay
------------
All levels 99.0%
8. METAL AVAILABILITY
------------------
The metal availability date for gold and silver will be the 15th working
day following receipt of each consignment at the Refinery.
9. TRANSFER OF GOLD AND SILVER
---------------------------
The Refiner shall deliver, sell, convey or otherwise transfer the gold and
silver in accordance with specific written instructions from the Supplier
delivered to the Refiner from time to time. Deliveries or transfers shall
be effected loco London.
10. PRICE BASIS
Gold - The London Gold Market pm fixing in US Dollars, unless otherwise
instructed, in writing by Supplier.
Silver - The London Silver Market spot fixing in US Dollars.
<PAGE> 4
11. PRICING PERIOD
--------------
Supplier elects to price up to 95% (ninety five percent) of the estimated
content of each shipment on the market day following shipment of the
material from Ghana. The date of shipment from Ghana is as acknowledged by
telex advice discussed in Section 4-b.
Any balances (gold and silver) will be priced on a fixing immediately
following completion of analysis by the Refiner.
12. PAYMENT
-------
Payment for the pricings in Clause 11 above will be made in US Dollars by
Refiner to Supplier, less Refiners charges, two market days following
receipt of the material at the Refiner's refinery.
Any balance pricings will be effected at the same time as the 95% priced
quantities.
An example of clauses 11 and 12 in practice are:-
Shipping Telex Pricing Arrival Payment
-------------- ------- ------- -------
Advice Date Refiner * Date
------ ---- --------- ----
Monday Tuesday Wednesday Friday
Tuesday Wednesday Thursday Monday
Wednesday Thursday Friday Tuesday
Thursday Friday Monday Wednesday
Friday Monday Tuesday Thursday
* Subject to airline time arrival and customs inspection.
In the event that either the pricing day or payment day is a holiday, the
next market day will become the effective date for the appropriate action.
<PAGE> 5
13. CHARGES
-------
(a) Treatment:
USD 0.75 per troy ounce of material received. (Minimum charge
USD 500.00).
(b) Freight:
(i) British Airways:
0-100 Kgs = US$6.75 per kilo inc packing
100-300 Kgs = US$5.75" " " "
300 Kgs plus US$4.50" " " "
(ii) KLM, Royal Dutch Airlines:
0-100 Kgs = US$7. 00 per kilo inc packing
100-300 Kgs = US$6.00 " " " "
300 Kgs plus US$4.75 " " " "
(c) Customs Clearance:
USD 70.00 per shipment cleared.
14. WEIGHING & SAMPLING
--------------------
See attached appendix.
15. TERM
----
The term of this agreement shall commence on the 5th September 1994 and
shall continue for a period of two (2) years.
However, after the first twelve months of the Agreement, the Refiner will
advise the Supplier of any change in the Freight rates (as described
in Section 13 (b)) for the final twelve months of the Agreement.
The Supplier, at his option, is not obliged to accept the new freight
rate, and, as such, is free to terminate the contract with no penalty.
<PAGE> 6
16. INDEMNIFICATION
---------------
The Supplier shall indemnify Refiner or any third party to whom the Refiner
sub-contracts the work covered by this Agreement against all action,
proceedings, losses, claims, costs, damages and expenses whatsoever in
respect of loss of life, personal injury or damage to property arising
directly or indirectly out of or in connection with the execution of any
work covered by the Agreement resulting from any defects or health hazards
in the material or from any instructions or false or misleading information
given or supplied by the Supplier in connection with the Agreement unless
such loss of life, personal injury or damage to property is attributable to
the Refiner or to those in the Refiner's employ or to any third party to
whom the Refiner sub-contracts the work covered by this Agreement, and the
Supplier shall hereby appoint the Refiner its agent for the purpose of
granting the same indemnity by the Supplier to any third party to whom the
Refiner sub- contracts the work covered by this Agreement. The Supplier
shall further indemnify the refiner as aforesaid in the event of the
Supplier's warranty under condition 3 of the Refiner's Standard Refining
Conditions being untrue in any respect. The Refiner undertakes to carry out
its duties and responsibilities to the highest standard.
17. FORCE MAJEURE
-------------
a) In the event of any strike, act of God, lockout, shortage of fuel,
significant decrease in gold prices that the Supplier in its sole
discretion, determines causes the Agreement to be economically
inviable, combination of workers, interference of trade unions, act of
government or government appointed agents, suspensions of labour, fire
or accident, war, civil strike and insurrection, or any cause
whatsoever beyond the control of the Supplier or the Refiner preventing
or hindering them from meeting their obligations under this Agreement,
performance under this Agreement shall be suspended during such time,
provided that the party affected shall have given written notice of
any such disability to the other party; and provided further that
the time of such suspension shall be added to the term of the
Agreement.
b) If the duration of the disability should exceed a period of 120 days
and the parties, negotiating in good faith, cannot within a reasonable
period thereafter agree on a new programme for the performance of the
contract, either party shall be entitled to cancel the contract by
giving notice to the other to that effect.
<PAGE> 7
18. PROPER LAW AND ARBITRATION
--------------------------
If any dispute, difference or question (other than a dispute, difference or
question subject to final settlement pursuant to the express provisions
of appendix 2 to this Agreement) that shall arise at any time after the
date of this Agreement between the parties in respect of or in connection
with this Agreement is not resolved pursuant to a good faith effort by both
parties to settle such dispute, difference or question, then the dispute,
difference or question shall be finally settled in Zurich, Switzerland, in
the English Language under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in
accordance with such into any court having jurisdiction or application may
be made to such court for judicata acceptance of the award and an order of
enforcement, as the case may be. The validity and performance of this
Agreement shall be governed by and construed in accordance with the Laws of
England.
19. NOTICES
-------
All notices required or permitted under this Agreement shall be in writing
and shall be addressed by with mail, telex, or fax to the other party at
the address shown above, or at such other address or addresses as either
party shall designate to the other in accordance with this Section 19.
20. ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, whether written or
oral, relating to the subject matter of this Agreement.
21. AMENDMENT
---------
This Agreement may be amended or modified only by a written instrument
executed by both the Supplier and the Refiner.
22. SUCCESSORS AND ASSIGNS
----------------------
This Agreement shall be binding upon, and inure to the benefit of both
parties and their respective successors and assigns, including any
corporation with which, or into which, the Supplier may be merged or which
may succeed to its assets or business. The Supplier may assign this
Agreement, and its rights and obligation hereunder. The Refiner may not
assign its obligations under this Agreement without the prior written
consent of the Supplier. Any assignment in contravention of this Section
22 shall be void.
<PAGE> 8
For: Johnson Matthey PLC
Materials Technology Division - Chemicals
Signed /s/ Mark Bedford Dated November 5, 1994
-------------------------------------- ------------------
M Bedford
Sales & Marketing Director
For: Johnson Matthey PLC
Materials Technology Division - Chemicals
Signed /s/ G A Angwin Dated May 11, 1994
-------------------------------------- ------------------
G A Angwin
Sales Executive Bullion
For: Teberebie Goldfields Ltd
Signed /s/ L. Girard Dated July 19, 1994
-------------------------------------- ------------------
L. Girard
Managing Director
<PAGE> 1
CONTRACT
--------
Contract among Timber Harvesting Equipment Sales, Inc., 16285
S.W. 85th Avenue, Suite 404, Tigard, Oregon 97224, USA (the
"Seller"), Joint-Stock Company "Forest-Starma", 4 Koprovaya Street,
Komsomolsk-On-Amur, 681006, Russian Federation (the "Buyer"), and
The Pioneer Group Inc., 60 State Street, Boston, Massachusetts
02109-1820, USA (the "Payor").
ARTICLE I
Subject of the Contract and Prices
----------------------------------
1. Seller agrees to sell, Buyer agrees to buy, and Payor
agrees to make payment on behalf of Buyer for machines, parts and
tools (herein "Products") as follows:
(a) Machines for a total value of $619,091, as
specified in Annex B-1, which is an integral part of this Contract,
plus cost of freight and insurance from port of exit to port entry,
which shall be determined separately, according to Articles II and
III.5 below, CIF Vanino, Russian Federation (Incoterms 1990).
(b) Consumable parts for a total value of $3314, as
specified in Annex B-2, being an integral part of this Contract,
plus cost of freight and insurance from port of exit to port of
entry, which shall be determined separately, according to Articles
II and III.5 below, CIF Vanino, Russian Federation (Incoterms
1990).
(c) Operator Training for a total value of $8430,
as specified in Annex E, being an integral part of this Contract.
2. The total price for the Products, including Operator
Training, as specified in Annex A hereto (Price Summary), CIF,
Vanino, Russian Federation, amounts to $630,835 plus cost of
freight and insurance from port of exit to port of entry, which
shall be determined separately, according to Articles II and III.5
below.
ARTICLE II
Delivery
--------
Seller shall deliver the Products CIF port of exit (Incoterms
1990), as specified in Annex D hereto, not later than the date
specified in Annex D (herein called "Delivery Date"). Shipment of
Products to the port of entry shall be arranged through Seller's
forwarder and selection of route, method and agency of transportation
shall be made by Seller. Seller shall inform the
<PAGE> 2
Payor in writing of the cost of shipment from the port of exit to
the port of entry within 90 (ninety) days after the date of
execution of this Contract. Such notice shall contain a copy of
the applicable shipping invoice from Seller's freight forwarder.
Payor shall pay for the cost of such shipment by letter of credit,
according to Article V below.
ARTICLE III
Packing, Marking, Notification, Insurance
-----------------------------------------
1. The Products shall be packed in accordance with Seller's
normal export packing appropriate for machines and parts and
suitable for craneage and manual handling.
2. Buyer shall furnish to Seller by telex or fax no later
than 15 days after the date of this Contract, shipping marks and
trans Nos. applicable. The markings shall be made with indelible
paint both in the English and Russian languages and shall include
the following:
(a) Name of consignee;
(b) Final destination;
(c) Via (port of entry);
(d) Trans No.;
(e) Case No.;
(f) Gross weight; and
(g) Net weight.
3. Seller or its forwarder shall inform Buyer and Payor by
telex, fax or cable, within five (5) working days after ex-factory
shipment of Products, of the vessel name, estimated sailing date,
port of entry, contract No., trans No., product description, number
of cases and the gross and net weight of the shipment.
4. Seller or its forwarder will inform Buyer and Payor by
telex, fax or cable, within five (5) working days after vessel
sailing date, of the bill of lading date and number, name of
vessel, its estimated arrival time at the port of entry, contract
No., trans No., total number of cases against each trans No.,
description of products, gross and net weight and value of the
shipment.
5. Seller shall arrange for transportation insurance of the
Products against risk of damage from external cause or physical
loss from supplier's factory or warehouse to DES (delivered exship)
port of entry (Incoterms 1990). The cost of
-2-
<PAGE> 3
transportation insurance of the Products against risk of damage
from external causes or physical loss from supplier's factory to
port of exit shall be borne by Seller. The cost of transportation
insurance of the Products from the port of exit to DES (delivered
exship) port of entry shall be borne by the Payor as follows:
Seller shall inform the Payor in writing of the cost within 90
(ninety) days after the date of execution of this Contract. Such
notice shall contain a copy of the applicable insurance invoice
from Seller's freight forwarder. Payor shall pay for the cost of
transportation insurance as indicated in such notice by letter of
credit, according to Article V below.
ARTICLE IV
Title Risk of Loss
------------------
Legal title to, ownership of, right to possession of and
control over, and risk of loss and damage to the Products shall
remain with the Seller until delivery of the Products to the port
of entry.
ARTICLE V
Terms of Payment
----------------
Payment for the Products shall be made by Payor as provided in
Annex F, which forms an integral part of this Contract. Payment
for freight and insurance of the Products from port of exit to port
of entry, as provided in Articles II and III.5 above, shall be made
by Payor as provided in Annex F-2, which forms an integral part of
this Contract.
ARTICLE VI
Duties, Taxes and Charges
-------------------------
Buyer agrees to pay all duties, tariffs, taxes, financial
levies and other charges relating to or arising from this transaction
or from the sale, purchase, import, possession or use of the Products
which are payable in Russia.
ARTICLE VII
Force Majeure
-------------
1. None of the parties to this Contract shall be liable for
failure to perform their obligations hereunder in full or in part
if such failure is due to an event of force majeure ("Force
Majeure") that occurred after the execution of this Contract and
cannot be reasonably prevented and for which no reasonable
-3-
<PAGE> 4
performance alternative exists. For the purposes of this Contract
Force Majeure shall include (but is not limited to) war, riots,
revolutions, strikes, lockouts, labor disputes, accidents, fires,
floods or other acts of God, embargoes, governmental action, delays
in transportation, delay of materials, or other events, the
occurrence of which is beyond the parties' responsibility and which
is beyond the parties' reasonable control. In the event of Force
Majeure the affected party's performance shall be extended for a
period equal to the duration of such event plus ten (10) working
days.
2. If an event of Force Majeure extends for more than one
hundred twenty (120) days, any party shall have the right to
terminate this Contract upon written notice to the other parties
without liability of any kind to the other parties with respect to
incomplete performance, except the Payor shall pay Seller for all
Products delivered prior to such termination in accordance with
Article V and Seller shall perform all warranty obligations
incurred prior to such termination in accordance with Article VIII
and Annex G hereof.
ARTICLE VIII
Warranty
--------
Seller's warranty is attached hereto as Annex H. Such
warranty is expressly in lieu of any other warranties, express or
implied, including any warranty of merchantability or fitness for a
particular purpose.
ARTICLE IX
Technical Documentation
-----------------------
For machines Seller shall provide Buyer with technical literature
as set forth in Annex C hereto.
ARTICLE X
Commissioning
-------------
Seller shall provide an English speaking technician (herein
referred to as "Technician") for up to two (2) weeks at Buyer's job
site, according to the payment terms to be agreed upon between the
parties. The Technician shall guide Buyer's personnel in the
assembly of the Products and make all functional checks. The
Technician shall instruct Buyer's operators on proper machine
maintenance procedures, basic trouble shooting, usage of parts,
books and service manuals.
-4-
<PAGE> 5
Airfare from the U.S. to the designated local commercial
airport and the return shall be reimbursed by Payor within 30 days
after receipt of Seller's invoice for such expenses.
Transportation between the nearest commercial airport and
Buyer's job site, local transportation, local accommodations (food
and lodging) shall be provided free of charge by the Buyer.
Necessary tools for assembly of the Products shall be provided by
the Buyer. An English-Russian translator shall be provided by
Buyer at no cost to the Seller.
ARTICLE XI
Operator Training
-----------------
Seller shall provide a professional machine operating
engineer (herein referred to as "Demonstrator") for Buyer's
operator training, according to the payment terms set forth in
Annex E hereto, as follows: 3 week start-up training upon delivery
of the Products; 1 week follow-up training within 90 days after
delivery of the Products; 1 week follow-up training within 180 days
after delivery of the Products. The operator training shall
include theoretical and practical sessions and cover how to safely
and efficiently operate the Products. The Demonstrator shall also
review Buyer's operators' maintenance practices.
Transportation between the nearest commercial airport and
Buyer's job site, local transportation, and local accommodations
(food and lodging) shall be provided free of charge by the Buyer.
An English/Russian translator shall be provided by the Buyer at no
cost to the Seller.
ARTICLE XII
Technical Inspections
---------------------
Seller shall provide an English speaking technician (herein
referred to as "Technician"), according to the payment terms to be
agreed upon between the parties, for two (2) times up to five (5)
days at Buyer's job site: the first inspection at approximately
six (6) months after the date of commissioning the Products, and
the second at the end of the warranty period to inspect the
Products and to provide technical counsel to Buyer's personnel.
Seller shall provide Buyer with copies of such inspection reports.
Airfare from the U.S. to the designated local commercial
airport and the return shall be paid by Payor within 30 days after
receipt of Seller's invoice for such expenses.
Transportation between the nearest commercial airport and
Buyer's job site, local transportation, and local accommodations
(food and lodging) shall be provided free of charge by the Buyer.
-5-
<PAGE> 6
An English/Russian translator shall be provided by the Buyer at no
cost to the Seller.
ARTICLE XIII
Liability and Claims
--------------------
1. Seller's liability for any claim of any kind, including
under Seller's warranty according to Article VIII and including
claims for loss or damage resulting from or connected with this
Contract or from the manufacture, sale, delivery, resale, repair or
use of any Product covered by or furnished under this Contract,
shall in no case exceed the purchase price allocable to the Product
or part thereof that gives rise to the claim. In no event shall
Seller be liable for indirect, special, incidental or consequential
damages.
2. Any claim against Seller for shortages or errors in
making shipments shall be made in writing to Seller within fifteen
(15) days after arrival of the Products at the port of entry. For
loss, damage or destruction of Products during shipment, if any,
Buyer shall follow the procedure for filing claims as set forth in
Annex G.
ARTICLE XIV
Termination By Seller
---------------------
If payment arrangements, as outlined in Article V hereof, are
not completed by Payor and confirmed to Seller on or before the
date specified in Article V hereof, or if Payor or Buyer otherwise
breaches this Contract, Seller may, at its sole option, terminate
all or any part of its obligations under this Contract upon thirty
(30) day's written notice to Buyer and Payor without liability or
penalty of any kind whatsoever. Termination of such obligations by
Seller shall be in addition to any other remedies Seller may have.
ARTICLE XV
Governing Law; Arbitration
--------------------------
This Agreement shall be governed and construed in accordance
with the substantive laws of the Commonwealth of Massachusetts,
without giving effect to the conflicts of law provisions thereof
and without giving effect to the United Nations Convention on
Contracts for the International Sale of Goods. If any dispute,
difference or question shall arise at any time after the date of
Agreement between the parties in respect of or in connection with
this Agreement, then, if so elected by either party, the dispute,
-6-
<PAGE> 7
difference or question shall be finally settled by arbitration to
be conducted in Boston, Massachusetts, in the English language
under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators
appointed in accordance with such rules. Judgment upon the award
rendered may be entered in any court having jurisdiction or
application may be made to such court for a judicial acceptance of
the award and an order of enforcement, as the case may be.
ARTICLE XVI
Representations and Warranties
------------------------------
Each party hereby represents and warrants to the other party
as follows:
(a) It is, as of the date of this Contract, an enterprise duly
organized and validly existing under the laws of (i) for Seller,
Oregon, U.S.A., (ii) for Buyer, the Russian Federation, and (iii)
for Payor, Delaware, U.S.A., with full power and authority to own
its properties and conduct its business.
(b) It, acting on its own behalf, has the full power and
authority to execute and deliver this Contract and to perform and
comply with the provisions contained herein and the persons signing
this Contract on its behalf have been duly authorized and empowered
to enter into this Contract.
(c) This Contract is a duly authorized, legal, valid and
binding obligation of it enforceable against it according to its
terms.
ARTICLE XVII
Amendments
----------
This Contract shall not be altered or amended except by
agreement in writing signed by duly authorized representatives of
the parties hereto.
ARTICLE XVIII
Notices
-------
All notices hereunder shall be in writing in the English
language and shall be delivered in person, or, if between Payor and
Seller, by U.S. post or telefax, or, if between Buyer and Payor or
Seller, by courier or by telex or telefax, to the respective
parties at the addresses set forth below. Notice shall be deemed
given, respectively, on the date of delivery in person, with
receipt acknowledged, five days after dispatch, in the case
-7-
<PAGE> 8
of notices sent by U.S. mail, on the date indicated on the courier
delivery acknowledgment, in the case of notices sent by courier,
and on the date of receipt of a correct electronic acknowledgment
in case of notice by telex or telefax. Any party may change its
address for notice by a notice duly given as aforesaid.
If to Payor: The Pioneer Group, Inc.
60 State Street
Boston, Massachusetts 02109-1820
U.S.A.
Telephone: (617) 742-7825
Telefax: (617) 422-4288
If to Buyer: Joint-Stock Company "Forest-Starma"
4 Koprovaya Street
Komsomolsk-On-Amur
681006 Russian Federation
Telephone/Telefax: 74217247947
Telex: 141118 8PLAW
If to Seller: Timber Harvesting Equipment
16285 S.W. 85th Avenue, Suite 404
Tigard, Oregon 97224
U.S.A.
Telephone: (503) 620-2331
Telefax: (503) 639-3308
ARTICLE XIX
Survival
--------
All representations, covenants and agreements contained
herein shall survive the termination of this Contract to the extent
required for the full observance and performance.
ARTICLE 20
Complete Agreement
------------------
This Contract, including the annexes hereto, constitute the
entire agreement between the parties with respect of the subject
matter hereof. All prior agreements, representations, statements,
negotiations and undertakings, whether oral or written, are
superseded hereby.
<PAGE> 9
ARTICLE 21
Counterparts and Effective Date
-------------------------------
This Contract is made in three (3) uniform copies in English,
one copy for each party. This Contract may be executed in one or
more counterparts or in facsimile counterparts. Each such
counterpart shall be deemed to be an original copy of this Contract
and all such counterparts shall be deemed to one and the same
Contract. This Contract shall become effective upon signature by
all parties.
SELLER
TIMBER HARVESTING EQUIPMENT
SALES, INC.
By:
-----------------------------
Fred Darby
President
Date:
-----------------------------
PAYOR
THE PIONEER GROUP, INC.
By: /S/ John F. Lawlor
-----------------------------
John F. Lawlor
Vice President
Date: 20 May 1994
BUYER
JOINT-STOCK COMPANY "FOREST-STARMA"
By: /s/ Anatoly Khomchenko
-----------------------------
Anatoly Khomchenko
President
By: /s/ Pavel Grinjaev
-----------------------------
Pavel Grinjaev
Deputy President
Date: 30 May 1994
-9-
<PAGE> 10
ANNEX A
-------
PRICE SUMMARY
Machines U.S. Dollars
-------- ------------
As per Annex B-1 $619,091.00
Consumable Parts $ 3,314.00
----------------
As per Annex B-2
Total $630,835.00
Operator Training $ 8,430.00
----------------
As per Annex E
TOTAL $630,835.00
Freight and insurance from port of exit to port of entry to be
determined separately.
<PAGE> 11
ANNEX B-1
---------
Machines U.S. Dollars
-------- ------------
Two Hahn Harvestors, Model HTL 300/F,
complete with all standard equipment
and the following options: electronic
log length measuring; loader cab and
controls; spare parts kit; C&D weather
starting package (Rykon MV or ATF/F
hydraulic fluid, Espar type engine
pre-heater, high output cab heater,
Premium 4-D battery, insulated,
oversize fuel lines, synthetic
gear lube in axles and gear boxes)
Price per machine
First Machine $308,380.00
Second Machine, with 2% discount $302,391.00
Total $610,771.00
Freight - Factory to West Coast Port $ 8,320.00
TOTAL $ 619,091.00
<PAGE> 12
ANNEX B-2
---------
<PAGE> 13
<TABLE>
CONSUMABLE PARTS
ANNEX B-2
<S> <C> <C>
(3) Retract Cable-25' 10.99 each $ 32.97
(2) 151 ML-1 Micro Switch-kick out 275.68 each 551.36
(2) 51 ML-1 Micro Switch-saw & anti-slab 280.74 each 573.48
(2) E65CNL1 Scanner 232.63 each 465.26
(2) Parts/Service/Operator Manual 50.00 each 100.00
(2) 1N1096 Diode 2.08 each 4.10
(2) 12.5 oz Hahn Green Spray Paint 6.71 each 13.42
(4) 924792 Filters 74.31 each 297.24
(2) 92538510 Pilot Filter 42.12 each 84.24
(2) 927588 Filter 94.00 each 188.00
(2) 927572 gasket for 927588 filter 3.55 each 7.10
(8) Reflectors 5.05 each 40.40
(2) HL-1-0102 Adapter 39.94 each 79.88
(2) Log Diameter Cut Cards n/c
(2) Saw Chain Sprocket 268.42 each 536.84
(2) Repair Kit-saw chain sprocket 14.47 each 28.94
(4) Step Keys-saw sprocket 1.43 each 5.72
(4) RC 160 Conn Links 7.44 each 29.76
(2) RC 160 Roller Links 14.29 each 28.58
(2) Taperlock bushing-saw sprocket 8.42 each 16.84
(2) Toggle Switch 34.73 each 69.46
(2) Count Command Switch (12087001) 30.13 each 72.26
(2) Saw Chain Repair Kit 32.52 each 65.04
(4) #8 BSP Washer 1.79 each 7.17
(4) #12 BSP Washer 4.08 each 16.32
---------
Total $3,314.43
</TABLE>
<PAGE> 14
ANNEX C
-------
Technical Documentation
Seller shall provide with each machine and at its own expense the
following:
1 - Service Manual
1 - Parts Book
1 - Operator's and Maintenance Manual
1 - Carburetor, Operation, Lubrication and Maintenance
Instructions
1 - Set of Instruction Decals installed on each machine
<PAGE> 15
<TABLE>
ANNEX D
-------
Delivery Schedule
(Subject to Timely Completion of
Payment Arrangements as Provided in Article V)
<CAPTION>
Description Port of Exit Delivery Date CIF
----------- ------------ -----------------
<S> <C> <C>
Machines as per West Coast Port August 20, 1994
Annex B-1 of Buyer's Choice
Consumable Parts West Cost Port August 20, 1994
As per Annex B-2 of Buyer's Choice
</TABLE>
<PAGE> 16
<TABLE>
ANNEX E
-------
Operator Training Fees
<CAPTION>
Description Cost
----------- ----
<S> <C>
3 week start-up training $3,000.00
1 week follow-up training $1,000.00
in 90 days
1 week follow-up training $1,000.00
in 180 days
Three round trips via Alaska Airlines $3,430.00
to the port of entry, Russia ---------
Total $ 8430.00
</TABLE>
<PAGE> 17
ANNEX F
-------
Payor shall pay Seller for the Products, including Operator
Training but not including freight and insurance from port of exit
to port of entry, which shall be paid for in accordance with Annex
F-2, as follows:
(a) Down payment of 30%. United States Dollars ONE HUNDRED
EIGHTY-NINE THOUSAND TWO HUNDRED-FIFTY ONE (U.S.$189,251),
representing 30% of the total Product price, including Operator
Training but not including freight and insurance from port of exit
to port of entry, shall be paid by wire transfer within thirty (30)
days after signature of this Contract to Seller's account no.
2394701051, bank routing No. 323-070-380 with Bank of America, 1001
SW 5th Avenue, Portland Oregon 97204, Attention Nattawan Thang
Vijit, Vice President and Manager, fax: 503-275-1830, SWIFT No.:
BofAUS6P, telex: 673-4290 BOAPDX, tel: 503-275-1246, under telex
advice to Seller. For funds received, Seller shall provide a
signed receipt to Payor as specified in Annex F-1(a). All banking
charges incurred by Payor's bank shall be for Payor's account. All
banking charges incurred by Seller's bank shall be for Seller's
account.
(b) Balance payment of 70%. United States Dollars FOUR
HUNDRED FORTY-ONE THOUSAND FIVE HUNDRED EIGHTY-FOUR (U.S.
$441,584), representing 70% of the total Product price, shall be
paid by Payor to Seller under an irrevocable letter of credit to be
opened in favor of Seller within thirty (30) days after execution
of this Contract. This letter of credit shall be issued by State
Street Bank and Trust Company, Boston, Massachusetts, and shall be
valid for shipment and negotiation of documents until September 1,
1994. Payment under this letter of credit shall be made as
follows: 30% of the total Product price shall be paid to Seller at
sight and the remaining 40% of the total Product price shall be
paid to Seller thirty (30) days after the bill of lading date
against presentation of the following documents:
(i) Commercial invoice in four copies;
(ii) Packing list in two copies;
(iii) Full set of clean, on-board bills of lading evidencing
shipment to Vanino, Russian Federation, issued to the order of
Seller, endorsed to the order of Joint-Stock Comp "Forest-Starma",
marked notify: Anatoly Khomchenko, President, Joint-Stock Company
"Forest-Starma", 4, Koprovaya Street, Komsomolsk-on-Amur, Russian
Federation, tel/fax (7)(42172) 47947; telex: 141115 SPLAW SU; and
Page 1 of 2
<PAGE> 18
Annex F Continued
(iv) Original insurance certificate for 110% of the CIF
value, port of exit, payable in U.S. Dollars.
All banking and collection charges incurred in connection with
opening, advising and negotiating the letter of credit shall be for
Payor's account. Payor shall fax or telex Seller the number of the
letter of credit, amount and opening date not later than three
working days after the opening date of the letter of credit.
Notwithstanding any of the foregoing, in the event that Seller
fails to present a full set of clean, on-board bills of lading in
connection with a drawing under Payor's letter of credit, as
provided in point (b)(iii) above, Payor will waive presentation of
such bills of lading under the letter of credit, provided that
Seller presents to Payor's bank the following documents instead:
(1) a dock receipt issued by the Port of Tacoma evidencing receipt
of the Products; and (2) an original copy of a Materials Receiving
Report, issued by Sea-Pac Services, 6100 West Marginal Way, S.W.,
Seattle, WA 98106, tel: 206-763-0339, fax: 206-763-0488, attention
Van Carroll or Paul Kimball, indicating that all of the Products
shipped have been delivered to Circle International, Inc. and that
none of the Products shipped have been lost, damaged or destroyed.
In such event, provided that the documents described in points
(b)(i),(b)(ii) and b(iv) above have also been presented and conform
to the requirements of the letter of credit, Payor shall authorize
its bank to make payment under such letter of credit as follows:
30% of the total Product price shall be paid to Seller at sight and
the remaining 40% of the total Product price shall be paid to
Seller thirty days after the date of the Materials Receiving
Report.
<PAGE> 19
ANNEX F-1A
----------
Receipt
-------
We hereby confirm having received from ______________________ on
________________________, 19__ the amount of U.S. dollars ________________
(U.S.$ ________________), representing the advance payment of
____________ percent (___%), under contract among Timber Harvesting
Equipment, The Pioneer Group, Inc. and Joint-Stock Company
"Forest-Starma", dated ________________, 19__.
Tigard, Oregon. Timber Harvesting Equipment
Sales, Inc.
___________________________
By: _______________________
Title: ____________________
<PAGE> 20
ANNEX F-2
---------
Payor shall pay Seller for the cost of freight and insurance for the
Products from port of exit to port of entry, as notified by Seller to Payor
according to Articles II and III.5 of this Contract, via check or wire transfer
within (30) days after receipt by Payor from Seller of a faxed copy of the
freight forwarder's invoice indicating cost of freight and insurance for the
Products from port of exit to port of entry. Payment via wire transfer shall be
made to Seller's bank account as described in Annex F of this Agreement. For
funds received, Seller shall provide a signed receipt to Payor as specified in
Annex F-1 (a).
All banking charges incurred in connection with the payment to be made
under this Annex F-2 shall be for Payor's account.
<PAGE> 21
ANNEX G
-------
Procedure for Filing Claims For Loss, Damage or
Destruction of any Products In Accordance with
Article XIII, Paragraph 2 of this Contract.
1. Buyer or Buyer's agent shall inspect all products upon
receipt from the carrier at the point of entry.
2. In the case of loss, damage or destruction of any
products, Buyer or Buyer's agent shall: (i) provide a written
report evidencing that the loss, damage or destruction occurred
while the product was in the carrier's custody; (ii) immediately
request a surveyor to inspect the products at the port of entry and
obtain a survey report from the local Chamber of Commerce; (iii)
upon receipt of the survey report Buyer shall file a letter of
claim to Seller describing the damage incurred and listing the
serial numbers and reference numbers and quantity of all lost,
damaged or destroyed products.
This letter of claim is to be accompanied by the following
supporting documents: (1) copy of Seller's related product invoice;
(2) original or copy of the bills of lading; (3) written report as
per Paragraph 2(i) above; (4) survey report by the Chamber of
Commerce as per Paragraph 2(ii) above; (5) pictures of damaged or
destroyed products. The letter of claim and supporting documents
must be submitted by Buyer in the English language, and any
documents issued in the Russian language must be accompanied by
English translations. It shall be the Buyer's responsibility to
obtain and provide all of the above documents as fast as possible
to the Seller. However, if any of the supporting documents are not
available, Buyer shall so state together with the reasons the
missing documents are not available in its letter of claim.
<PAGE> 22
ANNEX H
-------
Warranty
<PAGE> 23
ANNEX H
-------
HTL 300/F
HAHN TREE LENGTH PROCESSOR
--------------------------
a product of Hahn Machinery, Inc.
SPECIAL WARRANTY
Each new Hahn Harvester, manufactured by HAHN MACHINERY, INC. is
warranted for a period of six (6) months from the date of receipt
by the initial user or 1,000 hours of operation, whichever occurs
first. This warranty does NOT apply if the machine has been
overloaded, inadequately maintained, involved in an accident, or
subjected to conditions for which it was not designed.
HAHN MACHINERY, INC.'s obligation under this warranty is limited to
the repair or replacement, FOB its factory, of any part or
component which is proven to be defective in material or
workmanship, and which is not specifically excluded from this
warranty. All parts and components must be returned to the
factory, freight prepaid, for evaluation and warranty
consideration.
EXCLUSION OF WARRANTIES
This warranty shall not apply to any item, supplied by HAHN
MACHINERY, INC. which has been repaired or altered, neglected, or
used in any way which, in the manufacturer's opinion, adversely
affects its performance. Buyer assumes all liability for all
personal injury and property damage resulting from the handling,
possession of, or use of HAHN HARVESTERS and/or attachments, by the
buyer.
Engines, tires, and batteries are covered under separate warranties
provided by their respective manufacturers and are not included in
this warranty policy.
Shear blades, saw bars, and saw chains are not covered under this
warranty policy, and replacement will be at the buyers expense.
This warranty is in lieu of all other warranties, expressed or
implied, including specifically, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE and all other
obligations and liabilities.
HAHN MACHINERY, INC. neither assumes nor authorizes any agent,
employee, or representative to assume for it, any other liability
concerning its machinery and/or attachments.
Consequential damages are expressly disclaimed to the extent
permitted by law.
December 27, 1991
HAHN MACHINERY, INC. TWO HARBORS, MN 55616
<PAGE> 1
CONTRACT
--------
Contract among Morbark Northwest, Inc., 954 Jackson Highway
S., Toledo, WA 98591, USA (the "Seller"), Joint-Stock Company
"Forest-Starma", 4 Koprovaya Street, Komsomolsk-On-Amur, 681006,
Russian Federation (the "Buyer"), and The Pioneer Group Inc., 60
State Street, Boston, Massachusetts 02109-1820, USA (the "Payor").
ARTICLE I
Subject of the Contract and Prices
----------------------------------
1. Seller agrees to sell, Buyer agrees to buy, and Payor
agrees to make payment on behalf of Buyer for machines and parts
(the "Products"), as specified in Annex B, being an integral part
of this Contract.
2. The total contract price for the Products, as specified
in Annex A hereto (Price Summary), excluding the price of the
additional cold weather package described in Article I(3) below and
the cost of commissioning an operator training, as described in
Article VIII below, which shall be invoiced separately, amounts to
$629,810, FOB Tacoma, Washington, Dockside (Incoterms 1990).
3. Products consisting of an additional cold weather
package, as agreed on by Kjell Carlsson, on behalf of the Buyer,
and Jim Carter, on behalf of the Seller, shall be delivered
according to Article II below and shall be invoiced separately
according to Article V below.
ARTICLE II
Delivery
--------
1. Seller shall deliver the Products FOB Tacoma, Washington,
dockside (Incoterms 1990), as specified in Annex D hereto, not
later than the date specified in Annex D (herein called "Delivery
Date") . Shipment of Products from Tacoma, Washington to the port
of Vanino, Russian Federation or any other destination shall be
arranged by Payor at the Buyer's sole risk and expense.
2. Immediately upon delivery of the Products FOB Tacoma,
Washington, Dockside, Seller shall transfer the Products to the
Caterpillar storage yard at the Port of Tacoma or other storage
area designated by Payor in writing.
<PAGE> 2
ARTICLE III
Packing, Marking, Notification, Insurance
1. The Products shall be packed for export in packing
appropriate for machines and parts and suitable for craneage, lift-
truck handling and manual handling. Products consisting of
electrical equipment shall be protected against salt damage by
spraying electrical connections with MPS 3 lubricant.
2. The Products, including all parts, shall be accompanied
by an invoice or invoices containing price, Product description and
itemized part numbers. A copy of such invoice or invoices shall be
provided to and approved by Kjell Carlsson or another authorized
representative of Buyer or Payor prior to shipment of the Products
under this Agreement.
3. Seller or its forwarder shall inform Payor by fax,
immediately upon shipment of the Products from supplier's factory
or warehouse, of the date of such shipment, expected delivery date
of the Products FOB Tacoma, Washington, Dockside, inland transport
document date and number, Product description, number of cases and
the gross and net weight of the shipment.
4. Seller or its forwarder will inform Payor by fax
immediately upon delivery of the Products FOB Tacoma, Washington,
Dockside, of the date of such delivery.
5. Seller shall arrange for transportation insurance of the
Products against risk of damage from external causes or physical
loss from supplier's factory or warehouse to the Caterpillar
storage yard at the Port of Tacoma, Washington, or other storage
area designated by Payor in writing.
ARTICLE IV
Title Risk of Loss
------------------
Legal title to, ownership of, right to possession of and
control over, and risk of loss and damage to the Products shall
remain with the Seller until delivery of the Products to the
Caterpillar storage yard at the Port of Tacoma, Washington, or
other storage area designated by Payor in writing and until payment
in full for the Products by Buyer according to Article V below.
ARTICLE V
Terms of Payment
----------------
Payment for the Products shall be made by Payor as provided in
Annex F, which forms an integral part of this Contract.
-2-
<PAGE> 3
ARTICLE VI
Duties, Taxes and Charges
-------------------------
Buyer agrees to pay all duties, tariffs, taxes, financial
levies and other charges payable in Russia relating to or arising
from this transaction or from the sale, purchase, import,
possession or use of the Products.
ARTICLE VII
Technical Documentation
-----------------------
Seller shall provide Buyer with technical literature for the
Products as set forth in Annex C hereto.
ARTICLE VIII
Commissioning and Operator Training
-----------------------------------
Seller shall provide an English speaking technician/
demonstrator (herein referred to as "Technician") for up to ten
(10) days at Buyer's job site, according to the payment terms set
forth in Annex E hereto. The Technician shall guide Buyer's
personnel in the assembly of the Products and make all functional
checks. The Technician shall instruct Buyer's operators regarding
operation of the Products, proper machine maintenance procedures,
basic trouble shooting, usage of parts, books or parts manuals.
Airfare from the U.S. to the designated local commercial
airport and the return shall be reimbursed by Payor within 30 days
after receipt of Seller's invoice for such expenses.
Transportation between the nearest commercial airport and
Buyer's job site, local transportation, local accommodations (food
and lodging) shall be provided free of charge by the Buyer.
Necessary tools for assembly of the Products shall be provided by
the Buyer. An English-Russian translator shall be provided by the
Buyer at no cost to the Seller.
ARTICLE IX
Warranties
----------
Seller makes no warranties, express or implied, with respect
to the Products.
-3-
<PAGE> 4
ARTICLE X
Termination
-----------
This Agreement may be terminated at any time by sending
written notification of termination:
(a) By Seller if Buyer or Payor has breached any material
provision contained in this Agreement and has not cured the breach
within thirty (30) days after receipt of written notice thereof; or
(b) By Buyer or Payor if Seller has breached any material
provisions contained in this Agreement and has not cured the breach
within thirty (30) days of receipt of written notice thereof.
Termination of this Agreement by a party shall be without
prejudice to any other remedies such party may have with respect to
any other party.
ARTICLE XI
Governing Law; Arbitration
--------------------------
This Agreement shall be governed and construed in accordance
with the substantive laws of the State of Washington, without
giving effect to the conflicts of law provisions thereof and
without giving effect to the United Nations Convention on Contracts
for the International Sale of Goods. If any dispute, difference or
question shall arise at any time after the date of Agreement
between the parties in respect of or in connection with this
Agreement, then, if so elected by either party, the dispute,
difference or question shall be finally settled by arbitration,
pursuant to the procedural rules of the American Arbitration
Association. Arbitration shall take place in Seattle, Washington,
USA, and shall be conducted in the English language. Judgment upon
the award rendered may be entered in any court having jurisdiction
or application may be made to such court for a judicial acceptance
of the award and an order of enforcement, as the case may be.
ARTICLE XII
Representations and Warranties
------------------------------
Each party hereby represents and warrants to the other party
as follows:
(a) It is, as of the date of this Contract, an enterprise duly
organized and validly existing under the laws of (i) for Seller,
Oregon, U.S.A., (ii) for Buyer, the Russian Federation,
-4-
<PAGE> 5
and (iii) for Payor, Delaware, U.S.A., with full power and
authority to own its properties and conduct its business.
(b) It, acting on its own behalf, has the full power and
authority to execute and deliver this Contract and to perform and
comply with the provisions contained herein and the persons signing
this Contract on its behalf have been duly authorized and empowered
to enter into this Contract.
(c) This Contract is a duly authorized, legal, valid and
binding obligation of it enforceable against it according to its
terms.
ARTICLE XIII
Amendments
----------
This Contract shall not be altered or amended except by
agreement in writing signed by duly authorized representatives of
the parties hereto.
ARTICLE XIV
Notices
-------
All notices hereunder shall be in writing in the English
language and shall be delivered in person by courier or by telex or
telefax to the respective parties at the addresses set forth below.
Notice shall be deemed given respectively on the date of delivery
in person, with receipt acknowledged on the date indicated on the
courier delivery acknowledgment, and on the date of receipt of a
correct electronic acknowledgment in case of notice by telex or
telefax. Any party may change its address for notice by a notice
duly given as aforesaid.
If to Payor: The Pioneer Group, Inc.
60 State Street
Boston, Massachusetts 02109-1820
U.S.A.
Telephone: (617) 742-7825
Telefax: (617) 422-4288
If to Buyer: Joint-Stock Company "Forest-Starma"
4 Koprovaya Street
Komsomolsk-On-Amur
681006 Russian Federation
Telephone/Telefax: 74217247947
Telex: 141118 8PLAW
-5-
<PAGE> 6
If to Seller: Morbark Northwest, Inc.
954 Jackson Highway S.
Toledo, WA 98591
U.S.A.
Telephone: (206) 864-6004
Telefax: (206) 864-6002
ARTICLE XV
Survival
--------
All representations, covenants and agreements contained herein
shall survive the termination of this Contract to the extent
required for the full observance and performance.
ARTICLE XVI
Complete Agreement
------------------
This Contract, including the annexes hereto, constitutes the
entire agreement between the parties with respect to the subject
matter hereof. All prior agreements, representations, statements,
negotiations and undertakings, whether oral or written, are
superseded hereby.
ARTICLE XVII
Counterparts and Effective Date
-------------------------------
This Contract is made in three (3) uniform copies in English,
one copy for each party. This Contract may be executed in one or
more counterparts or in facsimile counterparts. Each such
counterpart shall be deemed to be an original copy of this Contract
and all such counterparts shall be deemed to one and the same
Contract. This Contract is executed and effective as of the
____ day of _____________, 1994.
SELLER
MORBARK NORTHWEST, INC.
By: /s/ Don Revelle
---------------------------
Don Revelle
Manager
-6-
<PAGE> 7
PAYOR
THE PIONEER GROUP, INC.
By: /s/ John F. Lawlor
------------------------------
John F. Lawlor
Vice President
BUYER
JOINT-STOCK COMPANY "FOREST-STARMA"
By:
------------------------------
Anatoly Khomchenko
President
By:
------------------------------
Pavel Grinjaev
Deputy President
By:
------------------------------
Nina Dronova
Chief Accountant
-7-
<PAGE> 8
<TABLE>
ANNEX A
PRICE SUMMARY
<CAPTION>
Machines and Parts U.S. Dollars
------------------ ------------
<S> <C>
As per Annex B $629,810
Cold weather package, as To be invoiced per
Article I(3) separately
Total Price FOB, Tacoma,
Washington, Dockside $629,810
Commissioning and Operator Training To Be Invoiced
----------------------------------- Separately
As per Annex E
/s/ Don Revelle
</TABLE>
<PAGE> 9
ANNEX B
Machines and Parts U.S. Dollars
------------------ ------------
Two (2) New Timbco T-445 Feller
Bunchers equipped complete as
follows: Caterpillar 330 Undercarriage
w/24" single bar Grousers and 2-speed
Travel; Cummins 210HP Diesel, Air
Conditioner w/Heater, 2-cylinder
4-way Hydraulic Leveling, Halogen
Lighting Package, Window Guarding,
Automatic Fire Suppression, Electric
Hydraulic Oil Fill Pump, Radio-Cassette
Player, "Uptime" Kit, Engine Wet Kit,
Ether Starting Aid, Hydraulic Tank Heater
and Quadco 22" disc saw $579,810.00
-----------
Two (2) Export Spare Parts Kits $ 50,000.00
($25,000 each) -----------
Cold weather package, as To be invoiced per
Article I(3) separately
TOTAL $629,810.00
/s/ Don Revelle
<PAGE> 10
ANNEX C
Technical Documentation
Seller shall provide with each machine and at its own expense
the following:
1 - Service Manual
1 - Parts Book
1 - Operator's and Maintenance Manual
1 - Operation, Lubrication and Maintenance Instructions
1 - Set of Instruction Decals installed on each machine
/s/ Don Revelle
<PAGE> 11
<TABLE>
ANNEX D
Delivery Schedule
(Subject to Timely Completion of
Payment Arrangements as Provided in Article V)
<CAPTION>
Delivery Date FOB
Description Tacoma, Washington
----------- ------------------
<S> <C>
Machines and Parts as per Anticipated minimum
Annex B 60 days after execu-
tion of Contract;
may be earlier
/s/ Don Revelle
</TABLE>
<PAGE> 12
ANNEX E
Technician/Demonstrator Fees
Description Cost
----------- ----
One Technician/Demonstrator US $500/day from
date of departure
from home base to
date of return.
To be invoiced by
Seller to Payor
separately and
payable by Payor
within 30 days
after receipt of
Seller's invoice
/s/ Don Revelle
<PAGE> 13
ANNEX F
Payor shall pay Seller the total Contract price plus the price
of an additional cold weather package as follows:
(a) DOWN PAYMENT OF 30% OF THE TOTAL CONTRACT PRICE. United
States Dollars one hundred eighty-eight thousand nine hundred
forty-three (U.S. $188,943), representing 30% of the total Contract
price, shall be paid by Payor to Seller by wire transfer within
five (5) business days after the execution date of this Contract
according to the wiring instructions set forth in Annex G. For
funds received, Seller shall provide a signed receipt to Payor as
specified in Annex F-1(a).
(b) BALANCE PAYMENT OF 70% OF THE TOTAL CONTRACT PRICE.
United States Dollars four hundred forty thousand eight hundred
sixty-seven (U.S. $440,867), representing 70% of the total Contract
price, shall be paid by Payor to Seller under an irrevocable letter
of credit to be opened in favor of Seller within thirty (30) days
after the execution date of this Contract. This letter of credit
shall be issued by State Street Bank and Trust Company, Boston,
Massachusetts and advised through Hong Kong Shanghai Bank
Corporation, Ltd., Portland Branch (Telex No. 360160; Contact:
Renee Andre; Tel. (503) 299-1156), and shall be valid for shipment
and presentation of documents until March 6, 1995. This letter of
credit shall be payable at sight upon presentation of the following
documents:
(i) Commercial invoice in four copies;
(ii) Packing list in two copies;
(iii) Full set of clean truck/inland bills of lading,
issued by a common carrier, consigned to Circle
International, Inc., transport documents to be
marked freight prepaid FOB Tacoma, Washington,
dockside, and notify: John F. Lawlor, The Pioneer
Group, Inc., 60 State Street, Boston, MA 02109;
Tel: 617-742-7825; fax: 617-422-4288;
(iv) Original copy of a Materials Receiving Report,
issued by Sea-Pac Services, 6100 West Marginal Way,
S.W., Seattle, WA 98106, tel: 206-763-0339 fax:
206-763-0488, attention Van Carroll or Paul
Kimball, indicating that all of the Products
shipped have been delivered to Circle
International, Inc. and that none of the Products
shipped have been lost, damaged or destroyed, and
/s/ Don Revelle
<PAGE> 14
(v) Original insurance certificate evidencing transport
insurance coverage for the Products shipped from
the factory to Port of Tacoma, dockside, in the
amount of U.S. $1 million, with Morbark Northwest,
Inc. designated as the loss payee.
Payor shall fax Seller the number of the letter of credit,
amount and opening date not later than three working days after the
opening date of the letter of credit.
(c) ADDITIONAL COLD WEATHER PACKAGE. The invoice price of an
additional cold weather package, as described in Article I(3) of
this Contract, shall be paid by Payor to Seller by wire transfer
according to the wiring instructions set forth in Annex G within
five (5) business days after the later of: (a) the date of receipt
by Payor of a faxed copy of the applicable invoice; or (b) the date
of receipt by Payor of a faxed copy of a written confirmation from
Russ Kallinen of Sea-Pac Services that such additional cold weather
package has been installed and is in good working order. For funds
received, Seller shall provide a signed receipt to Payor as
specified in Annex F-1(a).
All banking charges incurred by Payor's bank shall be for
Payor's account. All banking charges incurred by Seller's bank
shall be for Seller's account.
Notwithstanding any of the foregoing, Buyer and Payor agree:
(1) that the Products shall not be shipped from Tacoma, Washington,
to the port of Vanino, Russian Federation or any other destination
until the total Contract price and the price of the additional cold
weather package have been paid in full in accordance with this
Contract; and (2) in the event of any loss of Products during
transport from the factory to Port of Tacoma, dockside, Seller, at
Payor's request, shall either (a) refund to Payor all amounts paid
by Payor to Seller under this Contract up until the time of such
loss or (b) provide Buyer with replacement Products within a time
frame to be agreed upon between the Parties.
/s/ Don Revelle
<PAGE> 15
ANNEX F-1A
Receipt
-------
We hereby confirm having received from _____________ on
_____________, 19__ the amount of U.S. dollars _____________
(U.S.$_____________), representing the advance payment of
________________ percent (___ %), under contract among Morbark
Northwest, Inc., The Pioneer Group, Inc. and Joint-Stock Company
"Forest-Starma", dated __________, 19__.
Toledo, Washington Morbark Northwest, Inc.
___________________________
By: _______________________
Title: ____________________
/s/ Don Revelle
<PAGE> 16
ANNEX G
-------
Wire Transfer Information
-------------------------
First Interstate Bank
Eugene Main Branch
99 East Broadway
Eugene, Oregon 97401
Please credit to the account of:
Pape' Brothers, Inc.
Account # 0170000566
ABA# 123000123
Reference: Morbark Northwest, Inc.
/s/ Don Revelle
<PAGE> 1
CONTRACT NO. CWT001/94
----------------------
Made between CATERPILLAR OVERSEAS S.A.
76, route de Frontenex
1208 GENEVA
Switzerland
herein referred to as "SELLER"
and JOINT STOCK CO. "FOREST STARMA"
4 KOPROVAYA STREET
KOMSOMOLSK-ON-AMUR 681006
RUSSIAN FEDERATION
herein referred to as "BUYER"
and THE PIONEER GROUP INC.
60 STATE STREET
BOSTON, MA, 02109-1820
U.S.A.
herein referred to as "PAYOR"
<PAGE> 2
page 2 of 7
ARTICLE I - SUBJECT OF THE CONTRACT AND PRICES
----------------------------------------------
1. SELLER agrees to sell, BUYER agrees to buy, and PAYOR agrees to make
payments on behalf of
BUYER for machines, generator sets, parts and tools (herein called
"Products") as follows:
a) Machines and generator sets for a total value of US$2,058,225.00
(two million fifty eight thousand and two hundred and twenty
five United States Dollars) CIF Vanino, Russian Federation
(Incoterms 1990) as specified in Annex B-1/A thru H being an
integral part of the Contract.
b) Consumables and replacement parts and tools, subject to Article I-3
below for a total value of US$408,500.00
(four hundred and eight thousand and five hundred United States
Dollars) CIF Vanino, Russian Federation (Incoterms 1990) as
specified in Annex B-2/A and up through B-4/A and up being an
integral part of the Contract.
2. The total Contract price of the Products as specified in Annex A, Price
Summary, amounts to US$2,466,725.00
(two million four hundred and sixty six thousand and seven hundred and
twenty five United States Dollars)
CIF Vanino, Russian Federation (Incoterms 1990)
3. For sale of consumables and replacement parts and tools in accordance with
Article I-1 b) above, a list of parts and tools (including one pick-up
truck) identified by reference numbers and the individual price of each
shall be sent by SELLER to BUYER and PAYOR within thirty (30) days from
the date of this Contract. BUYER and PAYOR shall have thirty (30) days
to review this list, which may only be amended by SELLER or with the
written consent of SELLER. The Products contained in this list shall be
purchased by BUYER and PAYOR and this list shall become Annex B-2 and up
through B-4/A and up to this Contract. The parts and tools shall be
priced CIF Vanino, Russian Federation (Incoterms 1990).
ARTICLE II - DELIVERY
----------------------
SELLER shall deliver the Products FAS port of exit (Incoterms 1990) specified in
Annex D not later than the date specified in Annex D (herein called "Delivery
Date"). Shipment of Products to the port of entry shall be arranged through
SELLER's forwarder and selection of route, method and agency of transportation
shall be made by SELLER.
ARTICLE III - PACKING, MARKING, NOTIFICATION, INSURANCE
-------------------------------------------------------
1. The Products shall be packed in accordance with SELLER's normal export
packing appropriate for machines, generator sets and parts and suitable
for craneage and manual handling.
2. BUYER shall furnish to SELLER by telex or fax no later than fifteen (15)
days after the date of this Contract shipping marks and the Trans No/s.
applicable.
<PAGE> 3
page 3 of 7
The marking shall be made with indelible paint both in the English and
Russian languages and shall include the following:
NAME OF CONSIGNEE: :
FINAL DESTINATION :
VIA (PORT OF ENTRY) :
TRANS NO. :
CASE NO. :
GROSS WEIGHT :
NET WEIGHT :
4. SELLER or its forwarder shall inform BUYER and PAYOR by telex, fax or
cable, within five (5) working days after ex-factory shipment of
Products, of the vessel name, estimated sailing date, port of entry,
contract No., trans No., Product description, number of cases, and the
gross and net weight of the shipment.
5. SELLER or its forwarder will inform BUYER and PAYOR by telex, fax or cable,
within (5) working days after vessel sailing date, of the bill of lading
date and number, name of vessel, its estimated arrival time at the port
of entry, contract No., trans No., total number of cases against each
trans No., description of products, gross and net weight and value of the
shipment.
6. SELLER, at its own cost, shall arrange for transportation insurance for the
Products, against risk of damage from external cause or physical loss,
from supplier's factory or warehouse to DES (delivered ex ship) port of
entry (Incoterms 1990).
ARTICLE IV - TITLE, RISK OF LOSS
--------------------------------
Legal title to, ownership of, right to possession of and control over, and risks
of loss and damage to, the Products shall remain with SELLER until immediately
before the carrier upon which the Products are laden departs international
waters and either enters directly into the territorial waters of the Russian
Federation, or into the taxing jurisdiction of any other country en route to the
Russian Federation once the Products finally depart international waters.
ARTICLE V - TERMS OF PAYMENT
----------------------------
Payment for the Products shall be made by PAYOR as provided in Annex E which
forms an integral part of this Contract.
ARTICLE VI - DUTIES, TAXES AND CHARGES
--------------------------------------
BUYER agrees to pay all duties, tariffs, taxes, financial levies, and other
charges payable in Russia relating to or arising from this transaction or from
the sale, purchase, import, possession or use of the Products.
<PAGE> 4
page 4 of 7
ARTICLE VII - FORCE MAJEURE
---------------------------
1. SELLER shall not be liable for failure to perform its obligations under this
Contract in full or in part if such failure is due to an event of force majeure
("FORCE MAJEURE') including war, riots, revolutions, strikes, lockouts, labor
disputes, accidents, fires, floods or other acts of God, embargoes, governmental
action, delays in transportation, delay of materials, or other events affecting
the SELLER or SELLER'S suppliers, the occurrence of which is beyond the SELLER'S
responsibility and which is beyond SELLER'S reasonable control. In the event of
FORCE MAJEURE, SELLER'S performance shall be extended for a period equal to the
duration of such event plus ten (10) working days.
2. If an event of FORCE MAJEURE extends for more than six (6) months, any party
shall have the right to terminate this Contract upon written notice to the other
parties without liability of any kind to the other parties with respect to
incomplete performance, except that PAYOR shall pay SELLER for all products
delivered prior to such termination in accordance with Article V and SELLER
shall perform all warranty obligations incurred prior to such termination in
accordance with Article VIII and Annex G hereof.
ARTICLE VIII - WARRANTY
-----------------------
SELLER's warranty is attached hereto as Annex G. [SUCH WARRANTY IS EXPRESSLY IN
LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.]
ARTICLE IX - TECHNICAL DOCUMENTATION
------------------------------------
For machines and generator sets, SELLER shall provide BUYER with technical
literature as set forth in Annex C
ARTICLE X - COMMISSIONING
-------------------------
SELLER shall provide, at no charge, a Russian/English speaking Technician
(herein referred to as "Technician") for up to two (2) weeks at BUYER'S job
site. The Technician shall guide BUYER'S personnel in the assembly of the
products and make all functional checks. The Technician shall instruct BUYER'S
operators on proper machine and generator set maintenance procedures, basic
trouble-shooting, usage of parts books and service manuals.
All travel expenses from the home base of the Technician to the designated local
commercial airport and the return are borne by the SELLER.
Transportation between the nearest commercial airport and BUYER'S job site,
local transportation, local accommodation (food and lodging) shall be provided
free of charge by the BUYER. Necessary tools for assembly of the products shall
be provided by the BUYER.
ARTICLE XI - OPERATOR TRAINING
------------------------------
SELLER shall provide, at no charge, a professional machine/generator set
operator/demonstrator (herein referred to as "Demonstrator") for BUYER'S
operator training for up to ten (10) days at BUYER'S job site, within sixty (60)
days from delivery of the products. The operator training shall include
theoretical and practical sessions and cover how to safely and efficiently
operate the products. The Demonstrator shall also review BUYER'S operators'
maintenance practices. The same cost split as described in ARTICLE X-
COMMISSIONING shall apply, except that an English/Russian translator shall be
provided by the BUYER, at no cost to the SELLER.
<PAGE> 5
page 5 of 7
ARTICLE XII - TECHNICAL INSPECTIONS
-----------------------------------
SELLER shall provide, at no charge, a Russian/English speaking Technician
(herein referred to as "Technician") for two times up to five (5) days at
BUYER'S job site: the first inspection at approximately six (6) months after the
date of commissioning the products and the second at the end of the warranty
period, to inspect the products and to provide technical counsel to BUYER'S
personnel. SELLER shall provide BUYER with copies of such inspection reports.
The same cost split as described in ARTICLE X - COMMISSIONING shall apply.
ARTICLE XIII - PENALTY, LIABILITY AND CLAIMS
--------------------------------------------
- 1. Subject to Article VII - Force Majeure, and provided all conditions as
described in Article V are fully and timely met by BUYER and/or PAYOR, if
delivery of any of the Products is delayed more than thirty (30) days
after the date(s) specified in Annex D, SELLER shall be liable to BUYER for
a penalty of two tenths of one percent (0.2%) of the purchase price of those
Products so delayed, for each full calendar week by which delivery is
delayed beyond the thirty (30) day period. This penalty shall in no event
exceed a maximum of two percent (2%) of the purchase price of such delayed
Products. SELLER shall have no liability whatsoever to BUYER and/or PAYOR
for delay(s) in delivery of Products other than to pay the penalty set forth
in the first paragraph of this Article.
SELLER shall have no liability whatsoever (including liability to pay the
penalty described above) for delays caused by failure of BUYER and/or PAYOR
to fully and timely perform their obligation under this Contract.
- 2. SELLER'S liability for any claim of any kind, including under SELLER'S
warranty according to Article VIII and including claims for loss or damage
resulting from or connected with this Contract, or from the manufacture,
sale, delivery, resale, repair or use of any Product covered by or furnished
under this Contract, shall in no case exceed the purchase price allocable to
the Product or part thereof that gives rise to the claim. In no event
shall SELLER be liable for indirect, special, incidential or consequential
damages.
- 3. Any claim against SELLER for shortages or errors in making shipments shall
be made in writing to SELLER within fifteen (15) days after arrival of the
Products at the port of entry. For loss, damage or destruction of Products
during shipment, if any, BUYER shall follow the procedure for filing claims
as set forths in Annex F.
ARTICLE XIV - TERMINATION BY SELLER
-----------------------------------
If payment arrangements as outlined in Article V hereof are not completed by
PAYOR and confirmed to SELLER within seven (7) days after the date specified in
Article V and Annex E hereof, or if BUYER or PAYOR otherwise materially breaches
this Contract, SELLER may, at its sole option, terminate all or any part of its
obligations under this Contract upon thirty (30) days written notice to BUYER
and PAYOR, without liability or penalty of any kind whatsoever. Termination of
such obligations by SELLER shall be in addition to any other remedies SELLER may
have.
<PAGE> 6
page 6 of 7
ARTICLE XV - ARBITRATION AND GOVERNING LAW
------------------------------------------
All disputes arising out of or in connection with this Contract, or the breach,
termination or validity thereof, which are not settled by mutual agreement,
shall be solely and finally settled by arbitration at Geneva, Switzerland, in
the English language, before three (3) arbitrators under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce. Judgement
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction. SELLER shall appoint one arbitrator and BUYER and PAYOR jointly
shall appoint a second arbitrator. The first two arbitrators shall jointly
select the third arbitrator who shall be the chairman. If one party does not
select its arbitrator within fifteen (15) days after the demand for arbitration
is filed, or if the two (2) arbitrators cannot agree upon the third arbitrator
within ten (10) days after being appointed, the International Chamber of
Commerce shall make the appointment(s). This Contract shall be subject to the
laws of Switzerland, excluding the laws relating to conflicts of law and further
excluding the United Nations Convention on Contracts for the International Sale
of Goods.
ARTICLE XVI - REPRESENTATION AND WARRANTIES
-------------------------------------------
Each party hereby represents and warrants to the other party as follows:
(a) it is, as of the date of this Contract, an enterprise duly organized and
validly existing under the laws of (i) for SELLER Switzerland, (ii) for
BUYER the Russian Federation, and (iii) for PAYOR the State of Delaware,
United States of America, with full power and authority to own its
properties and conduct its business;
(b) it, acting on its own behalf, has the full power and authority to execute
and deliver this Contract and to perform and comply with the provisions
contained herein, and the persons signing this Contract on its behalf
have been properly authorized and empowered to enter into this Contract;
(c) this Contract, made in three (3) uniform copies in English, is a duly
authorized, legal, valid and binding obligation of it enforceable
against it according to its terms.
ARTICLE XVII - AMENDMENTS
-------------------------
This Contract shall not be altered or amended except by an agreement in writing
signed by duly authorized representatives of the parties hereto.
ARTICLE XVIII - NOTICES
-----------------------
All notices hereunder shall be in writing in the English language and shall be
delivered in person, by courier, or by telex or telefax to the respective
parties at the addresses set forth below. Notice shall be deemed given,
respectively, on the date of delivery in person with receipt acknowledged, on
the date indicated on the courier delivery acknowledgement, or on the date of
receipt of a correct electronic acknowledgement in case of notice by telex or
telefax. Any party may change its address for notice by a notice duly given as
aforesaid.
<PAGE> 7
page 7 of 7
<TABLE>
<CAPTION>
If to SELLER: If to BUYER: If to PAYOR:
<S> <C> <C>
CATERPILLAR OVERSEAS SA JOINT STOCK COMPANY THE PIONEER GROUP INC.
Route de Frontenex 76 "FOREST STARMA" 60, State Street
P.O. Box 456 4 Koprovaya Street BOSTON, MA, 02109-1820
1211 GENEVA 6 KOMSOMOLSK-ON-AMUR 6810006 U.S.A.
Switzerland Russian Federation Telephone 001(617) 7427825
Attention: CIS Manager Telephone/Fax: 74 217 247947 Telefax 001 (617) 4224286
Telephone 0041 22 8494544 Telex 411 188 PLAW Telefax 004122 849 117
Telex 413323
</TABLE>
ARTICLE XIX - SURVIVAL
----------------------
All representations, covenants and agreements contained herein shall survive the
termination of this Contract to the extent required for their full observance
and performance.
ARTICLE XX - COMPLETE AGREEMENT
-------------------------------
This Contract, including the Annexes hereto, constitutes the entire agreement
between the parties with respect to the subject matter hereof. All prior
agreements, representations, statements, negotiations and undertakings whether
oral or written are superseded hereby.
ARTICLE XXI - COUNTERPARTS AND EFFECTIVE DATE
---------------------------------------------
This Contract is made in two (2) uniform copies in English, one (1) copy for
each party. This Contract may be executed in one or more counterparts or in
facsimile counterparts. Each such counterpart shall be deemed to be an original
copy of this Contract and all such counterparts shall be deemed to be one and
the same Contract. This Contract shall become effective upon signature by both
parties.
<TABLE>
<CAPTION>
SELLER: PAYOR: BUYER:
<S> <C> <C>
CATERPILLAR OVERSEAS S.A. THE PIONEER GROUP INC. JOINT STOCK CO.
"FOREST STARMA"
By: (Illegible Signature) By: John Lawlor By: Anatoly Khomchenko
------------------------- ---------------- -------------------------
Title: Sr. Trade Representative Title: Vice President Title: President
------------------------- ---------------- -------------------------
By: Pavel Grinjaev
-------------------------
Date: 25 May 1994 Title: Deputy President
------------------------- -------------------------
</TABLE>
<PAGE> 8
<TABLE>
ANNEX A
PRICE SUMMARY
-------------
<CAPTION>
MACHINES, GENERATOR SETS AND ATTACHMENTS U.S. DOLLARS
---------------------------------------- ------------
<S> <C>
As per Annex B-1/A 303,800
B-1/B 351,000
B-1/C 284,200
B-1/D 223,800
B-1/E 275,575
B-1/F 302,200
B-1/G 112,250
B-1/H 205,400
---------
2,058,225
CONSUMABLE PARTS
----------------
As per Annex B-2/A AND UP 52,500
REPLACEMENT PARTS
-----------------
As per Annex B-3/A AND UP 206,000
TOOLS
-----
As per Annex B-4/A AND UP 150,000
TOTAL PRICE
C.I.F. VANINO, RUSSIAN FEDERATION U.S. DOLLARS 2,466,725.00
==========================
</TABLE>
<PAGE> 9
ANNEX B-1/A CONTRACT NO. CWT001/94
----------- ----------------------
CATERPILLAR QUOTATION NO. CWT94010
25 MAY 1994
PAGE 1 OF 2
THE PIONEER GROUP INC. AND
JOINT STOCK COMPANY "FOREST STARMA"
KOMSOMOLSK-ON-AMUR
RUSSIAN FEDERATION
TECHNICAL SPECIFICATIONS AND PRICES
-----------------------------------
Description Ref. No.
----------- --------
518C GEARING ARRANGEMENT 61-8982
- 154 HP WITH 14-INCH TORQUE CONVERTER AND 528B INPUT
- TRANSFER GEARS OPTIMIZES SECOND GEAR RIMPULL
<TABLE>
Standard equipment:
<S> <C>
ELECTRICAL POWERTRAIN
38-ampere alternator Air cleaner with precleaner
Back-up alarm Diesel engine with 24-volt direct electric
start Horn, warning Differentials, NoSPIN
Hour meter Ether starting aid
On-off switch with key Fan, blower
Four wheel enclosed disc brakes
GUARDS Inboard planetary final drives
Brush guards Parking brake
Engine enclosures Pump, fuel priming
Fan guard Torque converter
Radiator, hinged, with lift-out screen Transmission, powershift
Underguards, integral Transmission, neutralizer
OPERATOR ENVIRONMENT OTHER STANDARD EQUIPMENT
Canopy, ROPS, with screened doors Bulldozer, hydraulic
Gauge group Fenders, rear
Mirror, rearview Fire extinguisher
Seat, adjustable Grapple, single function boom, 2082 MM tong
Seat belt opening
Warning horn, low air pressure Implement hydraulic system, 3 valve
Tires and tubes, 28L x 28 12PR, LS-2
Vandalism protection
</TABLE>
<TABLE>
ATTACHMENTS:
<S> <C>
GUARD, INSTRUMENT PANEL 8V-5990
ROPS CAB WITH WINDOWS 106-7649
-- WITH FRONT WINDSHIELD, WINDOWS, SWINGOUT SCREENS, ON
-- SIDES AND REAR WASHER WIPER, CAB FLOOR HEATER AND
-- FRONT AND REAR WINDOWS DEFROSTER
HEATER, CAB 104-6018
AIR DRYER 9U-2374
-- REMOVES MOISTURE FROM BRAKE SYSTEM
TIRES, 28L X 26 14PR, WT 106-7997
</TABLE>
<PAGE> 10
ANNEX B-1/A
-----------
QUOTATION NO. CWT94010, PAGE 2
HYDRAULIC SYSTEM, FOUR VALVE 7V-0842
TRAVEL LAMPS 4E-1330
* TWO FRONT, TWO REAR
COLD WEATHER PACKAGE 0Z-0000
* INCLUDES ANTIFREEZE TO PROTECT MINUS 40 DEGREE C,
* ARCTIC LUBE, ENGINE BLOCK HEATER, IN-LINE FUEL HEATER,
* HEAT PADS FOR: ENGINE/TRANSMISSION/HYDRAULIC TANK/
* BATTERIES, RADIATOR BLANKET, SIDE PANEL COVERS,
* AIR INTAKE UNDER HOOD
FLEXXAIRE FAN 0Z-0000
PACKING 0P-0145
TOTAL UNIT PRICE
C.I.F. VANINO, RUSSIAN FEDERATION US $151,900
===========
TOTAL PRICE FOR TWO UNITS
C.I.F. VANINO, RUSSIAN FEDERATION US $303,800
===========
<PAGE> 11
ANNEX B-1/B CONTRACT NO. CWT001/94
----------- ----------------------
CATERPILLER Quotation No. CWT94007
25 May 1994
Page 1 of 2
THE PIONEER GROUP INC. AND
JOINT STOCK COMPANY "FOREST STARMA''
KOMSOMOLSK-ON-AMUR
RUSSIAN FEDERATION
<TABLE>
TECHNICAL SPECIFICATIONS AND PRICES
------------------------------------
<CAPTION>
Description Ref. No.
----------- --------
518C GEARING ARRANGEMENT 6I-8982 BU 184
* HP WITH 14-INCH TORQUE CONVERTER AND 528B INPUT
* TRANSFER GEARS OPTIMIZES SECOND GEAR RIMPULL
Standard equipment:
<S> <C>
ELECTRICAL POWERTRAIN
35-ampere alternator Air cleaner with precleaner
Back-up alarm Diesel engine with 24-volt direct electric start
Horn, warning Differentials, NoSPIN
Hour meter Ether starting aid
On-off switch with key Fan, blower
Four wheel enclosed disc brakes
GUARDS Inboard planetary final drives
Brush guards Parking brake
Engine enclosures Pump, fuel priming
Fan guard Torque converter
Radiator, hinged, with lift-out screen Transmission, powershift
Underguards, integral Transmission, neutralizer
OPERATOR ENVIRONMENT OTHER STANDARD EQUIPMENT
Canopy, ROPS, with screened doors Bulldozer, hydraulic
Gauge group Fenders, rear
Mirror, rearview Fire extinguisher
Seat, adjustable Grapple, single function boom, 2082 MM tong
Seat belt opening
Warning horn, low air pressure Implement hydraulic system, 3 valve
Tires and tubes, 28L x 28 12PR, LS-2
Vandalism protection
</TABLE>
ATTACHMENTS:
GUARD, INSTRUMENT PANEL 8V-5990
ROPS CAB WITH WINDOWS 106-7649
* WITH FRONT WINDSHIELD, WINDOWS, SWINGOUT SCREENS, ON
* SIDES AND REAR, WASHER WIPER, CAB FLOOR HEATER AND
* FRONT AND REAR WINDOWS DEFROSTER
HEATER, CAB 104-6018
AIR DRYER 9U-2374
* REMOVES MOISTURE FROM BRAKE SYSTEM
TIRES, 28L X 26 14PR, WT 106-7997
<PAGE> 12
ANNEX B-1/B
-----------
QUOTATION NO .CWT94007, PAGE 2
HYDRAULIC SYSTEM, FOUR VALVE 7V-0842
TRAVEL LAMPS 4E-1330
* TWO FRONT, TWO REAR
LESS STANDARD BOOM/GRAPPLE HEAD 9U-2667
YOUNG SWING BOOM GRAPPLE 175C
COLD WEATHER PACKAGE 0Z-0000
* INCLUDES ANTIFREEZE TO PROTECT MINUS 40 DEGREE C,
* ARCTIC LUBE,ENGINE BLOCK HEATER, IN-LINE FUEL HEATER,
* HEAT PADS FOR: ENGINE/TRANSMISSION/HYDRAULIC TANK/
* BATTERIES, RADIATOR BLANKET, SIDE PANEL COVERS,
* AIR INTAKE UNDER HOOD
FLEXXAIRE FAN 0Z-0000
PACKING 0P-0145
TOTAL UNIT PRICE
C.I.F. VANINO, RUSSIAN FEDERATION US$175,500
==========
TOTAL PRICE FOR TWO UNITS
C.I.F. VANINO, RUSSIAN FEDERATION US$351,000
==========
<PAGE> 13
ANNEX B-1/C CONTRACT NO. CWT001/94
----------- ----------------------
CATERPILLAR Quotation No. CWT94005
25 May 1994
Page 1 of 2
THE PIONEER GROUP INC. AND
JOINT STOCK COMPANY "FOREST STARMA"
KOMSOMOLSK-ON-AMUR
RUSSIAN FEDERATION
<TABLE>
TECHNICAL SPECIFICATIONS AND PRICES
-----------------------------------
<CAPTION>
Description Ref. No.
----------- --------
D7H XR SERIES II DIF. STEER TRACK-TYPE TRACTOR 104-5538 +BU
* 230 HP ENGINE
* 1980 MM GAUGE
* 8-ROLLER TRACK FRAME
* 560 MM EXTREME SERVICE SINGLE GROUSER
* SEALED AND LUBRICATED TRACK (41 SECTION)
Standard equipment:
<S> <C>
ELECTRICAL UNDERCARRIAGE
50-ampere alternator Hydraulic track adjuster
Back-up alarm Lifetime lubricated track rollers and idlers
Horn End track guiding guards
OPERATOR ENVIRONMENT OTHER STANDARD EQUIPMENT
Dual twist tiller control Front pull device
EMS operator warning system Hinged radiator grill
Temperature gauge group Caplocks
Fuel gauge Crankcase guard
Rear view mirrors Instrument panel guard
Rops mounting and canopy Two valve hydraulic (lift tilt)
Seat belt Cooler, hydraulic oil
Suspension seat with adjustable armrests
POWERTRAIN
Diesel engine with 24-volt direct electric
starting
Decelerator
Ether starting aid
Blower fan
Muffler
Precleaner
Air cleaner with prescreener
Multiple row module radiator
Rain cap
Receptacle, starting
Powershift transmission
</TABLE>
<PAGE> 14
ANNEX B-1/C
-----------
QUOTATION NO. CWT94005, PAGE 2
ATTACHMENTS:
LIGHTING SYSTEM, 6 LIGHTS 9U-8267
* RECTANGULAR HALOGEN LAMPS
GUARD, CRANKCASE EXTREME SERVICE 7T-3480
GUARD, FUEL TANK DS 61-9172
GUARD, RADIATOR 9U-9184
HEAVY DUTY HINGED GRILL
GUARD, TRACK ROLLER-XR 9U-9213
CAB, ROPS, DIFFERENTIAL STEER 9U-9115
* SOUND SUPPRESSED
* INCLUDES AIR PRESSURIZER, HEATER, CONTOUR SERIES SEAT,
* SEAT BELT, RADIO MOUNTING AND SPEAKERS, FRONT AND REAR
* WINDSHIELD WIPERS AND WASHERS, AIR FILTER, REARVIEW
* MIRROR, VANDALISM PROTECTION, KEY LOCKS, CUP HOLDER,
* LIGHTER, AND A STORAGE COMPARTMENT
FAN, REVERSIBLE 2W-5812
ENGINE ENCLOSURE 9U-8703
BATTERIES, HEAVY-DUTY 7T-5513
7SU BULLDOZER ARRANGEMENT 9U-8602
* SEMI-UNIVERSAL BLADE INSTALLED. INCLUDES BLADE TILT
* CYLINDER AND ABRASION END BITS. COMPLETE BULLDOZERS
* ARE USUALLY NOT SHIPPED INSTALLED
HYDRAULIC CONTROL, RIPPER DS 6Y-1096
* THIRD VALVE LINES AND CONTROLS TO STANDARD HYDRAULICS
7 RIPPER, MULTI SHANK 1U-0701
* HYDRAULIC, PARALLELOGRAM REAR MOUNTED. INCLUDES ONE
* TOOTH. CAN ACCOMMODATE 3 TEETH
TOOTH, RIPPER 9J-1641
* ONE ADDITIONAL (EACH)
TRACKS 6Y-4114
COLD WEATHER ARRANGEMENT 1Q-4312
* INCLUDES ESPAR HEATER
* DIESEL FUEL HEATER
* RADIATOR SHUTTERS
SPECIAL PACKING OP-0001
ANTIFREEZE-50 DEGREE C 0P-2407
TOTAL UNIT PRICE
C.I.F. VANINO, RUSSIAN FEDERATION US $284,200
===========
<PAGE> 15
ANNEX B-1/D CONTRACT NO. CWT001/94
----------- ------------------------
CATERPILLAR Quotation No. CWT94004
25 May 1994
Page 1 of 2
THE PIONEER GROUP INC. AND
JOINT STOCK COMPANY "FOREST STARMA"
KOMSOMOLSK-ON-AMUR
RUSSIAN FEDERATION
<TABLE>
TECHNICAL SPECIFICATIONS AND PRICES
-----------------------------------
<CAPTION>
Description Ref. No.
----------- --------
D6H XR PS DIFF STEER SERIES II TRACK-TYPE TRACTOR 3A-8831
* 175 HP ENGINE
* 1880 MM GAUGE
* 7-ROLLER TRACK FRAME
* 560 MM TRACK SHOE WIDTH (40 SECTION)
* EXTENDS TRACK FRAME TO THE REAR GIVING 150 MM MORE
* TRACK ON THE GROUND
Standard equipment:
<S> <C>
ELECTRICAL UNDERCARRIAGE
50-ampere alternator Single grouser sealed and lubricated track
Back-up alarm Hydraulic track adjuster
Horn Lifetime lubricated track rollers and idlers
End track guiding guards
OPERATOR ENVIRONMENT OTHER STANDARD EQUIPMENT
Dual tiller control Caplocks
EMS operator warning system Crankcase guard
Temperature gauge group Front pull device
Fuel gauge Grill, hinged radiator
Rear view mirrors Instrument panel guard
ROPS mounting and canopy Two valve hydraulics (lift tilt)
Seat belt Cooler, hydraulic oil
Suspension seat with adjustable armrests Load sensing hydraulics
POWERTRAIN
3306T diesel engine with 24-volt direct electric
starting
Decelerator
Ether starting aid
Blower fan
Muffler
Air cleaner with precleaner
Multiple row module radiator
Powershift transmission
</TABLE>
<PAGE> 16
ANNEX B-1/D
-----------
QUOTATION NO. CWT94004, PAGE 2
ATTACHMENTS:
LIGHTING SYSTEM, 4 LIGHTS 8E-2351
* RECTANGULAR HALOGEN LAMPS, TWO FRONT, TWO REAR
CRANKCASE EXTREME SERVICE 7G-5506
GUARD, FUEL TANK 8E-2845
GUARD GROUP, PRECLEANER 3W-1654
* RECOMMENDED FOR LOGGING OR WITH SWEEPS
GRILL, HEAVY DUTY RADIATOR 7G-5542
SCREEN, REAR 3W-3057
SWEEP, LOGGING 3W-5366
GUARD, TRACK ROLLER 7R XR 3W-3627
CAB, ROPS, SOUND SUPPRESSED DS 9U-8971
* INCLUDES AIR PRESSURIZER, HEATER, CONTOUR SERIES SEAT,
* SEAT BELT, RADIO MOUNTING AND SPEAKERS, FRONT AND REAR
* WINDSHIELD WIPERS AND WASHERS, AIR FILTER, REARVIEW
* MIRROR, VANDALISM PROTECTION AND KEY LOCKS
FAN, REVERSIBLE 2W-5921
PRESCREENER 7S-9396
TRACK 560 MM, ES 6Y-6415
ENGINE ENCLOSURE 7G-5550
* INCLUDES PERFORATED SIDE PANELS
6SU STD/XR BULLDOZER ARRANGEMENT 6Y-5718
HYDRAULIC CONTROL 3V (DS) 6I-8153
* ADDS RIPPER VALVE LINES AND CONTROLS TO STANDARD
* HYDRAULICS
56 WINCH (STANDARD SPEED) 6Y-6956
INSTALLATION ARRANGEMENT 9W-3525
COLD WEATHER ARRANGEMENT 0Z-0000
* INCLUDES ESPAR HEATER WITH SEPARATE FUEL TANK
* DIESEL FUEL HEATER
* RADIATOR SHUTTERS
* HEAVY DUTY BATTERIES
PACKING 0G-3255
* RORO SHIPMENT-BY SEA OR TRUCK
ANTIFREEZE -50 DEGREE C 0G-6009
TOTAL UNIT PRICE
C.I.F. VANINO, RUSSIAN FEDERATION US $223,800
===========
<PAGE> 17
ANNEX B-1/E CONTRACT NO. CWT001/94
----------- ----------------------
CATERPILLAR Quotation No. CWT9408B
25 May 1994
Page 1 of 2
THE PIONEER GROUP INC. AND
JOINT STOCK COMPANY "FOREST STARMA"
KOMSOMOLSK-ON-AMUR
RUSSIAN FEDERATION
<TABLE>
TECHNICAL SPECIFICATIONS AND PRICES
-----------------------------------
<CAPTION>
Description Ref. No.
----------- --------
980F WHEEL LOADER 6C-5337
Standard equipment:
<S> <C>
ELECTRICAL POWERTRAIN
50 Ampere Alternator Diesel Engine with 24-volt electric starting
Heavy Duty Starting Motor Power Shift Transmission (4F/4R)
Halogen Working Light Torque Converter
(front, cab and rear) Blower Fan
Diagnostic connector Muffler
Fuel Priming Aid
Radiator Multi-Row Module
29.5 x R25 Radial Tires
OPERATOR ENVIRONMENT OTHER STANDARD EQUIPMENT
Computerized Montoring System (CMS) Automatic Lift Kick-Out, Return-to-Dig
includes operator warning system Wing-Type Fenders
and gauge group Hydraulic Steering Front and
Rear Window Washer/Wiper Crankcase Guard
Heater and Defroster
Rear View Mirrors-External
ROPS Structure and Sound Suppressed
Pressurized Cab
Caterpillar Contour Series suspended seat with
automatic seat belt
ATTACHMENTS:
POWERTRAIN GUARD 8R-2568
LOGGING ARRANGEMENT 4E-8501
* NON PIN-ON ATTACHMENT. COMPATIBLE WITH MERCHANDISING
* ARRANGEMENT. WITHOUT FORK OR TOP CLAMP. INCLUDES 3RD
* VALVE HYDRAULICS HEAVY-DUTY TRANSMISSION, HEAVY DUTY
* TILT CYLINDER, COUNTERWEIGHTS (3,185 KGS)
AIR DRYER 4E-4121
BACK-UP ALARM 4E-4376
ENGINE BLOCK HEATER 6C-5799
HEAVY DUTY BATTERIES 6W-5133
VANDALISM LOCK GROUP 4E-2321
* INCLUDES:
* CAP LOCK, HYDRAULIC SYSTEM
* CAP LOCK,RADIATOR
* CAP LOCK, TRANSMISSION FILLER
</TABLE>
<PAGE> 18
ANNEX B-1/E
-----------
QUOTATION NO. CWT9408B, PAGE 2
TIRES 29.5 R25 GY 28PR E3 1V-7550
* OPTIONAL TO STANDARD MICHELIN TIRES
RADIATOR SHUTTERS 2Z-9264
LOGGING FORK 7Q-8334
* HIGH CAPACITY
ROADING FENDERS 4Q-3350
* SWING-AWAY TYPE
"ESPAR" FUEL FIRED ENGINE COOLANT HEATER 4Q-3399
PACKING 0G-3009
* PACK RORO W/RIM W/TIR W/BUCKET
ANTIFREEZE, -50 DEGREE C 0G-6013
TOTAL UNIT PRICE
C.I.F. VANINO, RUSSIAN FEDERATION US$ 275,575
===========
<PAGE> 19
ANNEX B-1/F CONTRACT NO. CWT001/94
----------- ----------------------
CATERPILLAR Quotation No. CWT9408A
25 May 1994
Page 1 of 2
THE PIONEER GROUP INC. AND
JOINT STOCK COMPANY "FOREST STARMA"
KOMSOMOLSK-ON-AMUR
RUSSIAN FEDERATION
<TABLE>
TECHNICAL SPECIFICATIONS AND PRICES
-----------------------------------
<CAPTION>
Description Ref. No.
----------- --------
980F WHEEL LOADER 6C-5337
Standard equipment:
<S> <C>
ELECTRICAL POWERTRAIN
50 Ampere Alternator Diesel Engine with 24-volt electric starting
Heavy Duty Starting Motor Power Shift Transmission (4F/4R)
Halogen Working Light Torque Converter
(front,cab and rear) Blower Fan
Diagnostic connector Muffler
Fuel Priming Aid
Radiator Multi-Row
Module
29.5 x R25 Radial Tires
OPERATOR ENVIRONMENT OTHER STANDARD EQUIPMENT
Computerized Montoring System (CMS) Automatic Lift Kick-Out, Return-to-Dig
includes operator warning system Wing-Type Fenders
and gauge group Hydraulic Steering
Front and Rear Window Washer/Wiper Crankcase Guard
Heater and Defroster
Rear View Mirrors-External
ROPS Structure and Sound Suppressed
Pressurized Cab
Caterpillar Contour Series suspended seat with
automatic seat belt
ATTACHMENTS:
POWERTRAIN GUARD 8R-2568
LOGGING ARRANGEMENT 4E-8501
* NON PIN-ON ATTACHMENT. COMPATIBLE WITH MERCHANDISING
* ARRANGEMENT. WITHOUT FORK OR TOP CLAMP. INCLUDES 3RD
* VALVE HYDRAULICS HEAVY-DUTY TRANSMISSION, HEAVY DUTY
* TILT CYLINDER, COUNTERWEIGHTS (3,185 KGS)
AIR DRYER 4E-4121
BACK-UP ALARM 4E-4376
ENGINE BLOCK HEATER 6C-5799
HEAVY DUTY BATTERIES 6W-5133
VANDALISM LOCK GROUP 4E-2321
* INCLUDES:
* CAP LOCK, HYDRAULIC SYSTEM
* CAP LOCK, RADIATOR
* CAP LOCK, TRANSMISSION FILLER
</TABLE>
<PAGE> 20
ANNEX B-1/F
-----------
QUOTATION NO. CWT9408A, PAGE 2
TIRES 29.5 R25 GY 28PR E3 1V-7550
* OPTIONAL TO STANDARD MICHELIN TIRES
RADIATOR SHUTTERS 2Z-9264
COUPLER 4464C
* COMPLETE WITH INDEPENDENT HYDRAULICS TO OPERATE
* COUPLER
COUPLER BUCKET 11007C
* GENERAL PURPOSE, 4.2 M3 WITH BOLD-ON-EDGE
COUPLER LOGGING FORK 000-000
ROADING FENDERS 4Q-3350
* SWING-AWAY TYPE
"ESPAR" FUEL FIRED ENGINE COOLANT HEATER 4Q-3399
PACKING 0G-3009
* PACK RORO W/RIM W/TIR W/BUCKET
ANTIFREEZE, -50 DEGREE C 0G-6013
TOTAL UNIT PRICE
C.I.F. VANINO, RUSSIAN FEDERATION US$ 302,200
===========
<PAGE> 21
ANNEX B-1/G CONTRACT NO+BU CWT001/94
----------- ------------------------
Quotation No. CWT94009
25 May 1994
CATERPILLAR Page 1 of 2
THE PIONEER GROUP INC. AND
JOINT STOCK COMPANY "FOREST STARMA"
KOMSOMOLSK-ON-AMUR
RUSSIAN FEDERATION
<TABLE>
TECHNICAL SPECIFICATIONS AND PRICES
-----------------------------------
<CAPTION>
Description Ref. No.
----------- --------
446B BACKHOE LOADER 104-5856
Standard equipment:
<S> <C>
BACKHOE POWERTRAIN
5.2 m center pivot backhoe with 2-lever control Cat 3114 turbocharged diesel engine with
Boom transport lock 24-volt electric starting
Swing transport lock Water separator
Grouser type stabilizer shoes Dry-type air cleaner with precleaner and filter
condition indicator
ELECTRICAL Hand and foot throttle
55-ampere alternator Hydraulically applied multi-plate wet disk brake
Hazard flashers/turn signals with dual pedals and interlock
Head lights Differential lock
Horn Driveline parking brake
Rear flood lights Torque converter
Stop and tail lights Transmission - four speed powershift
Key start stop system with auxiliary position Transmission neutralizer switch
Two 700 CCA maintenance free batteries Spin-on fuel engine oil and transmission oil filters
LOADER OTHER STANDARD EQUIPMENT
Bucket level indicator Anti-freeze solution (to -30 degrees centigrade)
Lift cylinder brace and return-to-dig (automatic 14.5 75 x 161 OPR F3 laborer front tires
bucket positioner) 21 L x 24 12PR industrial torque rear tires
Self-leveling loader with single lever control Hydrostatic power steering
Transmission neutralizer switch Impact absorbing front grill
Tool box
OPERATOR ENVIRONMENT Vandalism protection
Lighted gauge group Transport tie-down points
Interior rearview mirror Ground line fill fuel tank
Rear fenders
Fender cover
ROPS canopy
Retractable seat belt
Two-way adjustable vinyl suspension seat with
arm rests
Floor mat
Backhoe position foot rests
Lockable storage area
</TABLE>
<PAGE> 22
ANNEX B-1/G
-----------
QUOTATION NO. CWT94009, PAGE 2
ATTACHMENTS:
EXTENDABLE STICK 100-4865
* PROVIDES 6.5 METER MAXIMUM DIG DEPTH.
* INCLUDES FOOT PEDAL CONTROL, HYDRAULIC VALVE AND LINES
BACKHOE CONTROLS 9R-4728
COUNTERWEIGHT GROUP, 680 KG 9R-7808
* RECOMMENDED WHEN VEHICLE IS FITTED WITH E-STICK AND
* G.P. LOADER BUCKET (2 OR 4 WHEEL DRIVE)
BUCKET, 750 MM (380 LITERS) 9R-3230
* INCLUDES 5 TOOTH TIPS
LIGHT GROUP, 4 WORKING LIGHTS 9R-8041
* INCLUDES THE 90 AMP ALTERNATOR AND 4 ADDITIONAL
* WORKING LIGHTS (2 FRONT AND 2 REAR)
GENERAL PURPOSE BUCKET 9R-7090
* 1.15 CU.M. SAE CAPACITY. INCLUDES BOLT ON REVERSIBLE
* CUTTING EDGE
CAB, ROPS (NORTH AMERICAN) 9R-8077
* INCLUDES ISOLATION MOUNTS, WINDOW DEFROSTER, FRONT
* AND REAR WINDSHIELD WIPERS, HEATER PRESSURIZER, LEFT
* AND RIGHT SIDE DOORS WITH LOCKS, FLOOR MAT, COAT HOOK,
* DOME LIGHT, INTERIOR REARVIEW MIRROR AND LOCKABLE
* STORAGE AREA. (DOES NOT INCLUDE ROAD LIGHTS AND
* WINDSHIELD WASHER)
FOUR WHEEL DRIVE 9R-3660
* INCLUDES ON-OFF CONTROL. 12.5 X 20 10 PR R4 INDUSTRIAL
* SURE GRIP FRONT TIRES
STABILIZER PADS, REVERSIBLE 9R-6646
* FLIP-OVER TYPE PADS FOR USE ON ASPHALT, CONCRETE
* SURFACES OR SOIL
GUARD, FRONT AXLE DRIVESHAFT 9R-2246
BACK-UP ALARM 9R-2340
ETHER STARTING AID 9R-2240
COLD
WEATHER PACKAGE 0Z-0000
* INCLUDES ENGINE BLOCK HEATER 220V, DIESEL FUEL
* HEATER 12V, ADDITIONAL CAB HEATING, CANVAS COVERS
* FOR ENGINE SIDE COVERS AND RADIATOR GRILL
PACKING 0G-3274
* PREPARATION FOR SHIPMENT BY SEA; COMPLETE MACHINE
ANTIFREEZE, -50 DEGREE C 0P-2407
TOTAL UNIT PRICE
C.I.F. VANINO, RUSSIAN FEDERATION US$112,250
==========
<PAGE> 23
ANNEX B-1/H CONTRACT NO. CWT001/94
----------- ----------------------
CATERPILLAR Quotation No. CWT94017
25 May 1994
Page 1 of 2
THE PIONEER GROUP INC. AND
JOINT STOCK COMPANY "FOREST STARMA"
KOMSOMOLSK-ON-AMUR
RUSSIAN FEDERATION
TECHNICAL SPECIFICATIONS AND PRICES
-----------------------------------
CATERPILLAR PACKAGE GENERATOR SET
* Caterpillar 3300 Family Diesel Generator Set
Rated Kw at 0.8 Power Factor as per page 2
1500 rpm for Prime Power Service
200/400 volt at 50 Hz
Standard equipment:
<TABLE>
<S> <S>
ENGINE FUEL SYSTEM
Caterpillar heavy duty 3300 turbocharged Fuel filters, spin on
aftercooled diesel engine Fuel pressure gauge
Fuel lines, flexible, shipped loose
AIR INLET SYSTEM 3/8 NPTF male ends
Heavy duty (exhaust augmented) air cleaner Fuel priming pump
with service indicator Fuel transfer pump
Turbocharger and aftercooler Variable timing, automatic
Primary fuel filter installed
CONTROL SYSTEM Fuel tank base
Governor, hydra-mechanical
24 volt governor control motor GENERATOR
SR4 brushless self excited generator with VR3
COOLING SYSTEM voltage regulator and space heater
Drain lines
Blower fan, fan drive, and fan guard INSTRUMENTATION
Thermostats and housing Control panel, mounted on generator terminal
Radiator, engine mounted box
Jacket water pump, gear driven, centrifugal Includes:
Standard generator controls and monitoring:
EXHAUST SYSTEM Digital ammeter, voltmeter and frequency meter
Exhaust manifold, dry round flanged outlet Ammeter/voltmer phase selector switch
Muffler Voltage adjust rheostat
Standard engine controls and monitoring:
FLYWHEELS AND FLYWHEEL HOUSINGS Automatic/manual start stop control
Flywheel and flywheel housing Engine control switch for off/reset auto start,
SAE standard rotation manual start, stop
Cycle cranking
Cooldown timer
Emergency stop pushbutton
</TABLE>
<PAGE> 24
ANNEX B-1/H
-----------
QUOTATION NO. CWT94017, PAGE 2
<TABLE>
<S> <S>
INSTRUMENTATION (cont.) MOUNTING SYSTEM
Safety shutdown protection and LED indicators Base, structural steel base or mounting rails
for: Linear vibration isolators between base and
Low oil pressure, high coolant temperature, engine generator
overcrank, overspeed, emergency stop, spare Fuel tank built into base
alarm and spare shutdown
Digital display for: PROTECTION SYSTEM
Coolant temperature, oil pressure, service hours, Shutoff, solenoid 24 volt
Engine RPM system DC volts, system Circuit breaker set mounted, amperage suitable
diagnostic codes for output
Synchronizing module (lights) with reverse STARTING SYSTEM
power relay, parallel kit and speed control 24 volt electric starting motor
mounted in panel to allow parallel operation Batteries, battery cables and rack
Jacket water heater and low temperature switch
LUBE SYSTEM Battery charger 10 amp
Crankcase breather and fumes disposal line
Oil cooler GENERAL
Oil filler in valve cover and dipstick Paint Caterpillar yellow
Oil filter, spin on Vibration damper
Lubricating oil, SAE 10W-30 Lifting eyes
Oil drain lines Tool set
Oil pump
Oil pan
</TABLE>
TOTAL UNIT PRICE FOR ONE CATERPILLAR 3306 GENERATOR US$ 84,700
SET (RATED AT 180 kW PRIME POWER), ==========
C.I.F. VANINO, RUSSIAN FEDERATION
TOTAL PRICE FOR TWO CATERPILLAR 3306 GENERATOR US$169,400
SETS (RATED AT 180 kW PRIME POWER), ==========
C.I.F. VANINO, RUSSIAN FEDERATION
TOTAL UNIT PRICE FOR ONE CATERPILLAR 3304 GENERATOR US$ 36,000
SET (RATED AT 90 kW PRIME POWER), ==========
C.I.F. VANINO, RUSSIAN FEDERATION
TOTAL PRICE FOR TWO CATERPILLAR 3306 AND US$205,400
ONE 3304 GENERATOR SETS AS DESCRIBED ABOVE, ==========
C.I.F. VANINO, RUSSIAN FEDERATION
<PAGE> 25
ANNEX C
TECHNICAL DOCUMENTATION
-----------------------
SELLER shall provide, with each machine and generator set, and at its own
expense, the following:
One - Service Manual (in English)
One - Parts Book (in English)
One - Operator's and Maintenance Manual (in English)
One - Cold Weather Operation, Lubrication and Maintenance Instructions (in
Russian)
One - Set of Instruction Decals installed on each machine and genset (in
English)
<PAGE> 26
ANNEX D
DELIVERY SCHEDULE (subject to timely completion of payment arrangements as
-----------------
provided in Article V)
DESCRIPTION PORT OF EXIT DELIVERY DATE FAS
----------- ------------ -----------------
MACHINES, GENERATOR
-------------------
SETS AND ATTACHMENTS
--------------------
As per Annex B-1/A US WEST COAST 10 weeks
B-1/B US WEST COAST 10 weeks
B-1/C US WEST COAST 16 weeks
B-1/D EUROPEAN 20 weeks
B-1/E EUROPEAN 20 weeks
B-1/F EUROPEAN 20 weeks
B-1/G US WEST COAST 15 weeks
B-1/H US WEST COAST 12 weeks
CONSUMABLE PARTS
----------------
As per Annex B-2/A AND UP US WEST COAST 10 weeks
AND/OR EUROPEAN
REPLACEMENT PARTS
-----------------
As per Annex B-3/A AND UP US WEST COAST 20 weeks
AND/OR EUROPEAN
TOOLS
-----
As per Annex B-4/A AND UP US WEST COAST 20 weeks
AND/OR EUROPEAN
<PAGE> 27
ANNEX E
PAYOR shall pay SELLER the total Contract Price of the products as follows:
A) DOWN PAYMENT OF 30% OF THE TOTAL CONTRACT PRICE
--------------------------------------------------
UNITED STATES DOLLARS 740,017.50 (seven hundred and forty thousand and
seventeen United States Dollars and fifty United States Cents) representing
thirty percent (30%) of the total contract price shall be paid by telegraphic
transfer within 30 days from signature of contract to SELLER'S account No.
101-WA-701 874 000/CHIPS I.D. NO. 052431 with Swiss Bank Corporation, New York
(Swift address: SBCOUS33NYC) under telex advice to SELLER. For funds received,
SELLER shall provide a signed receipt to PAYOR as specified in Annex E/1/A
All banking charges incurred by PAYOR'S bank shall be for PAYOR'S account.
All banking charges incurred by SELLER'S bank shall be for SELLER's account.
B) BALANCE PAYMENT OF 70% OF THE TOTAL CONTRACT PRICE
-----------------------------------------------------
UNITED STATES DOLLARS 1,726,707.50 (one million seven hundred and twenty six
thousand and seven hundred and seven United States Dollars and fifty
United States Cents) representing seventy percent (70%) of the total contract
price shall be paid by PAYOR to SELLER under an irrevocable Letter of Credit to
be opened in favor of SELLER within 30 days from signature of the contract.
This Letter of Credit shall be confirmed and payable by a first class U.S. or
European Bank acceptable to SELLER and shall be valid for at least eight
months (8) for shipment and nine months (9) for negotiation of the shipping
documents.
Payment under this Letter of Credit shall be made as follows:
------------------------------------------------------------
-- Thirty percent (30%) of the total contract price shall be paid to
SELLER at sight
and the remaining
-- Forty percent (40%) of the total contract price shall be paid to
SELLER thirty days (30 days) from the Bill of Lading date
against presentation of the following documents:
a) Commercial Invoice in four (4) copies
<PAGE> 28
b) Packing list in two (2) copies
c) Full set of Clean on-board Ocean Bill of Lading evidencing shipment
to Vanino, Russian Federation issued to the order of SELLER,
endorsed to the order of BUYER and marked notify: BUYER
d) Original Insurance Certificate endorsed to PAYOR for 110% of CIF
value of Products, payable in the United States and in U.S. Dollars
against all risks including American Institute Cargo Clause,
S.R.C.C. (Strike, Riots & Civil Commotion Clause) and war risk.
PAYOR shall, at SELLER'S request, extend the validity of the Letter of
Credit to allow SELLER to make shipment of and collection of payment for the
products in accordance with the terms of this Contract or in the event of any
of the circumstances referred to in Article VII - delays in documentation or
other excusable delays under this Contract.
The Letter of Credit shall further specify:
------------------------------------------
-- "Stale dated documents are acceptable"
-- "Partial shipments are allowed"
-- "Transhipments are allowed"
All banking and collection charges incurred in connection with opening,
advising, negotiating and confirming the Letter of Credit shall be for PAYOR'S
account.
PAYOR shall fax/telex SELLER the No. of the Letter of Credit, amount, name of
opening bank and opening date and the name of the confirming bank, not later
than three (3) working days from the opening date of the Letter of Credit.
<PAGE> 29
ANNEX E/1/A
RECEIPT
-------
WE HEREBY CONFIRM HAVING RECEIVED FROM ____(INSERT NAME OF PAYOR)____,
__________________ ON ______________________ 19__, THE AMOUNT OF
US$ 1,073,737.50 (ONE MILLION AND SEVENTY THREE THOUSAND AND SEVEN HUNDRED
AND THIRTY SEVEN UNITED STATES DOLLARS AND FIFTY UNITED STATES CENTS)
REPRESENTING THE ADVANCE PAYMENT OF THIRTY PERCENT (30) UNDER CONTRACT
NO. CWT001/94 DATED _______________ 19__.
GENEVA,___________________ CATERPILLAR OVERSEAS S.A
(Date)
By:_____________________
<PAGE> 30
ANNEX F
PROCEDURE FOR FILING CLAIMS FOR LOSS, DAMAGE OR DESTRUCTION
-----------------------------------------------------------
OF ANY PRODUCTS IN ACCORDANCE WITH ARTICLE X, PARAGRAPH 2,
----------------------------------------------------------
OF THIS CONTRACT
----------------
1. BUYER or BUYER's agent shall inspect all Products upon receipt from the
carrier at the port of entry.
2. In the case of loss, damage or destruction of any Products, BUYER or
BUYER's agent shall:
(i) provide a written report evidencing that the loss, damage or
destruction occurred while the Product was in the carrier's custody.
(ii) immediately request a surveyor to inspect the Products at the port
of entry and obtain a survey report from the local Chamber of
Commerce.
3. Upon receipt of the survey report, BUYER shall file a Letter of Claim
with SELLER describing the destruction, or loss, or damage incurred and
listing the serial numbers and/or reference numbers and quantity of all
destroyed, lost or damaged Products. This Letter of Claim is to be
accompanied by the following supporting documents.
1. Copy of SELLER's related product invoice
2. Original or copy of the Bill of Lading
3. Written report as per paragraph 2 (i) above
4. Survey report by the Chamber of Commerce as per paragraph 2 (ii)
above
5. Pictures of damaged or destroyed Products
The Letter of Claim and supporting documents must be submitted by BUYER in
the English language, and any documents issued in the Russian language must
be accompanied by English translations.
It shall be the BUYER's responsibility to obtain and provide all of the above
documents as fast as possible to the SELLER. However, if any of the supporting
documents are not available BUYER shall so state, together with the reasons the
missing documents are not available, in its Letter of Claim.
<PAGE> 31
ANNEX G
WARRANTY
--------
1. SELLER warrants Caterpillar Products sold under this Contract to be
free from defects in material and workmanship, under normal use and
service, for the following periods of time:
A. Caterpillar machines and generator sets: twelve (12) months
after the date of initial use or eighteen (18) months after the
delivery date specified in Annex D, whichever first occurs.
B. Caterpillar replacement engines, parts and tools with a
Caterpillar reference number: twelve (12) months after the
delivery date specified in Annex D.
2. SELLER's liability under this warranty is limited to the repair
replacement, as SELLER may elect, of components or parts which are
found upon inspection by SELLER to have been defective in material or
workmanship. If SELLER elects to repair any parts or components found
by SELLER to be defective, such repairs shall be performed at an
establishment authorized by SELLER.
3. Replacement parts and components supplied by SELLER under this
warranty shall be provided free of charge to BUYER CIF Russian port of
entry (Incoterms 1990).
4. This warranty excludes all labor costs and the costs of normal
maintenance service, such as engine tune-ups, replacement of filters,
lubrication, etc.
5. BUYER shall present a warranty claim to SELLER within forty-five
(45) days after the date a defect is found.
6. Within thirty (30) days after the date of initial use of each
machine and generator set, BUYER shall advise SELLER of its serial
number and the date of its initial use.
7. If SELLER should request BUYER, in writing, to return any
defective part or component to SELLER, BUYER shall return such part or
component to SELLER. Prior to the actual return of the requested
item(s) SELLER and BUYER shall agree upon the transportation costs.
Parts or components that are subject to a warranty claim shall be
properly protected and stored at BUYER's/ END-USER's premises until
settlement of the warranty claim.
8. This warranty is expressly in lieu of any other warranties,
express or implied, including without limitation any warranty of
merchantability or fitness for a particular purpose. Remedies under this
warranty are expressly limited to repair or replacement as specified
above, and any claims for other loss or damage of any type (including
without limitation loss from failure of the product to operate for
any period of time, other economic or moral loss, or incidental,
special, indirect or consequential damage) are expressly excluded.
9. Other manufacturer's Products sold hereunder are supplied with the
warranty provided by such manufacturer. In the event of a warranty
claim by BUYER for such Products, SELLER agrees to pass on such claim
to manufacturer on behalf of BUYER.
<PAGE> 1
OVERSEAS PRIVATE INVESTMENT CORPORATION
WASHINGTON,D.C. 20527, U.S.A.
OFFICE OF THE
PRESIDENT
[LOGO] November 28, 1994
Forest Starma
c/o John Lawlor and Alexander Telitsyn John F. Lawlor
The Pioneer Group Inc. The Pioneer Group Inc.
60 State Street State Street
Boston, MA 02109-1820 Boston, MA 02109-1820
Starma Holding Company
4, Koprovaya St.,
Komsomol'sk-on-Amur
681005, Russia
RE: OVERSEAS PRIVATE INVESTMENT CORPORATION
("OPIC") COMMITMENT TO GUARANTEE LOANS TO
FOREST STARMA - ID NUMBER: 118-94-162-IG
Ladies and Gentlemen:
This letter (the "Commitment Letter") constitutes and sets forth
the terms and conditions of OPIC's commitment to guarantee, pursuant to
Section 234(b) of the Foreign Assistance Act of 1961, as amended, a loan
or loans to Forest Starma ("Forest Starma" or the "Company"), a
corporation organized and existing under the laws of Russia in the
administrative division of Khabarovsk Kray. OPIC is willing to
guarantee, and, by its acceptance of this letter, the Company confirms
that it is willing to borrow, a loan or loans (the "Loan") to be applied
to the Project (as defined herein) on the following terms and conditions
and such other terms and conditions as shall be agreed upon by OPIC, the
Company and the Sponsors (as defined herein):
1. The Project: As more fully described in the Sponsor
----------- Disclosure Report dated April 26, 1994,
the Jaakko Poyry Consulting Oy consulting
report dated December 1, 1994 and The
Pioneer Group Inc. letters to OPIC dated
February 4, March 18, April 10, May 4,
September 21 and September 26, 1994, the
Loan will be applied to finance the
construction of a jetty facility in the
Siziman region of the Russian Far East,
as well as the development of a forestry
tract in the Siziman area, north east of
Komsomol'sk in the Khabarovsk
administrative division of the Russian
Federation (the "Project"). The
development of the forestry tract will
involve the production of up to 168,000 m3
of timber from the Siziman and adjacent
forests.
1100 NEW YORK AVENUE, N.W. - WASHINGTON D. C. 20527 - FAX (202) 408-9859
- (202) 336-8400
<PAGE> 2
2. Sponsors and
------------
Shareholders: (a) The Pioneer Group Inc., a financial
------------- services and natural resources corporation
incorporated in the state of Delaware (the
"U.S. Sponsor" or "PGI"). The U.S. Sponsor
owns 50% of the Company directly and a
further 7% indirectly through the U.S.
Sponsor's 32% equity holding in Starma
Holding Company.
(b) Starma Holding Company (the "Russian
Sponsor"; references herein to "the Sponsors"
shall be to both the U.S. Sponsor and the
Russian Sponsor).
(c) Goskomsever.
(d) The remaining shareholders of Forest
Starma.
The shareholders of Forest Starma are set
forth below:
<TABLE>
<CAPTION>
Shares Percentage
<S> <C> <C>
Pioneer Group Inc. 750 50%
Starma Holding Company 345 23%
Sovgavan Complex Timber Industry Ent. 90 6%
Goskomsever 90 6%
Vanino District Foundation 45 3%
Other Local Minority Shareholders 180 12%
TOTAL 1,500 100%
</TABLE>
3. Amount: The outstanding principal amount of the
------ Loan shall not exceed $9,300,000 (the
"Guaranty Commitment") . As used herein
the symbol "$" indicates United States
dollars.
4. Financial Plan: The Project's total cost is estimated to
-------------- be $15,500,000, to be funded as follows
(the "Financial Plan"):
<TABLE>
<S> <C>
$ 000's
Senior Debt: Amount
------------ -------
OPIC $ 9,300
Subordinated Debt:
------------------
The Pioneer Group Inc. $ 5,400 1
Equity:
------------
Goskomsever $ 800 2
-------
Total $15,500
=======
</TABLE>
-------------------------
1 The subordinated loans may be made directly by PGI, or, indirectly,
by a financial institution pursuant to an agreement with PGI.
2 Goskomsever's contribution may be reduced only to the extent that
the PGI contribution is increased.
- 2 -
<PAGE> 3
5. Term: The Loan will have a term of eight years.
---- The Loan shall be repaid in 15 semi-annual
installments on March 15 and September 15
of each year (each such date a "Payment
Date"), commencing on the first Payment
Date occurring six months after the first
disbursement. During the first six
months after the first disbursement only
interest payments on the Loan will be made.
6. Interest Rate: To be negotiated with the guaranteed
------------- lender or lenders on terms acceptable to
OPIC. The Company shall pay to OPIC a
default premium at the rate of two
percent (2%) per annum with respect to
any amount not paid when due under the Finance
Agreement (as defined in subparagraph
13(a) herein).
7. Guaranty Fee: (i) Two and three quarters percent (2.75%)
------------ per annum on the outstanding balance of
the Loan prior to Project Completion (as
defined in Annex A attached hereto), and
(ii) five and one eighth percent (5.125%)
per annum on the outstanding balance of
the Loan subsequent to Project Completion,
payable to OPIC semi-annually in arrears
on each Payment Date (the "Guaranty
Fee").
8. Facility Fee: One percent (1%) of the Guaranty
------------ Commitment (the "Facility Fee"); of which
(i) $50,000 has been paid to OPIC by the
U.S. Sponsor upon the execution of the
retainer letter dated March 24, 1994,
(ii) $20,000 is due and payable to OPIC on
the date of execution of this Commitment
Letter, and (iii) the remainder, $23,000,
shall be due and payable on the date of
execution of the Finance Agreement.
9. Commitment Fee: One half of one percent (0.5%) per annum
-------------- on the undisbursed and uncanceled amount
of the Guaranty Commitment (the
"Commitment Fee"). Such fee shall accrue
from the date of this Commitment Letter
and be due and payable to OPIC semi-
annually in arrears on each Payment Date
and upon either the termination of this
Commitment Letter or the date of
execution of the Finance Agreement. The
Commitment Fee will continue to accrue under
and shall be payable as provided in the
Finance Agreement on the undisbursed and
uncanceled amount of the Guaranty Commitment.
10. Cancellation Fee: The Company may cancel any portion of the
---------------- Guaranty Commitment to the extent of any
disbursed portion of the Loan upon
payment to OPIC of a cancellation fee
equal to (i) one half of one percent
(0.5%) of the amount canceled prior to
- 3 -
<PAGE> 4
execution of the Finance Agreement, and
(ii) one percent (1%) of the amount
canceled after execution of the Finance
Agreement (the "Cancellation Fee"). Any
portion of the Guaranty Commitment that
for any reason expires or is terminated
shall be deemed to have been canceled,
and the Cancellation Fee shall apply.
11. Reimbursement
-------------
of Expenses: The Company or the Sponsors shall pay or
----------- reimburse OPIC for all reasonable
expenses incurred by OPIC in connection
with this Commitment Letter and the negotiation,
execution and implementation of the
Finance Agreement, including reasonable fees
and expenses for outside legal counsel,
business advisors and consultants, travel
expenses, costs of reproducing and binding
post-closing document transcripts (including
up to 5 OPIC copies) and other such
out-of-pocket expenses incurred by OPIC,
including any costs of collecting any amount
due hereunder. Such payment or reimbursement
shall be due and payable promptly upon
the Company's receipt of OPIC's request
therefor from time to time and upon the
extension or termination of this
Commitment Letter or execution of the
Finance Agreement, provided that, to the
extent any portion of the Facility Fee
has been paid to OPIC, travel expenses
incurred by OPIC shall be reimbursed out
of such fee. Such payment or reimbursement
shall be due whether or not this Commitment
Letter expires without renewal or is canceled
or a Finance Agreement is executed or any
disbursement of the Loan is made thereunder.
12. Payments: All payments due hereunder to OPIC shall
-------- be paid by wire transfer as follows:
U.S. Treasury Department
New York, New York
ABA No. 0210-3000-4
TREAS NYC/CTR/BNF = AC - 71000001
OBI = OPIC Loan Number 118 94 162-IG
13. Other Conditions:
----------------
(a) The terms and conditions of the Loan
and of OPIC's guaranty thereof (the "OPIC
Guaranty") shall be set forth in a loan
agreement or finance agreement with the
Company (the "Finance Agreement")
providing the foregoing terms, the terms
and conditions set forth in a term sheet
(attached as Annex A hereto) and such
other terms and conditions customarily
required by OPIC including, without
limitation, conditions for disbursement,
- 4 -
<PAGE> 5
representations, reporting requirements,
dividend and indebtedness restrictions, the
Sponsors' guaranty under the Project
Completion Agreement, (as defined in Annex A),
collateral security and events of default.
(b) On the date of execution of the
Finance Agreement, no condition shall exist
that in OPIC's judgment materially
adversely affects the Company's or the
Sponsors' ability to carry out the
Project or to perform their respective
obligations under the Finance Agreement.
(c) The Finance Agreement and all
documents, instruments and approvals
required by the Finance Agreement
(collectively, the "Financing Documents")
shall be satisfactory to OPIC in form and
substance.
(d) The Company shall arrange for, and
pay all costs associated with, the
funding of the Loan, including without
limitation, the fees of all placement
agents, paying agents and liquidity
facility providers and their respective
counsel, and all documents, instruments
and approvals required in connection with
such funding shall be satisfactory to OPIC
in form and substance.
14. Termination: If for any reason the Finance Agreement is
----------- not executed and delivered on or before
January 15, 1995, OPIC's commitment and
its obligations hereunder shall thereupon
terminate and the Company or the Sponsors
shall forthwith pay to OPIC the Commitment
Fee, the Cancellation Fee and any other
amounts then due hereunder.
15. Extension of
------------
Commitment: The parties hereto shall continue to use
---------- their best efforts to complete
negotiations of the Financing Documents
as soon as possible prior to the termination
of this Commitment Letter. Extension of
the term of this Commitment Letter shall
be subject, at OPIC's discretion, to
modification of the terms hereof.
16. Indemnity: The Company and the Sponsors shall
--------- indemnify and hold harmless OPIC and each
of its directors, officers and employees
(each, an "indemnified person") in
connection with any losses, claims,
damages, liabilities or other expenses to
which such indemnified person may become
subject arising out of or relating to
this Commitment Letter, the provision of the
financing and guaranty contemplated hereby
or the use or intended use of the proceeds
- 5 -
<PAGE> 6
thereof; PROVIDED, that such indemnity
shall not apply (i) to the extent the
loss, claim, damage, liability or other
expense results from the gross negligence
or willful misconduct of the indemnified
person and (ii) to the extent that the
loss, claim, damage, liability or other
expense results from a failure by OPIC to
fulfill its obligations under the OPIC
Guaranty. Further, the Sponsors'
indemnity obligations hereunder (i) shall
not apply to the extent that the loss,
claim, damage, liability or other expense
arises from the Company's failure to pay
its financial obligations under the
Finance Agreement (with the exception of
fraud); (ii) shall not in the aggregate
exceed the amount of the loan; and (iii)
shall end on the Project Completion Date
(as defined in Annex A). This indemnity
obligation shall survive the execution of
the Finance Agreement and the expiration
or other termination of the Guaranty
Commitment set forth herein.
17. Joint and Several
-----------------
Obligations: Payment of all fees and expenses payable
----------- to OPIC hereunder prior to Project
Completion (as defined in Annex A) shall
be the joint and several obligation of
the and the Sponsors. Payment of all
fees and expenses payable to OPIC
subsequent to Project Completion shall be
the obligation of the Company.
18. Counterparts: This Commitment Letter may be executed
------------ in separate counterparts, each of which
shall be an original and all of which
taken together shall constitute one and
the same agreement.
19. Governing Law: This Commitment Letter shall be governed
------------- by the law of the State of New York.
- 6 -
<PAGE> 7
If the foregoing correctly sets forth our understanding and agreement,
please confirm your acceptance thereof by (i) signing and returning to OPIC an
executed counterpart of this Commitment Letter and (ii) wiring to OPIC the
amount referred to in paragraph 8 as payment of the Facility Fee owed, no later
than November 30, 1994. If OPIC receives such countersigned copy and funds by
such time, then this Commitment Letter shall constitute an agreement between us
effective and legally binding on each of us as of its date.
Very truly yours,
OVERSEAS PRIVATE INVESTMENT CORPORATION
(Illegible signature)
By:______________________________________
Title:___________________________________
ACCEPTED AND AGREED TO
as of the date of this Commitment Letter:
FOREST STARMA
By:______________________________________
Title:___________________________________
PIONEER GROUP, INC.
(Illegible signature)
By:______________________________________
Title:___________________________________
STARMA HOLDING COMPANY
By:______________________________________
Title:___________________________________
- 7 -
<PAGE> 8
ANNEX A
TERM SHEET FOR OPIC U.S.$9,300,000 LOAN GUARANTY FOR FOREST STARMA
All capitalized terms used herein have the meanings given them in the
Commitment Letter to which this Term Sheet is attached, unless the
context otherwise requires. The Finance Agreement shall include the
following terms and conditions, in addition to standard representations
and warranties, covenants and events of default:
1. Drawdown and
------------
Commitment
----------
Period: The Loan shall be made in one disbursement
------ totaling $9,300,000, upon certification that the
contributions of equity and subordinated loans
as set forth in the Financial Plan (paragraph 4
of the Commitment Letter) have been made. No
disbursement of the Loan shall be made after
December 31, 1995 (the period from the date of
the Commitment Letter to the earlier of the date
of disbursement and December 31, 1995 being the
"Commitment Period").
2. Voluntary
---------
Prepayment: In addition to any requirements of the lender(s),
---------- the Loan, after the Commitment Period, may be
prepaid in inverse order of maturity upon the
payment to OPIC of the following premiums (each a
"Prepayment Premium"), each expressed as a percent
of the principal amount prepaid. If prepayment
occurs in the twenty-four month period commencing
with: (i) the last day of the Commitment Period,
the Prepayment Premium shall be 3%, (ii) the
third anniversary of the last day of the Commitment
Period, the Prepayment Premium shall be 2%, and
(iii) thereafter, prepayments may be made without
premium.
3. Mandatory
---------
Prepayment: Prepayment of the Loan shall be mandatory (i) in
---------- the event that, and in the amount by which
insurance proceeds received by the Company in
any fiscal year in excess of $500,000 are not
used to repair or replace damaged assets, and
(ii) in the event that any compensation,
dividends or other payments made in any fiscal
year to the Sponsors or any affiliate (as
defined in paragraph 10(e) of this Term Sheet)
exceed the amounts set forth in paragraph 10(e)
of this Term Sheet, such prepayment to be in the
amount set forth in subparagraph 10(e)(ii)(z).
4. Security: (a) OPIC, as guarantor, shall be secured by
-------- security interests in (i) all of the Company's
<PAGE> 9
assets and rights, (ii) the ownership interests
of the Sponsors in the Company, and (iii) such
other security interests as OPIC may request;
PROVIDED, that upon OPIC's prior approval, the
Company may create or permit to exist vendor
liens, such liens to be mutually agreed upon by
OPIC and the Company at such time.
(b) The Company shall pay all costs and
expenses relating to notarization, registration
or other procedures required for establishment
of OPIC's security interests.
5. Bank Accounts: (a) The Company shall open and maintain one or
------------- more accounts (the "Designated Accounts")
established in London through Moscow Narodny
Bank, or any other bank acceptable to OPIC,
pursuant to the applicable Russian Central Bank
license for offshore bank accounts. The Company
shall receive the Loan disbursement in a special
Designated Account (hereinafter, the "Funding
Account"). The Company shall deposit the
proceeds from the export of raw logs and timber
(the "Proceeds") into a special U.S. dollar
Designated Account (hereinafter, the "Timber
Proceeds Account"). Taking into account the
relevant currency regulations of the Russian
Federation and the provisions of the license
issued by the Russian Central Bank, (i) the
Proceeds will be credited to the Cash Collateral
Account (defined in paragraph 5(c) below), and
(ii) any Proceeds in excess of the Cash
Collateral Amount (defined in paragraph 5(c))
will be deposited in a Designated Account (the
"Capital Expenditure and US $ Operating
Expenditure Account") and will be used to fund
the hard currency capital expenditures and
operating expenses of the Project. Any
remaining Proceeds will be forwarded to the
Company's foreign currency bank account in
Russia. The Designated Accounts will be subject
to a Security and Trust Deed under English Law,
in form and substance satisfactory to OPIC,
establishing a first priority security interest
in favor of OPIC (the "Security and Trust
Deed") .
(b) The Company shall maintain all of its
Russian accounts in a bank approved by OPIC (the
"Russian Depository Accounts"). Such bank,
OPIC, and the Company will enter into an
agreement satisfactory to OPIC regarding the
establishment and use of such accounts (the
"Russian Depository Agreement"). Such accounts
will be subject to a pledge in favor of OPIC.
(c) The Company shall open and maintain as one
of the Designated Accounts, an account (the
"Cash Collateral Account"), in which the Company
will maintain, in U.S. Dollars, the Cash
Collateral Amount (the "CCA") (as defined
below), so long as any amount remains
- 2 -
<PAGE> 10
outstanding under the Loan or any fees are due
to OPIC. The CCA may be used by OPIC to cure a
payment default, with full replenishment
obligations by the Company within 10 days of
use. The "CCA" means (i) prior to Project
Completion (as defined in paragraph 12) an
amount equal to the principal of and interest on
the Loan and all fees due to OPIC (the "Debt
Service") for the six month period from but
excluding the immediately preceding Payment Date
to and including the next Payment Date (the
"Interest Period"), and (ii) subsequent to
Project Completion, an amount equal to the Debt
Service for two Interest Periods.
6. Charter
-------
Restrictions: The Company's charter shall (i) provide that
------------ indebtedness of the Company (other than the OPIC
Loan) shall require approval by a two-thirds
majority vote of the Company's board of
directors and (ii) prohibit indebtedness
incurred by the Company other than indebtedness
permitted in the Finance Agreement and (iii)
prohibit any liens on the assets of the Company
other than liens permitted in the Finance
Agreement.
7. Sponsor
-------
Contribution: The contributions to the Project shall be an
------------ equity contribution by Goskomsever in Russian
Roubles of the equivalent of U.S. $800,000 and
subordinated loans by the U.S. Sponsor
aggregating $5,400,000 (together, the
"Contributions"). Goskomsoever's contribution
may be reduced only to the extent that The
Pioneer Group Inc. contribution is increased.
For the purposes of the financial covenants set
forth in paragraph 10(b)(i) and (ii) of this
term sheet and the restrictions on payments to
the Sponsors and their affiliates set forth in
paragraph 10(e) of this term sheet, and any
other similar provisions, subordinated loans
provided by the U.S. Sponsor will be
characterized as equity of the Company.
8. Principal Conditions Precedent to Loan Disbursement:
---------------------------------------------------
(a) The agreements set forth in Schedule 1 of this Term Sheet shall
have been entered into by the Company and the other respective
parties on terms and conditions satisfactory to OPIC and shall
each be fully effective.
(b) OPIC shall have received satisfactory evidence, including an
independent accountant's certificate, that the Contributions have
been fully paid in to the Company.
(c) OPIC shall have received satisfactory evidence of all necessary
consents and approvals of the Government of Russia (including the
Administrative Division of Khabarovsk Kray) necessary for the
Company to carry out the Project, including, without limitation:
- 3 -
<PAGE> 11
(i) registration of the Loan with the Central Bank of Russia,
foreign exchange consents permitting the remittance of all amounts
payable under the Financing Documents and all other Central Bank
approvals and licenses required in connection with the financing
and the establishment of the bank accounts referred to above; and
(ii) all licenses necessary to confer rights to the Company for
the cutting and harvesting of timber.
(d) OPIC shall have received satisfactory evidence of the items set
forth in Schedule 2 of this Term Sheet.
(e) OPIC shall have received legal opinions of (i) counsel to OPIC in
Russia, (ii) counsel to the Company in Russia and the United
States and (iii) counsel to the U.S. Sponsor, each in form and
substance satisfactory to OPIC.
(f) As of the date of the disbursement, (i) no default under the
Finance Agreement shall have occurred and be continuing; (ii) the
representations and warranties contained in the Finance Agreement
shall be true and correct in all material respects as if made on
such date; and (iii) no change in circumstances shall have
occurred which materially adversely affects the Company's or the
Sponsors' financial condition or ability to fulfill their
respective obligations under the Finance Agreement or the Project
Completion Agreement.
9. Reporting Requirements:
----------------------
(a) The Company shall furnish OPIC with financial information and
reports expressed in U.S. dollars and in the English language,
including but not limited to quarterly financial statements,
audited annual financial statements, compliance certificates and,
prior to Project Completion (as defined in paragraph 12),
quarterly progress reports, in the case of annual financial
statements, prepared in accordance with generally accepted U.S.
accounting principles. OPIC shall have reasonable access, during
normal business hours and at the Company's premises, to the
Company's books and records and to the Company's premises for
purposes of inspection.
(b) The Company shall annually complete and deliver to OPIC a "Self-
Monitoring Questionnaire" in such form as OPIC may from time to
time prescribe.
10. Principal Financial Covenants:
-----------------------------
(a) WORKING CAPITAL: After Project Completion, the Company shall not
permit the ratio of current assets to current liabilities to be
less than 1.4 to 1.
(b) Other Financial Covenants: The Company shall:
-------------------------
(i) maintain a ratio of Indebtedness (as defined in paragraph
10(c)(ii)) to equity and U.S. Sponsor subordinated loans
("Adjusted Net Worth") of 1.857 to 1; and
(ii) after Project Completion, maintain a ratio of Adjusted Cash
Flow to Debt Service Requirement ("Indebtedness Service Ratio")
of 1.2 to 1.
- 4 -
<PAGE> 12
"Adjusted Cash Flow" shall mean, as of any date, the sum of the
following amounts for the preceding six months, multiplied by two:
(i) net income of the Company; (ii) all depreciation, amortization
and other non-cash charges of the Company; and (iii) interest
payments made by the Company on all loans and fees paid to OPIC.
"Debt Service Requirement" shall mean an amount equal to the
principal, interest and all fees due to OPIC for the next
succeeding one year period.
(c) INDEBTEDNESS RESTRICTIONS: The Company shall not incur any
indebtedness other than:
(i) the Loan and U.S. Sponsor subordinated loans; and
(ii) other Indebtedness, which when incurred, will not cause (x)
the Company's ratio of Indebtedness to Adjusted Net Worth to
exceed 1.857 to 1, and (y) its Adjusted Net Worth to be less than
$3,200,000, and PROVIDED, that no Event of Default under the
Finance Agreement then exists or would exist after such
Indebtedness is incurred.
"Indebtedness" shall mean: (x) any obligation created, issued,
incurred or assumed by the Company for borrowed money or arising
out of any credit facility or financial accommodation or for the
deferred purchase price of goods and services, including, without
limitation, any credit to the Company under any conditional sale
or other title retention agreement and trade credit from suppliers
or goods and services in the ordinary course of business, (y) all
guaranties by the Company of liabilities or indebtedness of any
other party or liabilities or indebtedness of any other party
secured by any assets of the Company, and (z) the net aggregate
rentals under any lease by the Company as lessee which under
accounting principles generally accepted in the United States of
America would be capitalized on the books of the lessee or which
is the substantial equivalent of the financing of the property so
leased, PROVIDED, that Indebtedness shall not include U.S. Sponsor
subordinated loans.
(d) MORTGAGE AND LIEN RESTRICTIONS: The Company shall not create or
suffer to exist any liens, security interests or encumbrances on
any of its properties or assets other than:
(i) the liens and encumbrances securing the Loan;
(ii) subject to OPIC's prior approval, vendor liens, and
(iii) tax and other statutory liens being contested or litigated
in good faith and for which adequate reserves have been
established.
(e) RESTRICTIONS ON PAYMENTS TO THE SPONSORS AND THEIR AFFILIATES:
The Company shall not make any payment to the Sponsors or any
affiliate, pay any bonus, management fee, commission or other
compensation, or declare or pay dividends or make any other
distributions on or in respect of shares of its capital stock, or
make any principal, interest or fee payments on U.S. Sponsor
subordinated loans prior to Project Completion, and may do so
thereafter only if (i) no Event of Default under the Finance
Agreement then exists or would exist after giving effect to such
payments, compensation, dividend or distribution, (ii) after such
payments, compensation, dividend or distribution (x) the Company's
ratio of Indebtedness to Adjusted Net Worth would not exceed 1.857
- 5 -
<PAGE> 13
to 1, (y) its Adjusted Net Worth would not be less than
$3,200,000; and (z) the aggregate amount of all such payments,
compensation, dividends or distributions paid in any fiscal year
would not exceed 50% of the Company's net income for the prior
fiscal year, based on the Company's annual financial statement for
such fiscal year, unless the Company shall have made a mandatory
prepayment of the Loan in an amount equal to one-half of such
excess.
As used herein "affiliate" shall mean (x) any entity or individual
that is directly or indirectly controlled by, under common control
with or controlling any Sponsor or any shareholder; or (y) any
entity or individual owning beneficially or controlling 5% or more
of the equity interest of a Sponsor or any shareholder.
(f) TAX GROSS-UP: If for any reason any withholding or other tax is
applied to any payments due under the Finance Agreement, the
Company shall gross-up all such payments.
11. Other Covenants:
---------------
(a) (i) The Company shall not enter into any Inter-company transaction
(as defined below) or any transaction with any entity or individual
except in the ordinary course of business, on ordinary commercial
terms and on the basis of arm's length arrangements.
"Inter-company transaction" shall mean any transaction between the
Company and a Sponsor, between the Company and any shareholder of
the Company or between the Company and any affiliate.
(ii) The Company shall not, without OPIC's prior approval, pay any
salary, bonus, management fee, commission or other compensation to
any officer, director or partner of a Sponsor, any shareholder of
the Company, any affiliate, or any employee of the Company in any
of its fiscal years in excess of $150,000.
(b) The Company shall not, without OPIC's prior written consent,
either (i) form any subsidiaries or (ii) make any investments
outside the ordinary course of business.
(c) Standard covenants will be provided in the Finance Agreement,
including no material changes in the Project, the documents
referred to herein or the Company's Charter, no substantial
disposition of assets and no merger, consolidation, or change of
control.
(d) The Company shall not take actions to prevent its employees from
lawfully exercising their right of free association and their
right to organize and bargain collectively. The Company shall
observe applicable laws relating to a minimum age for employment
of children, acceptable conditions of work with respect to minimum
wages, hours of work, and occupational health and safety, and
shall not use forced labor. The Company is not responsible for
the actions of a government.
(e) The Project shall be operated in compliance with the 1992 United
States Forest Service guidelines, as applied to the Project and
set forth in Jaakko Poyry Oy's letter to the Company dated
September 26, 1994 and countersigned by PGI, Russian forestry
regulations and Russian law. A schedule will be attached to the
Finance Agreement consolidating all the agreements on
environmental standards applicable to the Project, pursuant to the
- 6 -
<PAGE> 14
agreements between OPIC and PGI set forth in the letter dated
September 26, 1994, and making reference to earlier submissions
made by PGI to OPIC (the "Guidelines Schedule").
The Company shall appoint an independent environmental advisory
committee (the "IEAC") to be composed of three members chosen by
the Company, with OPIC's prior approval (such approval not to be
unreasonably withheld). The IEAC will (i) review annually the
Company's annual harvesting plan prior to its submission to the
Khabarovsk Kray Forest Natural Resources Authority for approval,
and (ii) monitor annually the Company's annual harvesting plan for
compliance with the Guidelines Schedule. Failure to comply with
the annual harvesting plan and the Guidelines Schedule shall
constitute an Event of Default under the Finance Agreement.
(f) OPIC and the Sponsors shall execute a share retention agreement
pursuant to which the Sponsors shall agree to maintain the legal
and beneficial ownership of the shares owned by each of them, as
set forth in paragraph 2 of the Commitment Letter, provided, that
the U.S. Sponsor may maintain such ownership directly or
indirectly through one or more majority owned subsidiaries or
affiliates. If the U.S. Sponsor converts its subordinated loans
to the Company into equity of the Company, such equity shall be
subject to the share retention agreement.
12. Project Completion:
------------------
(1) The Sponsors shall execute a Project Completion Agreement that
will require the Sponsors, jointly and severally, (i) to cause the
Company to fulfill all of the requirements needed to achieve
Project Completion, as defined below in sub-paragraphs (a) to (e),
(ii) up to the date of Project Completion (the "Project Completion
Date"), unconditionally and irrevocably to guarantee the payment
of all of the Company's financial obligations as they become due
and payable, including, without limitation, the Company's
obligations under the Finance Agreement and the Notes, and (iii)
pursuant to such guaranty, to pay amounts demanded from time to
time by OPIC in fulfillment of such requirements and obligations.
"Project Completion" shall mean and be deemed to have occurred at
the time that OPIC has notified the Sponsors that the following
have been accomplished to OPIC's satisfaction as of the date of
the Completion Certificate:
(a) Physical Completion Tests:
-------------------------
All buildings, jetties, other physical facilities and necessary
infrastructure and relevant equipment shall have been completely
constructed utilizing first-class standards of workmanship and
materials and in accordance with the Project plans and the terms of
applicable construction agreements and all equipment shall have
been installed and be operating in accordance with applicable
specifications.
(b) Environmental Completion Tests:
------------------------------
The IEAC shall have certified the compliance of the Project and the
Company's annual harvesting plan with the Guidelines Schedule.
(c) Operational Completion Tests:
----------------------------
- 7 -
<PAGE> 15
(i) Following commencement of its timber logging operations
and the giving of notice to OPIC by the Company of the date
of commencement of a time period (the "Test Period"), the
Company shall have achieved one of the following tests:
(A) during a Test Period of 90 consecutive days, the
Company shall have produced a minimum of 25,000 cubic
meters of timber, shipped and invoiced the timber to clients
and deposited the proceeds therefrom in the Timber Proceeds
Account specified in paragraph 5; or
(B) in the event that the Company has failed to meet the
test set forth in (A) above, after electing to continue the
Test Period for an additional 90 consecutive days, the
Company shall have produced, in the total of 180 consecutive
days, a minimum of 55,000 cubic meters of timber from its
operations, shipped and invoiced the timber to clients and
deposited the proceeds therefrom in the Timber Proceeds
Account;
(ii) the Company shall have demonstrated a positive cash
flow and a ratio of net operating cash flow to net sales of
at least 30% for a period of six consecutive months (to be
certified by an internationally recognized independent
accounting firm). For the purposes of this paragraph "cash
flow" shall mean net income from operations after taxes and
interest paid, PLUS depreciation; and
(iii) the Company shall have maintained the CCA set forth in
paragraph 5(c).
(d) Legal Conditions:
----------------
(i) the Company shall have valid surface rights to the
forestry tract covered by its cutting license, valid
leasehold interests free and clear of all liens and
encumbrances (except for security interests permitted by the
Finance Agreement) on all of the land and all buildings,
equipment and facilities referred to above, and to all other
facilities required for the Project;
(ii) the Company shall have taken all steps required by
OPIC for the granting of liens in favor of OPIC with respect
to all of the assets required to be pledged pursuant to the
Finance Agreement, and in accordance with the requirements
thereof;
(iii) all obligations of any kind of the Company through the
Project Completion Date shall have been met or waived,
including, without limitation, payment of all amounts at any
time to become due up to Project Completion under contracts
for construction, procurement, installation and improvement
of land, buildings, equipment and facilities for the Project;
(iv) each Financing Document and each other document
identified in the Finance Agreement as being necessary for
the Project, including all relevant licenses, shall remain
in full force and effect, to the extent applicable; and
(v) no Event of Default (or condition or event that, with
the giving of notice, or lapse of time, or both, would
- 8 -
<PAGE> 16
constitute an Event of Default) under the Finance Agreement
shall then exist.
(e) Financial Tests:
---------------
(i) the ratio of the Company's current assets to current
liabilities shall be no less than 1.5 to 1;
(ii) the ratio of the Company's Indebtedness to Adjusted
Net Worth shall not exceed 1.857 to 1;
(iii) the Company shall have an Indebtedness Service
Ratio of at least 1.2 to 1; and
(iv) the Company shall have made at least one principal
repayment on the Loan as and when due from cash flow
generated from the Project.
(2) The Company shall make diligent, good faith efforts to achieve
Project Completion by December 15, 1995.
13. Governing Law:
-------------
The Finance Agreement, the Project Completion Agreement, the
Financing Documents and related agreements shall be governed by
the laws of the State of New York. Agreements for the Designated
Accounts and the Security and Trust Deed shall be governed by
English law and, at OPIC's option, documents establishing OPIC's
security interests may be governed by Russian law.
- 9 -
<PAGE> 17
Schedule 1
----------
(i) A Project Completion Agreement among the Company, the
U.S. Sponsor, Starma Holding Company and OPIC;
(ii) A Finance Agreement between the Company and OPIC;
(iii) An Indemnity Agreement between the U.S. Sponsor and
OPIC;
(iv) Security documents providing for the security
arrangements in favor of OPIC referred to in paragraph
4 of the Term Sheet;
(v) Subordination agreements providing for the
subordination arrangements referred in paragraph 7 of
the Term Sheet;
(vi) A share retention agreement between the Sponsors and
OPIC;
(vii) Agreements establishing the bank accounts referred to
in paragraph 5 of the Term Sheet,;
(viii) All documents and instruments required to fund the
Loan on terms and conditions satisfactory to OPIC;
(ix) A management agreement between the U.S. Sponsor and
the Company setting forth the obligations of the U.S.
Sponsor to provide management, personnel, and
management and financial accounting assistance; and
(x) Construction management agreement with Jaakko Poyry
Consulting Oy, construction contracts with local
contractors in the Khabaravosk region and any other
lease, equipment or material supply or other relevant
contracts required for the Company to build the jetty
in Siziman and to commence operations.
<PAGE> 18
Schedule 2
----------
(i) All necessary corporate documents and authorizations of the Company.
(ii) Adequate commercial insurance coverage, with OPIC named as additional
insured.
(iii) Copies of all material contracts, including the ITT Rayonier Sales
Agreement, and or any other material sales contract entered into
by Forest Starma for the distribution of raw logs.
(iv) The bank accounts referred to in paragraph 5 of the Term Sheet
established in a manner satisfactory to OPIC and in full force and
effect, and the CCA paid in to the Designated Account.
(v) The security interests referred to in paragraph 4 of the Term Sheet
established in a manner satisfactory to OPIC.
Commit9.doc
- 2 -
<PAGE> 1
Form 234 KGT 5-87 MAJ
OPIC Contract of Insurance No. D581
OVERSEAS PRIVATE INVESTMENT CORPORATION
CONTRACT OF INSURANCE
Against
BUSINESS INCOME LOSS
as defined below,
between the Overseas Private Investment Corporation ("OPIC") and
The Pioneer Group, Inc.
60 State Street, 18th Floor
Boston, Massachusetts 02109-1975
a corporation organized and existing
under the laws of the State of Delaware
or any of its subsidiaries
(the "Investor")
<PAGE> 2
TABLE OF CONTENTS
Title Page
----- ----
[S] [C] [S] [C]
Article I - Subject of Insurance and Exchange of Promises
1.01 Subject I-1
1.02 Promises I-1
1.03 Self-Insurance Requirement I-2
1.04 Maximum Aggregate Compensation I-2
1.05 Full Faith and Credit I-2
1.06 Term I-2
1.07 Premiums and Coverage Elections I-2
Article II - Business Income - Scope of Coverage
2.01 Loss of Business Income II-1
2.02 Exclusions II-1
Article III - Business Income - Amount of Compensation
3.01 Basis of Compensation III-1
3.02 Adjustments III-1
3.03 Limitations III-2
3.04 Appraisal III-2
3.05 Estimated Compensation III-3
Article IV - Procedures
4.01 Application for Compensation IV-1
4.02 Security IV-1
4.03 Arbitration IV-1
4.04 Election of Amount of Coverage IV-1
and Termination
4.05 Legal and Miscellaneous IV-2
4.06 Notices IV-2
4.07 Refund of Premiums IV-2
Article V - Investor's Duties
5.01 Duties V-1
5.02 Default V-3
5.03 Non-Waiver V-3
5.04 Cure V-3
Article VI - Amendments VI-1
(i)
<PAGE> 3
I-1
Article I - Subject of Insurance and Exchange of Promises.
---------------------------------------------------------
1.01 Subject.
-------
1. INVESTMENT. The Investor promises that the Investor contributed or
will contribute
$300,000 in United States dollars
--------------------------------------------------------------------------------
to
Financial Services Limited (FSL)
24G, Wilanow 02-958 Mokotow
Warsaw, Poland
a joint venture organized under the laws of the
Republic of Poland
(the "foreign enterprise").
--------------------------------------------------------------------------------
The Investor owns 50% of the total equity shares of the foreign enterprise (the
"Investor's share").
2. PROJECT. The investment will be applied to
the development and operation of a mutual fund to
be located in Warsaw, Poland.
(the "project").
--------------------------------------------------------------------------------
1.02 Promises.
---------
OPIC promises that if acts occur during the term of this contract which
satisfy the requirements for coverage in Article II, OPIC will pay the Investor
the amount of compensation provided in Article III, in accordance with the
procedures in Article IV.
The Investor promises to comply with the duties in Article V. If the
Investor violates any of those duties, the Investor may lose rights, including
the right to compensation.
Amendments to Articles I through V, if any, are contained in
Article VI.
<PAGE> 4
I-2
1.03 Self-Insurance Requirement.
---------------------------
The Investor shall bear at least 10% of business income loss
compensable under Article II hereof.
1.04 Maximum Aggregate Compensation.
-------------------------------
OPIC will not pay compensation under this contract in an aggregate
amount that exceeds $590,000.
1.05 Full Faith and Credit.
----------------------
The full faith and credit of the United States of America is pledged to
secure the full payment by OPIC of its obligations under this contract.
1.06 Term.
-----
This contract shall enter into force on September 30, 1992, provided it
has been signed by OPIC and the Investor, and shall terminate 20 years
afterward unless terminated earlier (section 4.04; section 5.02).
1.07 Premiums and Coverage Elections.
--------------------------------
The Investor shall elect amounts of coverage (\4.04) and pay premiums
on or before each annual anniversary of the effective date of the contract. By
notice to the Investor at least thirty days prior to a premium due date, OPIC
may increase the rates for Current Insured Amount. The total increase during
the first ten years shall be limited to 50% of the rates for the first period
of this contract and thereafter to 100% of the rates for the first period.
The coverages and premiums for the first period shall be as follows:
<TABLE>
<S> <C> <C>
Maximum Insured Amount: $590,000
Current Insured Amount: $210,000
Premium rate is: x 0.45000 %
-----------
Premium due for Current is: = $945.00
==========
Standby Amount (Maximum less Current): $380,000
Premium rate is: x 0.25000 %
-----------
Premium due for Standby is: = $950.00
=========
Total premium is: $1,895.00
=========
</TABLE>
--------------------------------------------------------------------------------
<PAGE> 5
II-1
Article II - Business Income - Scope of Coverage.
-------------------------------------------------
2.01 LOSS OF BUSINESS INCOME. Compensation is payable, subject to
exclusions (section 2.02) and limitations (section 3.03), if tangible property
of the foreign enterprise used for the project sustains damage, including
disappearance or seizure and retention, directly resulting from political
violence, and if such damage causes the partial or total cessation of project
operation and results in a loss of business income during the period of
restoration.
"Political violence" means a violent act undertaken with the primary
intent of achieving a political objective, such as declared or undeclared war,
hostile action by national or international armed forces, civil war,
revolution, insurrection, civil strife, terrorism or sabotage. However, acts
undertaken primarily to achieve labor or student objectives are not covered.
"Business income" means the net income (net profit or loss before
income taxes) of the foreign enterprise that would have been earned or incurred
from operation of the project, plus continuing normal operating expenses
incurred.
"Period of restoration" means the period of time that begins with the
date of the direct physical damage caused by political violence which causes
the loss of business income and ends on the sooner of
(a) the date by which the tangible property should, with due diligence
and dispatch, have been repaired, rebuilt, or replaced with property
of similar quality, or
(b) one year from the date of damage.
2.02 EXCLUSIONS. Regardless of any other provision of this contract, no
compensation shall be payable
(a) FINISHED STOCK. If the loss results from damage or destruction of
manufactured stock ("finished stock"); or
(b) MINIMUM LOSS. If the amount of compensation payable would be
less than $10,000; or
(c) REASONABLE PROTECTIVE MEASURES. To the extent the loss results
from the failure to take reasonable measures to protect or preserve the
property; or
(d) PROVOCATION. If a preponderant cause of the loss is attributable
to the unreasonable actions of the Investor, including corrupt
practices, which provoke or instigate a loss; or
(e) EXCLUDED PROPERTY. If the loss is due to damage to or loss of
precious metals, gems, works of art, money or documents.
<PAGE> 6
III-1
Article III - Business Income - Amount of Compensation.
-------------------------------------------------------
3.01 BASIS OF COMPENSATION. If the requirements of Article II are
satisfied, and subject to the adjustments (section 3.02) and limitations
(section 3.03), OPIC shall pay compensation in United States dollars for
business income loss. The amount of business income loss will be 90% (section
1.03) of
(1) the Investor's share (section 1.01) of the net income loss of the
foreign enterprise, plus
(2) the continuing, normal operating expenses of the foreign
enterprise,
and will be determined based on
(a) the net income of the foreign enterprise before the loss or damage
occurred,
(b) the likely net income of the foreign enterprise if the loss or
damage had not occurred,
(c) the operating expenses of the foreign enterprise, including payroll
expenses, necessary during the period of restoration to permit the
productive capacity of the project that existed just before the damage
to be restored, and
(d) any other relevant information including financial records,
accounting procedures, bills, invoices, other vouchers, deeds, liens,
or contracts.
3.02 ADJUSTMENTS.
(a) LOSS REDUCTION EXPENSES. OPIC will pay compensation for necessary
expenses incurred by the foreign enterprise during the period of
restoration that would not have been incurred if no loss or damage had
occurred, to the extent that the expenses reduce the business income
loss otherwise payable to the Investor. Compensation for loss
reduction expenses is payable for necessary expenses incurred to avoid
or minimize the complete or partial cessation of project operations and
to continue operations at the project site, at replacement premises, or
at temporary locations, and will include relocation expenses and costs
to equip and operate the replacement or temporary locations.
Compensation will be reduced by the salvage value of any property
bought for temporary use during the period of restoration.
(b) OTHER COMPENSATION. OPIC may reduce compensation for the
Investor's share of compensation received from other sources on account
of the business income loss.
<PAGE> 7
III-2
(c) EXCHANGE RATE. Any expense incurred or net income denominated in
local currency will be valued in U.S. dollars at the official exchange
rate in effect on the date the expenses were incurred or, in the case
of net income, on the date when it would under ordinary circumstances
have been payable to the Investor. If, however, on that date U.S.
dollars were not generally available at the official exchange rate, and
exchanges of local currency for U.S. dollars were effected legally and
normally through another channel, then the exchange rate shall be the
effective rate obtained through that channel.
(d) SELF-INSURANCE. Breach of the duty to be self-insured (section
1.03) shall result in a corresponding reduction of compensation
otherwise payable under this coverage.
3.03 LIMITATIONS. Regardless of any other provision of this contract,
the following limitations shall apply in computing compensation:
(a) TIME LIMIT. No compensation shall be payable for any
business income loss or loss reduction expenses sustained after one
year from the date of damage.
(b) CURRENT INSURED AMOUNT. Compensation shall not exceed the
Current Insured Amount on the date of damage.
(c) ELECTRONIC MEDIA AND RECORDS. OPIC will not pay for any
loss of business income caused by physical loss or damage to electronic
media and records after the longer of (1) 60 consecutive days from the
date of direct physical loss or damage or (2) the period of restoration
for all other property.
"Electronic Media and Records" means all electronic data processing,
recordings or storage media such as films, tapes, discs, drums or
cells; data stored on such media; or programming records used for
electronic data processing or electronically controlled equipment.
(d) RESUMPTION OF OPERATIONS. OPIC will not pay compensation for any
business income loss that could have been avoided by using damaged or
undamaged property (including merchandise or stock) at the project site
or elsewhere; nor will OPIC pay compensation for loss reduction
expenses incurred after operations of the project could have been
returned to normal and such expenses discontinued.
3.04 APPRAISAL. If OPIC determines that compensation is payable for a
business income claim, but OPIC and the Investor are unable to agree on the
amount of business income loss compensation, either may demand an appraisal of
the loss. In this event, each party will select a competent appraiser. The
appraisers will state separately the amount of business income
<PAGE> 8
III-3
loss. If the appraisals are different and the two parties cannot agree to a
compromise, they will submit their differences to an umpire, selected by the
two appraisers, whose decision will be binding. If the appraisers cannot agree
on an umpire, either may request that selection be made by the American
Arbitration Association. Each party will pay the costs of its chosen appraiser
and share the expenses of the umpire equally.
3.05 ESTIMATED COMPENSATION. If OPIC determines that compensation is payable
for a business income claim but due to lack of information cannot determine the
precise amount due, OPIC may pay estimated compensation based on the
information then available. OPIC may revise its estimate and recover any
excess or pay any additional amount due.
<PAGE> 9
IV-1
Article IV - Procedures.
------------------------
4.01 APPLICATION FOR COMPENSATION. An application for compensation shall
demonstrate the Investor's right to compensation in the amount claimed. The
Investor shall provide such additional information as OPIC may reasonably
require to evaluate the application. The Investor may withdraw an application
for compensation, but the right to recover compensation will be lost for any
acts covered by the application.
(a) OPIC must be notified immediately of any damage or loss caused by
political violence which could result in a business income loss. That
notice together with proof of the Investor's right to compensation and
of the total amount of compensation due will be considered a completed
application, which must be filed within two years of the damage or
loss. The Investor may file partial applications for compensation
during the period of restoration and as the Investor determines
business income losses thereafter.
(b) OPIC shall have a reasonable time in which to complete processing
of any application for compensation.
4.02 SECURITY. As a condition for the payment of compensation, OPIC may
require the Investor to provide reasonable security satisfactory to OPIC for
repaying compensation (as may be required, for example, by section 3.05).
4.03 ARBITRATION. Any controversy relating to this contract shall be settled
by arbitration in Washington, D.C. according to the the prevailing Commercial
Arbitration Rules of the American Arbitration Association. Unless the Investor
initiates arbitration, OPIC's liability shall expire one year after OPIC
notifies the Investor of its determination concerning an application for
compensation. A decision by arbitrators shall be final and binding, and any
court having jurisdiction may enter judgment on it.
4.04 ELECTION OF AMOUNT OF COVERAGE AND TERMINATION. By prior notice to OPIC
effective as of the next due date for premiums (section 1.07), the Investor may
increase or decrease the Current Insured Amount and/or decrease the Maximum
Insured Amount for any coverage for the remainder of the contract term, subject
to the following limitations:
(a) Current Insured Amount shall not exceed Maximum Insured Amount;
(b) Maximum Insured Amount shall be reduced automatically by
compensation paid by OPIC; Current Insured Amount shall also be reduced
for the remainder of the annual election period to which the claim
relates (section 3.03(b)).
<PAGE> 10
IV-2
The Investor may terminate this contract effective as of any premium
due date unless the premium is already paid. However, termination shall not
affect any rights or obligations of either party relating to prior periods.
4.05 LEGAL AND MISCELLANEOUS. This contract shall be governed by the laws of
the District of Columbia, its conflicts of law rules excepted. This contract
constitutes the complete agreement between the parties, superseding any prior
understandings. This contract may be modified, or its terms waived, only in
writing.
4.06 NOTICES. Notices must be in writing, and shall be effective when
received. Notices may be given to the Investor at the address on the title
page (unless changed in writing), and to OPIC at
Overseas Private Investment Corporation
Washington, D.C. 20527
Attention: Vice President, Insurance.
---------
4.07 REFUND OF PREMIUMS. Upon timely request, OPIC will refund premiums PRO
RATA if the Investor becomes ineligible for coverage or ceases to hold all or a
portion of the insured investment.
<PAGE> 11
V-1
Article V - Investor's Duties.
-----------------------------
5.01 Duties.
------
1. REPRESENTATIONS AND PROJECT EXECUTION. The Investor understands
that OPIC has issued this contract based on statutory policy goals (22 U.S.C.
section 2191) as well as underwriting considerations. All statements made by
the Investor to OPIC in connection with this contract are true and complete,
and the investment and the project shall be carried out as described.
2. OWNERSHIP AND ELIGIBILITY. The Investor shall at all times remain
the beneficial owner of the insured investment and shall remain eligible for
OPIC insurance as
(a) a citizen of the United States; or
(b) a corporation or other association created under the laws of the
United States, its states or territories, of which more than 50% of
both the total interest and each class of shares is beneficially owned
by citizens of the United States; or
(c) an entity created under foreign law in which a 95% interest is
owned by entities eligible under (a) or (b).
3. RESUMPTION OF OPERATIONS. The Investor shall take all reasonable
actions so that the operations of the project will be resumed as quickly as
possible without undue expense.
4. ASSIGNMENT. The Investor shall not assign this contract, or any of
its rights, without OPIC's written consent, which will not be withheld
unreasonably.
5. PREMIUMS. The Investor shall pay the premiums for this contract in
accordance with Article I. In the event that premiums are not paid when due,
the Investor shall be in default but may cure this default within sixty days by
paying the premiums plus interest at a rate of 12% per annum.
6. ACCOUNTING RECORDS.
(a) The Investor shall maintain in the United States the records, books
of account and current financial statements for the foreign enterprise
necessary to compute and substantiate compensation, including
(1) records documenting the investment;
(2) annual balance sheets,;
(3) annual statements of income, retained earnings,
changes in financial position and related footnotes.
<PAGE> 12
V-2
(b) Accounting records shall be maintained in United States dollars
in accordance with principles of accounting generally accepted in the
United States (including principles of currency translation).
(c) The Investor shall retain all accounting records until
(1) the deadline for filing an application for
compensation has expired (section 4.01); or
(2) if an application has been filed, final action
has been taken on an application for compensation
(including arbitration and judicial appeals).
However, if compensation has been paid, the accounting records shall
be retained for three years after the Investor receives the
compensation.
7. REPORTS AND ACCESS TO INFORMATION. In order that OPIC may perform
its statutory duties, including settling claims and reporting to the Congress
(22 U.S.C. section 2200a), the Investor shall furnish OPIC with such
information as OPIC may reasonably request, including
(a) making available for interviews any persons subject to the
Investor's practical control (including, to the extent within the
investor's control, employees of the project and independent
accountants);
(b) making available for inspection and copying all documents and
accounting records relating to the project (including, to the extent
within the investor's control, workpapers of independent accountants);
(c) permitting OPIC to inspect the project; and
(d) furnishing available information concerning the effects of the
project on the economy of the United States, the environment, and the
economic and social development of the country in which the project is
located.
The Investor's duties under this paragraph shall continue for the
period specified for the retention of accounting records (section 5.01.8(c)).
8. COMPULSORY NOTICE. The Investor shall notify OPIC promptly of any
acts or threats to act in a manner which may come within the scope of business
income coverage (Article II) and shall keep OPIC informed as to all relevant
developments.
9. PRESERVATION AND CONTINUING COOPERATION. The Investor shall take
all reasonable measures to preserve property, to pursue available
administrative and judicial remedies, and to negotiate in good faith with the
governing authority of the country in which the project is located and other
potential sources of compensation. The Investor shall take all actions
reasonably requested by OPIC to assist OPIC in management of the claim and
related claims.
<PAGE> 13
V-3
10. OTHER COMPENSATION. The Investor shall not enter into any
agreement with any foreign governing authority with respect to compensation for
any acts within the scope of coverage (Article II) without OPIC's prior written
consent.
5.02 DEFAULT. Material breach or misrepresentation by the Investor shall
constitute default, and OPIC may
(a) refuse to make payments to the Investor;
(b) recover payments made; or
(c) terminate this contract effective as of the date of the breach by
giving notice to the Investor.
5.03 NON-WAIVER. Neither OPIC's failure to invoke its rights, nor its
acceptance of premiums, shall constitute waiver of any of its rights, even
though OPIC knows of the Investor's breach.
5.04 CURE. OPIC may permit the Investor to cure a breach in a manner
satisfactory to OPIC, but shall have no obligation to allow breaches to be
cured.
<PAGE> 14
VI-1
ARTICLE VI - AMENDMENTS
The following amendment is hereby incorporated as part of this Contract of
Insurance No. D581:
6.01 Section 1.07, "PREMIUMS AND COVERAGE ELECTIONS," shall be amended
by deleting in their entirety the second and third sentences of the first
paragraph.
6.02 Subparagraph 3.02(b), "OTHER COMPENSATION", is amended by
deleting the period and adding the following:
"(excluding compensation payable under other insurance
policies, except to the extent necessary to prevent the
Investor from recovering more than the amount of the loss
as recognized under any of the policies under which
compensation is due, without regard to policy limits)."
6.03 Section 3.02, "ADJUSTMENTS", is amended by deleting
subparagraph (c), "EXCHANGE RATE", and replacing it with the
following new subparagraph:
"(c) EXCHANGE RATE. Any expense incurred or net income
denominated in local currency will be valued in U.S.
dollars at the official exchange rate applicable to
dividend remittances in effect on the date the expenses
were incurred or, in the case of net income, when it would
under ordinary circumstances have been recognized on the
periodic income statement of the Investor. If, however,
on such date U.S. dollars were not generally available at
the official exchange rate, and exchanges of local
currency for U.S. dollars were effected legally and
normally through another channel, then the exchange rate
shall be the effective rate obtainable through that
channel.
Notwithstanding the above:
(1) any expense incurred in local currency and funded
through the inward remittance of dollars will be valued in
U.S. dollars at the most favorable exchange rate at which
dollars could have been inwardly remitted using legal and
normal channels on the date the remittance occurred; and
<PAGE> 15
VI-2
(2) OPIC reserves the right to compensate expenses
incurred in local currency with local currency."
6.04 A new subsection 5.01.11, "WORKERS' RIGHTS", is added to read as
follows:.
"11. WORKERS' RIGHTS. The investor agrees not to take actions
to prevent employees of the foreign enterprise from lawfully
exercising their right of association and their right to organize
and bargain collectively. The Investor further agrees to observe
applicable laws relating to a minimum age for employment of
children, acceptable conditions of work with respect to minimum
wages, hours of work, and occupational health and safety, and not
to utilize forced or compulsory labor. The Investor is not
responsible under this paragraph for the actions of a government".
INVESTOR
By: /s/ William H. Keough Date: 9/25/92
-------------------------- -----------------------
Effective September 30, 1992
WILLIAM H. KEOUGH, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER, AND TREASURER
--------------------------------------------------------------------------------
(Print Name and Title)
OVERSEAS PRIVATE INVESTMENT CORPORATION
By: /s/ B. Thomas Mansbach Date:
-------------------------- -----------------------
Effective September 30, 1992
B. Thomas Mansbach, Managing Director
--------------------------------------------------------------------------------
(Print Name and Title)
<PAGE> 1
Form 234 KGT 5-87 MAJ
OPIC Contract of Insurance No. D582
OVERSEAS PRIVATE INVESTMENT CORPORATION
CONTRACT OF INSURANCE
Against
BUSINESS INCOME LOSS
as defined below,
between the Overseas Private Investment Corporation ("OPIC") and
The Pioneer Group, Inc.
60 State Street, 18th Floor
Boston, Massachusetts 02109-1975
a corporation organized and existing
under the laws of the State of Delaware
or any of its subsidiaries
(the "Investor")
<PAGE> 2
TABLE OF CONTENTS
Title Page
----- ----
Article I - Subject of Insurance and Exchange of Promises
1.01 Subject I-1
1.02 Promises I-1
1.03 Self-Insurance Requirement I-2
1.04 Maximum Aggregate Compensation I-2
1.05 Full Faith and Credit I-2
1.06 Term I-2
1.07 Premiums and Coverage Elections I-2
Article II - Business Income - Scope of Coverage
2.01 Loss of Business Income II-1
2.02 Exclusions II-1
Article III - Business Income - Amount of Compensation
3.01 Basis of Compensation III-1
3.02 Adjustments III-1
3.03 Limitations III-2
3.04 Appraisal III-2
3.05 Estimated Compensation III-3
Article IV - Procedures
4.01 Application for Compensation IV-1
4.02 Security IV-1
4.03 Arbitration IV-1
4.04 Election of Amount of Coverage IV-1
and Termination
4.05 Legal and Miscellaneous IV-2
4.06 Notices IV-2
4.07 Refund of Premiums IV-2
Article V - Investor's Duties
5.01 Duties V-1
5.02 Default V-3
5.03 Non-Waiver V-3
5.04 Cure V-3
Article VI - Amendments VI-1
(i)
<PAGE> 3
I-1
Article I - Subject of Insurance and Exchange of Promises.
---------------------------------------------------------
1.01 Subject.
-------
1. INVESTMENT. The Investor promises that the Investor
contributed or will contribute
$301,000 in United States dollars
----------------------------------------------------------------------------
to
Pioneer First Polish Trust Fund Company, ("PFPTFC")
24G, Wilanow 02-958 Mokotow
Warsaw, Poland
a joint stock company organized under the laws of the Republic of
Poland
(the "foreign enterprise").
----------------------------------------------------------------------------
The Investor owns 100% of the total equity shares of the foreign
enterprise (the "Investor's share").
2. PROJECT. The investment will be applied to
the development and operation of a mutual fund to be
located in Warsaw, Poland.
(the "project").
----------------------------------------------------------------------------
1.02 Promises.
--------
OPIC promises that if acts occur during the term of this
contract which satisfy the requirements for coverage in Article
II, OPIC will pay the Investor the amount of compensation provided
in Article III, in accordance with the procedures in Article IV.
The Investor promises to comply with the duties in Article
V. If the Investor violates any of those duties, the Investor may
lose rights, including the right to compensation.
Amendments to Articles I through V, if any, are contained
in Article VI.
<PAGE> 4
1.03 Self-Insurance Requirement.
--------------------------
The Investor shall bear at least 10% of business income
loss compensable under Article II hereof.
1.04 Maximum Aggregate Compensation.
------------------------------
OPIC will not pay compensation under this contract in an
aggregate amount that exceeds $1,854,000.
1.05 Full Faith and Credit.
---------------------
The full faith and credit of the United States of America
is pledged to secure the full payment by OPIC of its obligations
under this contract.
1.06 Term.
----
This contract shall enter into force on September 30,
1992, provided it has been signed by OPIC and the Investor, and
shall terminate 20 years afterward unless terminated earlier
( 4.04; 5.02).
1.07 Premiums and Coverage Elections.
-------------------------------
The Investor shall elect amounts of coverage ( 4.04) and
pay premiums on or before each annual anniversary of the effective
date of the contract. By notice to the Investor at least thirty
days prior to a premium due date, OPIC may increase the rates for
Current Insured Amount. The total increase during the first ten
years shall be limited to 50% of the rates for the first period of
this contract and thereafter to 100% of the rates for the first
period.
The coverages and premiums for the first period shall be as follows:
<TABLE>
<S> <C>
Maximum Insured Amount: $ 1,854,000
Current Insured Amount: $ 400,000
Premium rate is; x 0.45000 %
-------------
Premium due for Current is: = $ 1,800.00
==========
Standby Amount (Maximum less Current): $ 1,454,000
Premium rate is: x 0.25000 %
-------------
Premium due for Standby is; = $ 3,635.00
==========
Total premium is: $5,435.00
==========
--------------------------------------------------------------------
</TABLE>
<PAGE> 5
II-1
Article II - Business Income - Scope of Coverage.
------------------------------------------------
2.01 LOSS OF BUSINESS INCOME. Compensation is payable, subject to
exclusions (sec. 2.02) and limitations (sec. 3.03), if tangible property of the
foreign enterprise used for the project sustains damage, including
disappearance or seizure and retention, directly resulting from political
violence, and if such damage causes the partial or total cessation of project
operation and results in a loss of business income during the period of
restoration.
"Political violence" means a violent act undertaken with the primary
intent of achieving a political objective, such as declared or undeclared war,
hostile action by national or international armed forces, civil war,
revolution, insurrection, civil strife, terrorism or sabotage. However, acts
undertaken primarily to achieve labor or student objectives are not covered.
"Business income" means the net income (net profit or loss before
income taxes) of the foreign enterprise that would have been earned or incurred
from operation of the project, plus continuing normal operations expenses
incurred.
"Period of restoration" means the period of time that begins with the
date of the direct physical damage caused by political violence which causes
the loss of business income and ends on the sooner of
(a) the date by which the tangible property should, with
due diligence and dispatch, have been repaired, rebuilt, or
replaced with property of similar quality, or
(b) one year from the date of damage.
2.02 EXCLUSIONS. Regardless of any other provision of this
contract, no compensation shall be payable
(a) FINISHED STOCK. If the loss results from damage or
destruction of manufactured stock ("finished stock"); or
(b) MINIMUM LOSS. If the amount of compensation payable
would be less than $10,000; or
(c) REASONABLE PROTECTIVE MEASURES. To the extent the
loss results from the failure to take reasonable measures
to protect or preserve the property; or
(d) PROVOCATION. If a preponderant cause of the loss is
attributable to the unreasonable actions of the Investor,
including corrupt practices, which provoke or instigate a
loss; or
(e) EXCLUDED PROPERTY. If the loss is due to damage to or
loss of precious metals, gems, works of art, money or
documents.
<PAGE> 6
III-1
Article III - Business Income - Amount of Compensation.
------------------------------------------------------
3.01 BASIS OF COMPENSATION. If the requirements of Article II are
satisfied, and subject to the adjustments (sec. 3.02) and limitations
(sec. 3.03), OPIC shall pay compensation in United States dollars for business
income loss. The amount of business income loss will be 90% (sec. 1.03) of
(1) the Investor's share (sec. 1.01) of the net income loss of
the foreign enterprise, plus
(2) the continuing, normal operating expenses of the
foreign enterprise,
and will be determined based on
(a) the net income of the foreign enterprise before the
loss or damage occurred,
(b) the likely net income of the foreign enterprise if the
loss or damage had not occurred,
(c) the operating expenses of the foreign enterprise,
including payroll expenses, necessary during the period of
restoration to permit the productive capacity of the project that
existed just before the damage to be restored, and
(d) any other relevant information including financial records,
accounting procedures, bills, invoices, other vouchers, deeds,
liens, or contracts.
3.02 ADJUSTMENTS.
(a) LOSS REDUCTION EXPENSES. OPIC will pay compensation for necessary
expenses incurred by the foreign enterprise during the period of
restoration that would not have been incurred if no loss or
damage had occurred, to the extent that the expenses reduce the
business income loss otherwise payable to the Investor. Compensation
for loss reduction expenses is payable for necessary expenses incurred
to avoid or minimize the complete or partial cessation of project
operations and to continue operations at the project site, at
replacement premises, or at temporary locations, and will include
relocation expenses and costs to equip and operate the replacement or
temporary locations. Compensation will be reduced by the salvage value
of any property bought for temporary use during the period of
restoration.
(b) OTHER COMPENSATION. OPIC may reduce compensation for the
Investor's share of compensation received from other sources on
account of the business income loss.
<PAGE> 7
III-2
(c) EXCHANGE RATE. Any expense incurred or net income denominated in
local currency will be valued in U.S. dollars at the official exchange
rate in effect on the date the expenses were incurred or, in the case
of net income, on the date when it would under ordinary circumstances
have been payable to the Investor. If, however, on that date U.S.
dollars were not generally available at the official exchange
rate, and exchanges of local currency for U.S. dollars were effected
legally and normally through another channel, then the exchange rate
shall be the effective rate obtained through that channel.
(d) SELF-INSURANCE. Breach of the duty to be self-insured (sec. 1.03)
shall result in a corresponding reduction of compensation
otherwise payable under this coverage.
3.03 LIMITATIONS. Regardless of any other provision of this
contract, the following limitations shall apply in computing
compensation:
(a) TIME LIMIT. No compensation shall be payable for any
business income loss or loss reduction expenses sustained
after one year from the date of damage.
(b) CURRENT INSURED AMOUNT. Compensation shall not exceed
the Current Insured Amount on the date of damage.
(c) ELECTRONIC MEDIA AND RECORDS. OPIC will not pay for
any loss of business income caused by physical loss or damage to
electronic media and records after the longer of (1) 60 consecutive
days from the date of direct physical loss or damage or (2) the
period of restoration for all other property.
"Electronic Media and Records" means all electronic data
processing, recordings or storage media such as films,
tapes, discs, drums or cells; data stored on such media; or
programming records used for electronic data processing or
electronically controlled equipment.
(d) RESUMPTION OF OPERATIONS. OPIC will not pay compensation for
any business income loss that could have been avoided by using
damaged or undamaged property (including merchandise or stock) at
the project site or elsewhere; nor will OPIC pay compensation for
loss reduction expenses incurred after operations of the project
could have been returned to normal and such expenses discontinued.
3.04 APPRAISAL. If OPIC determines that compensation is payable for a
business income claim, but OPIC and the Investor are unable to agree on the
amount of business income loss compensation, either may demand an appraisal of
the loss. In this event, each party will select a competent appraiser.
The appraisers will state separately the amount of business income loss. If
the appraisals are different and the two parties cannot agree to a compromise,
they will submit their differences to an umpire, selected by the two
appraisers, whose decision will be binding. If the appraisers cannot agree on
an umpire, either may request that selection be made by the American
Arbitration Association. Each party will pay the costs of its chosen appraiser
and share the expenses of the umpire equally.
<PAGE> 8
III-3
3.05 ESTIMATED COMPENSATION. If OPIC determines that compensation is
payable for a business income claim but due to lack of information cannot
determine the precise amount due, OPIC may pay estimated compensation based on
the information then available. OPIC may revise its estimate and recover any
excess or pay any additional amount due.
<PAGE> 9
IV-1
Article IV - Procedures.
-----------------------
4.01 APPLICATION FOR COMPENSATION. An application for compensation shall
demonstrate the Investor's right to compensation in the amount claimed. The
Investor shall provide such additional information as OPIC may reasonably
require to evaluate the application. The Investor may withdraw an
application for compensation, but the right to recover compensation will be
lost for any acts covered by the application.
(a) OPIC must be notified immediately of any damage or loss caused
by political violence which could result in a business income loss.
That notice together with proof of the Investor's right to compensation
and of the total amount of compensation due will be considered a
completed application, which must be filed within two years of the
damage or loss. The Investor may file partial applications for
compensation during the period of restoration and as the Investor
determines business income losses thereafter.
(b) OPIC shall have a reasonable time in which to complete processing
of any application for compensation.
4.02 SECURITY. As a condition for the payment of compensation, OPIC may
require the Investor to provide reasonable security satisfactory to OPIC
for repaying compensation (as may be required, for example, by sec. 3.05).
4.03 ARBITRATION. Any controversy relating to this contract shall be
settled by arbitration in Washington, D.C. according to the the prevailing
Commercial Arbitration Rules of the American Arbitration Association. Unless
the Investor initiates arbitration, OPIC's liability shall expire one year
after OPIC notifies the Investor of its determination concerning an application
for compensation. A decision by arbitrators shall be final and binding, and
any court having jurisdiction may enter judgment on it.
4.04 ELECTION OF AMOUNT OF COVERAGE AND TERMINATION. By prior notice to
OPIC effective as of the next due date for premiums (sec. 1.07), the Investor
may increase or decrease the Current Insured Amount and/or decrease the
Maximum Insured Amount for any coverage for the remainder of the contract term,
subject to the following limitations:
(a) Current Insured Amount shall not exceed Maximum Insured
Amount;
(b) Maximum Insured Amount shall be reduced automatically by
compensation paid by OPIC; Current Insured Amount shall also be reduced
for the remainder of the annual election period to which the claim
relates (sec. 3.03(b)).
<PAGE> 10
IV-2
The Investor may terminate this contract effective as of any premium
due date unless the premium is already paid. However, termination shall not
affect any rights or obligations of either party relating to prior periods.
4.05 LEGAL AND MISCELLANEOUS. This contract shall be governed by the laws
of the District of Columbia, its conflicts of law rules excepted. This
contract constitutes the complete agreement between the parties, superseding
any prior understandings. This contract may be modified, or its terms waived,
only in writing.
4.06 NOTICES. Notices must be in writing, and shall be effective when
received. Notices may be given to the Investor at the address on the title
page (unless changed in writing), and to OPIC at
Overseas Private Investment Corporation
Washington, D.C. 20527
ATTENTION: Vice President, Insurance.
4.07 REFUND OF PREMIUMS. Upon timely request, OPIC will refund premiums PRO
RATA if the Investor becomes ineligible for coverage or ceases to hold all
or a portion of the insured investment.
<PAGE> 11
V-1
Article V - Investor's Duties.
-----------------------------
5.01 DUTIES.
1. REPRESENTATIONS AND PROJECT EXECUTION. The Investor understands
that OPIC has issued this contract based on statutory policy goals (22 U.S.C.
2191) as well as underwriting considerations. All statements made by the
Investor to OPIC in connection with this contract are true and complete, and
the investment and the project shall be carried out as described.
2. OWNERSHIP AND ELIGIBILITY. The Investor shall at all times
remain the beneficial owner of the insured investment and shall remain
eligible for OPIC insurance as
(a) a citizen of the United States; or
(b) a corporation or other association created under the laws
of the United States, its states or territories, of which
more than 50% of both the total interest and each class of
shares is beneficially owned by citizens of the United States;
or
(c) an entity created under foreign law in which a 95% interest
is owned by entities eligible under (a) or (b).
3. RESUMPTION OF OPERATIONS. The Investor shall take all reasonable
actions so that the operations of the project will be resumed as quickly as
possible without undue expense.
4. ASSIGNMENT. The Investor shall not assign this contract, or any of
its rights, without OPIC's written consent, which will not be withheld
unreasonably.
5. PREMIUMS. The Investor shall pay the premiums for this contract in
accordance with Article I. In the event that premiums are not paid when due,
the Investor shall be in default but may cure this default within sixty days by
paying the premiums plus interest at a rate of 12% per annum.
6. ACCOUNTING RECORDS.
(a) The Investor shall maintain in the United States the
records, books of account and current financial statements for
the foreign enterprise necessary to compute and substantiate
compensation, including
(1) records documenting the investment;
(2) annual balance sheets;
(3) annual statements of income, retained earnings, changes
in financial position and related footnotes.
<PAGE> 12
V-2
(b) Accounting records shall be maintained in United States dollars
in accordance with principles of accounting generally accepted in the
United States (including principles of currency translation).
(c) The Investor shall retain all accounting records until
(1) the deadline for filing an application for compensation
has expired (sec. 4.01); or
(2) if an application has been filed, final action has been
taken on an application for compensation (including arbitration
and judicial appeals).
However, if compensation has been paid, the accounting records shall
be retained for three years after the Investor receives the
compensation.
7. REPORTS AND ACCESS TO INFORMATION. In order that OPIC may perform
its statutory duties, including settling claims and reporting to the Congress
(22 U.S.C. sec. 2200a), the Investor shall furnish OPIC with such information as
OPIC may reasonably request, including
(a) making available for interviews any persons subject to the
Investor's practical control (including, to the extent within the
investor's control, employees of the project and independent
accountants);
(b) making available for inspection and copying all documents and
accounting records relating to the project (including, to the extent
within the investor's control, workpapers of independent accountants);
(c) permitting OPIC to inspect the project; and
(d) furnishing available information concerning the effects of the
project on the economy of the United States, the environment, and the
economic and social development of the country in which the project is
located.
The Investor's duties under this paragraph shall continue for the
period specified for the retention of accounting records (sec. 5.01.6(c)).
8. COMPULSORY NOTICE. The Investor shall notify OPIC promptly of any
acts or threats to act in a manner which may come within the scope of business
income coverage (Article II) and shall keep OPIC informed as to all relevant
developments.
9. PRESERVATION AND CONTINUING COOPERATION. The Investor shall take
all reasonable measures to preserve property, to pursue available
administrative and judicial remedies, and to negotiate in good faith with the
governing authority of the country in which the project is located and other
potential sources of compensation. The Investor shall take all actions
reasonably requested by OPIC to assist OPIC in management of the claim and
related claims.
<PAGE> 13
V-3
10. OTHER COMPENSATION. The Investor shall not enter into any
agreement with any foreign governing authority with respect to compensation for
any acts within the scope of coverage (Article II) without OPIC's prior written
consent.
5.02 DEFAULT. Material breach or misrepresentation by the
Investor shall constitute default, and OPIC may
(a) refuse to make payments to the Investor;
(b) recover payments made; or
(c) terminate this contract effective as of the date of the
breach by giving notice to the Investor.
5.03 NON-WAIVER. Neither OPIC's failure to invoke its rights, nor
its acceptance of premiums, shall constitute waiver of any of its rights, even
though OPIC knows of the Investor's breach.
5.04 CURE. OPIC may permit the Investor to cure a breach in a manner
satisfactory to OPIC, but shall have no obligation to allow breaches to be
cured.
<PAGE> 14
VI-1
ARTICLE VI - AMENDMENTS
-----------------------
The following amendment is hereby incorporated as part of this
Contract of Insurance No. D582
6.01 Section 1.07, "PREMIUMS AND COVERAGE ELECTIONS," shall be
amended by deleting in their entirety the second and third
sentences of the first paragraph.
6.02 Subparagraph 3.02(b), "OTHER COMPENSATION", is amended by
deleting the period and adding the following:
"(excluding compensation payable under other insurance policies,
except to the extent necessary to prevent the Investor from recovering
more than the amount of the loss as recognized under any of the
policies under which compensation is due, without regard to policy
limits)."
6.03 Section 3.02, "ADJUSTMENTS", is amended by deleting
subparagraph (c), "EXCHANGE RATE", and replacing it with the
following new subparagraph:
"(c) EXCHANGE RATE. Any expense incurred or net income denominated in
local currency will be valued in U.S. dollars at the official exchange
rate applicable to dividend remittances in effect on the date the
expenses were incurred or, in the case of net income, when it would
under ordinary circumstances have been recognized on the periodic
income statement of the Investor. If, however, on such date U.S.
dollars were not generally available at the official exchange rate,
and exchanges of local currency for U.S. dollars were effected legally
and normally through another channel, then the exchange rate shall be
the effective rate obtainable through that channel.
Notwithstanding the above:
(1) any expense incurred in local currency and funded through the
inward remittance of dollars will be valued in U.S. dollars at the
most favorable exchange rate at which dollars could have been inwardly
remitted using legal and normal channels on the date the remittance
occurred; and
<PAGE> 15
VI-2
(2) OPIC reserves the right to compensate expenses incurred in
local currency with local currency."
6.04 A new subsection 5.01.11, "WORKER'S RIGHTS", is added to
read as follows:
"11. WORKERS' RIGHTS. The Investor agrees not to take actions to
prevent employees of the foreign enterprise from lawfully exercising
their right of association and their right to organize and bargain
collectively. The Investor further agrees to observe applicable
laws relating to a minimum age for employment of children,
acceptable conditions of work with respect to minimum wages, hours
of work, and occupational health and safety, and not to utilize
forced or compulsory labor. The Investor is not responsible under
this paragraph for the actions of a government".
INVESTOR
By: William H. Keough Date: 9/25/92
--------------------------------------------- ----------------
Effective September 30, 1992
William H. Keough, Senior Vice President, Chief Financial Officer,
and Treasurer
---------------------------------------------------------------------
(Print Name and Title)
OVERSEAS PRIVATE INVESTMENT CORPORATION
By: B. Thomas Mansbach Date:
----------------------------------------------- -------------
Effective September 30, 1992
B. Thomas Mansbach, Managing Director
--------------------------------------------------------------------
(Print Name and Title)
<PAGE> 1
Form 234 KGT 12-85 NS
OPIC Contract of Insurance No.D547
OVERSEAS PRIVATE INVESTMENT CORPORATION
CONTRACT OF INSURANCE
Against
Inconvertibility
Expropriation
Political Violence
as defined below,
between the Overseas Private Investment Corporation ("OPIC") and
The Pioneer Group, Inc.
60 State Street, 18th Floor
Boston, Massachusetts 02109-1975
a corporation organized and existing under the
laws of the State of Delaware or any of its
subsidiaries
(the "Investor").
<PAGE> 2
TABLE OF CONTENTS
Title Page
----- ----
Article I - Subject of Insurance and Exchange
of Promises
1.01 Subject I-1
1.02 Promises I-2
1.03 Maximum Aggregate Compensation I-2
1.04 Full Faith and Credit I-2
1.05 Term I-2
1.06 Premiums and Active Amount Elections I-2
1.07 Administrative Fee I-3
Article II - Inconvertibility - Scope of Coverage*
2.01 Inconvertibility of Local Currency II-1
2.02 Exclusions II-1
Article III - Inconvertibility - Amount of
Compensation*
3.01 Rate of Compensation for Inconvertibility III-1
3.02 Limitation III-2
Article IV - Expropriation - Scope of Coverage*
4.01 Total Expropriation IV-1
4.02 Expropriation of Funds IV-1
4.03 Provocation Exclusion IV-1
Article V - Expropriation - Amount of Compensation*
5.01 Total Expropriation V-1
5.02 Expropriation of Funds V-1
5.03 Adjustments V-1
5.04 Limitations V-2
-----------------------
*/ This Table of Contents applies to all coverages offered by OPIC whether
or not of those coverages are provided in this contract.
<PAGE> 3
Title Page
----- ----
Article VI - Political Violence - Scope of Coverage*
6.01 Loss Due to Political Violence VI-1
6.02 Exclusions VI-1
Article VII - Political Violence - Amount of
Compensation*
7.01 Basis of Compensation VII-1
7.02 Limitations VII-1
7.03 Investor's Share VII-2
7.04 Book Value of Insured Investment VII-2
7.05 Appraisal VII-3
7.06 Estimated Compensation VII-3
Article VIII - Procedures
8.01 Application for Compensation VIII-1
8.02 Assignment to OPIC VIII-1
8.03 Security VIII-2
8.04 Excess Salvage Value VIII-2
8.05 Arbitration VIII-2
8.06 Election of Active Amounts and Coverage
Ceilings VIII-3
8.07 Termination VIII-3
8.08 Legal and Miscellaneous VIII-3
8.09 Notices VIII-4
8.10 Refund of Premiums VIII-4
Article IX - Investor's Duties
9.01 Duties IX-1
9.02 Default IX-3
9.03 Non-Waiver IX-3
9.04 Cure IX-4
Article X - Amendments X-1
- ii -
<PAGE> 4
I-1
Article I - Subject of Insurance and Exchange of Promises.
---------------------------------------------------------
1.01 SUBJECT.
1. INVESTMENT. The Investor promises that the Investor contributed or
will contribute
(i) $301,000 in United States dollars in the form of equity
(ii) $1,350,000 in United States dollars in the form of debt
to
Pioneer First Polish Trust Fund Company, ("PFPTFC")
24G, Wilanow 02-958 Mokotow
Warsaw, Poland
a joint stock company organized under the laws of the Republic
of Poland
(the "foreign enterprise")
for which the Investor has acquired or will acquire
(i) 1000 shares of the common stock issued by the foreign
enterprise, representing a 100 percent equity interest in it.
(ii) undivided interest in the loan agreement, and any underlying
promissory notes, between the Investor and the foreign
enterprise in the principal amount of $1,350,000, a true and
complete copy of which will be submitted in form and substance
satisfactory to OPIC in its sole discretion within 90 days of
the execution thereof
(together "the investment").
Ninety percent of each of these interests acquired by the Investor is insured
under this contract (the "insured investment").
2. PROJECT. The investment will be applied to the development
and operation of a mutual fund to be located in Warsaw, Poland.
(the "project").
3. Foreign governing authority means the governmental
authority(ies) in effective control in all or part of the Republic of Poland.
<PAGE> 5
I-2
1.02 PROMISES.
OPIC promises that if acts occur during the term of this contract which
satisfy the requirements for coverage in Article II, IV or VI, OPIC will pay the
Investor the amount of compensation provided in Article III, V or VII, in
accordance with the procedures in Article VIII.
The Investor promises to comply with the duties in Article IX. If the
Investor violates any of those duties, the Investor may lose rights, including
the right to compensation.
Amendments to Articles I through IX may be contained in Article X.
1.03 MAXIMUM AGGREGATE COMPENSATION.
OPIC will not pay compensation under this contract in an aggregate
amount that exceeds $4,866,000.
1.04 FULL FAITH AND CREDIT.
The full faith and credit of the United States of America is pledged to
secure the full payment by OPIC of its obligations under this contract.
1.05 TERM.
This contract shall enter into force on September 30, 1992, provided it
has been signed by OPIC and the Investor, and shall terminate 20 years afterward
unless terminated earlier ( 8.07; 9.02).
1.06 PREMIUMS AND ACTIVE AMOUNT ELECTIONS.
The Investor shall elect amounts of coverage ( 8.06) and pay premiums on
or before each annual anniversary of the effective date of the contract.
The coverages and premiums for the first period shall be as follows:
<PAGE> 6
I-3
<TABLE>
<CAPTION>
Equity securities:
Inconvertibility Expropriation Political Violence
---------------- ------------- ------------------
<S> <C> <C> <C> <C>
Coverage Ceiling: $2,440,000 $2,440,000 $1,000,000
Active Amount: $ 270,000 $ 270,000 $ 270,000
Premium rate is: x 0.36000 % x 0.66000 % x 0.60000 %
---------- ---------- ----------
Total premium is: $ 972.00 + $ 1,782.00 + $ 1,620.00 = $ 7,134.00
==========
---------------------------------------------------------------------------------------------
Debt securities:
Inconvertibility Expropriation Political Violence
---------------- ------------- ------------------
Coverage Ceiling: $2,426,000 $2,426,000 $1,000,000
Active Amount: $1,215,000 $1,215,000 $ 730,000
Premium rate is: x 0.36000 % x 0.66000 % x 0.06000 %
---------- ---------- ----------
Total premium is: 4,374.00 + $8,019.00 + $ 438.00 $12,831.00
==========
---------------------------------------------------------------------------------------------
Total Premium is: $19,965.00
==========
</TABLE>
1.07 ADMINISTRATIVE LEAVE. The Investor will pay an annual fee for contract
administration of .25% of the Investment amount (sec. 1.01.1) on or before the
contract effective date and on or before each annual anniversary of the contract
effective date, but only if the administrative fee exceeds the premium due for
the contract for that period. If the administrative fee exceeds the premium due
for that period, the premium will be waived.
<PAGE> 7
II-1
Article II - Inconvertibility - Scope of Coverage.
-------------------------------------------------
2.01 INCOVERTIBILTY OF LOCAL CURRENCY. Local currency shall be deemed
inconvertible and compensation shall be payable, subject to the exclusions
(sec. 2.02) and limitation (sec. 3.02), if neither the Investor nor the foreign
enterprise is able legally
(a) to convert earnings from or returns of the insured investment
into United States dollars through any channel during the 90 days
immediately prior to a claim to OPIC, except at an exchange rate
that is less favorable than the then-prevailing exchange rate
described under sec. 3.01.2, or
(b) to transfer such converted earnings to the United States
during such period.
2.02 EXCLUSIONS. No compensation for inconvertibility shall be payable if
(a) PRE-EXISTING RESTRICTIONS.
(1) An investor in comparable circumstances would have been
unable legally (a) to convert local currency into United
States dollars on the date of this contract or (b) to
transfer such dollars to the United States on the date of
this contract; and
(2) The Investor knew or should have known about the
restriction; or
(b) INVESTOR DILIGENCE. The Investor has not made all reasonable
efforts to convert the local currency into United States dollars
or to transfer such dollars to the United States through all
direct and indirect legal mechanisms reasonably available; or
(c) RECONVERSIONS. The local currency represents funds which were
previously converted into another currency; or
(d) PROVOCATION. The preponderant cause is unreasonable action
attributable to the Investor, including corrupt practices.
(e) USE RESTRICTED BY EXPROPRIATION. The use of such local
currency is restricted by an expropriatory action (sec. 4.02).
<PAGE> 8
III-1
Article III - Incovertibility - Amount of Compensation.
------------------------------------------------------
3.01 Rate of Compensation for Inconvertibility.
-----------------------------------------
1. DATE. If the requirements of inconvertibility are satisfied
(Article II), subject to the limitation (sec. 3.02), OPIC shall pay compensation
(a) against prior delivery of the inconvertible local currency, or
(b) if the Investor is unable legally to deliver the local currency or
if OPIC so requests, against prior assignment of the Investor's
right to receive the payment that is the subject of the claim.
If the Investor delivers local currency or an assignment of rights denominated
in local currency, compensation shall be the United States dollar equivalent of
the local currency at the exchange rate in effect 90 days before OPIC receives
the completed application for compensation.
If the Investor delivers an assignment of rights denominated in United States
dollars, compensation shall be the United States dollar amount of the rights so
assigned.
2. Exchange Rate.
(a) The exchange rate shall be the official exchange rate applicable
to the type of remittance involved.
(b) If, however,
(1) United States dollars were not generally available at the
applicable official exchange rate; and
(2) exchanges of local currency for United States dollars
were effected legally and customarily through another
channel;
then the exchange rate shall be the effective rate obtained through
that channel.
(c) In either case, the exchange rate shall be net of all deductions
for governmentally imposed charges, such as taxes and commissions.
3.02 LIMITATION. Compensation shall not exceed the Active Amount
(sec 8.06) in effect 90 days before OPIC receives the application for
compensation.
<PAGE> 9
IV-1
Article IV - Expropriation - Scope of Coverage.
----------------------------------------------
4.01 TOTAL EXPROPRIATION. Compensation is payable for total expropriation
(sec. 5.01), subject to the exclusions (sec. 4.03) and limitations (sec. 5.04),
if an act or series of acts satisfies all of the following requirements:
(a) the acts are attributable to a foreign governing authority which
is in de facto control of the part of the country in which the project
is located;
(b) the acts are violations of international law (without regard to
the availability of local remedies) or material breaches of local
law;
(c) the acts directly deprive the Investor of fundamental rights in
the insured investment (Rights are "fundamental" if without them
the Investor is substantially deprived of the benefits of the
investment.); and
(d) the violations of law are not remedied (sec. 9.01.9) and the
expropriatory effect continues for six months.
4.02 EXPROPRIATION OF FUNDS. Compensation is payable for an expropriation
of funds that constitute a return of the insured investment or earnings on the
insured investment (sec. 5.02) if an act or series of acts
(a) satisfies the governmental action, illegality and duration
requirements (sec. 4.01(a), (b) and (d)); and
(b) directly results in preventing the Investor from
(1) repatriating the funds; and
(2) effectively controlling the funds in the country in
which the project is located.
4.03 EXCLUSIONS. No compensation for expropriation shall be payable if
(a) Provocation. The preponderant cause is unreasonable action
attributable to the Investor, including corrupt practices.
(b) Government Action. The action is taken by the foreign
governing authority in its capacity or through its powers as a
purchaser, supplier, creditor, shareholder, director or manager of the
foreign enterprise.
<PAGE> 10
V-1
Article V - Expropriation - Amount of Compensation.
---------------------------------------------------
5.01 TOTAL EXPROPRIATION. For total expropriation (sec. 4.01), OPIC shall pay
compensation in United States dollars in the amount of the book value of the
insured investment, subject to adjustments (sec. 5.03) and limitations
(sec. 5.04).
Compensation is computed as of the date the expropriatory effect
commences (sec. 4.01(c)) and is based on financial statements maintained in
accordance with sec. 9.01.6 for the foreign enterprise. However, OPIC may
(1) conform the financial statements to principles of accounting
generally accepted in the United States; and
(2) make adjustments (sec. 5.03).
OPIC shall be bound by the Investor's choice among generally accepted accounting
principles, if the choice is consistent with the Investor's own accounting,
unless such choice results in a substantial overstatement of the fair market
value of the insured investment or the foreign enterprise as an independent
entity.
5.02 EXPROPRIATION OF FUNDS. For expropriation of funds (sec. 4.02), OPIC shall
pay compensation in the amount of the United States dollar equivalent of the
expropriated funds at the exchange rate determined in accordance with sec.
3.01.2, computed as of the date the expropriation begins. Compensation for
expropriation of funds shall be subject to the adjustments and limitations
(sec. 5.03 and sec. 5.04).
5.03 ADJUSTMENTS.
1. INVESTMENTS OF PROPERTY. Non-cash items contributed as part of the
investment shall be adjusted if necessary to reflect the fair market value of
the items furnished at the time of contribution to the project, plus freight,
installation and other reasonable direct costs incurred in furnishing the items
to the project.
2. NON-INSURED CONTRIBUTION. Any direct or indirect contribution (and
retained earnings thereon) by the Investor after the insured investment is made
shall be deducted from the book value of the foreign enterprise.
3. SPECIAL ACCOUNTING RULES. Dealings among related parties shall be
adjusted if necessary to reflect transactions as they would have occurred had
they been at arm's length, and forgiveness of obligations shall be disregarded.
Each entity shall be accounted for as if it were a separate person for income
tax purposes, and the effect of tax shifting arrangements shall be disregarded.
Obsolescence or permanent reduction in recoverable values shall be recognized
by adjusting the book value
<PAGE> 11
V-2
of assets to realizable value. OPIC may adjust financial statements to reflect
the effect of events that occur before the expropriatory effect commences, such
as events of loss which are later confirmed.
4. OTHER COMPENSATION AND RETAINED PROPERTY. OPIC may reduce
compensation by the amount of
(a) compensation received from other sources on account of the
loss (excluding compensation payable under other insurance policies,
except to the extent necessary to prevent the Investor from recovering
more than the amount of the loss as recognized under any of the
policies under which compensation is due, without regard to policy
limits); and
(b) the book value of commercially viable property which remains
subject to the Investor's effective disposition and control after the
expropriatory effect commences (unless OPIC requires the
Investor to assign the property (sec. 8.02)); and
(c) any obligation the Investor is relieved of by the expropriation.
The reduction shall be proportionate to the extent that these items are
attributable to the insured investment.
5. START-UP EXPENSES. If the book value of the insured investment of
a new foreign enterprise in the development stage is less than the insured
amount originally contributed, the accumulated loss will be disregarded if
(a) the foreign enterprise is newly formed for the principal purpose
of undertaking the project,
(b) the foreign enterprise is a going concern as of the date the
expropriatory effect commences,
(c) that date is within three years of the date this contract is
issued, and
(d) it is clear that no adjustment to book value is necessary by reason
of obsolescence or permanent reduction in recoverable values of
productive facilities or assets.
5.04 LIMITATIONS. Compensation shall not exceed any of the following
limitations:
(a) ACTIVE AMOUNT. The Active Amount (sec. 8.08) on the date the
expropriatory effect commences;
<PAGE> 12
V-3
(b) INSOLVENCY. If the liabilities of the foreign enterprise exceed
its assets as of the date the expropriatory effect commences, the
amount that the Investor would have been entitled to receive in
insolvency proceedings with respect to the insured investment if assets
had been liquidated at book value on that date;
(c) SELF-INSURANCE. The maximum amount which could be received by the
Investor from OPIC without breaching sec. 9.01.3.
<PAGE> 13
VI-1
Article VI - Political Violence - Scope of Coverage.
---------------------------------------------------
6.01 LOSS DUE TO POLITICAL VIOLENCE. Compensation is payable, subject to
the exclusions (sec. 6.02) and limitations (sec. 7.02), if political violence
is the direct and immediate cause of the permanent loss (including loss of
value by damage or destruction) of tangible property of the foreign enterprise
used for the project.
"Political violence" means a violent act undertaken with the
primary intent of achieving a political objective, such as
declared or undeclared war, hostile action by national or
international armed forces, civil war, revolution, insurrection,
civil strife, terrorism or sabotage. However, acts undertaken
primarily to achieve labor or student objectives are not covered.
6.02 EXCLUSIONS. No compensation for political violence shall be payable
(a) EXCLUDED PROPERTY. For loss of precious metals, gems, works
of art, money or documents;
(b) MINIMUM LOSS. If the amount of compensation payable would be
less than $5,000;
(c) REASONABLE PROTECTIVE MEASURES. If the loss results from the
failure to take reasonable measures to protect or preserve the
property; or
(d) PROVOCATION. If the preponderant cause of the loss is unreasonable
action attributable to the Investor, including corrupt practices.
<PAGE> 14
VII-1
Article VII - Political Violence - Amount of Compensation.
---------------------------------------------------------
7.01 BASIS OF COMPENSATION. If the requirements of Article VI are satisfied,
and subject to the limitations (sec. 7.02), OPIC shall pay compensation FOR A
LOSS in United States dollars in the amount of
(a) ADJUSTED COST. Adjusted cost is the Investor's share (sec. 7.03)
of the lowest of
(1) the original cost;
(2) fair market value; or
(3) the reasonable cost of repair;
less anything of value received by the Investor on account of the
property lost and less the Investor's share of any such receipts
by the foreign enterprise; or
(b) REPLACEMENT COST. If the Investor so elects, OPIC will pay
the reasonable cost to repair any item of lost property or to
replace it with equivalent new property, less anything of value
received by the Investor or the foreign enterprise on account of
the property lost. Such compensation shall not exceed 200% of the
original cost of the item. To receive such compensation, the
Investor must repair or replace the lost property to the project
within three years of the loss.
OPIC shall not reduce the compensation payable under subsections (a) or (b)
above by the amount of compensation payable under other insurance policies on
account of the property lost, except to the extent necessary to prevent the
Investor from recovering more than the amount of the loss as recognized under
any of the policies under which compensation is due, without regard to policy
limits.
7.02 LIMITATIONS. Compensation shall not exceed any of the following
limitations:
(a) ACTIVE AMOUNT. The Active Amount (sec. 8.06) on the date of the
loss.
(b) SELF-INSURANCE. The maximum amount which could be recovered
by the Investor from OPIC without breaching sec. 9.01.3.
(c) AGGREGATE ADJUSTED COST COMPENSATION. Aggregate compensation
for property compensated at adjusted cost shall not exceed the
book value of the insured investment (sec. 7.04) at the time of loss.
<PAGE> 15
VII-2
7.03 INVESTOR'S SHARE. "Investor's share" means the ratio that the equity
owned by the Investor bears to the total equity of the foreign enterprise.
7.04 BOOK VALUE OF INSURED INVESTMENT.
(a) BOOK VALUE. Book value is based on financial statements
maintained by the Investor in accordance with 9.01.6 for the
foreign enterprise. However, OPIC may
(1) conform the financial statements to principles of
accounting generally accepted in the United States; and
(2) make adjustments (sec. 7.04(b)).
OPIC shall be bound by the Investor's choice among generally accepted
accounting principles, if the choice is consistent with the Investor's
own accounting, unless such choice results in a substantial
overstatement of the fair market value of the insured investment or
the foreign enterprise as an independent entity.
(b) ADJUSTMENTS.
(1) INVESTMENTS OF PROPERTY. Non-cash items contributed to the
investment shall be adjusted if necessary to reflect the fair
market value of the items furnished at the time of contribution
to the project, plus freight, installation and other
reasonable direct costs incurred in furnishing the items to the
project.
(2) NON-INSURED CONTRIBUTION. Any direct or indirect
contribution (and retained earnings thereon) by the Investor
after the insured investment is made shall be deducted from
book value of the foreign enterprise.
(3) SPECIAL ACCOUNTING RULES. Dealings among related parties
shall be adjusted if necessary to reflect transactions as they
would have occurred had they been at arm's length, and
forgiveness of obligations shall be disregarded. Each entity
shall be accounted for as if it were a separate person for income
tax purposes, and the effect of tax shifting arrangements shall
be disregarded. Obsolescence or permanent reduction in
recoverable values shall be recognized by adjusting the book
value of assets to realizable value. OPIC may adjust financial
statements to reflect the effect of events that occur before the
loss of property, such as events of loss which are later
confirmed.
<PAGE> 16
VII-3
(4) START-UP EXPENSES. If the book value of the insured
investment of a new foreign enterprise in the development stage is
less than the insured amount originally contributed, the
accumulated loss will be disregarded if
(a) the foreign enterprise is newly formed for the
principal purpose of undertaking the project,
(b) the foreign enterprise is a going concern as of the
date of the loss,
(c) that date is within three years of the date this
contract is issued, and
(d) it is clear that no adjustment to book value is
necessary by reason of obsolescence or permanent
reduction in recoverable values of productive
facilities or assets.
(c) INSOLVENCY. If the liabilities of the enterprise exceed its
assets as of the date of the loss, book value of the insured
investment shall not exceed the amount that the Investor would
have been entitled to receive in insolvency proceedings with
respect to the insured investment if assets had been liquidated at
book value on the day prior to the loss.
7.05 APPRAISAL. If OPIC determines that compensation is payable but OPIC and
the Investor are unable to agree on a question of valuation, either may demand
the appointment of an impartial appraiser. If the parties are unable to agree
on the appraiser, the appointment shall be made by the American Arbitration
Association. The appraiser's itemized appraisal shall be binding. Appraisal
costs shall be borne equally by OPIC and the Investor.
7.06 ESTIMATED COMPENSATION. If OPIC determines that compensation is payable
but conditions in the project country preclude reasonable efforts by OPIC to
determine the precise amount due, OPIC may pay estimated compensation based on
the information then available. OPIC may revise its estimate and recover any
excess or pay any additional amount due upon receipt of additional information.
<PAGE> 17
VIII-1
Article VIII - Procedures.
-------------------------
8.01 APPLICATION FOR COMPENSATION. An application for compensation shall
demonstrate the Investor's right to compensation in the amount claimed. The
Investor shall provide such additional information as OPIC may reasonably
require to evaluate the application. The Investor may amend or withdraw an
application for compensation at any time, but the right to recover compensation
will be lost for any acts covered by a withdrawn application.
(a) There is no time limit on application for inconvertibility
compensation (Article III); however, compensation shall not exceed
the Active Amount applicable in accordance with sec. 3.02.
(b) An application for expropriation compensation (Article V) must
be filed within six months after the Investor has reason to
believe that all requirements of Article IV have been satisfied.
(c) A notice demonstrating the Investor's entitlement to political
violence compensation for loss of assets (Article VI) must be
filed within six months of the loss. The notice together with
proof of the amount of compensation due will be considered a
completed application, which must be filed within three years of
the loss. The Investor may request adjusted cost compensation
(sec. 7.01(a)) and later amend the application within three years of
the loss to elect replacement cost compensation (sec. 7.01(b)).
(d) OPIC shall have a reasonable time in which to complete
processing of any application for compensation.
8.02 ASSIGNMENT TO OPIC. Within sixty days after OPIC notifies the Investor of
the amount of compensation OPIC will pay under expropriation or political
violence coverage, and concurrent with payment, the Investor shall
transfer to OPIC (a) for expropriation, all interests attributable to the
insured investment (sec. 4.01) or funds (sec. 4.02) as of the date the
expropriatory effect commences, including claims arising out of the
expropriation, or (b) for political violence, claims arising out of the loss
due to political violence (sec. 6.01). The Investor shall transfer the
interests and claims free and clear of, and shall agree to indemnify OPIC
against, claims, defenses, counterclaims, rights of setoff and other
encumbrances (except defenses relating to the expropriation).
<PAGE> 18
VIII-2
In connection with an inconvertibility claim, immediately upon receipt
of instructions from OPIC together with notification that it intends to pay
such claim, the Investor shall deliver the local currency to OPIC by draft
subject to collection (or, at OPIC's option, in cash), or, if the Investor is
unable legally to deliver the local currency or if OPIC so requests, shall
instead deliver an assignment of the Investor's rights with respect to the
payment that is the subject of the claim.
OPIC may decline all or any portion of the Investor's interests or
claims; if so, the Investor's right to compensation shall be affected only as
provided in sec. 5.03.4(b).
8.03 SECURITY. As a condition for paying compensation (including estimated
compensation (sec. 7.06)) prior to a final determination of its liability, OPIC
may require the Investor to provide security, satisfactory to OPIC in its
reasonable judgment, for repayment pursuant to section 9.02(b).
8.04 EXCESS SALVAGE VALUE. With respect to compensated expropriation and
political violence claims, OPIC shall pay to the Investor any amounts OPIC
realizes in United States dollars from the rights transferred (sec. 8.02) in
excess of
(a) the compensation paid by OPIC; plus
(b) reasonable interest; plus
(c) OPIC's out-of-pocket expenses in maintaining and realizing
funds from the transferred property.
However, this provision shall not in any way restrict OPIC's discretion to deal
with the rights transferred. OPIC shall have no obligation to take action with
respect to the rights transferred and shall incur no liability to the Investor
for any actions taken or not taken after the transfer.
8.05 ARBITRATION. Any controversy relating to this contract shall be settled
by arbitration in Washington, D.C. according to the then prevailing Commercial
Arbitration Rules of the American Arbitration Association. Unless the Investor
initiates arbitration, OPIC's liability shall expire one year after OPIC
notifies the Investor of its determination concerning an application for
compensation. A decision by arbitrators shall be final and binding, and any
court having jurisdiction may enter judgment on it.
<PAGE> 19
VIII-3
8.06 ELECTION OF ACTIVE AMOUNTS AND COVERAGE CEILINGS. By prior notice to
OPIC effective as of the next due date for premiums (sec. 1.06), the Investor
may increase or decrease the Active Amount for any coverage for the remainder
of the contract term, subject to the following limitations:
(a) Active Amount shall not exceed the Coverage Ceiling (sec. 1.06);
(b) The Coverage Ceiling shall be reduced automatically by compensation
paid by OPIC; Active Amount shall also be reduced for the remainder
of the annual election period to which the claim relates (sec. 3.02,
sec. 5.04(a), or sec. 7.02(a));
(c) For inconvertibility, expropriation, and political violence
coverages, Active Amount shall not be less than the lesser of book
value (sec. 5.01) or the Coverage Ceiling for that coverage.
8.07 TERMINATION. The Investor may terminate this contract effective as of
any premium due date unless the premium is already paid. However, termination
shall not affect any rights or obligations of either party relating to prior
periods.
8.08 LEGAL AND MISCELLANEOUS. This contract shall be governed by the law of
the District of Columbia, its conflict of law rules excepted. This contract
constitutes the complete agreement between the parties, superseding any prior
understandings. This contract may be modified, or its terms waived, only in
writing.
8.09 NOTICES. Notices must be in writing and shall be effective when received.
Notices may be given to the Investor at the address on the title page (unless
changed in writing), and to OPIC at
Overseas Private Investment Corporation
Washington, D.C. 20527
ATTENTION: Vice-President, Insurance.
8.10 REFUND OF PREMIUMS. Upon timely written request, OPIC will refund
premiums PRO RATA if
(a) excess coverage is elected while a valid claim for compensation
is pending; or
(b) the Investor becomes ineligible for coverage or ceases to hold all
or a portion of the insured investment, in which case any refund shall
be calculated from the later of (i) the date the Investor becomes
ineligible or ceases to hold the insured investment, or (ii) the
date OPIC receives such written request.
<PAGE> 20
IX-1
Article IX - Investor's Duties.
------------------------------
9.01 DUTIES.
1. REPRESENTATIONS AND PROJECT EXECUTION. The Investor understands
that OPIC has issued this contract based on statutory policy goals (22 U.S.C.
sec. 2191) as well as underwriting considerations. All statements made by the
Investor to OPIC in connection with this contract are true and complete, and
the investment and the project shall be carried out as described.
2. OWNERSHIP AND ELIGIBILITY. The Investor shall at all times remain
the beneficial owner of the insured investment and shall remain eligible for
OPIC insurance as
(a) a citizen of the United States; or
(b) a corporation or other association created under the laws of
the United States, its states or territories, of which more than
50% of both the total interest and of each class of shares is
beneficially owned by citizens of the United States; or
(c) an entity created under foreign law in which a 95% interest is
owned by entities eligible under (a) or (b).
3. SELF-INSURANCE. The Investor shall continue to bear the risk of loss
of at least 10% of the book value of its interest in the foreign enterprise.
4. ASSIGNMENT. The Investor shall not assign this contract, or any of
its rights, without OPIC's written consent, which will not be withheld
unreasonably.
5. PREMIUMS. The Investor shall pay the premiums for this contract in
accordance with Article I. In the event that premiums are not paid when due,
the Investor shall be in default but may cure this default within sixty days by
paying the premiums plus interest at a rate of 12% per annum.
6. ACCOUNTING RECORDS.
(a) The Investor shall maintain in the United States true and
complete copies of the records, books of account and current
financial statements for the foreign enterprise necessary to
compute and substantiate compensation, including
(1) records documenting the investment;
(2) annual balance sheets;
<PAGE> 21
IX-2
(3) annual statements of income, retained earnings, cash flow
and related footnotes.
(b) Accounting records shall be maintained and financial
statements prepared in United States dollars in accordance with
principles of accounting generally accepted in the United States
(including principles of currency translation), as modified by the
special accounting rules (sec. 5.03.3 and sec. 7.04(b)(3)).
(c) Subject to the obligations of the Investor under Section
9.01.6, the Investor or the foreign enterprise shall retain all
accounting records until
(1) the deadline for filing an application for compensation
has expired (sec. 8.01); or
(2) final action has been taken on an application for
compensation (including arbitration and judicial appeals).
However, if compensation has been paid, the accounting records
shall be retained for three years after the Investor receives the
compensation.
7. REPORTS AND ACCESS TO INFORMATION. In order that OPIC may perform
its statutory duties, including settling claims and reporting to the Congress
(22 U.S.C. sec. 2200a), the Investor shall furnish OPIC with such information as
OPIC may reasonably request, including
(a) making available for interviews any persons subject to the
Investor's practical control (including employees of the project
and independent accountants);
(b) making available for inspection and copying all documents and
accounting records relating to the project (including workpapers
of independent accountants if available);
(c) permitting OPIC to inspect the project; and
(d) furnishing available information concerning the effects of the
project on the economy of the United States, the environment, and
the economic and social development of the country in which the
project is located.
The Investor's duties under this paragraph shall continue for the
periods specified for retention of accounting records (sec. 9.01.6(c)).
8. COMPULSORY NOTICE. The Investor shall notify OPIC promptly if it
has reason to believe that the Investor or the foreign enterprise will not be
able to convert or transfer local currency during the waiting period (Article
II). The Investor shall notify OPIC promptly of any acts or threats to act in
a manner which may come within the scope of the expropriation or political
violence coverage (Articles IV and VI) and shall keep OPIC informed as to all
relevant developments.
<PAGE> 22
IX-3
9. PRESERVATION, TRANSFER AND CONTINUING COOPERATION. At OPIC's
request, the Investor shall promptly assign rights with respect to the
investment, as required by sec. 8.02. Prior to the assignment of rights
required by sec. 8.02, the Investor shall, in consultation with OPIC, take all
reasonable measures to preserve property, to pursue available administrative
and judicial remedies, and to negotiate in good faith with the governing
authority of the country in which the project is located and other potential
sources of compensation. After a transfer of rights or delivery of local
currency, in exchange for reimbursement of reasonable out-of-pocket expenses,
the Investor shall take all actions reasonably requested by OPIC to assist OPIC
in preserving the property and rights transferred to OPIC and in prosecuting
related claims.
10. OTHER AGREEMENTS. The Investor shall not enter into any agreement
with any foreign governing authority with respect to compensation for any acts
within the scope of coverage (Article II, IV or VI) without OPIC's prior written
consent.
9.02 DEFAULT. Material breach or misrepresentation by the Investor shall
constitute default, and OPIC may:
(a) refuse to make payments to the Investor,;
(b) recover payments made; and
(c) terminate this contract effective as of the date of the breach
by giving notice to the Investor.
9.03 NON-WAIVER. Neither OPIC's failure to invoke its rights, nor its
acceptance of premiums, shall constitute waiver of any of its rights, even
though OPIC knows of the Investor's breach.
OPIC, but shall have no obligation to allow breaches to be cured.
9.04 CURE. OPIC may permit the Investor to cure a breach in a manner
satisfactory to
<PAGE> 23
X-1
ARTICLE X - AMENDMENTS
----------------------
The following amendments are hereby incorporated as part of this Contract of
Insurance No. D547:
10.01 Notwithstanding any other provision of this Contract or Contract No.
D545, the Insured shall not file applications, and OPIC shall have no
liability, for claims under inconvertibility coverage under this Contract of
Insurance or Contract of Insurance No. D545, or both, which, in the
aggregate, exceed $1,250,000 in any 91-day period.
10.02 A new subsection 9.01.11, "WORKERS' RIGHTS", is added to read
as follows:
"11. WORKERS' RIGHTS. The investor agrees not to take actions
to prevent employees of the foreign enterprise from lawfully
exercising their right of association and their right to
organize and bargain collectively. The Investor further agrees
to observe applicable laws relating to a minimum age for
employment of children, acceptable conditions of work with
respect to minimum wages, hours of work, and occupational
health and safety, and not to utilize forced or compulsory
labor. The Investor is not responsible under this paragraph
for the actions of a government."
INVESTOR
By: William H. Keogh Date: September 25, 1992
---------------------------------------- ----------------------------------
Effective September 30, 1992
William H. Keough, Senior Vice President, Chief Financial Officer and Treasurer
--------------------------------------------------------------------------------
(Print Name and Title)
OVERSEAS PRIVATE INVESTMENT CORPORATION
By: B. Thomas Mansbach Date:
---------------------------------------- ----------------------------------
Effective September 30, 1992
B. Thomas Mansbach, Managing Director
------------------------------------------------------------------------------
(Print Name and Title)
<PAGE> 1
Form 234 KGT 12-85 NS
OPIC Contract of Insurance No. D545
OVERSEAS PRIVATE INVESTMENT CORPORATION
CONTRACT OF INSURANCE
Against
Inconvertibility
Expropriation
Political Violence
as defined below,
between the Overseas Private Investment Corporation ("OPIC") and
The Pioneer Group, Inc.
60 State Street, 18th Floor
Boston, Massachusetts 02109-1975
a corporation organized and existing under
the laws of the State of Delaware or any of
its subsidiaries
(the "Investor").
<PAGE> 2
TABLE OF CONTENTS
Title Page
----- ----
<TABLE>
<S> <C> <S> <C>
Article I - Subject of Insurance and Exchange of Promises
1.01 Subject I-1
1.02 Promises I-2
1.03 Maximum Aggregate Compensation I-2
1.04 Full Faith and Credit I-2
1.05 Term I-2
1.06 Premiums and Active Amount Elections I-2
1.07 Administrative Fee I-3
Article II - Inconvertibility - Scope of Coverage*
2.01 Inconvertibility of Local Currency II-1
2.02 Exclusions II-1
Article III - Inconvertibility - Amount of Compensation*
3.01 Rate of Compensation for Inconvertibility III-1
3.02 Limitation III-2
Article IV - Expropriation - Scope of Coverage*
4.01 Total Expropriation IV-1
4.02 Expropriation of Funds IV-1
4.03 Provocation Exclusion IV-1
Article V - Expropriation - Amount of Compensation*
5.01 Total Expropriation V-1
5.02 Expropriation of Funds V-1
5.03 Adjustments V-1
5.04 Limitations V-2
<FN>
------------------
*/ This Table of Contents applies to all coverages offered by OPIC whether
or not all of those coverages are provided in this contract.
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Title Page
----- ----
<S> <C> <S> <C>
Article VI - Political Violence - Scope of Coverage*
6.01 Loss Due to Political Violence VI-1
6.02 Exclusions VI-1
Article VII - Political Violence - Amount of Compensation*
7.01 Basis of Compensation VII-1
7.02 Limitations VII-1
7.03 Investor's Share VII-2
7.04 Book Value of Insured Investment VII-2
7.05 Appraisal VII-3
7.06 Estimated Compensation VII-3
Article VIII - Procedures
8.01 Application for Compensation VIII-1
8.02 Assignment to OPIC VIII-1
8.03 Security VIII-2
8.04 Excess Salvage Value VIII-2
8.05 Arbitration VIII-2
8.06 Election of Active Amounts and Coverage Ceilings VIII-3
8.07 Termination VIII-3
8.08 Legal and Miscellaneous VIII-3
8.09 Notices VIII-3
8.10 Refund of Premiums VIII-3
Article IX - Investor's Duties
9.01 Duties IX-1
9.02 Default IX-3
9.03 Non-Waiver IX-3
9.04 Cure IX-4
Article X - Amendments X-1
</TABLE>
- ii -
<PAGE> 4
I-1
Article I - Subject of Insurance and Exchange of Promises.
---------------------------------------------------------
1.01 Subject.
-------
1. INVESTMENT. The Investor promises that the Investor contributed or
will contribute.
(i) $300,000 in United States dollars in the form of equity
(ii) $350,000 in United States dollars in the form of debt
to
Financial Services Limited
24G, Wilanow 02-958 Mokotow
Warsaw, Poland
a joint venture organized under the laws of the Republic of Poland
(the "foreign enterprise")
for which the Investor has acquired or will acquire
(iii) 500 shares of the common stock issued by the foreign enterprise,
representing a 50 percent equity interest in it.
(iv) undivided interest in the loan agreement, and any underlying
promissory notes, between the Investor and the foreign enterprise
in the principal amount of $350,000, a true and complete copy of
which will be submitted in form and substance satisfactory to OPIC
in its sole discretion within 90 days of the execution thereof
(together "the investment").
Ninety percent of each of these interests acquired by the Investor is insured
under this contract (the "insured investment").
2. PROJECT. The investment will be applied to the development
and operation of a mutual fund to be located in Warsaw, Poland.
(the "project").
3. Foreign governing authority means the governmental
authority(ies) in effective control in all or part of the Republic of Poland.
<PAGE> 5
I-2
1.02 Promises.
--------
OPIC promises that if acts occur during the term of this contract which
satisfy the requirements for coverage in Article II, IV or VI, OPIC will pay the
Investor the amount of compensation provided in Article III, V or VII, in
accordance with the procedures in Article VIII.
The Investor promises to comply with the duties in Article IX. If the
Investor violates any of those duties, the Investor may lose rights, including
the right to compensation.
Amendments to Articles I through IX may be contained in Article X.
1.03 Maximum Aggregate Compensation.
------------------------------
OPIC will not pay compensation under this contract in an aggregate
amount that exceeds $1,624,000.
1.04 Full Faith and Credit.
---------------------
The full faith and credit of the United States of America is pledged to
secure the full payment by OPIC of its obligations under this contract.
1.05 Term.
----
This contract shall enter into force on September 30, 1992, provided it
has been signed by OPIC and the Investor, and shall terminate 20 years afterward
unless terminated earlier (section 8.07; section 9.02).
1.06 Premiums and Active Amount Elections.
------------------------------------
The Investor shall elect amounts of coverage (section 8.08) and pay
premiums on or before each annual anniversary of the effective date of the
contract.
The coverages and premiums for the first period shall be as follows:
<PAGE> 6
I-3
<TABLE>
<CAPTION>
Equity securities:
Inconvertibility Expropriation Political Violence
---------------- ------------- ------------------
<S> <C> <C> <C> <C>
Coverage Ceiling: $ 995,000 $ 995,000 $ 500,000
Active Amount: $ 270,000 $ 270,000 $ 270,000
Premium rate is: x 0.36000 % x 0.66000 % x 0.60000 %
----------- ----------- -----------
Total premium is: $ 972.00 + $ 1,782.00 + $ 1,620.00 = $4,374.00
=========
----------------------------------------------------------------------------------------------
Debt securities:
Inconvertibility Expropriation Political Violence
---------------- ------------- ------------------
<S> <C> <C> <C> <C>
Coverage Ceiling: $ 629,000 $ 629,000 $ 500,000
Active Amount: $ 315,000 $ 315,000 $ 230,000
Premium rate is: x 0.36000 % x 0.66000 % x 0.06000 %
----------- ----------- -----------
Total premium is: $ 1,134.00 + $ 2,079.00 + $ 138.00 = $3,351.00
=========
----------------------------------------------------------------------------------------------
Total Premium is: $7,725.00
=========
</TABLE>
1.07 Administrative Fee. The Investor will pay an annual fee for contract
administration of .25% of the Investment amount (section 1.01.1) on or before
the contract effective date and on or before each annual anniversary of the
contract effective date, but only if the administrative fee exceeds the premium
due for the contract for that period. If the administrative fee exceeds the
premium due for that period, the premium will be waived.
<PAGE> 7
II-1
Article II - Inconvertibility - Scope of Coverage.
-------------------------------------------------
2.01 INCONVERTIBILITY OF LOCAL CURRENCY. Local currency shall be deemed
inconvertible and compensation shall be payable, subject to the exclusions
(section 2.02) and limitation (section 3.02), if neither the Investor nor the
foreign enterprise is able legally
(a) to convert earnings from or returns of the insured investment into
United States dollars through any channel during the 90 days immediately
prior to a claim to OPIC, except at an exchange rate that is less
favorable than the then-prevailing exchange rate described under section
3.01.2, or
(b) to transfer such converted earnings to the United States during such
period.
2.02 EXCLUSIONS. No compensation for inconvertibility shall be payable if
(a) PRE-EXISTING RESTRICTIONS.
(1) An investor in comparable circumstances would have been unable
legally (a) to convert local currency into United States dollars
on the date of this contract or (b) to transfer such dollars to
the United States on the date of this contract; and
(2) The Investor knew or should have known about the restriction;
or
(b) INVESTOR DILIGENCE. The Investor has not made all reasonable
efforts to convert the local currency into United States dollars or to
transfer such dollars to the United States through all direct and
indirect legal mechanisms reasonably available; or
(c) RECONVERSIONS. The local currency represents funds which were
previously converted into another currency; or
(d) PROVOCATION. The preponderant cause is unreasonable action
attributable to the Investor, including corrupt practices.
(e) USE RESTRICTED BY EXPROPRIATION. The use of such local currency
is restricted by an expropriatory action (section 4.02).
<PAGE> 8
III-1
Article III - Inconvertibility - Amount of Compensation.
-------------------------------------------------------
3.01 Rate of Compensation for Inconvertibility.
-----------------------------------------
1. DATE. If the requirements of inconvertibility are satisfied (Article
II), subject to the limitation (section 3.02), OPIC shall pay compensation
(a) against prior delivery of the inconvertible local currency, or
(b) if the Investor is unable legally to deliver the local currency or
if OPIC so requests, against prior assignment of the Investor's right
to receive the payment that is the subject of the claim. If the Investor
delivers local currency or an assignment of rights denominated in local
currency, compensation shall be the United States dollar equivalent of
the local currency at the exchange rate in effect 90 days before OPIC
receives the completed application for compensation.
If the Investor delivers an assignment of rights denominated in United States
dollars, compensation shall be the United States dollar amount of the rights so
assigned.
2. Exchange Rate.
-------------
(a) The exchange rate shall be the official exchange rate applicable to
the type of remittance involved.
(b) If, however,
(1) United States dollars were not generally available at the
applicable official exchange rate; and
(2) exchanges of local currency for United States dollars were
effected legally and customarily through another channel;
then the exchange rate shall be the effective rate obtained through
that channel.
(c) In either case, the exchange rate shall be net of all deductions for
governmentally imposed charges, such as taxes and commissions.
3.02 LIMITATION. Compensation shall not exceed the Active Amount (section
8.08) in effect 90 days before OPIC receives the application for compensation.
<PAGE> 9
IV-1
Article IV - Expropriation - Scope of Coverage.
----------------------------------------------
4.01 TOTAL EXPROPRIATION. Compensation is payable for total expropriation
(section 5.01), subject to the exclusions (section 4.03) and limitations
(section 5.04), if an act or series of acts satisfies all of the following
requirements:
(a) the acts are attributable to a foreign governing authority which
is in de facto control of the part of the country in which the project
is located;
(b) the acts are violations of international law (without regard to
the availability of local remedies) or material breaches of local law;
(c) the acts directly deprive the Investor of fundamental rights in
the insured investment (Rights are "fundamental" if without them the
Investor is substantially deprived of the benefits of the investment.);
and
(d) the violations of law are not remedied (section 9.01.9) and the
expropriatory effect continues for six months.
4.02 EXPROPRIATION OF FUNDS. Compensation is payable for an expropriation of
funds that constitute a return of the insured investment or earnings on the
insured investment (section 5.02) if an act or series of acts
(a) satisfies the governmental action, illegality and duration
requirements (section 4.01(a), (b) and (d)); and
(b) directly results in preventing the Investor from
(1) repatriating the funds; and
(2) effectively controlling the funds in the country in which
the project is located.
4.03 EXCLUSIONS. No compensation for expropriation shall be payable if
(a) PROVOCATION. The preponderant cause is unreasonable action
attributable to the Investor, including corrupt practices.
(b) GOVERNMENT ACTION. The action is taken by the foreign governing
authority in its capacity or through its powers as a purchaser,
supplier, creditor, shareholder, director or manager of the foreign
enterprise.
<PAGE> 10
V-1
Article V - Expropriation - Amount of Compensation.
--------------------------------------------------
5.01 TOTAL EXPROPRIATION. For total expropriation (section 4.01), OPIC shall
pay compensation in United States dollars in the amount of the book value of
the insured investment, subject to adjustments (section 5.03) and limitations
(section 5.04).
Compensation is computed as of the date the expropriatory effect
commences (section 4.01(c)) and is based on financial statements maintained in
accordance with section 9.01.6 for the foreign enterprise. However, OPIC may
(1) conform the financial statements to principles of accounting
generally accepted in the United States; and
(2) make adjustments (section 5.03).
OPIC shall be bound by the Investor's choice among generally accepted accounting
principles, if the choice is consistent with the Investor's own accounting,
unless such choice results in a substantial overstatement of the fair market
value of the insured investment or the foreign enterprise as an independent
entity.
5.02 EXPROPRIATION OF FUNDS. For expropriation of funds (section 4.02), OPIC
shall pay compensation in the amount of the United States dollar equivalent of
the expropriated funds at the exchange rate determined in accordance with
section 3.01.2, computed as of the date the expropriation begins. Compensation
for expropriation of funds shall be subject to the adjustments and limitations
(section 5.03 and section 5.04).
5.03 ADJUSTMENTS.
1. INVESTMENTS OF PROPERTY. Non-cash items contributed as part of the
investment shall be adjusted if necessary to reflect the fair market value of
the items furnished at the time of contribution to the project, plus freight,
installation and other reasonable direct costs incurred in furnishing the items
to the project.
2. NON-INSURED CONTRIBUTION. Any direct or indirect contribution (and
retained earnings thereon) by the Investor after the insured investment is made
shall be deducted from the book value of the foreign enterprise.
3. SPECIAL ACCOUNTING RULES. Dealings among related parties shall be
adjusted if necessary to reflect transactions as they would have occurred had
they been at arm's length, and forgiveness of obligations shall be disregarded.
Each entity shall be accounted for as if it were a separate person for income
tax purposes, and the effect of tax shifting arrangements shall be disregarded.
Obsolescence or permanent reduction in recoverable values shall be recognized by
adjusting the book value
<PAGE> 11
V-2
of assets to realizable value. OPIC may adjust financial statements to reflect
the effect of events that occur before the expropriatory effect commences, such
as events of loss which are later confirmed.
4. OTHER COMPENSATION AND RETAINED PROPERTY. OPIC may reduce
compensation by the amount of
(a) compensation received from other sources on account of the loss
(excluding compensation payable under other insurance policies, except
to the extent necessary to prevent the Investor from recovering more
than the amount of the loss as recognized under any of the policies
under which compensation is due, without regard to policy limits); and
(b) the book value of commercially viable property which remains
subject to the Investor's effective disposition and control after the
expropriatory effect commences (unless OPIC requires the Investor to
assign the property (section 8.02)); and
(c) any obligation the Investor is relieved of by the expropriation.
The reduction shall be proportionate to the extent that these items are
attributable to the insured investment.
5. START-UP EXPENSES. If the book value of the insured investment of a
new foreign enterprise in the development stage is less than the insured amount
originally contributed, the accumulated loss will be disregarded if
(a) the foreign enterprise is newly formed for the principal purpose
of undertaking the project,
(b) the foreign enterprise is a going concern as of the date the
expropriatory effect commences,
(c) that date is within three years of the date this contract is
issued, and
(d) it is clear that no adjustment to book value is necessary by
reason of obsolescence or permanent reduction in recoverable values of
productive facilities or assets.
5.04 LIMITATIONS. Compensation shall not exceed any of the following
limitations:
(a) ACTIVE AMOUNT. The Active Amount (sec. 8.08) on the date the
expropriatory effect commences;
<PAGE> 12
V-3
(b) INSOLVENCY. If the liabilities of the foreign enterprise exceed its assets
as of the date the expropriatory effect commences, the amount that the Investor
would have been entitled to receive in insolvency proceedings with respect to
the insured investment if assets had been liquidated at book value on that date;
(c) SELF-INSURANCE. The maximum amount which could be received by the Investor
from OPIC without breaching sec. 9.01.3.
<PAGE> 13
VI-1
Article VI - Political Violence - Scope of Coverage.
---------------------------------------------------
6.01 LOSS DUE TO POLITICAL VIOLENCE. Compensation is payable, subject to
the exclusions (section 6.02) and limitations (section 7.02), if political
violence is the direct and immediate cause of the permanent loss (including
loss of value by damage or destruction) of tangible property of the foreign
enterprise used for the project.
"Political violence" means a violent act undertaken with the primary
intent of achieving a political objective, such as declared or
undeclared war, hostile action by national or international armed
forces, civil war, revolution, insurrection, civil strife, terrorism
or sabotage. However, acts undertaken primarily to achieve labor or
student objectives are not covered.
6.02 EXCLUSIONS. No compensation for political violence shall be payable
(a) EXCLUDED PROPERTY. For loss of precious metals, gems, works of
art, money or documents,;
(b) MINIMUM LOSS. If the amount of compensation payable would be less
than $5,000;
(c) REASONABLE PROTECTIVE MEASURES. If the loss results from the
failure to take reasonable measures to protect or preserve the
property; or
(d) PROVOCATION. If the preponderant cause of the loss is unreasonable
action attributable to the Investor, including corrupt practices.
<PAGE> 14
VII-1
Article VII - Political Violence - Amount of Compensation.
---------------------------------------------------------
7.01 BASIS OF COMPENSATION. If the requirements of Article VI are
satisfied, and subject to the limitations (section 7.02), OPIC shall pay
compensation FOR A LOSS in United States dollars in the amount of
(a) ADJUSTED COST. Adjusted cost is the Investor's share (section
7.03) of the lowest of
(1) the original cost;
(2) fair market value; or
(3) the reasonable cost of repair;
less anything of value received by the Investor on account of the
property lost and less the Investor's share of any such receipts by the
foreign enterprise; or
(b) REPLACEMENT COST. If the Investor so elects, OPIC will pay the
reasonable cost to repair any item of lost property or to replace it with
equivalent new property, less anything of value received by the Investor
or the foreign enterprise on account of the property lost. Such
compensation shall not exceed 200% of the original cost of the item. To
receive such compensation, the Investor must repair or replace the lost
property to the project within three years of the loss.
OPIC shall not reduce the compensation payable under subsections (a) or (b)
above by the amount of compensation payable under other insurance policies on
account of the property lost, except to the extent necessary to prevent the
Investor from recovering more than the amount of the loss as recognized under
any of the policies under which compensation is due, without regard to policy
limits.
7.02 LIMITATIONS. Compensation shall not exceed any of the following
limitations:
(a) ACTIVE AMOUNT. The Active Amount (section 8.06) on the date of the
loss.
(b) SELF-INSURANCE. The maximum amount which could be recovered by the
Investor from OPIC without breaching section 9.01.3.
(c) AGGREGATE ADJUSTED COST COMPENSATION. Aggregate compensation for
property compensated at adjusted cost shall not exceed the book value of
the insured investment (section 7.04) at the time of loss.
<PAGE> 15
VII-2
7.03 INVESTOR'S SHARE. "Investor's share" means the ratio that the equity
owned by the Investor bears to the total equity of the foreign enterprise.
7.04 Book Value of Insured Investment.
--------------------------------
(a) BOOK VALUE. Book value is based on financial statements maintained
by the Investor in accordance with sec. 9.01.6 for the foreign
enterprise. However, OPIC may
(1) conform the financial statements to principles of accounting
generally accepted in the United States; and
(2) make adjustments (sec. 7.04(b)).
OPIC shall be bound by the Investor's choice among generally accepted
accounting principles, if the choice is consistent with the Investor's
own accounting, unless such choice results in a substantial
overstatement of the fair market value of the insured investment or
the foreign enterprise as an independent entity.
(b) Adjustments.
-----------
(1) INVESTMENTS OF PROPERTY. Non-cash items contributed to the
investment shall be adjusted if necessary to reflect the fair
market value of the items furnished at the time of contribution
to the project, plus freight, installation and other reasonable
direct costs incurred in furnishing the items to the project.
(2) NON-INSURED CONTRIBUTION. Any direct or indirect
contribution (and retained earnings thereon) by the Investor
after the insured investment is made shall be deducted from
book value of the foreign enterprise.
(3) SPECIAL ACCOUNTING RULES. Dealings among related parties
shall be adjusted if necessary to reflect transactions as they
would have occurred had they been at arm's length, and
forgiveness of obligations shall be disregarded. Each entity
shall be accounted for as if it were a separate person for
income tax purposes, and the effect of tax shifting
arrangements shall be disregarded. Obsolescence or permanent
reduction in recoverable values shall be recognized by
adjusting the book value of assets to realizable value. OPIC
may adjust financial statements to reflect the effect of events
that occur before the loss of property, such as events of loss
which are later confirmed.
<PAGE> 16
VII-3
(4) START-UP EXPENSES. If the book value of the insured
investment of a new foreign enterprise in the development stage
is less than the insured amount originally contributed, the
accumulated loss will be disregarded if
(a) the foreign enterprise is newly formed for the
principal purpose of undertaking the project,
(b) the foreign enterprise is a going concern as of the
date of the loss,
(c) that date is within three years of the date this
contract is issued, and
(d) it is clear that no adjustment to book value is
necessary by reason of obsolescence or permanent
reduction in recoverable values of productive
facilities or assets.
(c) INSOLVENCY. If the liabilities of the enterprise exceed its
assets as of the date of the loss, book value of the insured
investment shall not exceed the amount that the Investor would have
been entitled to receive in insolvency proceedings with respect to the
insured investment if assets had been liquidated at book value on the
day prior to the loss.
7.05 APPRAISAL. If OPIC determines that compensation is payable but OPIC and
the Investor are unable to agree on a question of valuation, either may demand
the appointment of an impartial appraiser. If the parties are unable to agree
on the appraiser, the appointment shall be made by the American Arbitration
Association. The appraiser's itemized appraisal shall be binding. Appraisal
costs shall be borne equally by OPIC and the Investor.
7.06 ESTIMATED COMPENSATION. If OPIC determines that compensation is payable
but conditions in the project country preclude reasonable efforts by OPIC to
determine the precise amount due, OPIC may pay estimated compensation based on
the information then available. OPIC may revise its estimate and recover any
excess or pay any additional amount due upon receipt of additional information.
<PAGE> 17
VIII-1
Article VIII - Procedures.
-------------------------
8.01 APPLICATION FOR COMPENSATION. An application for compensation shall
demonstrate the Investor's right to compensation in the amount claimed. The
Investor shall provide such additional information as OPIC may reasonably
require to evaluate the application. The Investor may amend or withdraw an
application for compensation at any time, but the right to recover compensation
will be lost for any acts covered by a withdrawn application.
(a) There is no time limit on application for inconvertibility
compensation (Article III); however, compensation shall not exceed the
Active Amount applicable in accordance with section 3.02.
(b) An application for expropriation compensation (Article V) must be
filed within six months after the Investor has reason to believe that
all requirements of Article IV have been satisfied.
(c) A notice demonstrating the Investor's entitlement to political
violence compensation for loss of assets (Article VI) must be filed
within six months of the loss. The notice together with proof of the
amount of compensation due will be considered a completed application,
which must be filed within three years of the loss. The Investor may
request adjusted cost compensation (section 7.01(a)) and later amend the
application within three years of the loss to elect replacement cost
compensation (section 7.01(b)).
(d) OPIC shall have a reasonable time in which to complete processing
of any application for compensation.
8.02 ASSIGNMENT TO OPIC. Within sixty days after OPIC notifies the Investor
of the amount of compensation OPIC will pay under expropriation or political
violence coverage, and concurrent with payment, the Investor shall transfer to
OPIC (a) for expropriation, all interests attributable to the insured
investment (section 4.01) or funds (section 4.02) as of the date the
expropriatory effect commences, including claims arising out of the
expropriation, or (b) for political violence, claims arising out of the loss
due to political violence (section 8.01). The Investor shall transfer the
interests and claims free and clear of, and shall agree to indemnify OPIC
against, claims, defenses, counterclaims, rights of setoff and other
encumbrances (except defenses relating to the expropriation).
<PAGE> 18
VIII-2
In connection with an inconvertibility claim, immediately upon receipt
of instructions from OPIC together with notification that it intends to pay such
claim, the Investor shall deliver the local currency to OPIC by draft subject to
collection (or, at OPIC's option, in cash), or, if the Investor is unable
legally to deliver the local currency or if OPIC so requests, shall instead
deliver an assignment of the Investor's rights with respect to the payment that
is the subject of the claim.
OPIC may decline all or any portion of the Investor's interests or
claims; if so, the Investor's right to compensation shall be affected only as
provided in section 5.03.4(b).
8.03 SECURITY. As a condition for paying compensation (including estimated
compensation (section 7.06)) prior to a final determination of its liability,
OPIC may require the Investor to provide security, satisfactory to OPIC in its
reasonable judgment, for repayment pursuant to section 9.02(b).
8.04 EXCESS SALVAGE VALUE. With respect to compensated expropriation and
political violence claims, OPIC shall pay to the Investor any amounts OPIC
realizes in United States dollars from the rights transferred (section 8.02) in
excess of
(a) the compensation paid by OPIC; plus
(b) reasonable interest; plus
(c) OPIC's out-of-pocket expenses in maintaining and realizing funds
from the transferred property.
However, this provision shall not in any way restrict OPIC's discretion to deal
with the rights transferred. OPIC shall have no obligation to take action with
respect to the rights transferred and shall incur no liability to the Investor
for any actions taken or not taken after the transfer.
8.05 ARBITRATION. Any controversy relating to this contract shall be settled
by arbitration in Washington, D.C. according to the then prevailing Commercial
Arbitration Rules of the American Arbitration Association. Unless the Investor
initiates arbitration, OPIC's liability shall expire one year after OPIC
notifies the Investor of its determination concerning an application for
compensation. A decision by arbitrators shall be final and binding, and any
court having jurisdiction may enter judgment on it.
<PAGE> 19
VIII-3
8.06 ELECTION OF ACTIVE AMOUNTS AND COVERAGE CEILINGS. By prior notice to OPIC
effective as of the next due date for premiums (section 1.06), the Investor may
increase or decrease the Active Amount for any coverage for the remainder of the
contract term, subject to the following limitations:
(a) Active Amount shall not exceed the Coverage Ceiling (section 1.06);
(b) The Coverage Ceiling shall be reduced automatically by
compensation paid by OPIC; Active Amount shall also be reduced for the
remainder of the annual election period to which the claim relates
(section 3.02, section 5.04(a), or section 7.02(a));
(c) For inconvertibility, expropriation, and political violence
coverages, Active Amount shall not be less than the lesser of book
value (section 5.01) or the Coverage Ceiling for that coverage.
8.07 TERMINATION. The Investor may terminate this contract effective as of
any premium due date unless the premium is already paid. However, termination
shall not affect any rights or obligations of either party relating to prior
periods.
8.08 LEGAL AND MISCELLANEOUS. This contract shall be governed by the law of
the District of Columbia, its conflict of law rules excepted. This contract
constitutes the complete agreement between the parties, superseding any prior
understandings. This contract may be modified, or its terms waived, only in
writing.
8.09 NOTICES. Notices must be in writing and shall be effective when
received. Notices may be given to the Investor at the address on the title
page (unless changed in writing), and to OPIC at
Overseas Private Investment Corporation
Washington, D.C. 20527
Attention: Vice-President, Insurance.
---------
8.10 REFUND OF PREMIUMS. Upon timely written request, OPIC will refund premiums
PRO RATA if
(a) excess coverage is elected while a valid claim for compensation is
pending; or
(b) the Investor becomes ineligible for coverage or ceases to hold all
or a portion of the insured investment, in which case any refund shall
be calculated from the later of (i) the date the Investor becomes
ineligible or ceases to hold the insured investment, or (ii) the date
OPIC receives such written request.
<PAGE> 20
IX-1
Article IX - Investor's Duties.
------------------------------
9.01 Duties.
------
1. REPRESENTATIONS AND PROJECT EXECUTION. The Investor understands
that OPIC has issued this contract based on statutory policy goals (22 U.S.C.
section 2191) as well as underwriting considerations. All statements made by
the Investor to OPIC in connection with this contract are true and complete,
and the investment and the project shall be carried out as described.
2. OWNERSHIP AND ELIGIBILITY. The Investor shall at all times remain
the beneficial owner of the insured investment and shall remain eligible for
OPIC insurance as
(a) a citizen of the United States; or
(b) a corporation or other association created under the laws of the
United States, its states or territories, of which more than 50% of
both the total interest and of each class of shares is beneficially
owned by citizens of the United States; or
(c) an entity created under foreign law in which a 95% interest is
owned by entities eligible under (a) or (b).
3. SELF-INSURANCE. The Investor shall continue to bear the risk of loss
of at least 10% of the book value of its interest in the foreign enterprise.
4. ASSIGNMENT. The Investor shall not assign this contract, or any of
its rights, without OPIC's written consent, which will not be withheld
unreasonably.
5. PREMIUMS. The Investor shall pay the premiums for this contract in
accordance with Article I. In the event that premiums are not paid when due,
the Investor shall be in default but may cure this default within sixty days by
paying the premiums plus interest at a rate of 12% per annum.
6. Accounting Records.
------------------
(a) The Investor shall maintain in the United States true and complete
copies of the records, books of account and current financial
statements for the foreign enterprise necessary to compute and
substantiate compensation, including
(1) records documenting the investment;
(2) annual balance sheets;
<PAGE> 21
IX-2
(3) annual statements of income, retained earnings, cash flow
and related footnotes.
(b) Accounting records shall be maintained and financial statements
prepared in United States dollars in accordance with principles of
accounting generally accepted in the United States (including
principles of currency translation), as modified by the special
accounting rules (section 5.03.3 and section 7.04(b)(3)).
(c) Subject to the obligations of the Investor under Section 9.01.6,
the Investor or the foreign enterprise shall retain all accounting
records until
(1) the deadline for filing an application for compensation has
expired (section 8.01); or
(2) final action has been taken on an application for
compensation (including arbitration and judicial appeals).
However, if compensation has been paid, the accounting records shall
be retained for three years after the Investor receives the
compensation.
7. REPORTS AND ACCESS TO INFORMATION. In order that OPIC may perform
its statutory duties, including settling claims and reporting to the Congress
(22 U.S.C. section 2200a), the Investor shall furnish OPIC with such
information as OPIC may reasonably request, including
(a) making available for interviews any persons subject to the
Investor's practical control (including employees of the project and
independent accountants);
(b) making available for inspection and copying all documents and
accounting records relating to the project (including workpapers of
independent accountants if available);
(c) permitting OPIC to inspect the project; and
(d) furnishing available information concerning the effects of the
project on the economy of the United States, the environment, and the
economic and social development of the country in which the project is
located.
The Investor's duties under this paragraph shall continue for the
periods specified for retention of accounting records (section 9.01.6(c)).
8. COMPULSORY NOTICE. The Investor shall notify OPIC promptly if it
has reason to believe that the Investor or the foreign enterprise will not be
able to convert or transfer local currency during the waiting period (Article
II). The Investor shall notify OPIC promptly of any acts or threats to act in a
manner which may come within the scope of the expropriation or political
violence coverage (Articles IV and VI) and shall keep OPIC informed as to all
relevant developments.
<PAGE> 22
IX-3
9. PRESERVATION, TRANSFER AND CONTINUING COOPERATION. At OPIC's
request, the Investor shall promptly assign rights with respect to the
investment, as required by sec. 8.02. Prior to the assignment of rights
required by sec. 8.02, the Investor shall, in consultation with OPIC, take all
reasonable measures to preserve property, to pursue available administrative
and judicial remedies, and to negotiate in good faith with the governing
authority of the country in which the project is located and other potential
sources of compensation. After a transfer of rights or delivery of local
currency, in exchange for reimbursement of reasonable out-of-pocket expenses,
the Investor shall take all actions reasonably requested by OPIC to assist OPIC
in preserving the property and rights transferred to OPIC and in prosecuting
related claims.
10. OTHER AGREEMENTS. The Investor shall not enter into any agreement
with any foreign governing authority with respect to compensation for any acts
within the scope of coverage (Article II, IV or VI) without OPIC's prior written
consent.
9.02 DEFAULT. Material breach or misrepresentation by the Investor shall
constitute default, and OPIC may:
(a) refuse to make payments to the Investor;
(b) recover payments made; and
(c) terminate this contract effective as of the date of the breach by
giving notice to the Investor.
9.03 NON-WAIVER. Neither OPIC's failure to invoke its rights, nor its
acceptance of premiums, shall constitute waiver of any of its rights, even
though OPIC knows of the Investor's breach.
9.04 CURE. OPIC may permit the Investor to cure a breach in a manner
satisfactory to OPIC, but shall have no obligation to allow breaches to be
cured.
<PAGE> 23
X-1
ARTICLE X - AMENDMENTS
----------------------
The following amendments are hereby incorporated as part of this Contract of
Insurance No. D545:
10.01 Notwithstanding any other provision of this Contract or Contract No.
D547, the Insured shall not file applications, and OPIC shall have no liability,
for claims under inconvertibility coverage under this Contract of Insurance or
Contract of Insurance No. D547, or both, which, in the aggregate, exceed
$1,250,000 in any 91-day period.
10.02 A new subsection 9.01.11, "WORKERS' RIGHTS", is added to read
as follows.:
"11. WORKERS' RIGHTS. The Investor agrees not to take
actions to prevent employees of the foreign enterprise from
lawfully exercising their right of association and their
right to organize and bargain collectively. The Investor
further agrees to observe applicable laws relating to a
minimum age for employment of children, acceptable conditions
of work with respect to minimum wages, hours of work, and
occupational health and safety, and not to utilize forced or
compulsory labor. The Investor is not responsible under this
paragraph for the actions of a government."
INVESTOR
By: /s/ William H. Keogh Date: September 25, 1992
----------------------- -----------------------
Effective September 30, 1992
WILLIAM H. KEOUGH, SENIOR VICE PRESIDENT CHIEF FINANCIAL OFFICER, AND TREASURER
-------------------------------------------------------------------------------
(Print Name and Title)
OVERSEAS PRIVATE INVESTMENT CORPORATION
By: /s/ Thomas Mansbach Date:
------------------------ -----------------------
Effective September 30, 1992
B. Thomas Mansbach, Managing Director
-------------------------------------------------------------------------------
(Print Name and Title)
<PAGE> 1
CONSULTING AGREEMENT
This Agreement is made and entered into as of the 2nd day of January 1995,
by and between The Pioneer Group, Inc., a corporation organized and existing
under the laws of the state of Delaware, U.S.A. ("Pioneer"), and Pioneer First
Polish Trust Fund Joint Stock Company, a Company organized and existing under
the laws of the Republic of Poland (the "Company").
RECITALS
Whereas, the Company is engaged in the investment management business and
all business related thereto in Poland and in connection with its activities
requires certain advice and services described herein;
Whereas, Pioneer has the experience necessary to provide effective
information, advice and services which may be required in support of the
Company's activities and Pioneer is willing to make available to the Company
the benefits of the experience with advice and services in respect of the
Company's activities;
Whereas, the Company desires to enter into a consulting agreement with Pioneer
and Pioneer desires to perform consulting services for the Company;
Now therefore, in consideration of the mutual promises hereinafter set forth
and of the good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
SERVICES TO BE PERFORMED
1.0. Pioneer shall perform such general, consulting, advisory, and related
services (the "Services") to and for the Company as may reasonably be
requested from time to time by the Company, including, but not limited
to, the services described in subsection 1.1. below (including, but not
limited to, any financial, administrative, and other advice and services
as may be required in support thereof). The Services are rendered to the
Company by
1
<PAGE> 2
Pioneer in an attempt to increase the profitability and efficiency of the
operation, giving due cognizance to communication and logistical impediments.
1.1 The Services include, but are not limited to, the following:
(a) investment management techniques, including, but not limited to,
the establishment of investment criteria, the implementation of
portfolio management techniques, and the development of fundamental
and technical analysis for evaluating individual securities;
(b) financial techniques, including, but not limited to, the
establishment and monitoring of budget and cost controls, the
implementation of capital budgeting practices and the ongoing
optimization of insurance coverages and premiums;
(c) telecommunications and computer hardware and software
implementation and operation;
(d) cash management techniques, including, but not limited to, the
establishment and monitoring of an effective banking network,
maximizing interest income, controlling tariffs and enhancing
payment processing to achieve greater efficiency and cost
effectiveness;
(e) providing distribution, sales, and marketing advice and support to
augment sales efforts and to assist in the evaluation of related
consultants and contractors;
(f) logistical back-up support on the ordering and movement of
services.
1.2. The services shall be performed by Pioneer utilizing its own staff and
premises.
ARTICLE 2
RELEVANT COSTS AND ESTABLISHMENT OF THE CONSULTING
SERVICES FEE STRUCTURE
2.0. The Consulting Services Fee shall be as provided in Article 3 below. The
Consulting Services Fee shall be based on the costs of providing the
Services, as computed in accordance with Pioneer's customary accounting
practice with respect to materials, labor, and overhead expended;
provided, however, that the Consulting Services Fee is not to exceed 100%
of
2
<PAGE> 3
aforesaid costs which include specifically, but are not limited to, the
following:
(a) compensation, benefits, and office facilities attributable to
Pioneer's employees dedicated to providing the Services;
(b) a proportionate share of compensation, benefits, and office
facilities associated with Pioneer's employees responsible for
providing the Services on a non-routine basis;
(c) materials and services including telecommunications consumed in
providing the Services; and
(d) a proportionate share of the cost of Pioneer's office facilities
consumed by the Company while conducting Company business.
ARTICLE 3
PAYMENT BY THE COMPANY
3.0. The Company shall pay to Pioneer a Consulting Services Fee of US$
375,000 per quarter.
3.1. Pioneer shall not be required to advance any of its own funds on behalf of
the Company, and the Company agrees to advance all amounts necessary
therefor. If Pioneer elects to advance any of its own funds on behalf of
the Company shall cover Pioneer for such amounts within five days of
receiving written notice from Pioneer.
ARTICLE 4
CONFIDENTIALITY
4.0. For purpose of this Article 4 the term "Confidential Information" shall
mean, by way of illustration and not limitation, all knowledge or
information (whether or not patentable and whether or not copyrightable)
owned, possessed or used by Pioneer, including without limitation, any
invention, discovery, computer software, software documentation, data,
technology, designs, innovations, improvements, vendor information,
customer information, apparatus, equipment, trade secret, process,
research, report, technical data, know-how, technology, marketing or
business plan, forecast, unpublished financial statement, budget, license,
price, cost and employee list that is disclosed by, or on behalf of,
Pioneer as well as all data derived therefrom.
3
<PAGE> 4
4.1. The Company undertakes that both during the term of this Agreement and
after its termination it will:
(a) preserve and cause its employees to preserve the secrecy of any
Confidential Information;
(b) not disclose to any third party any Confidential Information
except with Pioneer's prior written consent;
(c) use Confidential Information only for the Company's activities
in accordance with the terms of this Agreement.
4.2. The Company's obligations under this Article 4 shall not apply to any
information that:
(a) is or becomes known to the general public under circumstances
involving no breach by the Company or others of the terms of this
Article 4;
(b) is generally disclosed to third parties by Pioneer without
restriction on such third parties;
(c) is approved for release by written authorization of the Board of
Directors of Pioneer.
ARTICLE 5
INDEPENDENT CONTRACTOR STATUS
50. Pioneer undertakes its duties under this Agreement as an "independent
contractor" providing information, advice and services, and not as an
employee or agent of the Company.
51. It is agreed between the parties hereto that the technical knowledge,
information, advice, interpretations, and recommendations are provided
hereunder to the Company by Pioneer in an advisory capacity and that the
decision to apply any of them or make use thereof for the benefit of the
Company's activities rests with the Company.
ARTICLE 6
PAYMENT CONDITIONS
6.0. Except as otherwise provided herein, the Company shall pay in US Dollars
to Pioneer within 30 days of receipt of an invoice of amounts due
hereunder at a place, and into an account to be nominated by Pioneer.
4
<PAGE> 5
6.1. The Company shall be responsible for and carry the risk of obtaining all
consents, permissions, and approvals of whatever nature with respect to the
payments required to be made pursuant to this Agreement.
ARTICLE 7
AUDIT CERTIFICATE
7.0. If the Company requires verification of any payment due to Pioneer under
this Agreement, Pioneer shall at the sole cost and expense of the Company
furnish to the Company a certificate by its statutory auditors.
ARTICLE 8
ASSIGNMENT
8.0. Neither this Agreement nor any rights or obligations created herein is
assignable by either of the parties hereto without the written consent
of the other party.
ARTICLE 9
FORCE MAJEURE
9.0 Neither party shall be liable for any failure to fulfill any term of this
Agreement, if fulfillment has been interfered with, hindered, delayed or
prevented by any circumstances whatsoever which are not reasonably within
the control of such party; provided that this exception shall not apply
to any obligation to make payment under this Agreement.
ARTICLE 10
DURATION
10.0 This Agreement is concluded for the period from January 2, 1995 till
December 31, 1995.
ARTICLE 11
APPLICABLE LAW
11.0 The validity, application, interpretation and implementation of this
Agreement shall be exclusively governed by the laws of the Commonwealth of
5
<PAGE> 6
Massachusetts, U.S.A.; this Agreement shall be deemed to be under seal
and executed as of the day and date referred to above.
ARTICLE 12
ENTIRETY OF AGREEMENT; AMENDMENTS
12.0 This Agreement constitutes the entire agreement between the parties
hereto, and supersedes all prior negotiations, understandings and
agreements between them with respect to the subject matter hereof.
12.1 The provisions of this Agreement may be waived, supplemented, altered,
amended, or modified only by an instrument in writing signed by both
of the parties hereto.
ARTICLE 13
MARGINAL HEADINGS AND TITLES
13.0 The marginal headings and titles of the Articles, subsections and
paragraphs are inserted for convenience of reference only and in no way
define, limit or effect the scope or substance of this Agreement.
ARTICLE 14
NOTICES
14.0 Any notice required or permitted to be given to the parties hereto shall be
given in writing and shall be deemed effectively given upon personal
delivery or within one week of being sent by expedited courier, fees
prepaid addressed to the other party at the address shown below, or at
such other address as such party may designate in writing to the other
party:
(a) Pioneer First Polish Trust Fund
Joint Stock Company
INTRACO, 29th Floor
Stawki 2
00193 Warszawa, Poland
(b) The Pioneer Group, Inc.
60 State Street
Boston, Massachusetts 02109
6
<PAGE> 7
ARTICLE 15
SEVERABILITY
15.0 In the event that any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be impaired.
IN WITNESS WHEREOF the parties have caused this Agreement to be duly
executed as of the second day of January, 1995 in two original copies, in
English.
THE PIONEER GROUP, INC.
By: /s/ JOHN F. COGAN, JR.
-----------------------------
John F. Cogan, Jr., President
PIONEER FIRST POLISH TRUST FUND
JOINT STOCK COMPANY
By: /s/ Alicja K. Malecka
-----------------------------
Alicja K. Malecka, President
7
<PAGE> 1
SERVICES CONTRACT
BETWEEN
PIONEERING SERVICES CORPORATION
AND
FINANCIAL SERVICES LIMITED
GENERAL
-------
This agreement is entered into as of the first day of January 1994 between
Pioneering Services Corporation, a U.S. Corporation (PSC) and Financial Services
Limited, a joint venture limited company organized under the laws of the
Republic of Poland (FSL).
FSL is engaged in the business of providing shareholder accounting services to
Pioneer First Polish Trust Fund (PFPTF) in Poland. There is no other Shareholder
accounting agent in Poland, no computer or system expertise in shareholder
accounting in Poland and no experts in Poland to support the shareholder
accounting function. FSL would like to continue to receive advice and support in
the production of shareholder accounting services and PSC would like to continue
to supply help and advice.
Notwithstanding the following services to be provided, the general direction of
the support will be to make FSL more self-sufficient and operationally
independent.
I. General Technical Advice and Other Advice and Services
PSC shall supply general advisory, systems support, and general management
consulting advice as requested by FSL. These services may include but are
not limited to the following:
a. Financial planning including the establishment and monitoring of budget,
business planning and cost controls, insurance coverage and premiums.
b. Telecommunications and computer configuration suitable for shareholder
accounting operations, automation of movement of data, and special
processing requirements that occur from time to time in operating the
Global System.
c. Supplying programming support for changes to the Global system to
support the dynamic sales environment, infrastructure environment, and
governmental environment that exists in Poland. Additionally, to look
at ways to shorten and improve cycle times, print capabilities, output
changes, and specific operating improvements as they occur in the
course of the business in Poland.
d. To provide management experience in guiding manpower requirements for
expanding operations, space, communications capability, and storage
capacity.
e. Installing and monitoring management reports on workflow, backlogs,
cycle times, numbers of accounts, bank/operations money reconciliation.
f. Aiding in establishment of a country wide data communication network to
move new account, redemption and repeat cash information through the
network into the computer system at FSL.
g. Provide training and improvements in operating systems in Poland. To
have available training capability in the U.S. for FSL employees as
needed in the mutual fund industry along with related functions.
h. Supply organizational guidance to FSL for management support in handling
and coordinating the operations environment.
<PAGE> 2
i. Providing support for consulting contracts including guidance in
responding to requests for proposal, format, English language
translation, U.S. experience expertise and worldwide knowledge
including other experts in various fields.
j. Providing access to industry conferences, training programs, providers
of equipment and keeping FSL informed.
II. Relevant Costs and Establishment of the Quarterly Fee Structure
A quarterly fee will be established for the above services that will be
negotiated every 2 years. The initial quarterly fee will be based on
the actual cost of services provided in accordance with PSC's, schedule of
costs for labor, overhead, systems support and training.
a. Compensation for labor includes labor costs, benefits and office
facilities for employees dedicated to providing services.
b. A share of compensation, benefits and office facilities for PSC
employees responsible for providing the services on a non-routine
basis.
c. Materials and services including telecommunications carriers, fax
machines, etc. in providing services.
d. A proportionate share of the costs associated with outside services
used in producing service for FSL such as training, conferences,
purchase of goods and services not easily obtainable in Poland.
III. Fees
FSL shall pay to PSC a quarterly fee of $50,000. In addition FSL will
reimburse PSC for all costs associated with providing these services
while in Poland such as travel, hotel, food, etc. The hotel and food shall
not exceed $150 per diem.
IV. Confidentiality
FSL shall keep confidential all information which it obtains from PSC
because of this service support agreement including but not limited to any
invention, discovery, computer software, software documentation, computer
hardware, data technology, designs, innovations, improvements, vendor
information, customer information, trade information, secrets, process
information, technical data, budgets, business plan, consulting
information gathered, prices, costs, and employee information.
V. Indemnification
FSL shall indemnify, defend and hold harmless Pioneer and Pioneers present
and future officers, directors, employees, agents and assignees from and
against any and all losses, claims, costs, damages, liabilities, fines,
penalties, forfeitures, causes of action, suits, and expenses (including,
but not limited to, settlement costs and any legal, accounting or other
expenses for investigating or defending any actions or threatened actions)
of any kind or of any nature arising directly or indirectly out of, or in
connection with, the execution of any work covered by this Agreement.
Should any work performed by PSC personnel need to be redone the
associated out-of-pocket expenses will be borne by PSC.
2
<PAGE> 3
VI. Independent Contractor Status
PSC undertakes its duties under this Agreement as an "independent
contractor" providing information, advice and services, and not as an
employee or agent of FSL.
It is agreed between the parties that the technical knowledge,
information, advice, interpretations, and recommendations are provided to
FSL by PSC in an advisory capacity and that the decision to apply any of
them or make use of them for the benefit of FSL's activities is with FSL.
PSC will make all reasonable efforts to undertake and complete the task
identified by FSL as promptly as can be expected in agreement with FSL.
VII. Payment Conditions
Payments shall be made in US Dollars to PSC within 30 days of receipt of
an invoice of amounts due at a place, and into an account to be nominated
by PSC.
FSL shall be responsible for and carry the risk of obtaining all
consents, permissions, and approvals of whatever nature with respect to
the payments required to be made pursuant to this Agreement.
VIII. Force Majeure
Neither party shall be liable for any failure to fulfill any term of this
Agreement, if fulfillment has been interfered with, hindered, delayed
or prevented by any circumstances whatsoever which are not reasonably
within the control of such party; provided that this exception shall not
apply to any obligation to make payment under this Agreement.
IX. Applicable Law
All matters not expressly provided for in this agreement and related to
the rights and obligations of the parties to this agreement with respect
of PSC and FSL activities shall be governed by this agreement and
Polish law, in particular the Commercial Code and the Civil Code.
X. Entirety of Agreement; Amendments
This Agreement constitutes the entire agreement between the parties, and
supersedes all prior negotiations, understandings and agreements between
them with respect to this subject matter.
The provisions of this Agreement may be waived, supplemented, altered,
amended, or modified only in writing signed by both of the parties.
3
<PAGE> 4
XI. Notices
Any notice required or permitted to be given to the parties shall be
given in writing and shall be deemed effectively given upon personal
delivery or within one week of being sent by expedited courier, fees
prepaid addressed to the other party at the address shown below, or at
such other address as such party may designate in writing to the other
party:
a. Financial Services Limited
ul. Wiertnicza 24 G
Warszawa, Poland
b. Pioneering Services Corporation
60 State Street
Boston MA 02109
XII. Severability
In the event that any provision of this Agreement shall be invalid,
illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be impaired.
IN WITNESS WHEREOF the parties have caused this Agreement to be duly
executed as of the in duplicate original.
FSL:
Financial Services Limited
By: /s/ Boleslaw Meluch
-------------------------
Boleslaw Meluch
President
PSC:
Pioneering Services Corporation
By: /s/ William H. Smith, Jr.
-------------------------
William H. Smith, Jr.
President
4
<PAGE> 1
AGREEMENT
signed 25th of June, 1992 in Warsaw between Pioneer Pierwsze
Polskie Towarzystwo Funduszy Powierniczych, Spolka Akcyjna, located
in Warsaw, hereinafter called "Principal" and Bank Polska Kasa
Opieki S.A., located in Warsaw, hereinafter called the "Appointee,"
is set forth as follows:
Article 1
1. The Principal requests the Appointee to carry out, on behalf
of the Principal, the following activities:
(1) accepting orders to buy and redeem units of participation,
hereinafter called the "Units," in Pioneer First Polish Trust Fund,
hereinafter called the "Fund," in the forms prepared by the
Appointee and accepted by the Principal, signed and completed
legibly by a person placing an order;
(2) accepting payments for the Units;
(3) making redemption payments for the Fund's units;
(4) advertising and promoting the Fund.
2. For purposes of performing the duties referred to in Section 1
above, the Appointee shall
1/ Inform clients about the availability of, and procedures
for, purchasing and redeeming the Units in accordance with the
terms of the Fund's By-laws and materials provided by the Principal
which have been earlier accepted by the Appointee;
2/ Act with reasonable care, in accepting orders to purchase
and redeem the Units; accepting payment therefor and making
redemption payments;
3/ Transfer to Financial Services Spolka z ograniczona
odpowiedzialnoscia, located in Warsaw, hereinafter called "FS Sp.
z o.o.," acting on behalf of the Principal, the original copy of
each purchase and redemption order together with documents
submitted by clients and daily reports with compiled data about
each client who placed an order. The activities referred to
hereinabove shall be performed daily after the close of business;
4/ Transfer, on a daily basis, funds or money orders accepted
in payment for the Units to an account held in the name of FS Sp. z
o.o., as agent for the Principal, in Bank Polska Kasa Opieki SA;
5/ Train employees in accepting purchase or redemption orders
indicated in Art. 1, Sec. 2. Paragraph 2.
<PAGE> 2
3. The Appointee is liable for any losses incurred by the
Principal caused solely by the Appointee.
4. In performing the activities referred to in Article 1,
Sections 1 and 2 above, the Appointee shall only use advertising
materials and information delivered to it, or approved, by both
parties.
5. The Appointee shall inform its employees that disclosing any
information about the Fund, inconsistent with the Fund's By-laws,
and other materials provided by the Principal, is prohibited.
6. The Appointee shall establish detailed procedures for use in
all its branches and agencies in accepting and processing client
orders referred to in Article 1, Sections 1 and 2 above, based upon
the the Fund's By-laws.
7. The scope of advertising and marketing activities concerning
the Fund is outlined in Appendix 1 hereto.
Article 2
1. The Principal's duties hereunder are as follows:
1/ Ensuring that the funds allocated for redemption of the
Units will be transferred within the time period and in the amount
specified in the Fund's By-laws to the account held in the name of
FS Sp. z o.o., on behalf of the Principal, at Bank Pekao SA in
order to make redemption payments.
2/ Designing and implementing systems for redemption payments
compatible with the Appointee's systems.
3/ Training the Appointee's employees about the functioning of
the Fund, advertising and promoting the Fund and the implementation
of the activities to be performed by the Appointee under this
Agreement.
4/ Providing the branches and agencies of the Appointee set
forth in Article 3 hereof with copies of the Fund's prospectus and
necessary information and marketing materials in quantities
sufficient for the Appointee to perform its duties under the
Agreement; the first delivery of said materials shall take place no
later than 4 business days prior to the commencement of the
Appointee's performance hereunder.
2. The Appointee is responsible solely for the costs of
transportation, food and hotel accommodation incurred by the
Appointee's employees in connection with the training referred to
in Art. 2, Sec. 1, par. 3 above.
2
<PAGE> 3
Article 3
The Appointee's activities referred to in Article 1 herein
shall be carried out through its branches and agencies throughout
Poland where Client Service Departments of the Central Brokerage
Office operate.
Article 4
1. The Appointee shall be compensated by the Principal for the
activities it shall perform in accordance with art. 1, paragraph 1,
items 1,2,3 above, in proportion to the amount of money or money
transfers received as payment for the purchased Units in accordance
with the following schedule:
up to, but excluding, 250.000.000 zl 4.50%
250.000.000 zl up to, but excluding. 1.000.000 zl 3.75%
1.000.000.000 zl up to, but excluding, 5.000.000.000 zl 3.00%
5.000.000.000 zl and above 2.00%
2. The Principal shall cover the cost of processing redemption
payments, in an amount of 30,000.00 Polish zlotys for each
transaction, in the event a number of all redemptions, whether the
redemptions are made in whole or in part, shall be in excess of
1.5% of all registered positions of the Fund's unitholders
maintained at FS Sp. z o.o. on a monthly basis, provided that said
transaction fee shall be applicable solely to transactions which
occur after the number of redemptions has reached the 1.5%
threshold specified hereinabove.
3. Members of the Appointee's Management Board and the Supervisory
Board, the Appointee's employees, FS Sp. z o.o.'s Management Board
and the Supervisory Board, and FS Sp. z o.o.'s employees shall not
pay commission for buying Units in the amounts set forth in Article
4, Section 1 hereof.
4. The compensation shall be paid monthly, within seven business
days of the following month into the Agent's account in Bank Pekao
SA, II Branch in Warsaw, account no. 501031-210245931610-1110. The
Principal shall make available to the Appointee the information
which constitutes the basis for calculating monthly compensation in
accordance with Article 4, Section 1 hereof.
5. The costs of advertising and promoting the Fund, except for the
cost of advertising campaign referred to in Appendix 1 to the
Agreement, will be covered in its entirety by the Principal.
3
<PAGE> 4
Article 5
Both parties undertake to cooperate fully in performing their
respective obligations under this Agreement in order to ensure the
effective implementation hereof.
Article 6
The Agreement has been signed for an undefined period of time.
The parties may terminate this Agreement at any time upon a three-
month termination notice.
Article 7
1. This Agreement shall become effective on the date it is signed
by both parties except art. 4, paragraph 2, which shall become
effective six months after the date on which the Principal
commences offering the Fund's units.
2. The Appointee shall commence its performance hereunder 4
business days after the Principal has performed its duties set
forth in Art. 2, Sec. 1, par. 4. hereof. In the event of a delay
on the performance of said obligations by the Principal, the 4 day
period shall commence on a day following the day on which the
Principal fulfilled said duties.
Article 8
To be valid, any amendments to this Agreement may only be made
in written form signed by both parties, otherwise they become null
and void.
Article 9
Matters not provided for in this Agreement shall be governed
by the Polish Civil Code (the "Code"), in particular, Title XXI of
the Code.
Article 10
The Agreement has been signed in four copies, with two copies
thereof provided for each party.
The Agreement has been written in Polish and English, with
both language versions equally valid. The Polish version
4
<PAGE> 5
of this Agreement shall be used exclusively in proceedings before
Polish authorities.
Pioneer Pierwsze Polskie
Towarzystwo Funduszy
Powierniczych, Spolka
Akcyjna
/s/ William H. Smith, Jr. /s/ James L. Spencer
---------------------------- ------------------------------
William H. Smith, Jr. James L. Spencer
President Vice President
Bank Polska Kasa
Opieki S.A.
/s/ Boleslaw Meluch /s/ Igor Chalupec
---------------------------- ------------------------------
Boleslaw Meluch Igor Chalupec
Director of the Mutual Director of the
Funds Central Brokerage
Department Office
5
<PAGE> 6
APPENDIX 1
MARKETING PROGRAM -- THE SCOPE OF ACTIVITIES RELATED TO THE
ADVERTISING AND PROMOTING PIONEER PIERWSZY POLSKI FUNDUSZ
POWIERNICZY (THE "FUND") CARRIED OUT BY BANK POLSKA KASA OPIEKI SA
(THE "BANK").
THE BANK IS APPOINTED BY PIONEER PIERWSZE POLSKIE TOWARZYSTWO
FUNDUSZY POWIERNICZYCH, S.A. ("PIONEER PPTFP, S.A.") TO PERFORM
THE FOLLOWING FUNCTIONS:
I. 1. WITHIN THE FRAMEWORK OF A TWO-WEEK ADVERTISING CAMPAIGN
RELATED TO THE FUND, THE BANK SHALL CAUSE ADVERTISEMENTS FOR THE
FUND TO APPEAR IN THE NEWSPAPERS, MAGAZINES, AND IN THE RADIO, AS
SPECIFIED BELOW:
A) NATIONAL NEWSPAPERS
1) "Gazeta Wyborcza" (1/3 of a page) three times in the daily
edition; two times in the Saturday/Sunday edition;
2) "Rzeczpospolita" (1/3 of a page) five times in the daily
edition;
3) "Sztandar Mlodych" (1/3 of a page) 10 times in the daily
edition;
4) "Zycie Warszawy" (1/3 of a page) three times in the daily
edition; two times in the Saturday/Sunday edition.
5) "Polityka" (1/4 of a page) two times;
6) "Gazeta Bankowa" (1/2 of a page) one time;
7) "Warsaw Voice" (1/2 of a page) two times;
8) "Wprost" (one column, in color) one time;
B) LOCAL NEWSPAPERS
1) "Dziennik Baltycki" (magazine) two times;
2) "Dziennik Lodzki" (magazine) two times;
3) "Gazeta Poznanska" (magazine) two times;
4) "Trybuna Slaska" (magazine) two times;
5) "Gazeta Krakowska" (magazine) two times;
6) "Gazeta Robotnicza" (magazine) two times.
C) RADIO
1) "Radio Zet" ten times daily for ten days.
I. 2. The Bank shall cover one half of the cost of the two-week
advertising campaign outlined in Paragraph I.1. above. The Bank's
contribution to cover the cost of said campaign shall not exceed
596.000.000 zlotys. The remaining cost of said advertising
campaign shall be covered by Pioneer PPTFP, S.A.
<PAGE> 7
II. The Bank shall place posters and distribute other advertising
materials at the Fund in its branches, agencies and other units.
III. The Bank shall distribute questionnaires among people
purchasing the Fund's units.
2
<PAGE> 1
AGREEMENT
between
Bank Polska Kasa Opieki S.A., with its principal office in
Warsaw, Poland ("Polish Shareholder"), and Pioneer International
Corporation, with its principal office in Wilmington, Delaware
("U.S. Shareholder"), collectively called hereinafter
"Shareholders," sets forth the rights and obligations of the
Shareholders with regard to the activities of Financial Services
Spolka z ograniczona odpowiedzialnoscia, ("FS Sp. z o.o.") (the
"Agreement").
In connection with FS Sp. z o.o.'s Deed of Association of
January 24, 1992 (the "Company Agreement"), the Shareholders,
desiring to ensure the necessary conditions for the development and
performance of FS Sp. z o.o.'s activities, have concluded the
following:.
ARTICLE 1: SCOPE OF FSL'S ACTIVITIES; REPRESENTATIONS
1.1. FS Sp. z o.o. shall perform any or all of the functions
set forth in the Company Agreement either (a) for its own account,
after it has obtained all necessary approvals, if required, (b) for
the account of the Shareholders, or (c) for the account of other
authorized persons.
1.2. Each of the Shareholders hereby represents and warrants
that:
(a) The terms and conditions of this Agreement and
the activities of each Shareholder contemplated herein do not
conflict with their respective statutes and bylaws;
(b) It will use its best efforts to enable FS Sp. z
o.o. to obtain all approvals from governmental authorities which
may be required;
1.3. The Shareholders and FS Sp. z o.o. shall not be
responsible for any obligation of either Shareholder incurred
before or after the execution of this Agreement unless such
obligation was incurred pursuant to the terms of this Agreement and
the Company Agreement.
ARTICLE 2: SHARE CAPITAL OF FS SP. Z O.O.
2.1. By unanimous resolution of the Shareholders' General
Assembly further contributions to FS Sp. z o.o.'s capital may be
made in installments or lump sums, according to FS Sp. z o.o.'s
needs.
<PAGE> 2
2.2. Profits due the U.S. Shareholder shall be transferred
out of Poland through the Polish Shareholder, pursuant to article
25 of the Law on Companies with Foreign Participation, hereinafter
called the "Foreign Participation Act" of June 14, 1991. Such net
profits will be transferred out of Poland, after payment of
standard transfer fees, within four weeks after the date of receipt
by the U.S. Shareholder of an auditors certificate required by the
Foreign Participation Act.
ARTICLE 3: NON-MONETARY PERFORMANCE OF SHAREHOLDERS
3.1. In addition to the Polish Shareholder's obligations set
forth in Article 3 of the Company Agreement, the Polish Shareholder
shall use its best efforts to assist, as needed, with the following
matters concerning FS Sp. z o.o.:
(a) Timely execution of all necessary documentation
and implementation of all matters in which the Polish Shareholder's
assistance is reasonably required;
(b) Providing guidance to the U.S. Shareholder to
facilitate the U.S. Shareholder's understanding of Polish
regulations affecting FS Sp. z o.o., including those concerning
taxation of services and sales policies;
(c) Obtaining all required permits for conducting
business by FS Sp. z o.o.;
(d) Obtaining permits required for conducting
business related to FS Sp. z o.o. on the Polish territory by
foreign nationals who are members of the Supervisory Board and the
Management Board of FS Sp. z o.o.;
(e) Establishing and developing contacts between FS
Sp. z o.o. and Polish institutions, organizations and government.
(f) Improving FS Sp. z o.o.'s services according to
market demands and development plans;
3.2. In addition to the U.S. Shareholder's obligations set
forth under the Article 3 of the Company Agreement, the U.S.
Shareholder shall use its best efforts to assist the Polish
Shareholder and FS Sp. z o.o., as needed, with the following
matters concerning FS Sp. z o.o.:
(a) Providing information related to the manner in
which FS Sp. z o.o. will operate;
(b) Determining and helping to acquire the
necessary accounting systems for operations, with the cost of
acquiring such systems to be charged to FS Sp. z o.o.;
2
<PAGE> 3
(c) Training FS Sp. z o.o.'s personnel and the
Polish Shareholder's employees in the area related to FS Sp. z
o.o.'s activities;
(d) Improving FS Sp. z o.o.'s services according to
market demands and development plans;
(e) Soliciting foreign specialists to work for FS
Sp. z o.o.;
(f) Establishing affiliates and representative
offices of FS Sp. z o.o. in other countries;
(g) Obtaining visas and permits for FS Sp. z o.o.'s
employees and the Polish Shareholder's representatives to make
trips (1) to the countries where U.S. Shareholder's enterprises and
representative offices are located, (2) to the countries proposed
by both Shareholders for training FS Sp. z o.o.'s personnel; or (3)
for other purposes connected with FS Sp. z o.o.'s activities.
(h) Obtaining the assistance of skilled and
experienced foreign companies to facilitate the efficient
management and operations of FS Sp. z o.o.'s projects.
(i) Establishing the principles of portfolio
accounting and custody services;
(j) Timely execution of all necessary documentation
and implementation of all matters in which the U.S. Shareholder's
assistance is reasonably required;
(k) Promoting services provided by FS Sp. z o.o. to
potential foreign fund groups.
3.3. In addition, for a period of ten years from
the date of establishment of FS Sp. z o.o., provided that this
Agreement is still in effect, each Shareholder agrees that it will
not, without prior consent of the other Shareholder, utilize or
become affiliated with any entity other than FS Sp. z o.o. which
would provide services in Poland comparable to the services to be
provided by FS Sp. z o.o. Each Shareholder further agrees that it
itself shall not carry activities similar to those performed by FS
Sp. z o.o. in Poland.
3.4. The U.S. Shareholder is not a competitor to FS
Sp. z o.o.
3.5. Each Shareholder shall render assistance to FS
Sp. z o.o. in advertising and marketing FS Sp. z o.o.'s products
and services, as mutually agreed.
3
<PAGE> 4
ARTICLE 4: MISCELLANEOUS MATTERS RELATED TO MEMBERSHIP OF THE
SUPERVISORY BOARD AND MANAGEMENT
4.1. Each Shareholder shall appoint two designees
to the Supervisory Board of FS Sp. z o.o. Both Shareholders agree
to accept, on a mutual basis, their respective designees.
4.2. In the event that any member of the Management
Board of FS Sp. z o.o. shall be made a party to any action brought
by or against a third party and resulting from an action or
omission undertaken by such person in his or her capacity as a
member of the Management Board, he or she shall be entitled to to
be represented in such action by counsel of his or her choice and
accepted by FSL which acceptance will not be reasonably refused,
and have reasonable expenses of such representation paid by FS Sp.
z o.o., provided, however, that such person shall not be entitled
to any payment of his or her expenses by FS Sp. z o.o., if he or
she acted in violation of the standard of reasonable care
applicable to managers in a limited liability company.
ARTICLE 5: PERSONNEL
5.1. The staff of FS Sp. z o.o. shall consist
predominantly of Polish nationals.
5.2. Any foreign national to be employed by FS Sp.
z o.o. shall enter into an individual employment contract with FS
Sp. z o.o., subject to approval by the Management Board.
5.3. Remuneration, work schedule, vacation, social,
security, health and other insurance for Polish employees of FS Sp.
z o.o. shall be determined by the Management Board in accordance
with the Polish law. The terms of employment of foreign nationals
shall be agreed upon by them and the Management Board by taking
into account, where appropriate, the standards applicable to Polish
employees.
ARTICLE 6: TRANSFER OF SHARES
6.1. Any assignment of shares by either Shareholder
shall be in writing. An executed duplicate copy of such assignment
shall be delivered to FS Sp. z o.o. within sixty (60) days from the
effective date of such assignment.
ARTICLE 7: CONFIDENTIALITY
7.1. During the term of this Agreement and for a
period of five (5) years thereafter, each Shareholder shall hold in
confidence and shall not disclose to any third party, without the
prior written consent of the other Shareholder, any information
related to FS Sp. z o.o. that the Shareholder has received from
<PAGE> 5
the other Shareholder, or their respective employees, except the
information that:.
(a) becomes public before the time of its
disclosure without any fault of the receiving Shareholder; or
(b) was obtained without any obligation of
confidentiality from a third party;
(c) must necessarily be given to a third party for
purposes of this Agreement, in which case the disclosing
Shareholder must cause the third party to keep the conveyed
information confidential in accordance with the terms and
conditions set forth herein;
(d) was duly requested by a court or a governmental agency.
7.2. Each Shareholder shall determine the scope of
confidentiality with respect to written materials transmitted to
the other, including drawings, reports and notes and, further,
shall determine which copies, reproduction and reprints must be
plainly marked to indicate the confidential nature thereof.
7.3. Each Shareholder shall obtain a statement of
confidentiality from its respective employees and the employees of
FS Sp. z o.o., including members of the g4 Supervisory Board and
the Management Board, to keep confidential any information related
to FS Sp. z o.o. and obtained by each such employee or member in
the course of carrying out his or her employment or membership
duties.
ARTICLE 8: BREACH OF AGREEMENT
8.1. Except as stated in article 10 hereof, each
Shareholder shall be liable to the other Shareholder for failure to
fulfill its obligations under this Agreement or for improper
fulfillment of its obligations under this Agreement, as a result of
violating the reasonable care standard applicable to its activities
hereunder, and shall compensate the other Shareholder directly for
damages caused by such failure or nonperformance. Such liability
shall be limited to $500,000.00 unless it results from a willful
wrongful action or omission. Applicable payment shall be made in
Polish zlotys on the basis of the average exchange rate between the
buy and the sell price announced by the Polish Shareholder on the
day on which the liability is determined.
8.2. FS Sp. z o.o.'s property shall not be utilized
in satisfaction of each Shareholder's liability hereunder.
5
<PAGE> 6
ARTICLE 9: INSURANCE
9.1. The property of FS Sp. z o.o. shall be
insured by any appropriate insurance company. At a Shareholder's
request and upon consent of the other Shareholder, FS Sp. z o.o.
may enter into additional insurance contracts with other Polish or
international insurance agencies, if not prohibited by Polish Law.
ARTICLE 10: FORCE MAJEURE
10.1. No Shareholder shall be liable for failure
to fulfill its obligations under this Agreement or for improper
fulfillment of such obligations, in part or in whole, if such
failure or improper performance was caused by circumstances which
cannot be predicted or prevented (such circumstances are
hereinafter called "Force Majeure").
For purposes of this Agreement, it is agreed that
Force Majeure includes, among others, war, uprisings, earthquake,
flood, fire, legal acts and decisions of Polish authorities
applicable to the Shareholder. When the Shareholder determines
that it is unable to fulfill its obligations hereunder by reasons
of Force Majeure, it will, if possible, immediately notify the
other Shareholder by fax, telex, or express mail and, upon request,
to the extent it is possible, will submit to the Shareholder a
certificate issued by Polish authorities attesting to that event.
The non-performing Shareholder shall inform the
other Shareholder in writing when the Force Majeure ceases to exist
and will immediately resume the performance of its obligations
under this Agreement.
10.2. If the state of non-performance lasts for
more than one month and if, after one month, the performing
Shareholder reasonably believes that performance cannot be resumed
within another one-month period, then such Shareholder shall have
the right to terminate this Agreement with immediate effect.
ARTICLE 11: LANGUAGE
11.1. Polish and English languages shall be
used, as appropriate, as working languages in FS Sp. z o.o.'s
activities.
ARTICLE 12: AMENDMENTS
12.1. In the event that any provision of this
Agreement is illegal, invalid or unenforceable by reasons of Polish
law, then such provision shall be treated as having no further
force and effect and the Shareholders shall be required, as
promptly as possible, and, to the extent legally permitted, to
6
<PAGE> 7
substitute such provision by another provision, acceptable by the
Polish legal order.
12.2. This Agreement cannot be amended except by
an instrument signed by all parties. Such instrument has to be in
writing, otherwise being null and void.
ARTICLE 13: ARBITRATION
13.1. The Shareholders shall exercise their best
efforts to resolve amicably all disputes or differences arising
between them in connection with this Agreement.
13.2. All disputes which arise under this
Agreement, and are not resolved pursuant to Section 13.1 hereof,
shall be resolved by arbitration, with each Shareholder appointing
one arbitrator and the two arbitrators so appointed choosing the
third arbitrator.
13.3. If within three months from the submission
of a dispute for arbitration, the arbitrators cannot resolve the
dispute and the Shareholders cannot settle it, the dispute shall be
brought before the Stockholm Chamber of Commerce ("SCC") and all
proceedings before SCC will be conducted in English. The governing
law shall be the Polish law.
ARTICLE 14: DURATION AND TERMINATION OF THE AGREEMENT
14.1. This Agreement is entered into for a term
of ten (10) years (the "Expiration Term"), and, unless one
Shareholder notifies the other, at least six (6) months before the
end of the Expiration Term of its intent to terminate this
Agreement, this Agreement shall automatically be extended for an
additional ten (10) years.
14.2. Notwithstanding the provisions of Section 14.1
herein, this Agreement shall be terminated at any time, with
an immediate effect:
(a) upon the dissolution or liquidation of FS Sp. z
o.o. or insolvency of either Shareholder;
(b) upon notice of a Shareholder, in the event of
sale by the other Shareholder to an unaffiliated party of all or
any of its shares held at the date hereof; for purposes of this
provision, the term "unaffiliated party" means a third party other
than the party which controls, is controlled by, or is under common
control with, the selling Shareholder;
(c) upon the unanimous consent of the Shareholders.
7
<PAGE> 8
14.3 Notice of the termination of this Agreement
shall be sent to the Shareholders by registered mail at the
addresses listed in Section 16.3 hereof.
ARTICLE 15: EFFECTIVE DATE
15.1. This Agreement shall become effective
after it has been signed by both Shareholders.
ARTICLE 16: MISCELLANEOUS PROVISIONS
16.1. All costs incurred by each Shareholder
before signing the Company Agreement and related to FS Sp. z o.o.'s
establishment shall be covered by the Shareholder. Expenses
incurred in connection with FS Sp. z o.o., after the Company
Agreement was signed, shall be covered by FS Sp. z o.o.
(a) All expenses related to the employment of FS
Sp. z o.o.'s staff, incurred solely by the Polish Shareholder
before April 30, 1992, including salaries and insurance, shall be
covered by the Polish Shareholder who will then be reimbursed by FS
Sp. z o.o. from its first revenue.
(b) All out-of-pocket expenses of the U.S.
Shareholder related to the training of FS Sp. z o.o.'s personnel,
whether in Poland or the United States, shall be reimbursable by FS
Sp. z o.o. from its first revenues. Said expenses shall include
the cost of transportation, hotels and food of both the persons
being trained, as well as those doing the training, in accordance
with the guidelines set forth in Appendix 1 hereto. Salaries of
the persons doing the training shall not be charged to FS Sp. z
o.o., but shall be covered entirely by the U.S. Shareholder.
16.2. All notices to the Shareholders shall be
sent to the following addresses:
If sent to the Polish Shareholder, at the address:
Bank Polska Kasa Opieki S.A.
Traugutta 7/9
00-950 Warszawa, Poland
Attention: Mr. Boleslaw Meluch
Telex: # 813441 pekao pl
Telephone: (48) 3912 0770
Fax: 625 73 09
If sent to the U.S. Shareholder, at the address:
c/o The Pioneer Group, Inc.
60 State Street
Boston, Ma 02109
8
<PAGE> 9
USA
Attention: Mr. William H. Smith, Jr.
Telex: # 94-0012
Telephone: (617) 742 7825
Fax:
If either Shareholder intends to change its address, it shall
immediately inform the other Shareholder about the intended change
before it goes into effect and specifies the new address.
16.3. Notices by one Shareholder to the other
shall be considered delivered to the addressee if they have been
sent by registered mail at the address indicated above and the
addressee has been simultaneously informed about the contents of
the message by telex or telefax.
16.4. This Agreement has been signed on June
25th, 1992 in four copies, two in Polish and two in English, with
both languages equally valid. In proceedings before Polish courts
and other Polish authorities, the Polish version of this Agreement
will be the sole version used. Each Shareholder shall receive one
copy of the Agreement in English and one copy of the Agreement in
Polish.
16.5. This Agreement and the Company Agreement
replace all prior agreements between the Shareholders related to FS
Sp z o.o. and, until this Agreement is amended in accordance with
Section 12.2 hereof or the Company Agreement is validly amended.
Said agreements comprise all rights and obligations of the
Shareholders except those which are set forth in Polish law.
ARTICLE 17: GOVERNING LAW
17.1. All matters not expressly provided for in
this Agreement and related to the rights and obligations of the
Shareholders with respect to FS Sp. z o.o.'s activities shall be
governed by the Company Agreement and Polish law, in particular the
Commercial Code and the Civil Code.
9
<PAGE> 10
In witness whereof, the undersigned have signed this
Agreement as of the date and year first written above.
On behalf of the
Polish Shareholder
/s/ Krzysztof Szajek /s/ Boleslaw Meluch
------------------------ ----------------------
Krzysztof Szajek Boleslaw Meluch
Director, Management Director of the Mutual
Board Member Trust Department
On behalf of the
U.S. Shareholder
/s/ William H. Smith, Jr. /s/ James L. Spencer
------------------------ ----------------------
William H. Smith, Jr. James L. Spencer
Director, Vice-President Director
10
<PAGE> 11
APPENDIX NO.1
I. FS Sp. z o.o. shall cover the following costs related to the
training of its employees and the establishment of FS Sp. z o.o.
in Poland.
1) The cost of hotel accommodation and food incurred in
connection with any such employee's stay in the U.S., PROVIDED THAT
(a) the cost of daily hotel accommodation per person may not
exceed U.S.$80.00, and
(b) the cost of daily food allowance and ground transportation
per person may not exceed U.S.$34.00.
2) The cost of stay in Poland of the U.S. Shareholder's
representatives who conduct the training for FS Sp. z o.o.'s
employees, PROVIDED THAT
(a) the cost of daily hotel accommodation per person may not
exceed U.S.$200.00, excluding applicable tax, if any
(b) the aggregate cost of daily food allowance and ground
transportation per person may not exceed U.S.$60.00.
3) The cost of air travel (tourist class) with respect to both
FS Sp. z o.o.'s employees being trained and the U.S Shareholder's
representatives conducting the training, except for the cost of
travel, irrespective of what class, already incurred by Mr. William
Smith.
4) Notwithstanding the above, the cost of hotel accommodation
and food allowance incurred by Mr. William Smith shall be covered
in an amount equal to 75% of the total cost.
5) Other expenses, such as the cost of PC's and microfilm
equipment that has been incurred by the US Shareholder will also be
reimbursed by the FS Sp. z o.o. The above does not apply to the
complex computer hardware and specialized software which are
referred to in art. 3 of the Company Agreement.
II. The cost incurred by training personnel of the Polish
Shareholder, including solely the cost of hotel accommodation, food
and transport, shall be covered separately by the Polish
Shareholder.
<PAGE> 1
AGREEMENT
Agreement made this 25th day of June, 1992, between Pioneer
Pierwsze Polskie Towarzystwo Funduszy Powierniczych, Spolka
Akcyjna, having its site in Warsaw, hereinafter called "Pioneer
PPTFP, S.A." and Bank Polska Kasa Opieki S.A., hereinafter called
the "Bank-Custodian," having its site in Warsaw, with respect to
the placement in its custody of the assets of Pioneer Pierwszy
Polski Fundusz Powierniczy, hereinafter called the "Fund."
ARTICLE
1. Pioneer PPTFP, S.A. entrusts the Bank-Custodian with the
assets of the Fund to hold them and to perform activities in
accordance with Article 2.1. of this Agreement.
2. Pioneer PPTFP, S.A. shall open accounts at the Bank-
Custodian on behalf of the Fund, into which cash and securities
will be deposited in accordance with appropriate internal
regulations of the Bank-Custodian.
ARTICLE 2
Duties of the parties.
1. The Bank-Custodian shall be required to:
i) ensure safe custody of the assets of the Fund,
ii) ensure that the purchase and redemption of parti-
cipation units in the Fund complies with the law
and with the regulations of the Fund ("Regulations"),
iii) calculate the net asset value, in accordance with the
law and the Regulations,
iv) carry out proper instructions of Pioneer PPTFP, S.A.
pursuant to the Agreement unless they contravene
the law or the By-laws or internal regulations of the
Bank-Custodian,
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v) ensure that in transactions involving assets of the
Fund, amounts due are paid within periods defined in
the By-laws,
vi) ensure that the income of the Fund is reported in
accordance with the law and the By-laws.
2. Pioneer PPTFP, S.A. shall be required to:
i) deliver to the Bank-Custodian the extract of the
notarial deed of the act of incorporation (the "Act
of Incorporation") and the statute of Pioneer PPTFP,
S.A. (the "Statute"), the By-laws, a copy of the
decision of the Securities Commission (the "Commission")
confirming the documents mentioned above, certified
and conformable with the original, and the certified
extract from the Commercial Register referring to
Pioneer PPTFP, S.A.,
ii) inform the Bank-Custodian of any change of the Act of
Incorporation, the Statute, and the By-laws
approved by the Commission,
iii) deliver to the Bank-Custodian a list of the members of
Pioneer PPTFP, S.A.'s authorities, together with detailed
determination of their powers, and the persons who are
duly authorized to give proper instructions to the
Bank-Custodian pursuant to this Agreement,
iv) inform the Bank Custodian about any decision of its
authorities, concerning the performance of the Agreement
by the Bank-Custodian,
v) deliver proper instructions to the Bank-Custodian,
concerning the assets of the Fund, in a form and on
terms determined in the Agreement in accordance
with Paragraph V in Appendix No. 1 hereto.
vi) deliver to the Bank-Custodian a list of entities in
control of, or being controlled by, the Fund within
the meaning of the Act on Public Trading in Securities
and Trust Funds of March 22, 1991 (the "Securities
Act").
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ARTICLE 3
1. Detailed powers and duties of the Bank-Custodian and
Pioneer PPTFP, S.A are set forth in Appendix No. 1 to the
Agreement.
2. The detailed standard of care is outlined in
Appendix No. 2 to the Agreement.
ARTICLE 4
Pioneer PPTFP shall, on behalf of the Fund, pay the BankCustodian
a custody fee for its performance hereunder calculated as follows:
From 0 to $25 million = 9/100 of 1% (0.0009);
From over $25 million to $50 million = 7/100 of 1% (0.0007);
From over $50 million to $100 million = 3/100 of 1% (0.0003);
From over $100 million to $500 million = 2/100 of 1% (0.0002);
Over $500 million = 1/100 of 1% (0.0001).
Said custody fee shall be calculated on a cumulative basis, in the
following manner:
a) the value of all assets of the Fund shall be treated as a sum of
separate components calculated in accordance with the above schedule;
b) the fee shall be calculated separately for each component of the
total value of the assets, which will then be added together;
c) the fee shall be based on the daily net average of all assets in
the Fund's portfolio (deposits and securities), and it
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shall be payable monthly within seven business days of the next month.
The custody fee, calculated as stated hereinabove, shall be paid in
Polish zlotys, after the value of all assets in the Fund's portfolio has been
re-stated in American dollars (USD) on the basis of the average exchange rate
between the buy and sell rates for American dollars announced by the
Bank-Custodian on the day on which the custody fee is calculated.
In addition, Pioneer PPTFP, S.A. shall cover the cost of telex charges
for inter-bank and other money transfers.
Pioneer PPTFP, S.A. shall not pay any charges for money transfers into
the investment account or accounts established for the benefit of the Fund and
consisting of securities and cash deposits. Further, it shall not pay any
transaction charges enumerated in items 1 through 7 and 9 through 10 in Chapter
8 in Appendix No. A/2 issued by the President of the Management Board of the
Bank- Custodian, dated as of February 27, 1992 or charges or fees related to
the maintenance of an investment account which may be required in the future by
amendements to said appendix.
In the event of investing the Fund's assets in foreign securities, the
parties to this Agreement shall agree on the terms and conditions of keeping
such assets in the custody of the BankCustodian.
In the event of keeping physical securities in the custody of the
Bank-Custodian, Pioneer PPTFP, S.A. shall cover the cost of servicing such
securities.
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ARTICLE 5
1. All disputes which arise under this Agreement shall be resolved
by arbitration, with each of the parties appointing one arbitrator
and the two arbitrators so appointed choosing unanimously the
third arbitrator.
2. If within three months from the submission of a dispute for arbitration
neither the arbitrators could resolve the dispute nor the parties
could settle it, the dispute shall be brought before the Arbitral
Center of the Federal Economic Chamber in Vienna, Austria where the
governing law shall be the Polish law and all proceedings before it
shall be conducted in Polish.
ARTICLE 6
This Agreement, which includes the Appendices attached hereto,
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof. All amendments to this Agreement may be made, after
they have been agreed to by both parties, exclusively in writing, otherwise
they shall be null and void.
ARTICLE 7
This Agreement is made for an unlimited period of time. Polish law
shall govern the rights and obligations of both parties under this Agreement.
ARTICLE 8
Either party may terminate this Agreement at any time upon a 90-day
written notice sent by registered mail to the other party; such termination to
take effect not sooner than ninety (90) days from the date of delivery of such
notice. In the event
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of the appointment of a successor custodian approved by the Commission (the
"Successor"), it is agreed that the funds and the securities owned by the Fund
and held by the Bank-Custodian shall be delivered to the Successor, as promptly
as possible, and, within 90 days thereafter, the Bank-Custodian shall cooperate
with the Fund in performing all actions necessary in order to substitute the
Successor for the Bank- Custodian under this Agreement. If Pioneer PPTFP, S.A.
shall not appoint a Successor within 90 days from the date on which this
Agreement was effectively terminated, the Bank-Custodian shall continue to hold
the Fund's assets in accordance with this Agreement. If the Bank-Custodian
continues to hold the Fund's assets beyond the 90-day period, the custody
fee set forth in art. 4 hereof shall double. After one year from the date of
termination, the Bank-Custodian shall have the right to return the Fund's
assets to Pioneer PPTFP, S.A.
ARTICLE 9
This Agreement shall be governed by the Polish law.
ARTICLE 10
The Agreement was signed in four copies, with two copies thereof
provided to each party. The Agreement has been written in Polish and English,
with both language versions equally valid. The Polish version of this
Agreement shall be used exclusively in proceedings before Polish authorities.
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On behalf of Pioneer Pierwsze Polskie Towarzystwo
Funduszy Powierniczych, Spolka Akcyjna
/s/ William H. Smith, Jr. /s/ James L. Spencer
--------------------------- ------------------------
William H. Smith, Jr. James L. Spencer
President Vice-President
On behalf of Bank Polska Kasa Opieki, SA
/s/ Boleslaw Meluch /s/ Igor Chalupec
--------------------------- ------------------------
Boleslaw Meluch Igor Chalupec
Director of the Mutual Director of the
Central Funds Department Brokerage Office
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APPENDIX NO.1
POWERS AND DUTIES OF THE BANK-CUSTODIAN AND PIONEER PPTFP, S.A. The
Bank-Custodian shall have the following powers and duties:
A. SAFEKEEPING - To keep safely, on behalf of the Fund, the securities
and other assets of the Fund that have been delivered to the Bank- Custodian.
B. MANNER OF HOLDING SECURITIES - To hold securities of the Fund (1)
by physical possession of ownership receipts. or other instruments evidencing
the ownership of securities, securities certificates, in registered or bearer
form, or (2) in book-entry or computerized form according to the procedures
applicable to the National Depository of Securities ("Central Depository"),
established by the Securities Act, and other appropriate procedures.
C. REGISTERED SECURITIES - To hold registered securities of the Fund
registered in the name of the Fund in an account established at the Bank-
Custodian containing only assets of the Fund or in an account which contains
exclusively assets held by the Bank-Custodian as fiduciary or custodian for
customers.
D. SEGREGATED ACCOUNT - The Bank-Custodian shall upon receipt of
proper instructions, establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities of the Fund. The Fund's assets maintained
by the Bank-Custodian, including bank deposits and securities, represent
exclusively the property of the Fund's participants. Accordingly, in performing
the activities hereunder, the Bank- Custodian has no right of
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disposition with respect to the Fund's assets without proper instructions.
E. PURCHASES - To pay for securities, including the commission, and
receive securities purchased for the account of the Fund, in accordance with
(i) the Central Depository rules with respect to securities to which the
Securities Act applies and the rules of the exchange where the transaction took
place, or (ii) other rules applicable to securities, including those covered by
Article 3 of the Securities Act, or foreign securities, provided that funds are
made available by Pioneer PPTFP, S.A. to the BankCustodian for this purposes.
F. SALES OF SECURITIES - To make delivery of securities which have
been sold for the account of the Fund in accordance with (i) Central Depository
rules with respect to securities to which the Securities Act applies and the
rules of the exchange where the transaction took place, or (ii) other rules
applicable to securities, including those covered by Article 3 of the
Securities Act, or foreign securities and pay applicable commission, provided
that funds are made available by Pioneer PPTFP, S.A. to the BankCustodian for
this purposes.
G. EXCHANGES - Upon receipt of proper instructions, to exchange
securities held by it for the account of the Fund for other securities in
connection with any reorganization, recapitalization, split-up of shares,
change of par value, conversion or other event, relating to the securities or
the issuer of such securities, and to deposit any such securities in accordance
with the terms of any reorganization or protective plan. Without proper
instructions, the Bank-Custodian may surrender securities in temporary form for
definitive securities, may surrender securities for transfer into a name or
nominee name as permitted in Section C, and may surrender securities for a
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different number of certificates or instruments representing the same number
of shares or same principal amount of indebtedness, provided the securities to
be issued are to be delivered to the Bank-Custodian and further provided that
the Bank-Custodian shall at the time of surrendering securities or instruments
receive a receipt or other evidence of ownership hereof.
H. EXERCISE OF RIGHTS: TENDER OFFERS - Upon receipt of proper
instructions, to deliver to the issuer or trustee thereof securities upon
invitation for tenders of securities, provided that the consideration is to be
paid or delivered or the tendered securities are to be returned to the Bank-
Custodian.
I. STOCK DIVIDENDS, RIGHTS, ETC. - To receive and collect all stock
dividends, rights and other items of like nature; and to deal with the same
pursuant to proper instructions relative thereto.
J. DEMAND DEPOSIT BANK ACCOUNTS - To open and operate an account or
accounts in the name of the Fund, subject only to draft or order by the Bank-
Custodian. All funds received by the BankCustodian from or for the account of
the Fund shall be deposited in said account(s). The Bank-Custodian's liability
for such deposits shall be that of the Bank-Custodian's liability for a similar
deposit.
If and when authorized by proper instructions, the Bank-Custodian may
open and operate additional account(s) in such other banks as may be designed
by Pioneer PPTFP, S.A. (any such bank so designated by Pioneer PPTFP, S.A.,
and approved by the BankCustodian, being referred to hereafter as a "Banking
Institution"). Such account(s) are hereinafter collectively referred to as
"demand deposit bank accounts" and shall be in the name of the Bank-Custodian
for account of the Fund and subject only to Bank-
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Custodian's draft or order. Such demand deposit accounts may be opened with
Banking Institutions in Poland and in other countries and may be denominated in
either zlotys or other currencies as Pioneer PPTFP, S.A. may determine. All
such deposits shall be deemed to be portfolio securities of the Fund and
accordingly, the liability of the Bank-Custodian therefor shall be the same as,
and no greater, than Bank-Custodian's liability in respect of cash
deposits and portfolio securities of the Fund held directly by the
Bank-Custodian, provided that the Bank-Custodian has not made any objections as
to the purpose of such deposits.
K(1). INTEREST BEARING CALL OR TIME DEPOSITS - To place interest
bearing fixed term and call deposits with such banks and in such amounts as
Pioneer PPTFP, S.A. may authorize pursuant to proper instructions. Such
deposits may be placed with the Bank-Custodian or other Banking Institutions as
Pioneer PPTFP, S.A. may determine. Deposits may be denominated in zlotys or
other currencies and need not be evidenced by the issuance or delivery of a
certificate to the Bank- Custodian, provided that (1) the Bank-Custodian shall
include in its records with respect to the assets of the Fund appropriate
notation as to the amount and currency of each such deposit, the accepting
Banking Institutions and other appropriate details, and (2) the Bank-Custodian
shall retain such forms of advice or receipt evidencing the deposits, if any,
as may be forwarded to the Bank-Custodian by the Banking Institution or
Subcustodian. All such deposits shall be deemed to be portfolio securities of
the Fund and accordingly, the liability of the Bank- Custodian therefor shall
be the same as, and no greater, than Bank-Custodian's liability in respect of
cash deposits and portfolio securities of the Fund held directly by the
Bank-Custodian, provided that the Bank-Custodian has not made any objections as
to the purpose of such deposits.
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K(2). PLACEMENT OF THE FUND'S ASSETS WITH A SUBCUSTODIAN. For
purposes of this Agreement, a "Subcustodian" is an institution designated by
the Bank-Custodian to perform certain custodial functions on behalf of the Fund
and approved for acting in such capacity Pioneer PPTFP, S.A. The
Bank-Custodian is liable for any action or omission of the Subcustodian which
harms directly the Fund and/or Pioneer PPTFP, S.A., in particular, it shall
cover the cost of replacing the securities which have been lost or damaged as a
result of the Subcustodian's action or omission. All assets held by the
Subcustodian shall be deemed to be portfolio securities of the Fund and
accordingly, the liability of the BankCustodian therefor shall be the same as,
and no greater, than BankCustodian's liability in respect of cash deposits and
portfolio securities of the Fund held directly by the Bank- Custodian, provided
that the Bank-Custodian has not made any objections as to the purpose of such
deposits.
L. COLLECTIONS - To collect, receive and deposit in said account or
accounts all income, payments of principal and other payments with respect to
the securities held hereunder, and in connection therewith to deliver the
certificates or other instruments representing the securities to the issuer
thereof or its agent when securities are called, redeemed, retired or otherwise
become payable. Payment is to be made in such form and manner at such time,
which may be applicable after delivery by the Bank-Custodian of the instrument
representing the security, or such proper instructions as the Bank-Custodian
may receive, or governmental regulations, the rules of that Central Depository
and clearing agencies.
M. PROXIES, NOTICES, ETC. - Promptly to deliver or mail to Pioneer
PPTFP, S.A. all forms of proxies and all notices of meetings and any other
notices or announcements affecting or
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relating to securities owned by the Fund that are received by the
Bank-Custodian, upon receipt of proper instructions, to execute and deliver to
proper parties such proxies or other authorizations as may be required.
The Bank-Custodian shall not vote upon any of such securities or execute any
proxy to vote thereon or give any consent or take any other action with respect
thereto unless ordered to do so by proper instructions.
N. OTHER TRANSFERS - Upon receipt of proper instructions, to deliver
securities, funds and other property of the Fund to a Subcustodian or
Successor; and, upon receipt of proper instructions, to make such other
disposition of securities, funds or other property of the Fund in a manner
other than, or for purposes other than, as enumerated elsewhere in this
Agreement; PROVIDED THAT the instructions relating to such disposition shall
include a statement of the purpose for which the delivery is to be made, the
amount of securities to be delivered and the name of the person or persons to
whom delivery is to be made.
O. NONDISCRETIONARY DETAILS - Without the necessity of express
authorization from Pioneer PPTFP, S.A., to attend to all nondiscretionary
details which have not been otherwise provided for in this Agreement and do not
require making investment decisions in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with securities, funds or
other property of the portfolio held by the Bank-Custodian.
P. PAYMENTS - Upon receipt of proper instructions, to pay or cause to
be paid, bills or other obligations of the Fund, stated in the Fund's By-laws,
provided that Pioneer PPTFP, S.A. makes funds available to the Bank-Custodian
for this purpose.
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Q. INVESTMENT LIMITATIONS - All instructions received in writing by
the Bank-Custodian from Pioneer PPTFP, S.A or persons authorized by Pioneer
PPTFP, S.A. to give instructions, are assumed by it, at the time of their
receipt, to be consistent with the Act of Incorporation, the Statute, the By-
laws, resolutions of the Management Board or the Supervisory Board of Pioneer
PPTFP, S.A. For purposes of this Agreement, the "proper instruction" means the
last instruction received by the Bank-Custodian from Pioneer PPTFP, S.A. or a
person authorized by Pioneer PPTFP, S.A. to give instructions, applicable to
an action or omission at the time of such action or omission. The Bank-
Custodian shall in no event be liable to the holders of units in the Fund or
Pioneer PPTFP, S.A. for direct damages and lost profits resulting from the
BankCustodian's acting pursuant to proper instruction. The BankCustodian shall
be indemnified by Pioneer PPTFP, S.A. for direct damages which result from the
Bank-Custodian's carrying out proper instructions related to any investment
limitations to which the Fund is subject or other limitations with respect to
the Fund's powers to make expenditures, encumber securities or take similar
actions affecting the Fund.
R. DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS - Upon receipt of proper
instructions from Pioneer PPTFP, S.A. or a person authorized by Pioneer PPTFP,
S.A. to give instructions, the Bank- Custodian shall pay dividends or make
other due payments to Fund unitholders in accordance with the By-laws for the
account of Financial Services Spolka z ograniczona odpowiedzialnoscia.
S. ASSISTANCE BY THE BANK-CUSTODIAN AS TO CERTAIN ACTIVITIES: The
Bank-Custodian may assist generally in the preparation of reports to Fund
participants and others, and of its accounts, and other ministerial matters of
like nature.
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T. ADDITIONAL DUTIES OF THE BANK-CUSTODIAN: The Bank-Custodian shall
have and perform the following additional powers and duties:
1. RECORDS - The Bank-Custodian shall create, maintain and retain
records relating to its activities and obligations under this Agreement as are
required under applicable Polish law, in particular, tax laws, the Securities
Act, and the By-laws. All such records will be the property of Pioneer PPTFP,
S.A. and, in the event of termination of this Agreement, shall be delivered to
the Successor.
2. ACCOUNTS - The Bank-Custodian shall keep the books of accounts and
render statements including monthly and quarterly financial statements in
accordance with proper instructions.
3. ACCESS TO RECORDS - The books and records maintained by the
Bank-Custodian pursuant to Sections T1 and T2 shall at all times during the
Bank-Custodian's regular business hours be open for inspection and audit by
persons authorized by the Commission or Pioneer PPTFP, S.A. The books and
records maintained by the BankCustodian pursuant to Sections T1 and T2 may be
kept in the form of physical or computer records.
U. CALCULATION OF NET ASSET VALUE - To compute and determine the net
asset value per unit of participation in the Fund in accordance with (1) the
By-laws, (2) applicable resolutions of the Management Board and the Supervision
Board of Pioneer PPTFP, S.A., and (3) proper instructions from such officers of
Pioneer PPTFP, S.A. or other persons authorized by the Management Board of
Pioneer PPTFP, S.A. to give instructions with respect to computation and
determination of the net asset value. On each day that the BankCustodian shall
compute the net asset value, per unit of the Fund, the Bank-Custodian shall
provide Pioneer PPTFP, S.A. with written reports which permit Pioneer PPTFP,
S.A. to verify that portfolio transactions have been recorded in accordance
with Pioneer PPTFP,
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S.A.'s instructions and are reconciled with the Fund trading records as
reflected in the books maintained by the Bank-Custodian.
In computing the net asset value, the Bank- Custodian shall rely upon
any information furnished by proper instructions, including without limitation
any information (1) as to accrual of liabilities of the Fund and as to
liabilities of the Fund not appearing at the time of their origination on the
books of account kept by the Bank-Custodian, but recorded in the books within
30 days from their origination, (2) as to the existence, status and proper
treatment of reserves, if any, authorized by Pioneer PPTFP, S.A., as to the
source of quotations to be used in computing the net asset value, (3) as to the
fair value to be assigned to any securities or other property for which price
quotations are not readily available, and (4) as to the sources of information
with respect to "corporate actions" affecting portfolio securities of the Fund.
(Information as to "corporate actions" shall include information as to
dividends, distributions, stock splits, stock dividends, recapitalization,
mergers, maturity dates and similar transactions, including the ex- and record
dates and the amounts or other terms thereof.)
In like manner, the Bank-Custodian shall compute and determine the net
asset value as of other times determined by the Management Board or Supervision
Board of Pioneer PPTFP, S.A in accordance with the By-laws.
Notwithstanding any other provisions of this Agreement, the following
provisions shall apply with respect to the BankCustodian's foregoing
responsibilities in this Section U: the Bank- Custodian shall be held to
exercise of reasonable care in computing and determining net asset as provided
in this Section U, but shall not be held accountable or liable for any losses,
damages or expenses, the Fund or any unitholder or former unitholder of the
Fund may
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suffer or incur arising from or based upon errors or delays in the
determination of such net asset value unless such error or delay was due to
Bank-Custodian's negligence, gross negligence or reckless or willful
misconduct in determination of such net asset value. Bank-Custodian's liability
for any such negligence, gross negligence or reckless or willful misconduct
which results in an error in determination of such net asset value shall be
limited to the direct, out-of-pocket loss of the Fund, unitholder or former
unitholder shall actually incur, measured by the difference between the actual
and the erroneously computed net asset value, and any expenses the Fund shall
incur in connection with correcting the records of the Fund affected by such
error or communicating with unitholders or former unitholders of the Fund
affected by such error.
Without limiting the foregoing, the Bank- Custodian shall not be held
accountable or liable to the Fund, unitholder or former unitholder thereof or
any other person for any delays or losses, damages or expenses any of them may
suffer or incur resulting from (1) the Bank-Custodian's failure to receive
timely and suitable notification concerning quotations or corporate actions
relating to or affecting portfolio securities of the Fund or (2) any errors in
the computation of the net asset value based upon or arising out of quotations
or corporate actions if received by the Bank-Custodian either (a) from a source
which the Bank-Custodian was authorized pursuant to the second paragraph of
this Section U to rely upon, or (b) from a source which in the Bank-Custodian's
reasonable judgement was as reliable a source for such quotations or
information as the sources authorized pursuant to that paragraph. Nevertheless,
the Bank-Custodian will use its best judgement in determining whether to verify
through other sources any information it has received as to quotations or
corporate actions if the BankCustodian has reason to believe that any such
information might be incorrect.
V. PROPER INSTRUCTIONS - Proper instructions shall mean a telex from
Pioneer PPTFP, S.A. or a person authorized by
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Pioneer PPTFP, S.A. to give instructions, a written request, direction,
instruction or certification signed on behalf of Pioneer PPTFP, S.A. by one or
more person or persons as the Management Board of Pioneer PPTFP, S.A. shall
have authorized, provided, however, that no such instructions directing
the delivery of securities or the payment of funds to an authorized signatory
of Pioneer PPTFP, S.A. shall be signed by such person. Those persons
authorized to give proper instructions shall be identified by name, title and
position, facsimile signature and will include at least one officer empowered
by the Management Board to name other individuals who are authorized to give
proper instructions on behalf of the Fund. Persons authorized to give
instructions hereunder may commence giving instructions from the time they have
been placed on the list of persons authorized to give proper instructions.
Proper instructions may include communications effected directly between
electromechanical or electronic devices or systems, in addition to tested
telex, provided that Pioneer PPTFP, S.A. and the BankCustodian agree to the use
of such device or system. Instructions may be conveyed by telephone, provided
that they are confirmed in writing.
The Bank-Custodian shall not be liable for any nonperformance of, or
failure to perform properly, its obligations under this Agreement, if any such
non-performance or failure to perform properly is caused by circumstances which
cannot be predicted or prevented (such circumstances are hereinafter called
"Force Majeure").
For purposes of this Agreement, it is agreed that Force Majeure
includes, among others, war, uprising, earthquake, flood, fire, legal acts and
decisions of Polish authorities applicable to the Bank-Custodian. When the
Bank-Custodian determines that it is unable to fulfill its obligations
hereunder by reasons of Force Majeure, it will, if possible, immediately notify
Pioneer PPTFP, S.A. by fax, telex, express mail and upon request, to the extent
it is possible, will submit
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to Pioneer PPTFP S.A. a certificate issued by Polish authorities attesting to
that event.
The Bank-Custodian will inform Pioneer PPTFP, S.A. in writing when the
Force Majeure ceases to exist and will immediately resume the performance of
its obligations under the Agreement.
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Appendix No. 2
Standard of Care and Related Matters:
------------------------------------
A. LIABILITY OF THE BANK-CUSTODIAN WITH RESPECT TO PROPER INSTRUCTION:
EVIDENCE OF AUTHORITY: Etc. The Bank-Custodian shall not be liable for any
action taken or omitted in reliance upon proper instructions conveyed by
Pioneer PPTFP, S.A. or a person authorized by Pioneer PPTFP, S.A. to give
instructions or upon any other document believed by it to be genuine.
The Management Board of Pioneer PPTFP, S.A. shall certify to the
Bank-Custodian the names, signatures and scope of authority of all persons
authorized to give proper instructions or any other documents on behalf of
Pioneer PPTFP, S.A. and resolutions, votes, instructions or directions of
Pioneer PPTFP, S.A. necessary for the performance by the Bank-Custodian of its
obligations hereunder. Such certificate may be relied upon by the Bank-
Custodian as conclusive evidence of the facts set forth therein and may be
considered in full force and effect until receipt of a similar certificate to
the contrary.
So long as to the extent that it is in the exercise of reasonable care,
the Bank-Custodian shall not be responsible for legal defects of the Fund's
assets or evidence of title thereto received by it or delivered by it pursuant
to this Agreement.
The Bank-Custodian shall be entitled, at the expense of the Fund, to
receive and act upon advice of (1) counsel regularly retained by the Bank-
Custodian in respect to custodian matters, (ii) counsel for Pioneer PPTFP,
S.A., or (iii) such other counsel as Pioneer PPTFP, S.A. and the Bank-
Custodian may agree upon, with respect to all matters. The Bank-Custodian
shall be without liability for any action reasonable taken or omitted pursuant
to such advice.
20
<PAGE> 21
B. LIABILITY OF THE BANK-CUSTODIAN WITH RESPECT TO USE OF SECURITIES
SYSTEM - With respect to the portfolio securities, cash and other property of
the Fund held by a "Security System," the Bank-Custodian shall be liable to the
Fund only for any direct loss or damage to the Fund resulting from use of the
Securities System if caused by any negligence, misfeasance or willful
misconduct of the Bank-Custodian or any of its agents or employees or from any
failure of the Bank-Custodian or any such agent to enforce effectively such
rights as it may have against the seller or producer of the Securities System.
The Bank- Custodian shall, if agreed to by Pioneer PPTFP, S.A., assign to
Pioneer PPTFP, S.A. its rights, with respect of any claim against the seller
or producer of the Securities System or any other person which the
Bank-Custodian may have as a consequence of any such loss or damage to the Fund
if, and to the extent that, the Fund has not been made whole for any such loss
or damage. The term "Securities System" means any safe or vault, physical books
and records and computer systems established and maintained for the purpose of
protecting funds, their property of the Fund against theft, damage,
falsification or erroneous recording.
C. STANDARD OF CARE; LIABILITY; INDEMNIFICATION - The Bank-Custodian
shall be held, in carrying out the provisions of this Agreement, only to the
exercise of proper care and diligence generally required of bank-custodians in
performing custodian and fiduciary functions, provided that the BankCustodian
shall not hereby be required to take any action which is in contravention of
any applicable Polish law. Pioneer PPTFP, S.A. agrees to indemnify and hold
harmless the Bank-Custodian from all claims and liabilities (including counsel
fees) (not including lost profits) incurred or assessed against it in
connection with the performance of this Agreement, except such as may arise
from its breach of the relevant standard of conduct set forth in this
Agreement.
21
<PAGE> 22
D. REIMBURSEMENT OF ADVANCES - The Bank- Custodian shall be entitled
to receive reimbursement from the Fund on demand, for its cash disbursements,
expenses and charges (including the fees and expenses of any Subcustodian or
any Agent, and the cost of rewizji sprawozdan finansowych requested by Pioneer
PPTFP,S.A.) in connection with this Agreement, but excluding salaries and
usual overhead expenses.
E. APPOINTMENT OF AGENTS - The Bank-Custodian may at any time in its
discretion appoint (and may at any time remove) any other bank or trust company
as its agent (an "Agent) to carry out such of the provisions of this Agreement,
as the BankCustodian may direct, provided, however, that the appointment of
such Agent shall be approved by Pioneer PPTFP, S.A. and that it shall not
relieve the Bank- Custodian of any of its responsibilities under this
Agreement.
F. POWERS OF ATTORNEY - Upon request, Pioneer PPTFP, S.A. shall
deliver to the Bank-Custodian such proxies, powers of attorney or other
instruments as may be necessary or desirable in connection with the performance
by the Bank- Custodian of its respective obligations under this Agreement.
22
<PAGE> 1
24-09-92
Agreement
signed on 24-09 1992 in Warsaw
between
Pioneer Pierwsze Polskie Towarzystwo Funduszy
Powierniczych S.A., located in Warsaw,
hereafter called the Principal
and
Financial Services Limited, located in Warsaw,
hereafter called the Appointee
is set forth as follows:
Article 1
1. The Principal appoints the Appointee to carry out administrative and
accounting services on behalf and for the benefit of Pioneer First Polish Trust
Fund hereafter called the "Fund".
2. The Appointee tasks are as follows:
I) Receiving money transfer or cash for purchasing participation units in the
Fund hereafter called "Units" on separate banking accounts opened and
maintained in the name of the Appointee;
II) Establishing and maintaining records of Unitholders and their proxies based
on the documents received from organizational units of Bank Pekao S.A., or
received directly by the Appointee in its office or via the distribution
network established by the Principal in cooperation with other banking and non-
banking financial institutions and brokerage offices; both domestically and
abroad;
III) Calculating the value of the Fund's assets, the Fund's net asset value and
the net asset value per Unit in cooperation with the Bank Pekao S.A.,
IV) Issuing certificates (confirmation statements) of participation in the
Fund;
V) Calculating costs of managing the Fund according to its By-laws;
VI) Transferring money collected for the purchasing of the Fund's Units to the
Fund's custody account;
VII) Receiving redemption orders from Unitholders, verifying them and providing
to the Principal the information on the amount of money required for redemption
transactions and the number and amount of redemption transactions;
VIII) Providing relevant organizational units of Bank Pekao S.A.or other banks
or entities with redemption payment instructions as directed by the Principal;
<PAGE> 2
2
IX) Mailing redemption confirmation statements to Unitholders;
X) Providing Unitholders with the relevant information pertaining to their
participation in the Fund;
XI) Providing all relevant information to persons interested in participation
in the Fund;
XII) Maintaining commissionable sales records and data register concerning the
distribution network of the Fund;
XIII) Providing the Principal with all available information concerning the
Fund's participants and service as may be required by the Principal for the
purposes of complying by the Principal with the requirements of applicable tax
and securities laws of various jurisdictions;
XIV) Providing the Principal with information regarding the Appointee's
correspondence between Unitholders and the Appointee;
XV) Establishing and maintaining bank accounts in the Appointee's name for the
purpose of:
- depositing money accumulated for purchases of Units
- payments in case of redemption
- payment of commissions
and making proper payments, including commissions for the Bank Pekao S.A. and
other further distributors according to the Fund's By-Laws and Agreements
signed by the Principal with the Bank Pekao S.A. and other distributors of
Units according to the Principal's instructions;
XVI) Providing the Principal with quarterly reports outlining the performance
of the Appointee's obligations arising under this agreement;
3. The Principal is obliged to provide the Appointee in writing before 1 of
October 1992 with all approved procedures concerning the methodology of
bookkeeping of the Pioneer First Polish Trust Fund. The Principal is also
obliged to provide the Appointee with all applicable operating manuals and to
deliver computer software manuals consisting of installation versions of them
on magnetic media and user guides and manuals.
4. The Principal is responsible to ensure that money is available for
redemption according to Appointee's timely instructions.
5. The Appointee may subcontract any services mentioned in the subparagraphs 1
and 2 to other entities. In that case, the Appointee shall be solely liable for
the acts or omissions of any such entity to the same extent as the Appointee
would be liable to the Principal with respect to any such act or omission
hereunder.
<PAGE> 3
24-09-92
Article 2
1. The Appointee shall make available to the Principal, its properly
authorized auditors and other persons designated by the Principal in writing
during its regular business hours, the books and computer records for
reasonable audits and inspection, after reasonable advance notification to the
Appointee in writing stating the time, purpose and extent of these audits and
inspections. Documents mentioned above cannot be photocopied, unless otherwise
agreed by the Appointee.
2. The Appointee shall not be liable for the safety of the documents delivered
to persons mentioned above during such review and shall not be liable for any
damages or losses caused to the Principal or other entity which would result
from such delivery. The Principal shall keep confidential all information
which has been obtained during the inspection and shall inform the persons
reviewing the information on its behalf about the duties to keep such
information confidential. In case of violation of the duties mentioned above
by the persons designated by the Principal, the Principal is liable as if the
action was taken by itself.
3. For purposes of this article the confidential information means: a) all
documents and information related to the Appointee's activities, security
procedures and data processing capabilities b) non public financial information
regarding the Appointee and its affiliates, and c) any information related to
the Appointee's customers and Unitholders.
4. The Principal shall inform the Appointee in writing immediately after the
inspection about its results.
5. All accommodation costs related to the inspection mentioned above shall be
covered by the Principal itself.
6. The Appointee may, at its discretion or upon the Principal's request, return
to the Principal all books and records maintained by itself, that are no longer
needed by the Appointee in the performance of its duties pursuant to this
Agreement.
Article 3
1. The Appointee is required to keep safe all books, reports, records and other
data, and is required to protect them against any destruction or losses in
accordance with the procedures prepared by the Appointee.
2. The Appointee shall maintain the insurance of books, reports, records and
other data in the event of such loss or damage and shall notify the Principal
about the terms of such insurance, its conditions and any changes thereof by
presenting the Principal the policy of insurance, and any amendment thereto.
Article 4
1. The Appointee shall be carrying out the provisions of this Agreement with
proper care. The Appointee shall be responsible for any losses or damages
resulting from willful default, gross negligence or reckless disregard.
<PAGE> 4
4
2. The Appointee shall not be liable for any non-performance or failure to
perform properly its obligations under this Agreement, if any such non
performance or failure to perform properly is caused by circumstances which
cannot be predicted or prevented (such circumstances are hereinafter called
"Force Majeure").
For purposes of this Agreement, it is agreed that Force Majeure includes, among
others: war, insurrection flood, fire, legal acts, strikes and decisions of
authorities. When the Appointee determines that it is unable to fulfill its
obligations hereunder by reasons of Force Majeure, it will, if possible,
immediately notify the Principal by either fax or telex or express mail, and
upon request, to the extent it is possible, will submit to the Principal a
certificate issued by Polish authorities attesting to that event. The Appointee
will inform the Principal in writing when the Force Majeure ceases to exist and
will immediately resume the performance of its obligations under the
Agreement.
Article 5
The Appointee is required to keep confidential and to not disclose to any third
party the information received from the Principal or Unitholder for the purpose
to carry out this agreement except the information that:
a) will be used by the Principal in the prospectus or in other information
materials prepared by the Principal or by the Appointee according to
Principal's instruction;
b) is required by a Polish court or by Polish government authorities.
Article 6
1. The Appointee, in agreement with the Principal, shall be entitled to seek
advice of the Principal's legal advisor with respect to the Appointee's
responsibilities and duties hereunder and shall in no event be liable to the
Principal for any action or omission taken pursuant to such advice and the
Principal shall cover all costs of such legal advice.
2. The Appointee shall not be entitled to use the right said above if the
rendering of such advice to the Appointee would result in a conflict of
interest.
Article 7
1. The Appointee is required to take action hereunder at its discretion or
pursuant to proper instructions from the Principal or the person designated and
authorized by the Principal.
2. For purposes of this Agreement the "instruction" shall mean a request of the
Appointee to perform within the scope of this Agreement made by the Principal
or an authorized person designated by the Principal to make such request.
3. Instructions shall be delivered in writing only. Instructions may be
conveyed by telephone and followed by a confirmation in writing.
4. The Principal shall deliver a list of persons authorized to give
instructions.
<PAGE> 5
24-09-92
5. All instructions received in writing by the Appointee from the Principal or
persons authorized by the Principal to give instructions are assumed by the
Appointee at the time of their receipt to be consistent with Polish law, the
Statute of the Principal, its By-laws and the Fund's By-Laws.
6. The Principal shall be liable to the Appointee for losses or damages
resulting from carrying out the performance of the instruction received by the
Appointee, as long as the Appointee has carried out the instructions without
willful default, negligence or reckless disregard.
7. In the event that Appointee shall be made a party to any action brought by
a third party resulting from its action or omission based on received
instructions from the Principal, the Principal shall be required pursuant to
article 7 section 6 to indemnify the Appointee. The Principal shall cover legal
processing and other costs related to performing court's verdict.
The Appointee may in no event confess any claim or make any compromise in any
case in which the Principal will be asked to indemnify the Appointee, except
with the Principal's prior written consent.
Article 8
The Appointee shall open and maintain on behalf of the Principal and at the
direction of the Principal, accounts referred to in article 1, section 2,
subsection XV. Moreover, the Appointee may open and maintain other accounts at
the direction or in agreement with the Principal into which money will be
deposited, if opening and maintaining such accounts is necessary to perform
services contemplated by this Agreement.
Article 9
1. For the services rendered in accordance with Article 1, the Appointee will
receive from the Principal the following compensation and reimbursement:
I) For establishing and maintaining records for each open new ownership
position in the Fund a monthly fee of 15,000 Polish zloties; such fee to be
paid monthly.
II) For services associated with the Fund accounting function of the Appointee
the monthly fee of 2000 U.S. Dollars paid in Polish zloties calculated on the
basis of the average buy and sell exchange rate of the National Bank of Poland
on the day of payment. Such fee to be paid monthly.
III) In addition the Principal shall reimburse the Appointee monthly for out-
of-pocket expenses, such as postage forms, envelops, checks and "outside"
mailings;
IV) Both parties agree that the terms and fee amount mentioned above should be
reviewed after twelve months from July 1, 1992 or earlier, upon request of the
Appointee in the event of a significant change in the economic and/or financial
situation in Poland. The Principal agrees to enter into a good faith discussion
with the Appointee concerning the establishment of the Appointee's fees for
services rendered under this agreement ensuring its self financing.
<PAGE> 6
6
2. The payments referred to in item 1 above will be made by a money transfer
into the Appointee's account or by a certified check or cash at a Bank
designated by the Appointee within seven days from the date of the invoice.
Article 10
1. Both parties undertake to cooperate daily in performing their respective
obligations under this Agreement in order to ensure the effective
implementation hereof.
2. All disputes which may arise under this Agreement shall be resolved by
carbitration, with each of the parties appointing one arbitrator and the two
arbitrators so appointed choosing unanimously the third arbitrator.
3. If within three months from the submission of a dispute for arbitration
neither the arbitrators could resolve the dispute nor the parties could settle
it, the dispute shall be brought before the Court of Arbitration at the Polish
Economic Chamber in Warsaw, Poland where the governing law shall be the Polish
law and all proceedings before it shall be conducted in Polish according to the
court's procedures.
Article 11
The Agreement is signed for an unspecified period of time. The Agreement shall
become effective the (Effective Date) after it has been signed by both parties.
Article 12
1. Either party may terminate this Agreement. Both parties agree not to
terminate this agreement before 10 years have elapsed from its effective date.
After 10 years from the effective date hereof this agreement may be terminated
at any time by giving six months, prior written notice to the other party.
2. After the date of notification or termination of this Agreement as long as
the Appointee shall perform its obligation pursuant to this Agreement, all
provisions shall continue in full force and effect.
Article 13
1. The Principal is required to furnish to the Appointee, prior to the
Effective Date, the following documents:
a) two copies of the statute of the Principal;
b) two copies of the Fund's by-laws with amendments, if any, approved by the
Polish Securities Commission;
c) two copies of the current prospectus of the Fund;
d) two copies of a list containing the names of members of the Supervisory and
Management Boards of the Principal, and the list of persons authorized and
designated by the Principal to give instructions to the Appointee;
e) two copies of each of the Custodian, Distribution and Brokerage Services
Agreements which were concluded by the Principal with the Bank Pekao S.A.
<PAGE> 7
24-09-92
2. In case of any changes in the Fund's By-laws, the Principal is to
immediately provide the Appointee with the revised version of the By-laws
approved by the Polish Securities Commission.
3. The duties of the Principal referred to in section 1 shall also be performed
after the Effective Date.
Article 14
This Agreement cannot be amended and changed unless agreed in writing by both
parties; otherwise any such amendment is null and void.
Article 15
The Polish law shall apply to all matters arising from the implementation and
interpretation of this Agreement.
All matters not expressly provided for in this Agreement shall be governed by
the Polish law.
Article 16
The Agreement to be signed in four copies, two in Polish and two in English.
Both parties shall receive one copy of the Agreement in English and one in
Polish. Both language versions are equally valid. In proceedings before Polish
courts and other Polish authorities, the Polish version of this Agreement will
be the sole version used.
Signed on behalf of the Principal:
/s/ William H. Smith Jr. /s/ James L. Spencer
-------------------- -------------------
William H. Smith, Jr. James L. Spencer
President Vice President
Signed on behalf of the Appointee:
/s/ Andre Szkutnik /s/ Leszek Baginski
-------------------- -------------------
Andre Szkutnik Leszek Baginski
President Vice President
<PAGE> 1
Exhibit 10.43
February 28, 1995
Mr. William H. Keough
SVP, CFO and Treasurer
The Pioneer Group, Inc.
60 State St.
Boston, MA 02110
Dear Bill:
We are pleased to confirm that The First National Bank of Boston,
(the "Bank") holds available an unsecured $30,000,000.00 line of
credit for The Pioneer Group, Inc. (the "Company") through
February 27, 1996.
1. TERM. This line of credit shall commence February 28, 1995
and expire 364 days later on February 27, 1996.
2. NOTICE AND MANNER OF BORROWINGS. Each loan made under this
line of credit must be in a minimum amount of $1,000,000.00 or
any larger amount which is an integral multiple of
$100,000.00, and aggregate loans outstanding may not exceed
$30,000,000.00. Requests by the Company for loans must be
received by the Bank no later than 12:00 noon (Boston time) on
the day of the requested loan (in the case of Alternate Base
Loans or Money Market Loans) or two business days prior to
such date (in the case of Eurodollar Rate Loans). Promptly
upon receipt of such notice, and provided that the condition
set forth in paragraph 10 has been satisfied, the Bank will
make the requested loans by crediting the proceeds thereof to
the demand deposit account of the Company maintained with the
Bank.
3. EVIDENCE OF INDEBTEDNESS. All Alternate Base Rate Loans and
Eurodollar Rate Loans will be evidenced by a promissory note
(a "Note") in the form attached hereto as Exhibit I. All
Money Market Loans will be evidenced by a promissory note in
the form attached hereto as Exhibit II (also a "Note"). The
Company hereby authorizes the Bank to record each loan and the
corresponding information on the schedule forming part of the
applicable Note, and, absent manifest error, this record shall
be conclusive and binding.
4. INTEREST RATES. Subject to the terms and conditions hereof,
the Company may elect in its request for a loan to have
interest thereon accrue at any of the following interest rate
options:
(a) a rate oper annum equal to the higher of the rate of
interest announced from time to time by the Bank at its head
office as its Base Rate, or the overnight Federal Funds Rate
plus 1/2% (the "Alternate Base Rate"); or
(b) a rate quoted by the Bank in its sole discretion (it
being understood that the Bank is under no obligation to quote
such rate) to the Company as the fixed rate of interest at
which it is willing to make a "money market" advance to the
Company in the amount and for the period of the requested loan
(the "Money Market Rate"); or
(c) a rate quoted by the Bank to the Company as the
prevailing rate per annum at which U.S. dollar deposits are
offered to the Bank by first class banks in the interbank
Eurodollar market in which it regularly participates at
approximately 10:00 a.m. (Boston time) two business days before
the date of
<PAGE> 2
2
the requested loan in the amount and for an interest period
approximately equal to that of the requested loan, adjusted for reserve
requirements, plus 1.10% per annum.
Loans bearing interest as provided in paragraphs (a), (b) and (c) of this
section 5 shall be referred to herein as "Alternate Base Rate Loans",
"Money Market Loans", and "Eurodollar Rate Loans", respectively. Money
Market Loans may be requested for interest periods of up to 180 days;
Eurodollar Rate Loans may be requested for interest periods of one, two or
three months; and no loan shall have an interest period that extends beyond
the expiration of this line of credit. In the event that the Company fails
to specify an interest period in its request for a loan, the interest
period for Money Market Loans shall be deemed to be 30 days and the
interest period for Eurodollar Rate Loans shall be deemed to be one month.
Interest on each loan shall be calculated on the basis of a 360-day year
for the actual number of days elapsed and shall be payable as set
forth in the Notes.
5. ADDITIONAL INTEREST. The Company shall pay to the Bank
additional interest at the rate of .25 of 1% per annum on the
unused amount of the line of credit. Additionally, such
interest shall be payable quarterly in arrears at the end of
each March, June, September, and December of any year.
6. PAYMENTS AND PREPAYMENTS. Base Rate Loans shall be payable on
demand. Money Market Loans and Eurodollar Rate Loans shall be
payable on the last day of the interest period applicable
thereto. The Company may prepay Alternate Base Rate Loans, in
whole or in part, at any time and without prepayment
penalties, but prepayments of Money Market Loans will not be
permitted. Your ability to prepay Eurodollar Rate Loans is
subject to the requirement that you compensate us for any
funding losses and other costs (including lost profits)
incurred as a result of such prepayment. If the Company for
any reason makes any payment with respect to a Money Market
Loan or Eurodollar Rate Loan before its maturity, or fails to
borrow a Money Market Loan or Eurodollar Rate Loan requested
by the Company pursuant to Section 2, the Company will be
required to pay any costs, losses or liabilities incurred by
the Bank as a result thereof, including any losses incurred in
obtaining, liquidating or employing deposits with reference to
which the rate of interest for such loan was determined, upon
presentation by the Bank of a statement in the amount and
setting forth the Bank's calculation thereof, which statement
shall be deemed true and correct absent manifest error.
7. CHANGED CIRCUMSTANCES; INCREASED COSTS
(a) In the event that any law, regulation, treaty or official
directive or the interpretation or application thereof by any
court or governmental authority or the compliance with any
guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(i) subjects the Bank to any tax with respect to any
amounts payable hereunder by the Company or otherwise with
respect to the transactions contemplated hereunder (except for
taxes on the overall net income of the Bank imposed by the
United States of America or any political subdivision thereof), or
(ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit, capital maintenance or similar requirement
against assets held by, or deposits in or for the account of, or loans
or commitments to make loans by, the Bank (other than such requirements
the effect of which is included in the determination of the interest
rates for loans made hereunder), or
(iii) imposes upon the Bank any other condition with respect to
the loans made hereunder,
<PAGE> 3
3
and the result of any of the foregoing is to increase the cost to the Bank,
reduce the income receivable by or return on equity of the Bank or impose
any expense upon the Bank with respect to any loans or commitments to make
loans hereunder, the Bank shall so notify the Company. The Company agrees
to pay to the Bank the amount of such increase in costs, reduction in
income, reduced return on equity or additional expense as and when such
cost, reduction or expense is incurred or determined, upon presentation by
the Bank of a statement in the amount and setting forth the Bank's
calculation thereof, which statement shall be deemed true and correct
absent manifest error.
8. LOAN PARTICIPATIONS. The Bank may sell, transfer or grant participations
in the Note without the prior consent of the Company, and the Company
agrees that any transferee or participant shall be entitled to the benefits
of paragraph 7 and 8 hereof to the same extent as if such transferee
or participant were the Bank hereunder.
9. AVAILABILITY OF LOANS. The availability of loans under this facility is
subject to (a) the Bank's usual condition that the Bank continue to be
satisfied that there shall have been no material adverse change in the
assets, liabilities, financial condition, business operations or prospects
of the Company or the Guarantor since the date, hereof; and (b) any
substantive changes in government regulations or monetary policies.
Sincerely,
The First National Bank of Boston
By: /s/ Stewart P. Neff
-------------------
Title: Managing Director
Acknowledged and Accepted:
The Pioneer Group, Inc.
By: /s/ William H. Keough
---------------------
Title: Senior Vice President, Chief Financial Officer, and Treasurer
-------------------------------------------------------------
Date: February 28, 1995
------------------------
<PAGE> 4
4
EXHIBIT I
THE PIONEER GROUP, INC.
PROMISSORY NOTE Boston, Massachusetts
February 28, 1995
FOR VALUE RECEIVED, the undersigned hereby promises to pay
to THE FIRST NATIONAL BANK OF BOSTON (the "Bank"), or order, at
the head office of the Bank in Boston, Massachusetts, the
aggregate principal amount of all loans made by the Bank to the
undersigned pursuant to the letter agreement between the Bank and
the undersigned dated February 28, 1995, as shown in the schedule
attached hereto (the "Note Schedule"), together with interest on
each loan from the date such loan is made until the maturity
thereof at the applicable rate set forth in the Note Schedule.
The principal amount of each loan shall be payable on demand or
on the maturity date of such loan as indicated in the Note
Schedule, and in any event, the aggregate outstanding principal
amount of all loans hereunder shall be due and payable on
February 27, 1996. Interest on the principal amount of each loan
shall be payable in arrears on the same day as the principal
amount is due, provided that (i) interest on each loan bearing
interest at the Alternate Base Rate shall be payable on the last
day of each quarter, beginning on the first of such dates
occurring after the date of such loan and when such loan is due,
and (ii) if the maturity of any loan is more than 90 days from
the date of such loan, then interest shall be payable at
intervals of 90 days and when such loan is due. Loans which are
shown as bearing interest at the Alternate Base Rate shall bear
interest at a rate per annum equal to the greater of (i) the rate
of interest announced from time to time by the Bank at its head
office as its "Base Rate", and (ii) the rate equal to the
weighted average of the published rates on overnight Federal
Funds transactions with members of the Federal Reserve System
plus 1/2%, in each case plus the applicable margin, if any, which
interest rate shall change as and when the Alternate Base Rate
changes. Interest shall be computed on the basis of a 360 day
year and paid for the actual number of days elapsed. All
payments shall be made in lawful currency of the United States of
America in immediately available funds.
Overdue payments of principal of any loan (whether at stated
maturity, by acceleration or otherwise), and, to the extent
permitted by law, overdue interest, shall bear interest, payable
on demand and compounded daily, at a rate per annum equal to two
percent (2%) above the greater of (i) the Alternate Base Rate and
(ii) the rate applicable to such loan prior to the date such loan
was due.
If any of the following events of default shall occur
("DEFAULTS"): (a) default in the payment of any amounts due
hereunder or performance of any of the Obligations or of any
obligations of any Obligor to others for borrowed money or in
respect of any extension of credit or accommodations; (b) failure
of any representation or warranty, statement or information in
any documents or financial statements delivered to the Bank for
the purpose of inducing it to make or maintain any loan under
this Note to be true and correct; (c) failure of the undersigned
to file any tax return, or to pay or remit any tax, when due; (d)
failure to furnish the holder promptly on request with financial
information about, or to permit inspection by the holder of
books, records and properties of, any Obligor; (e) loss, theft,
substantial damage, sale or encumbrance to or of any property
constituting any collateral for the Obligations, or the making of
any levy, seizure or attachment thereof or thereon or the failure
to pay when due any tax thereon or, with respect to any insurance
policy, any premium therefore; (f) default under any instrument
constituting, or under any agreement relating to, any collateral;
(g) Any Obligor generally not paying its debts as they become
due; (h) death, dissolution, termination of existence,
insolvency, business failure, appointment of a
<PAGE> 5
5
a receiver or other custodian of any part of the property of,
assignment for the benefit of creditors by, or the commencement
of any proceedings under any bankruptcy or insolvency laws by or
against, any Obligor; (i) change in the condition or affairs
(financial or otherwise) of which in the opinion of the holder
will impair its security or increase its risk; then immediately
and automatically with respect to any Defaults set forth in
clauses (g) and (h) above, and thereupon or at any time
thereafter with respect to each other Default (such Default not
having been previously cured), at the option of the holder, all
Obligations of the undersigned shall become immediately due and
payable without notice or demand and, if there is any collateral
for the Obligations, the holder shall then have in any
jurisdiction where enforcement hereof is sought, in addition to
all other rights and remedies, the rights and remedies of a
secured party under the Uniform Commercial Code of Massachusetts.
Any sums from time to time credited by or due from the
holder to any Obligor, and any property of the undersigned or any
guarantor in which the holder has from time to time any security
interest or which from time to time may be in the possession of
the holder for any purpose shall constitute collateral security
for the payment or performance of the Obligations of the
undersigned or such guarantor hereunder, and the undersigned
hereby grants the holder a security interest in such sums and
property. Regardless of the adequacy of any collateral, the
holder may apply such sums or property or realizations upon any
such security interest against such Obligations at any time in
the case of the primary Obligor but only against matured
Obligations in the case of a secondary Obligor.
The undersigned hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection
with the delivery, acceptance, performance and enforcement of
this Note.
Each Obligor waives presentment, demand, notice of dishonor
protest and all other demands and notices in connection with the
delivery, acceptance, performance, default and enforcement of
this Note or of any collateral, and assents to any extension or
postponement of the time of payment or any other indulgence under
this Note or with respect to any collateral, to any substitution,
exchange or release of any collateral and/or to the addition or
release of any other party or person primarily or secondarily
liable hereunder. As used herein "Obligor" means any person
primarily or secondarily liable hereunder or in respect hereto;
"Obligation" means any obligation hereunder or otherwise of any
Obligor to the holder whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
arising; and "holder" means the payee or any endorsee of this
Note who is in possession of it, or the bearer hereof if this
Note is at the time payable to the bearer.
The undersigned will pay on demand all costs of collection
and attorneys' fees paid or incurred by the holder in enforcing
the Obligations of any Obligor.
This instrument shall have the effect of an instrument
executed under seal and shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts.
The Pioneer Group, Inc.
By: /s/ William H. Keough
-----------------------
Title: Senior Vice President, CFO, and Treasurer
-----------------------------------------
<PAGE> 6
<TABLE>
6
NOTE SCHEDULE TO PROMISSORY NOTE OF
THE PIONEER GROUP, INC.
DATED FEBRUARY 28, 1995
<CAPTION>
Date and
--------
Amount of
---------
Principal Payment Notation Made
--------- ------- -------------
Date of Loan Amount of Loan Maturity Date Interest Rate Received By
------------ -------------- ------------- ------------- --------- --
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
7
EXHIBIT II
THE PIONEER GROUP, INC.
PROMISSORY NOTE (MONEY MARKET NOTE)
-----------------------------------
February 28, 1995
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned hereby promises to pay to THE
FIRST NATIONAL BANK OF BOSTON (the "Bank"), or order, at the head
office of the Bank in Boston, Massachusetts, the aggregate
principal amount of all loans made by the Bank to the undersigned
pursuant to the letter agreement between the Bank and the
undersigned dated February 28, 1995, as shown in the schedule
attached hereto (the "Note Schedule"), together with interest at
the rate or rates set forth in the Note Schedule. The principal
amount of each loan as shown on the Note Schedule shall be
payable on the maturity date set forth therein, and interest with
respect to such principal amount is due. Interest shall be
computed on the basis of a 360-day year and paid for the actual
number of days elapsed in any interest period. All payments
shall be made in lawful currency of the United States of America
in immediately available funds.
No prepayment of the principal amount of any loan shall be
permitted.
Upon the occurrence of any of the following events of
default: (a) default in the payment or performance of any of the
Obligations or of any obligations of any Obligor to others for
borrowed money or in respect of any extension of credit or
accommodation; (b) failure of any representation and warranty
hereunder or of any representation or warranty, statement or
information in any documents or financial statements delivered to
the Bank for the purpose of inducing it to make or maintain the
loans under this Note to be true and correct; (c) failure to
furnish the holder promptly on request with financial information
about, or to permit inspection by the holder of books, records
and properties of, any Obligor; (d) any Obligor generally not
paying its debts as they become due; (e) death, dissolution,
termination of existence, insolvency, business failure,
appointment of a receiver or other custodian of any part of the
property of, assignment for the benefit of creditors by, or the
commencement of any proceedings under any bankruptcy or
insolvency laws by or against, any Obligor; then the unpaid
principal balance of this Note, plus accrued interest may, at the
option of the Bank, be declared immediately due and payable. As
used herein "Obligor" means any person primarily or secondarily
liable hereunder or in respect hereto; "Obligation" means any
obligation hereunder or otherwise of any Obligor to the holder
whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising; and "holder" means
the payee or any endorsee or assignee of this Note.
Overdue payments of principal (whether at stated maturity,
by acceleration or otherwise), and , to the extent by law,
overdue interest, shall bear interest, payable on demand and
compounded monthly, at a rate per annum equal to two percent (2%)
above the rate of interest announced from time to time by the
First National Bank of Boston at its head office as its Base Rate
(the "Base Rate"), which rate shall change as the Base Rate
changes.
<PAGE> 8
8
The parties hereunder, including the undersigned, hereby
waive presentment, demand, notice of dishonor, protest and all
other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note.
The undersigned agrees to pay all charges of the Bank in
connection with the collection or enforcement of this Note,
including reasonable attorneys' fees.
This instrument shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
THE PIONEER GROUP, INC.
By: /s/ William H. Keough
---------------------
Senior Vice President, CFO, and Treasurer
-----------------------------------------
<PAGE> 9
9
<TABLE>
NOTE SCHEDULE TO PROMISSORY NOTE OF
THE PIONEER GROUP, INC.
DATED FEBRUARY 28, 1995
<CAPTION>
Date and
--------
Amount of
---------
Principal Payment Notation Made
--------- -------- -------------
Date of Loan Amount of Loan Maturity Date Interest Rate Received By
------------ -------------- ------------- ------------- --------- -------------
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 11
<TABLE>
THE PIONEER GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Amounts)
<CAPTION>
COMPUTATION FOR CONSOLIDATED
STATEMENT OF INCOME YEAR ENDED DECEMBER 31,
------------------- ----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net income (1) $ 33,460 $ 18,130 $ 14,598
=========== =========== ===========
Shares
Weighted average number of
common shares outstanding (2) 24,666,000 24,545,000 24,520,000
Dilutive effect of stock options considered
as common stock equivalents computed
under the treasury stock method using the
average price during the period (2) 688,000 431,000 304,000
----------- ----------- ----------
Weighted average number of shares
outstanding as adjusted (1) (2) 25,354,000 24,976,000 24,824,000
=========== =========== ==========
Earnings per share (1) (2) $1.32 $0.72 $0.59
=========== =========== ==========
<FN>
(1) These amounts agree with the related amounts in the Consolidated Statement of Income.
(2) Adjusted for December 1,1994 and September 1, 1993, 2-for-1 stock splits effected in the form of
100% stock dividends.
</TABLE>
<PAGE> 1
<TABLE>
THE PIONEER GROUP, INC.
CHART PLOT POINTS FOR 1994 ANNUAL REPORT
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
GROSS REVENUES AND SALES 59,980 80,919 101,802 129,403 171,702
(Thousands of Dollars
ASSETS UNDER MANAGEMENT 6,349 7,140 7,591 10,766 11,103
(Millions of Dollars)
SALES OF MUTUAL FUND SHARES 789 624 723 1,505 2,209
(Millions of Dollars)
EARNINGS PER SHARE 0.50 0.58 0.59 0.72 1.32
(Dollars)
STOCKHOLDERS' EQUITY 74,831 85,099 92,814 107,174 134,422
(Thousands of Dollars)
GOLD PRODUCTION N/A 65,400 126,200 164,900 176,400
(Ounces)
Commenced April 1, 1991
IN-SITU PROVEN AND N/A 2.2 4.5 4.8 6.7
PROBABLE RESERVES
(Millions of Ounces)
CASH DIVIDENDS PER SHARE 0.2 0.205 0.21 0.225 0.315
(Dollars)
</TABLE>
THE COMPANY
The Pioneer Group, Inc. (the "Company") and its subsidiaries engage in mutual
fund and related service businesses in the United States, operate a gold mine
in Ghana and participate as owners or joint venturers in several asset
management and natural resources related operations outside the United States.
Pioneering Management Corporation ("PMC") manages investments for the Pioneer
Family of Mutual Funds and for institutional and other accounts. Pioneer Funds
Distributor, Inc. serves as the principal underwriter of shares of the Pioneer
Family of Mutual Funds, utilizing a large network of independent broker
dealers. Pioneering Services Corporation provides services to Pioneer Family of
Mutual Fund shareholders, many of which are qualified retirement plans to which
the Company provides non bank trustee service. Pioneer Capital Corporation and
Pioneer SBIC Corp. make and manage venture capital investments.
Teberebie Goldfields Limited, which is 90% owned by the Company, is a gold
mining operation in Ghana. The Company also manages a mutual fund and owns 50%
of a financial services business in Poland. In addition, the Company has
invested in investment management operations in Taiwan, Russia, India, and the
Czech Republic, and in several non-financial ventures in Russia, including a
joint venture pursuing the development of timber production, in which the
Company has a 50% direct interest and a 7.4% indirect interest.
WHOLLY-AND MAJORITY-OWNED SUBSIDIARIES
Pioneering Management Corporation, Pioneering Services Corporation, Pioneer
Funds Distributor, Inc., Pioneer Fonds Marketing GmbH, Pioneer Capital
Corporation, Pioneer SBIC Corp., Pioneer Associates, Inc., Pioneer
International Corporation, Pioneer Plans Corporation, Pioneer Goldfields
Limited, Teberebie Goldfields Limited, Pioneer Investments Corporation, Pioneer
Metals and Technology, Inc., Pioneer First Polish Trust Fund Joint Stock
Company S.A., Pioneer Management (Ireland) Limited, Joint-Stock Company Pioneer
Metals International, Joint-Stock Company Pioneer Investments, Pioneer
Investment Poland Ltd.
JOINT VENTURES
Pioneer Winthrop Advisers, Financial Services Limited, ITI Pioneer AMC Ltd.,
Core Pacific Securities Investment Trust Co., Ltd., Joint-Stock Company Forest
Starma, International Joint-Stock Company Starma Holding.
The Company will file an Annual Report on Form 10-K with the Securities and
Exchange Commission for the year ended December 31, 1994. A copy of that Report
will be available, free of charge to stockholders of the Company, upon request
to William H. Keough, Senior Vice President and Chief Financial Officer, 60
State Street, Boston, MA 02109.
1
<PAGE> 2
THE PIONEER GROUP, INC.
FELLOW STOCKHOLDERS:
As expected, 1994 was yet another record year for The Pioneer Group, Inc. in
terms of earnings per share, gold production and assets managed, among other
things. However, the factors contributing to this growth were not exactly in
line with the scenario we would have predicted as the year began. On the
negative side, costs in a number of areas were higher than expected, and the
bond and stock markets created significant constraints as the year progressed.
On the plus side, the unusual tax-related benefit to our gold-mining profits in
the first quarter, and an extraordinary (but temporary) burgeoning of assets in
our fund in Poland in the first half of the year, more than compensated for the
impact of the markets. The result was a very good year overall, but a trend of
slower growth on a quarter-by-quarter basis.
FINANCIAL RESULTS
Earnings per share for 1994 were a record $1.32, compared to 72 cents in
1993. Fourth quarter earnings per share were 25 cents, versus 22 cents in the
1993 fourth quarter. All per-share results in this report have been adjusted
for the 2-for-1 stock splits effected in September 1993, and December 1994.
Revenues for the year and fourth quarter were $171.7 million and $44.0 million,
respectively, representing increases of $42.3 million and $8.1 million,
respectively, over the comparable 1993 periods. Details of the components of
the revenue and earnings results are provided in the Management's Discussion
section of the report.
INVESTMENT BUSINESSES
We continued to make significant progress in 1994, as sales, assets, relative
investment performance, and visibility in the press all showed positive
results, despite the negative impact of rising interest rates on financial
markets and the industry as the year unfolded. We were fortunate that we did
not share the experience of many of our competitors in the U.S. mutual fund
business, and many of our retail dealers, who saw sales decline and assets
shrink, at an accelerating rate, during the year.
At year-end 1994, our assets under management stood at $11.1 billion, up from
$10.8 billion one year earlier. The increase in assets of our Poland fund
represented about two-thirds of the net increase in assets at year-end.
Domestically, asset decreases in bond funds were more than offset by increases
in equity assets.
Sales of shares of U.S. registered funds, including reinvested dividends,
were $1.5 billion, an increase of 37% over 1993 sales. Redemptions increased
20% over the prior year, resulting in net sales of $615 million, versus $362
million in 1993. We continue to enjoy a redemption rate, as a percentage of
assets, that is lower than the mutual fund industry average.
There was no increase in the number of funds managed at year-end; two new funds
were launched but two former Mutual of Omaha funds were merged into Pioneer
funds with comparable objectives. At year-end, development of several new
Dublin-based offshore funds was underway, as well as a group of funds to serve
as the investment vehicles for a new variable annuity.
Reflecting the extraordinary price gains in the Polish stock market in 1993,
sales of our Polish fund soared early in the year. When the market showed
comparable volatility on the downside later in the year, it was redemptions
that were soaring while sales slowed to a trickle. People with limited
alternatives (and possibly even more limited understanding of markets) throwing
money at dramatically increasing stock markets is a familiar phenomenon in
emerging economies. So is the resulting exodus as the r oller coaster goes the
other way. Given Pioneer's long-term investment orientation, which we like to
think matches the
2
<PAGE> 3
ideal orientation of mutual fund investors in the U.S., we did not quite
anticipate the extent of the change in sales and assets of our Polish fund--in
either direction.
Assets in the Polish fund ended the year at close to $600 million.
Notwithstanding the higher asset levels reached earlier in the year, the net
result substantially exceeded our original expectations. Even though the asset
erosion has continued into 1995, we have established a unique operation, and
presence, in Poland that we believe has significant potential. While it
probably won't stay that way for very long, we still have the only
open-end fund publicly available in Poland.
At year-end, we were just about to close the first stage of an institutional
venture capital fund in Poland, with similar projects underway in both the U.S.
and Russia. None of these funds will likely contain huge levels of assets,
however they provide potential for significant earnings from sharing in profits
produced.
Our joint venture investment management operation in India launched a third
fund for the Indian market during the year and the venture continues to
demonstrate superior investment performance results. We continue to see
significant potential in the business in India. The joint-venture companies in
both India and Taiwan were profitable in 1994 and we expect them to make
modest contributions to our earnings in 1995.
On the shareholder-service side of the business, Pioneering Services
Corporation ("PSC") continues to improve efficiency through technology
improvements, including imaging systems, while providing important technical
and systems consulting to our operations in Germany and the Czech Republic, as
well as to our joint venture shareholder servicing operations in Poland and
India. PSC also made significant progress in establishing so-called "disaster
recovery" processing sites and a new processing facility in Dublin.
NATURAL RESOURCES
Significant progress continued at Teberebie Goldfields, Ltd ("TGL"), our
90%-owned gold-mining subsidiary in Ghana. The new West plant was constructed
quite smoothly by TGL personnel, at lower cost than expected, and the first bar
of gold from the new plant was poured in July. The new plant reached commercial
production levels during the year, contributing 32,200 ounces to TGL's total
gold production of 176,400 ounces for 1994. This compares to total production
of 164,900 ounces in 1993. Average realized gold sales price per ounce was
$383, an increase of $24. For the second consecutive year, TGL
contributed slightly more than half of the Company's earnings.
Cash cost per ounce and total cost per ounce for TGL were $161 and $248,
respectively, in 1994, versus $131 and $229, respectively, for the prior year.
Most of the increases in costs were attributable to higher stripping ratios and
mining of lower grade ore. Material hauled almost doubled during the year and
ore processed increased by 40%. Production for 1995 is targeted at
approximately 265,000 ounces.
At year-end, TGL's in situ proven and probable gold reserves were approximately
6.7 million ounces. TGL continues to add reserves at a rate greater than
depletion. In 1994, TGL's reserves were increased by 1.9 million ounces.
Continuing drilling is taking place to gain more information
3
<PAGE> 4
for mine planningand to increase proven and probable reserves. In mid-March,
the Company decided to proceed with a second expansion of TGL's existing heap
leaching facilities and has begun evaluating the economic feasibility of
various ore processing alternatives.
TGL was awarded a reconnaissance license on a separate area in western Ghana,
which TGL's geologists believe is a very promising exploration site.
Additional prospecting/exploration work by the Company is continuing in several
other countries, both within and outside Africa. One project was rejected as
not economically desirable, but several others appear to have potential,
including one where we hold an option on a small active gold mine which
recently received an exclusive prospecting order.
Forest Starma, a Russian joint venture in which the Company has a 50% direct
interest and a 7.4% indirect interest, is pursuing the development of timber
production under a 50-year lease of 33,000 hectares (82,000 acres) with annual
cutting rights of 130,000 cubic meters awarded to the venture in the Khabarovsk
Territory of Russia. The venture also expects to acquire a lease of additional
forest land. Forest Starma is developing a site, including the construction of
a jetty, from which its timber production would be exported primarily to the
Japanese market. Timber production is planned to commence by the end of the
first quarter of 1995 and it is expected that shipments will commence in the
second quarter of 1995.
The Company has increased its cost estimate for the Forest Starma venture from
the $17.6 million reported in the third quarter of 1994 to $20.6 million,
principally as a result of increased reliance on an outside contractor to
counteract delays in the delivery of heavy equipment associated with longer
than expected manufacturing lead times. $9.3 million of the capital costs would
be financed pursuant to a loan commitment already in place.
Our venture in Russia to manufacture and market powdered metals, and related
products such as permanent magnets, has been reorganized and additional staff
added. We continue to explore methods to expand the outlets for these products.
In summary, the year overall was a very good one for Pioneer, but with a
persistent series of unrelated surprises, the net of which was quite positive.
One result of such experiences, however, is that the possibility of one or more
unpleasant future surprises becomes of more concern. It remains to be seen
whether the worst bond market in recent history is another bump in the road for
the investing public or a major detour with serious delays in commitments that
are important to progress. It remains to be seen whether corporate earnings
growth will triumph over the elements pointing to lower stock prices. And we
certainly cannot predict the course of interest rates, the dollar and gold
prices.
We remain confident of our ability to generate growth in earnings and value for
stockholders over the long term. The uncertainties and challenges we see today,
when combined with a recognition of some of our prior good fortune, make us
quite reluctant to predict that growth will always continue without interim
periods of difficulty.
Respectfully submitted,
John F. Cogan, Jr.
President
March 24, 1995
4
<PAGE> 5
<TABLE>
Quarterly Results:
Dollars in Thousands Except Per Share Amounts
<CAPTION>
Total Net Earnings
Revenues and Sales Income Per Share*
<S> <C> <C> <C>
1994 by Quarter
March 31 $ 42,558 $ 11,891 $0.47
June 30 39,816 6,847 0.27
September 30 45,313 8,280 0.33
December 31 44,015 6,442 0.25
$171,702 $33,460 $1.32
1993 by Quarter
March 31 $ 29,679 $ 3,739 $0.15
June 30 30,903 4,054 0.16
September 30 32,916 4,790 0.19
December 31 35,905 5,547 0.22
$ 129,403 $ 18,130 $0.72
<FN>
* Adjusted for December 1, 1994, and September 1, 1993, 2-for-1 stock splits
effected in the form of 100% dividends.
</TABLE>
<TABLE>
Five Year Summary of Selected Financial Data
Dollars in Thousands Except Per Share Amounts
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Results of Operations
Revenues and sales $ 171,702 $ 129,403 $ 101,802 $ 80,919 $ 59,980
Costs and expenses 118,678 94,038 73,616 57,835 39,952
Unrealized and realized losses (gains)
on venture capital and marketable
securities investments, net 946 (3,468) (2,657) (4,359) (810)
Interest expense 1,305 2,388 1,427 1,580 218
Minority interest 2,129 1,409 1,169 487 --
Other, net 1,002 584 712 -- --
Income before provision for federal,
state and foreign
income taxes 47,642 34,452 27,535 25,376 20,620
Net provision for federal, state and
foreign income taxes 14,182 16,322 12,937 10,938 8,361
Net income $ 33,460 $ 18,130 $ 14,598 $ 14,438 $ 12,259
Earnings per share* $ 1.32 $ 0.72 $ 0.59 $ 0.58 $ 0.50
Cash dividends per share* $ 0.315 $ 0.225 $ 0.21 $ 0.203 $ 0.20
Weighted average common and common
equivalent shares outstanding* 25,354,000 24,976,000 24,824,000 24,766,000 24,504,000
Long-term notes payable $ 9,101 $ 13,306 $ 11,972 $ 17,070 $ 20,312
Total assets $ 202,509 $ 172,295 $ 134,705 $ 123,817 $ 108,880
Stockholders' equity $ 134,422 $ 107,174 $ 92,814 $ 85,099 $ 74,831
Stockholders' equity per share* $ 5.45 $ 4.36 $ 3.81 $ 3.46 $ 3.06
Return on average stockholders' equity 28% 18% 16% 18% 17%
Return on revenues 19% 14% 14% 18% 20%
<FN>
* Adjusted for December 1, 1994, and September 1, 1993, 2-for-1 stock splits effected in the form of 100% stock dividends.
</TABLE>
5
<PAGE> 6
<TABLE>
Assets Under Management at December 31:
Dollars in Millions
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
U.S. Registered Mutual Funds $ 9,925 $ 9,854 $7,330 $6,871 $6,012
Non-U.S. Registered Mutual Funds 589 388 -- -- --
Total Mutual Funds 10,514 10,242 7,330 6,871 6,012
Closed-end and subadvised funds and private
institutional accounts* 589 524 261 269 337
Total $11,103 $10,766 $7,591 $7,140 $6,349
<FN>
* Excludes assets of funds managed by foreign joint ventures.
</TABLE>
<TABLE>
Sales of Mutual Fund Shares:
Dollars in Millions
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
U.S. Registered Mutual Funds:
Sales* $1,475 $1,076 $723 $ 624 $789
Redemption of shares 860 714 784 939 657
Net sales (redemptions) of shares $ 615 $ 362 $(61) $(315) $132
Non-U.S. Registered Mutual Funds:
Sales* $734 $429 -- -- --
Redemption of shares 584 34 -- -- --
Net sales of shares $150 $395 -- -- --
<FN>
* Includes reinvestment of dividends, but excludes money market funds and funds managed by foreign joint ventures.
</TABLE>
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SUMMARY OF OPERATIONS
The Pioneer Group, Inc. (the "Company") reported record earnings per share of
$1.32 in 1994, significantly higher than the previous year's record earnings of
72 cents, and more than double 1992's earnings per share of 59 cents. Earnings
per share have been adjusted for the 2 for 1 stock splits, effected by the
payment of 100% stock dividends on December 9, 1994, and September 1, 1993,
respectively.
The Company's financial services businesses earned 63 cents in 1994, 27 cents
higher than in 1993, and 31 cents higher than in 1992. Polish mutual fund
operations contributed 31 cents per share to 1994's earnings, contrasted with 3
cents in 1993. Such operations lost 7 cents per share in 1992. Earnings from
the domestic mutual fund business and venture capital operations have remained
relatively stable over the last three years. Domestic mutual fund operations
earned 36 cents per share in 1994, 33 cents in 1993 and 36 cents in 1992.
Venture capital operations, net of operating expenses, lost 4 cents per share
in 1994, broke even in 1993 and earned 3 cents per share in 1992.
Sharply higher earnings per share of 72 cents from gold mining operations in
1994 included a favorable deferred income tax adjustment of 16 cents per share
from Teberebie Goldfields Limited ("TGL"), the Company's 90% owned gold mining
subsidiary. Net of the deferred income tax adjustment, total gold mining
earnings were 14 cents per share higher thanin 1993 and 27 cents higher than in
1992. The Company's various Russian initiatives lost an aggregate of 3 cents
per share in 1994, 6 cents in 1993 and 2 cents in 1992.
1994 COMPARED TO 1993
FINANCIAL SERVICES BUSINESSES
REVENUES. The Company's financial services businesses have three principal
sources of revenues: fees derived from managing the Pioneer Family of Mutual
Funds and institutional accounts, fees from underwriting and distributing
mutual fund shares, and fees derived from acting as shareholder services agent.
Revenues from the financial services businesses of $104.1 million in 1994 were
$33.9 million higher than the 1993 level, almost exclusively from higher
management fees and underwriting commissions. Management fees of $64.3 million
in 1994 were 63% higher than in 1993. Nearly one-half of the increase resulted
from higher average assets of U.S. registered funds, including funds whose
management was acquired from Mutual of Omaha Fund Management Company ("FMC") in
December 1993. The remainder of the increase is attributable to assets of the
Company's Polish mutual fund which, as is customary with many international
funds based outside the U.S., has a higher management fee rate than the
Company's U.S. registered funds.
Record year-end assets under management of $11.1 billion at December 31, 1994,
reflected an increase of $0.3 billion over 1993. Assets under management at
year end included
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
approximately $600 million from the Company's Polish mutual fund. Since year
end, assets in the Polish mutual fund have declined by approximately 35%,
approaching $385 million at March 17, 1995.
Underwriting commissions of $12.5 million in 1994 were 65% higher than in 1993.
Worldwide sales of mutual funds (including reinvested dividends) were a record
$2.2 billion in 1994, $0.7 billion higher than in 1993, almost evenly divided
between the Company's U.S. registered funds and the Polish mutual fund. Sales
of U.S. registered mutual funds of $1.5 billion in 1994, which matched the
Company's previous highest level (in 1986), were 37% higher than in 1993.
Redemptions increased by 20% in 1994 over 1993. Polish mutual fund sales were
$734 million in 1994 versus redemptions of $584 million. In 1993, Polish mutual
fund sales were $429 million and redemptions were $34 million.
Shareholder services fees of $19.8 million in 1994 increased by 16% over 1993.
The Company was servicing nearly 929,000 shareholder accounts at December 31,
1994, 55,000 higher than year-end 1993 and 164,000 higher than year-end 1992.
The 1993 increase of 109,000 accounts over 1992 resulted primarily from the
Company's December 1, 1993 acquisition of FMC. Trustee fees and other income of
$7.5 million increased by $1.4 million in 1994. Higher interest income
accounted for nearly two-thirds of the increase while the remainder resulted
principally from higher trustee fees.
COSTS AND EXPENSES. Worldwide costs and expenses of $76.0 million in 1994
increased by $18.2 million (32%) over the 1993 level. Approximately one-third
of the increase resulted from higher payroll costs, principally reflecting
costs related to: 1) increased staffing in the investment management, marketing
and shareholder servicing groups and 2) higher bonus expenses related
principally to investment management performance. Approximately one-fourth of
the increase reflected higher mutual fund distribution and advertising costs.
Nearly one-fifth of the increase resulted equally from a full year's
amortization of goodwill in 1994 associated with the Company's acquisition of
FMC versus only one month's amortization in 1993 and higher costs related to
additional office space.
OTHER INCOME AND EXPENSE. The Company reported no net venture capital
investment portfolio gains or losses (excluding operating expenses) in 1994 as
contrasted with net gains of $2.0 million in 1993. The Company's results for
1994 reflected net losses of $0.9 million as contrasted with 1993 net gains of
$1.5 million in market value from the Company's investments in its own mutual
funds during their start-up phases.
TAXES. The Company's effective tax rate for the financial services businesses
decreased slightly from 43% in 1993 to 42% in 1994.
GOLD MINING BUSINESS
In 1994, the gold mining business contributed $18.3 million, or 72 cents per
share, to the Company's earnings. This included a favorable adjustment to
earnings of 16 cents per share as a result of a reduction in the applicable
Ghanaian income tax rates for gold mines from 45% to 35% (the same rate for
other Ghanaian industries), which reduced TGL's cumulative deferred income
taxes accrued prior to January 1, 1994, by $4.4 million. Excluding this
adjustment, earnings increased by $3.5 million, or 14 cents per share compared
with 1993.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Revenues increased by 14% to $67.6 million as both gold shipments and the
average realized price of gold increased by 7% to 176,400 ounces and $383 per
ounce, respectively.
The mine expansion project, which replicated the Company's existing open pit
mining, crushing, and heap leaching technology, commenced commercial operations
in the third quarter of 1994. Expansion operations produced 32,200 ounces, or
18% of 1994 production.
Total production for 1995 is targeted at 265,000 ounces, an increase of 88,600
ounces over 1994.
<TABLE>
The following table compares the cash and total cost per ounce for 1994 with the
prior year:
<CAPTION>
Twelve months ended
December 31, (Increase)/
1994 1993 Decrease
<S> <C> <C> <C>
Cash costs:
Production costs $119 $ 92 ($27)
Royalties 11 11 -0-
130 103 (27)
General and administrative 31 28 (3)
Cash Cost Per Ounce 161 131 (30)
Non Cash:
Depreciation and amortization 73 79 6
Other 2 2 -0-
Cost of Production Per Ounce 236 212 (24)
Interest and other costs 12 17 5
Total Cost Per Ounce $248 $229 ($19)
</TABLE>
PRODUCTION COSTS. Production costs represent costs attributable to mining ore
and waste and processing the ore through crushing, leaching, and processing
facilities. The $27 per ounce increase in production costs was attributable to
higher stripping ratios, mining of lower grade ore, and start-up costs relating
to the mine expansion. Accordingly, production costs increased by 38%, or $5.7
million, as material hauled essentially doubled from 7.7 million tonnes to 14.2
million tonnes and ore processed increased by 40% to 4.9 million tonnes.
GENERAL AND ADMINISTRATIVE COSTS. These costs consist principally of
administrative salaries and related benefits, travel expenses, insurance,
utilities, legal costs, employee meals, rents and vehicle expenditures. Cost
increases associated with salaries and wages, commercial insurance premiums,
customs duties and clearing, and employee meals aggregated approximately $5 per
ounce. These increases were attributable to manpower and equipment additions
associated with the mine expansion and were offset, in part (approximately $2
per ounce), by the effect of higher production levels over a relatively fixed
cost base.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization is calculated
using units of production and straight line methods designed to fully depreciate
property, plant and equipment over the lesser of their estimated useful lives or
ten years. Depreciation and amortization costs decreased by $6 per ounce
principally because original mining equipment, which was depreciated rapidly
over 400,000 ounces, was fully depreciated by the end of the second quarter of
1994.
INTEREST AND OTHER COSTS. Interest and other costs decreased by $5 per ounce
compared with 1993. Since the beginning of 1993, outstanding loan principal
balances decreased by $15.3 million resulting in a $3 per ounce decrease in
interest expense. Foreign exchange losses
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
decreased by $2 per ounce as foreign currency exposure decreased and the
devaluation of the Ghanaian Cedi decreased from 56% in 1993 to 28% in 1994.
Under the laws of the Republic of Ghana, income taxes may be deferred until
recovery of capital investment, so TGL had accrued deferred income taxes of
$19.8 million for book purposes from the commencement of commercial operations
in April, 1991 through December 31, 1993. In the first quarter of 1994, the
Republic of Ghana reduced the income tax rate for mining companies from 45% to
35%. As a result, 1994 earnings were enhanced by 16 cents per share, or 90% of a
$4.4 million reduction in income taxes deferred through December 31, 1993. The
1994 effective tax rate was 36% as compared to 48% in 1993.
1993 COMPARED TO 1992
FINANCIAL SERVICES BUSINESSES
REVENUES. Revenues from the financial services businesses of $70.3 million in
1993 were $12.2 million higher than the 1992 level, almost exclusively from
higher management fees and underwriting commissions. Management fees of $39.5
million in 1993 were 23% higher principally reflecting higher average assets
under management. Record year-end assets under management of $10.8 billion at
December 31, 1993, reflected an increase of $3.2 billion over 1992. The increase
included $1.3 billion of assets from the acquisition of FMC and $400 million
from the Company's Polish mutual fund.
Underwriting commissions of $7.6 million more than doubled in 1993 (up 150%).
Worldwide sales of mutual funds (including reinvested dividends) were $1.5
billion in 1993, $800 million higher than in 1992, almost evenly divided between
the Company's U.S. register ed funds and the Polish mutual fund. Sales of U.S.
registered mutual funds of $1.1 billion (the Company's highest level since 1987)
were 52% higher than 1992. Redemptions, which have been traditionally lower than
industry averages, decreased by 9% in 1993 versus 1992.
Shareholder services fees of $17.1 million in 1993 were slightly higher (2%)
than 1992's fees. The Company was servicing nearly 874,000 shareholder accounts
at year end. The 1993 increase of 109,000 accounts resulted primarily from the
Company's December 1, 1993 acquisition of FMC.
Trustee fees and other income of $6.1 million were virtually unchanged from the
prior year's level.
COSTS AND EXPENSES. Costs and expenses of $58.4 million in 1993 increased by
$11.0 million (23%) over the 1992 level. Approximately 40% of the increase
resulted from higher payroll costs, principally reflecting costs related to:
1) increased staffing in the investment management and marketing groups and
2) higher bonus expenses related principally to the improvement in investment
management performance. Another 35% of the increase reflected higher mutual
fund advertising and distribution costs. These costs included the costs of
printing and mailing of sales literature and commissions paid to the Company's
sales personnel. The Company introduced five new funds in 1993, intensified its
bank marketing efforts and added six new funds in connection with the
acquisition of FMC.
10
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
OTHER INCOME AND EXPENSE. The Company reported net venture capital investment
portfolio gains (excluding operating expenses) of $2.0 million in 1993 (4 cents
per share), as compared to net gains of $2.5 million in 1992 (5 cents per
share), a decrease of 1 cent per share. The Company's results for 1993 also
included net gains of $1.5 million (4 cents per share) versus net gains of $0.2
million (1 cent per share) in market value from investments in its mutual funds
during their start-up phases.
TAXES. The Company adopted the new accounting and disclosure rules specified by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," as of January 1, 1993. There was no impact to results of operations as
the result of the adoption, and therefore the Company elected to adopt this
statement without restatement to prior periods. The Company's effective tax
rate for the financial services businesses decreased from 45% in 1992 to 43% in
1993. The Company was unable to take tax benefits on its losses on its Polish
mutual fund operations in 1992.
GOLD MINING BUSINESS
In 1993, the gold mining business contributed $10.4 million, or 42 cents per
share, to the Company's earnings. This represented an increase of $3.4 million,
or 13 cents per share compared with 1992.
Revenues increased by 35% to $59.2 million as gold shipments increased by 28%
to 164,900 ounces and the average realized gold price increased by over 5% to
$359 per ounce.
<TABLE>
The following table compares the cash and total cost per ounce for 1993 with
the prior year:
<CAPTION>
Twelve months ended
December 31, (Increase)/
1993 1992 Decrease
<S> <C> <C> <C>
Cash costs:
Production costs $92 $88 $(4)
Royalties 11 10 (1)
103 98 (5)
General and administrative 28 31 3
Cash Cost Per Ounce 131 129 (2)
Non Cash:
Depreciation and amortization 79 69 (10)
Other 2 2 -0-
Cost of Production Per Ounce 212 200 (12)
Interest and other costs 17 27 10
Total Cost Per Ounce $229 $227 $(2)
</TABLE>
While the total cost per ounce was about the same in both 1993 and 1992, on a
quarterly basis, the gold mining business experienced a $52 increase in total
costs per ounce in the fourth quarter of 1993 ($256) compared to the fourth
quarter of 1992 ($204). The increase was primarily attributable to higher
stripping ratios and lower grade ore and, to a lesser extent, maintenance costs
relating to the age of initial mining and processing equipment acquired in 1989
and 1990.
PRODUCTION COSTS. Production costs, as previously defined above, increased by
38%, or $4.2 million, while gold production increased by 31%, contributing to a
$4 increase in the cost per ounce. During 1993, the gold mining business
experienced increases in variable costs such as leaching reagents, fuel,
drilling and blasting costs, crusher wear parts, and mining equipment
maintenance and supplies.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
GENERAL AND ADMINISTRATIVE COSTS. Since these costs are primarily fixed and
unrelated to production levels, the cost per ounce decrease compared with 1992
was largely attributable to higher production levels (approximately $8 per
ounce). General and administrative cost increases in salaries, insurance
premiums and deductibles, cafeteria services and employee benefits aggregated
approximately $5 per ounce.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization costs increased by
$7 per ounce compared with the prior year because of a $4.1 million increase in
mining equipment additions during 1992 which were depreciated rapidly over
400,000 ounces. The depreciable asset base for other assets during 1992
increased by $3.2 million increasing depreciation costs by $3 per ounce.
INTEREST AND OTHER COSTS. These costs decreased by $10 per ounce compared with
1992 principally because of a $1.1 million, or $9 per ounce decrease in interest
expense. In this connection, outstanding loan principal balances were reduced
by $22 million while market interest rates dropped precipitously over the
twenty-four months ended December 31, 1993.
The effective tax rate for the gold mining business was 48% in 1993 as compared
to 49% in 1992.
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL SERVICES BUSINESSES
IRS regulations require that, in order to serve as trustee, the Company must
maintain a net worth of at least 2% of the assets of Individual Retirement
Accounts and other qualified retirement plans accounts at year end. At December
31, 1994, the Company served as trustee for $3.5 billion of qualified plan
assets and the ratio of net worth to qualified assets was 3.8%, nearly double
the required level. The Company's stockholders' equity of $134.4 million at
December 31, 1994, would permit it to serve as trustee for up to an additional
$3.2 billion of qualified plan assets.
The Company completed the acquisition of FMC on December 1, 1993. The Company
may pay to Mutual of Omaha in 1996 up to $3 million of additional consideration
if certain asset targets are reached.
For certain of the Pioneer Family of Mutual Funds, the Company
introduced a multi-class share structure, commencing April 4, 1994. Under such
structure, which was approved by the trustees of such funds, the participating
funds offer both the traditional front-end load shares and back-end load
shares. On back-end load shares, the investor does not pay any sales charge
unless there is a redemption before the expiration of the minimum holding
period which ranges from three to six years. However, the Company pays
commissions to broker-dealers related to sales and service of the back-end load
shares ranging from 2% to 4% of the sales transaction amount. The participating
funds pay the Company distribution fees of 0.75%, and service fees of 0.25%,
per annum of their respective net assets, subject to annual renewal by the
trustees. Sales of back-end load shares were $136 million in 1994 and dealer
advances totaled $4.7 million. In 1994, the Company financed this program
through working capital and a line of credit with a commercial bank.
GOLD MINING BUSINESS
TGL's cash balances decreased by $0.8 million to $3.5 million during 1994. Cash
generated from operating activities aggregated $23.0 million while capital
expenditures and loan
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
principal payments were $18.4 million and $5.4 million, respectively. Loan
principal payments included prepayment of $0.8 million in debt secured from two
third-party sources. TGL continued to generate sufficient operating cash flow to
fund all of its scheduled third party debt service payments, short-term cash
commitments and capital for the expansion.
Available cash increased by $1.9 million in the fourth quarter of 1994 as
escrow requirements were waived by a third party financing source. At the end
of 1994, direct investment in TGL aggregated $9.6 million, comprised of $7.7
million of third party debt and $1.9 million of direct equity investment by
the Company. Of such third party debt, $2.1 million was guaranteed by the
Company. Scheduled third party debt sevice in 1995 is expected to aggregate
$3.9 million, all of which is expected to be funded from mining operations
revenues.
The Company maintains $51.2 million of "political risk" insurance
principally from the Overseas Private Investment Corporation covering 90% of
its equity and loan guarantees. In addition, the political risk insurance
covers 90% of the Company's proportionate share of cumulative retained
earnings. The Company also secured up to $18.1 million in stand-by insurance
subject to semiannual coverage elections to cover increases in retained
earnings. TGL has purchased put options to limit its exposure to a decline in
market prices of gold to $310 per ounce. TGL has also secured business
interruption coverage of up to $19.0 million for losses associated with
machinery breakdown and property damage and continuing infrastructure and
interest costs.
In 1994, TGL received an independent certification of additional gold reserves
at its mining concession in Ghana. At December 31, 1994, remaining in-situ
proven and probable gold reserves were approximately 6.7 million ounces. TGL is
continuing its development drilling program to increase proven and probable
reserves and to gain additional information for mine planning.
In the third quarter of 1994, TGL completed construction of a mine expansion
expected to increase gold production to approximately 265,000 ounces per annum
in 1995. TGL poured the first gold bar from the expansion plant at the end of
July and commenced commercial operations in August. By the end of 1994, the new
plant produced 32,200 ounces including 900 ounces produced prior to achieving
commercial operations which were recorded as a reduction in mine development
costs. TGL funded the $23 million expansion both from operations and a $4.9
million loan guaranteed by the Swedish Export Credits Guarantee Board. In
mid-March, the Company decided to proceed with a second expansion of TGL's
existing heap leaching facilities and has begun evaluating the economic
feasibility of various ore processing alternatives. Preliminary capital cost
projections for a mine expansion which replicates TGL's existing open pit
mining, crushing, and heap leaching technology are estimated at approximately
$30.0 million. Gold production is expected to increase by at least 120,000
ounces annually under this alternative. The Company is also examining an in-pit
crushing alternative which would further increase gold production at an
additional cost of approximately $15.0 million. TGL estimates that the new
facility, under either alternative, will commence production in early 1997 and
will reach full production by the middle of that year. TGL expects to finance
75% of the expansion externally from third party sources, with the balance
financed through TGL's operations.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
OTHER NATURAL RESOURCE BUSINESS
The Company announced in the second quarter of 1994 that one of its Russian
ventures, Forest Starma, in which the Company has a 50% direct interest and a
7.4% indirect interest, is pursuing the development of timber production under
a 50-year lease of 33,000 hectares (82,000 acres) with annual cutting rights of
130,000 cubic meters awarded to the venture in the Khabarovsk Territory of
Russia. The venture also expects to acquire a lease of additional forest land.
Forest Starma is developing a site, including the construction of a jetty, from
which its timber production would be exported primarily to the Japanese market.
Timber production is planned to commence by the end of the first quarter of
1995 and it is expected that shipments will commence in the second quarter of
1995 and would approximate 95,000 cubic meters and 70,000 cubic meters,
respectively, in 1995.
Capital required by this venture is now projected at approximately $20.6
million (net of an assumed Value Added Tax recovery on imports) of which $9.3
million would be financed pursuant to a conditional loan commitment already in
place. The loan, which initially would be guaranteed by the Company, would
cease to be guaranteed when the project meets certain production and cash flows
tests. The Company expects to provide financing of $11.3 million in the form of
equity and subordinated debt. Investments by the Company in the venture totaled
$18.9 million at February 28, 1995, some of which is considered bridge
financing by the Company.
The Company has increased its cost estimate from the $17.6 million reported in
the third quarter of 1994 principally as a result of increased reliance on an
outside contractor to counteract delays in the delivery of heavy equipment
associated with longer than expected manufacturing lead times.
The Company is also in the process of securing political risk insurance. A
second venture with similar but not identical ownership is negotiating a lease
of another large tract of forest land in the Khabarovsk Territory.
GENERAL
The Company's liquid assets consisting of cash and marketable securities
(exclusive of gold mining operations) decreased by $7.0 million in 1994 to
$26.1 million, principally from the investments described above.
On February 28, 1995, the Company entered into an agreement with a commercial
bank providing for a $30 million unsecured line of credit. Advances under the
line bear interest, at the Company's option, at (a) the higher of the bank's
base lending rate or the federal funds rate plus 0.50%, (b) the London
Interbank Offered Rate plus 1.10%, or (c) at a money market rate set by the
bank. The line, which expires on February 27, 1996, provides that the Company
must pay additional interest to the bank at the rate of 0.25% per annum of the
unused portion of the line. At March 10, 1995, the Company had $10 million
outstanding under the line. The proceeds from this line were used in part to
repay $7.75 million outstanding to another bank under short-term lines which
had been operational since September 1994.
THE COMPANY BELIEVES THAT IT IS IN SOUND FINANCIAL CONDITION, THAT IT HAS
SUFFICIENT LIQUIDITY TO COVER SHORT-TERM COMMITMENTS AND CONTINGENCIES AND THAT
IT HAS ADEQUATE CAPITAL RESOURCES TO PROVIDE FOR LONG-TERM COMMITMENTS AND TO
TAKE ADVANTAGE OF INVESTMENT OPPORTUNITIES.
14
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of The Pioneer Group, Inc.:
We have audited the accompanying consolidated balance sheets of The Pioneer
Group, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Pioneer Group, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts,
March 10, 1995
<PAGE> 16
<TABLE>
Consolidated Statement of Income
Dollars in Thousands Except Per Share Amounts
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Revenues and sales:
Investment management fees $ 64,251 $ 39,455 $ 32,163
Underwriting commissions 12,541 7,609 3,014
Shareholder services fees 19,820 17,071 16,749
Trustee fees and other income 7,506 6,117 6,103
Revenues from financial services businesses 104,118 70,252 58,029
Gold sales 67,584 59,151 43,773
Total revenues and sales 171,702 129,403 101,802
Costs and expenses:
Management, distribution, shareholder service and administrative expenses 75,995 57,770 46,972
Gold mining operating costs and expenses 42,683 36,268 26,644
Total costs and expenses 118,678 94,038 73,616
Other (income) expense:
Unrealized and realized losses (gains) on venture capital and marketable
securities
investments, net 946 (3,468) (2,657)
Interest expense 1,305 2,388 1,427
Minority interest 2,129 1,409 1,169
Other, net 1,002 584 712
Total other (income) expense 5,382 913 651
Income before provision for federal, state and foreign income taxes 47,642 34,452 27,535
Provision for federal, state and foreign income taxes 18,613 16,322 12,937
Cumulative deferred foreign income tax adjustment (4,431) -- --
Net provision for federal, state and foreign income taxes 14,182 16,322 12,937
Net income $ 33,460 $ 18,130 $ 14,598
Earnings per share $ 1.32 $ 0.72 $0.59
Weighted average common and common equivalent shares outstanding 25,354,000 24,976,000 24,824,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
16
<PAGE> 17
<TABLE>
Consolidated Balance Sheet
Dollars in Thousands Except Per Share Amount
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents, at cost which approximates market value $ 23,118 $ 19,242
Restricted cash -- 2,227
Investment in marketable securities, at value 6,458 15,786
Receivables:
From securities brokers and dealers for sales of mutual fund shares 7,406 8,206
For gold shipments 4,393 1,807
Other 10,167 10,168
Mining inventory 11,881 5,216
Other current assets 4,696 2,896
Total current assets 68,119 65,548
Noncurrent assets:
Mining operations:
Mining equipment and facilities (net of accumulated depreciation of $29,793 in 1994 and $19,786 in 1993) 44,337 38,223
Deferred mining development costs (net of accumulated amortization of $9,022 in 1994 and $6,468 in 1993) 11,061 11,341
Cost in excess of net assets of minority interest acquired (net of accumulated amortization of $1,405 in
1994 and $1,030 in 1993) 2,341 2,715
Cost of acquisition in excess of net assets acquired (net of accumulated amortization of $2,458 in 1994
and $201 in 1993) 22,789 24,576
Long-term venture capital investments, at value (cost $18,181 in 1994 and $17,541 in 1993) 19,835 19,238
Timber project in development:
Deferred timber development costs 6,765 276
Timber equipment and facilities 5,384 --
Furniture, equipment and leasehold improvements (net of accumulated depreciation and
amortization of $9,724 in 1994 and $8,548 in 1993) 9,837 5,768
Dealer advances (net of accumulated amortization of $346 in 1994) 4,399 --
Other assets (including federal and state deferred income taxes, net) 7,642 4,610
Total noncurrent assets 134,390 106,747
$202,509 $172,295
Liabilities and Stockholders' Equity
Current liabilities:
Payable to funds for shares sold $ 7,075 $ 7,869
Accrued expenses and accounts payable 13,675 10,487
Accrued employees' compensation 1,547 2,475
Accrued income taxes 748 2,216
Current portion of notes payable 13,597 5,984
Total current liabilities 36,642 29,031
Noncurrent liabilities:
Notes payable, net of current portion 9,101 13,306
Deferred foreign income taxes 17,331 19,838
Total noncurrent liabilities 26,432 33,144
Total liabilities 63,074 62,175
Minority Interest 5,013 2,946
Commitments and Contingencies (Notes 9 and 12)
Stockholders' Equity:
Common stock, $.10 par value; authorized 33,000,000 shares; issued 24,697,960
shares in 1994 and 12,348,980 shares in 1993 2,470 1,235
Paid-in capital 3,599 3,708
Retained earnings 130,715 105,026
Treasury stock at cost, 28,772 shares in 1994 and 63,756 shares in 1993 (167) (693)
136,617 109,276
Less--Deferred cost of restricted common stock issued (2,195) (2,102)
Total stockholders' equity 134,422 107,174
$202,509 $172,295
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE> 18
<TABLE>
Consolidated Statement of Changes in Stockholders' Equity
Dollars in Thousands Except Per Share Amounts
Deferred
<CAPTION>
Deferred
Cost Total
Common Stock of Stock-
Shares Paid-in Retained Treasury Restricted holders'
Issued Amount Capital Earnings Stock Stock Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 6,174,490 $ 617 $ 3,095 $ 83,162 $ (340) $(1,435) $85,099
Add (Deduct):
Net income -- -- -- 14,598 -- -- 14,598
Dividends paid--$0.21 per share -- -- -- (5,340) -- -- (5,340)
Purchase of treasury stock, 455,000
shares -- -- -- -- (2,571) -- (2,571)
Shares awarded under the 1990
restricted stock plan, 187,600 shares -- -- 159 -- 1,016 (1,170) 5
Amortization of deferred cost of
restricted common stock issued -- -- -- -- -- 737 737
Additional tax benefits from
restricted stock -- -- 266 -- -- -- 266
Forfeitures of shares awarded under
the 1981 and 1990 restricted stock
plans (9,140 shares) -- -- -- -- (44) 44 --
Exercise of stock options awarded
under the 1988 stock option plan
(4,800 shares) -- -- (5) -- 25 -- 20
Balance, December 31, 1992 6,174,490 $ 617 $ 3,515 $ 92,420 $(1,914) $(1,824) $92,814
Add (Deduct):
Net income -- -- -- 18,130 -- -- 18,130
Dividends paid--$0.225 per share -- -- -- (5,524) -- -- (5,524)
Stock split in the form of a 100%
stock dividend 6,174,490 618 (618) -- -- -- --
Shares awarded under the 1990
restricted stock plan, 164,800 shares -- -- 332 -- 896 (1,223) 5
Amortization of deferred cost of
restricted common stock issued -- -- -- -- -- 929 929
Additional tax benefits from
restricted stock -- -- 557 -- -- -- 557
Forfeitures of shares awarded under
the 1981 and 1990 restricted stock
plans (2,820 shares) -- -- -- -- (16) 16 --
Exercise of stock options awarded
under the 1988 stock option plan
(62,800 shares) -- -- (78) -- 341 -- 263
Balance, December 31, 1993 12,348,980 $ 1,235 $ 3,708 $ 105,026 $ (693) $(2,102) $107,174
Add (Deduct):
Net income -- -- -- 33,460 -- -- 33,460
Dividends paid--$0.315 per share -- -- -- (7,771) -- -- (7,771)
Stock split in the form of a 100%
stock dividend 12,348,980 1,235 (1,235) -- -- -- --
Shares awarded under the 1990
restricted stock plan, (101,460
shares) -- -- 736 -- 551 (1,282) 5
Amortization of deferred cost of
restricted common stock issued -- -- -- -- -- 991 991
Additional tax benefits from
restricted stock -- -- 429 -- -- -- 429
Forfeitures of shares awarded under
the 1981 and 1990 restricted stock
plans (34,720 shares) -- -- -- -- (198) 198 --
Exercise of stock options awarded
under the 1988 stock option plan
(32,000 shares) -- -- (39) -- 173 -- 134
Balance, December 31, 1994 24,697,960 $2,470 $3,599 $130,715 $ (167) $(2,195) $134,422
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE> 19
<TABLE>
Consolidated Statement of Cash Flows
Dollars in Thousands
<CAPTION>
Year Ended December 31,
1994 1993 1992
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $33,460 $ 18,130 $ 14,598
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 17,689 14,904 10,335
Unrealized and realized losses (gains) on venture capital and marketable securities
investments, net 946 (3,468) (2,657)
(Equity in earnings of) provision on other investments (1,010) 778 693
Restricted stock plan expense 991 929 737
(Prepaid) deferred income taxes (1,256) 9,625 6,891
Minority interest 2,129 1,409 1,169
Changes in operating assets and liabilities:
Receivable from securities brokers and dealers for sales of mutual fund shares 800 (5,131) 394
Receivables for gold shipments (2,586) 772 (1,245)
Other receivables 1 (6,599) 215
Mining inventory (6,665) (1,971) (1,095)
Other current assets (1,800) 553 (627)
Dealer advances (4,745) -- --
Other assets (143) (558) --
Payable to funds for shares sold (794) 5,114 (402)
Accrued expenses and accounts payable 3,188 2,551 2,463
Accrued employees' compensation (928) 586 (751)
Accrued income taxes (1,038) 1,569 (764)
Total adjustments 4,779 21,063 15,356
Net cash provided by operating activities 38,239 39,193 29,954
Cash flows from investing activities:
Purchase of mining equipment and facilities (16,147) (25,142) (8,075)
Deferred mining development costs, net (2,274) (278) (871)
Additions to furniture, equipment and leasehold improvements (6,195) (3,228) (2,549)
Investments in marketable securities (14,370) (42,980) (21,850)
Proceeds from sale of marketable securities 22,720 37,892 25,175
Long-term venture capital investments (4,134) (5,518) (4,744)
Proceeds from sale of venture capital investments 3,569 2,356 6,418
Deferred timber development costs (6,489) (276) --
Timber equipment and facilities (5,384) -- --
Other investments (3,130) (1,049) (2,315)
Cost of acquisition in excess of net assets (470) (24,777) --
Net cash used in investing activities (32,304) (63,000) (8,811)
Cash flows from financing activities:
Dividends paid (7,771) (5,524) (5,340)
Distributions to limited partners of venture capital subsidiary (62) (119) --
Purchase of treasury stock -- -- (2,571)
Exercise of stock options 134 263 20
Restricted stock plan award 5 5 5
Borrowings 10,000 -- --
Issuance of notes payable -- 12,205 --
Repayments of notes payable (6,592) (9,398) (5,333)
Reclassification of restricted cash 2,227 608 365
Net cash used in financing activities (2,059) (1,960) (12,854)
Net increase (decrease) in cash and cash equivalents 3,876 (25,767) 8,289
Cash and cash equivalents at beginning of year 19,242 45,009 36,720
Cash and cash equivalents at end of year $23,118 $ 19,242 $ 45,009
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE> 20
Notes to Consolidated Financial Statements
December 31, 1994
Note 1--Organization and Summary of Significant Accounting Policies
Organization:
The Pioneer Group, Inc. and its wholly owned subsidiaries ("the Company") are
engaged in the four lines of financial services described below. In addition,
the Company is a 90% owner of a gold mining venture and is involved in other
investment activities.
Investment Management and Advisory Services Pioneering Management Corporation
("PMC") serves as investment adviser and manager for the 32 Pioneer Family of
Mutual Funds (including one closed end fund and seven funds sold in connection
with the Company's variable annuity product which was introduced in March 1995)
and provides advisory services to institutional and other accounts.
The Company also manages a mutual fund in Poland.
Underwriter
Pioneer Funds Distributor, Inc. ("PFD") serves as the principal
underwriter of shares of the Pioneer Family of Mutual Funds, utilizing a large
network of independent broker-dealers.
The Company also serves as underwriter for a mutual fund in Poland.
Shareholder Servicing
Pioneering Services Corporation ("PSC") provides services to the Pioneer Family
of Mutual Fund shareholders.
Venture Capital Investments
Pioneer Capital Corporation ("PCC") participates primarily in venture capital
investments. Pioneer SBIC Corp., a wholly owned subsidiary of PCC, is the
general partner (89.5%) of Pioneer Ventures Limited Partnership which
participates in venture capital investments under the SBIC program administered
by the Small Business Administration.
Gold Mining
The Company, through its wholly owned subsidiary, Pioneer Goldfields Limited,
owns 90% of Teberebie Goldfields Limited ("TGL"), a gold mining venture in the
Republic of Ghana. The Republic of Ghana owns the remaining 10%.
Other Investments
The Company owns 50% of a financial services business in Poland. In addition,
the Company has invested in investment management operations in Taiwan, Russia,
India and the Czech Republic, and in several non-financial ventures in Russia,
including a joint venture pursuing the development of timber production, in
which the Company has a 50% direct interest and a 7.4% indirect interest.
Summary of Significant Accounting Policies:
Principles of Consolidation and Basis of Presentation The accompanying
consolidated financial statements include the accounts of the Company and its
majority-owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.
Certain reclassifications have been made to 1993 and 1992 amounts to conform
with the 1994 presentation.
Consolidated Statement of Cash Flows Cash and cash equivalents consist
primarily of cash on deposit in banks and amounts invested in commercial paper,
Pioneer money market mutual funds and U.S. Treasury bills with original
maturities of three months or less.
Income taxes paid were approximately $16,440,000, $5,106,000 and $6,814,000 in
1994, 1993 and 1992, respectively. In addition, $1,329,000, $2,306,000 and
$1,362,000 of interest was paid in 1994, 1993 and 1992, respectively.
Recognition of Revenues
Investment management fees are recorded as income during the period in which
services are performed. Agreements with certain of the Pioneer Family of Mutual
Funds provide for fee reductions, which are based on the excess of annual
expenses of each mutual fund over certain limits. Fee reductions are recorded
on an accrual basis.
Underwriting commissions earned from the distribution of the Pioneer Family of
Mutual Fund shares and the systematic investment plan are recorded as income on
the trade (execution) dates.
Shareholder services fees and trustee fees are recorded as income during the
period in which services are performed.
The Company records sales of gold at sales value net of refining costs when
gold is shipped to a refinery.
The Company has purchased put options to limit its exposure to a decline in
market prices of gold to $310 per ounce. Premiums paid are amortized over the
term of the contract. Unamortized premiums are included in other assets in the
consolidated balance sheet. The put options, which are purchased from a major
money center bank, provide market price protection for planned production
during 1995.
Furniture, Equipment and Leasehold Improvements Depreciation and amortization
are provided for financial reporting purposes on a straight-line basis over the
following estimated useful lives: furniture and equipment, 3-5 years, and
leasehold improvements, over the term of the lease. In the event of retirement
or other disposition of furniture and equipment, the cost of the assets and the
related accumulated depreciation and amortization amounts are removed from the
accounts and any resulting gains or losses are reflected in earnings.
Mining Inventory
Gold bullion inventory and gold-in-process contained in the processing plant
are valued at the lower of cost or market.
Material and supplies are valued at the lower of average cost or replacement
cost.
20
<PAGE> 21
Mining Equipment and Facilities Processing plant and equipment is recorded at
cost and is depreciated on a units of production basis which anticipates
recovery over ten years or less.
Mining equipment (rolling stock) is recorded at cost and is depreciated on a
units of production basis which anticipates recovery over five years or less.
Buildings and housing units are recorded at cost and are depreciated on a
straight-line basis over five years.
Leach pads are recorded at cost and are depreciated on a units of production
basis.
All other equipment and facilities are recorded at cost and are depreciated
over their estimated useful lives on a straight-line basis ranging from three
to ten years. Depreciation begins at the time construction is completed and the
assets are placed into service.
Deferred Mining Development Costs Deferred mining development costs, which
include the cost of site development, capitalized interest and infrastructure
costs during the development and construction phases of the project, are
recorded at cost and amortized on a units of production basis which anticipates
recovery over ten years or less. Costs incurred to develop economically viable
ore bodies, to further define mineralization in existing ore bodies, or to
secure rights to proven reserves are capitalized as development costs.
Exploration costs associated with the initial identification of ore reserves
are expensed. Property and lease acquisition costs incurred in the process of
acquiring exploration mineral rights are expensed as incurred.
Mining Reclamation Costs Estimated future reclamation costs are based
principally on anticipated environmental and regulatory requirements and are
accrued and charged to expense over the expected operating life of the mine on
a units of production basis.
Deferred Timber Development Costs Deferred timber development costs principally
consist of construction and engineering expenditures incurred in developing the
site, the jetty and roads.
Timber Equipment and Facilities Timber equipment and facilities consists of
logging machinery and building and housing units.
Cost in Excess of Net Assets Acquired, Net Cost in excess of net assets
acquired is amortized on a straight- line basis over five to fifteen years. The
Company assesses the future useful life of this asset whenever events or
changes in circumstances indicate that the current useful life has diminished.
The Company considers the future undiscounted cash flows of the acquired
businesses in assessing the recoverability of this asset.
Valuation of Venture Capital Investments The Company's long-term venture
capital investments are in companies that are primarily engaged in bringing new
technology to market. The Company's investments are primarily in the form of
unregistered common and preferred stock, warrants and promissory notes. Most
securities are valued at fair value, as determined in good faith by management
and approved by the Board of Directors, since market quotes are not available.
Of the total venture capital portfolio value of $19,835,000 at December 31,
1994, the value of securities for which market quotes are not available was
$17,607,000. In determining fair value, investments are initially stated at
cost until significant subsequent events require a change in valuation. In
determining fair value, management considers the financial condition and
operating results of the investee, prices paid in subsequent private offerings
of the same or similar securities, the amount that the Company can reasonably
expect to realize upon the sale of these securities and any other factors
deemed relevant. Securities for which market quotations are available are
valued at the closing price as of the valuation date with an appropriate
discount, if restricted.
Earnings Per Share
Earnings per share ("EPS") are based on the weighted average number of common
and common equivalent shares outstanding. Fully diluted EPS were not materially
different from primary EPS.
Stockholders' Equity
In 1994, the Company's Board of Directors approved a two-for-one stock split of
the Company's common stock payable in the form of a 100% stock dividend for
stockholders of record on December 1, 1994. A total of 12,348,980 shares of
common stock were issued in connection with this split. The stated par value of
each share was not changed from $0.10. A total of $1,235,000 was reclassified
from the Company's additional paid-in capital account to the Company's common
stock account.
In 1993, the Company's Board of Directors approved a two- for-one stock split
of the Company's common stock payable in the form of a 100% stock dividend for
stockholders of record on September 1, 1993. A total of 6,174,490 shares of
common stock were issued in connection with the split. The stated par value of
each share was not changed from $0.10. A total of $618,000 was reclassified
from the Company's additional paid-in capital account to the Company's common
stock account.
All share and per share amounts have been restated to retroactively reflect the
stock splits.
Foreign Currency Translation
In accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation", the "functional currency" for translating the
accounts of the Company's operations outside the U.S., is U.S. dollars. In
addition, the U.S. dollar is used for the Company owned operations in highly
inflationary economies. As a result, all foreign currency gains and losses with
these operations are included in the consolidated statement of income. The
impact on the consolidated statement of income is immaterial.
21
<PAGE> 22
Concentration of Risk
The Company performs ongoing evaluations of its subsidiaries and
investments and obtains political risk insurance which mitigates its exposure
in foreign countries. Presently, the Company has applied for political risk
coverage relating to the Company's timber operations.
Note 2--Mining Inventory
<TABLE>
Mining inventories consist of the following:
<CAPTION>
December 31,
1994 1993
(Dollars in Thousands)
<S> <C> <C>
Gold-in-process $ 1,125 $ 400
Materials and supplies 10,756 4,816
$11,881 $5,216
</TABLE>
<TABLE>
<CAPTION>
Note 3--Mining Equipment December 31,
1994 1993
(Dollars in Thousands)
<S> <C> <C>
Processing plant and equipment $22,485 $12,078
Mining equipment (rolling stock) 26,958 11,890
Building and housing units 3,718 2,729
Leach pads and ponds 10,026 4,800
Construction in progress 1,010 20,726
All other equipment 9,933 5,786
74,130 58,009
Less: accumulated depreciation (29,793) (19,786)
Total mining equipment $44,337 $38,223
</TABLE>
Note 4--Income Taxes
The Company adopted the accounting and disclosure rules specified by
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," as of January 1, 1993. There was no impact to results of operations as
a result of the adoption therefore, the Company elected to adopt this statement
without restatement to prior periods.
<TABLE>
The following is a summary of the components of income before provision for
federal, state and foreign income taxes for financial reporting purposes:
<CAPTION>
1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C>
Domestic $ 9,408 $10,426 $13,339
Foreign 38,234 24,026 14,196
$47,642 $34,452 $27,535
</TABLE>
<TABLE>
The components of the provision for federal, state and foreign income taxes
consist of:
<CAPTION>
1994 1993 1992
(Dollars in Thousands)
<S> <C> <C> <C>
Current:
Federal $ 3,076 $ 3,135 $ 4,633
State 1,246 1,171 1,694
Foreign 12,228 1,223 133
Deferred:
Federal 93 533 (445)
State 46 165 (136)
Foreign (2,507) 10,095 7,058
$14,182 $16,322 $12,937
</TABLE>
<TABLE>
Income taxes, as stated as a percentage of income before provision for
federal, state and foreign income taxes, are comprised of the following:
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Federal statutory tax rate 34.0% 34.0% 34.0%
Increases (decreases) in tax
rate resulting from:
State income tax (net of
effect on federal income
tax) 2.0% 2.6% 3.7%
Foreign income taxes (8.0)% 7.4% 6.1%
Minority interest tax effect 1.5% 1.6% 1.4%
Unbenefited foreign losses 0.7% 0.9% 1.0%
Other, net (0.4)% 0.9% 0.8%
Effective tax rate 29.8% 47.4% 47.0%
</TABLE>
In 1994, the Republic of Ghana reduced the income tax rate for mining companies
from 45% to 35%. As a result, the Company's 1994 earnings were enhanced by 16
cents per share, on 90% of a $4.4 million reduction in income taxes deferred
since the commencement of TGL's commercial operations in April, 1991 through
December 31, 1993.
<TABLE>
The amount and components of the net deferred tax liability recognized in the
accompanying consolidated balance sheets are as follows:
<CAPTION>
1994 1993
(Dollars in Thousands)
<S> <C> <C>
Deferred tax assets $3,103 $1,423
Deferred tax liabilities (2,679) (1,147)
Deferred foreign tax liabilities (17,331) (19,838)
$(16,907) $(19,562)
</TABLE>
<TABLE>
The approximate income tax effect of each type of temporary difference is as
follows:
<CAPTION>
1994 1993
(Dollars in Thousands)
<S> <C> <C>
Accelerated depreciation on mining
operations $(17,331) $(19,838)
Deferred development costs 424 634
Foreign tax credit 837 --
Deferred rent 387 264
Restricted stock 474 187
Nondeductible reserves 277 173
Dealer advances (1,771) --
Prepaid insurance (158) (241)
Venture capital and other investments (357) (868)
Other temporary differences, net 311 127
$(16,907) $(19,562)
</TABLE>
Repatriation of cumulative undistributed foreign earnings is done only when
it is advantageous. Applicable federal taxes are provided only on amounts
planned to be remitted. Accumulated undistributed foreign earnings upon which
no U.S. Federal income taxes have been provided, is approximately $43,334,000
at December 31, 1994.
22
<PAGE> 23
Note 5--Restricted Stock Plan and Stock Option Plan
The Company has a Restricted Stock Plan ("the 1990 Plan") to provide incentives
to certain employees who have contributed and are expected to contribute
materially to the success of the Company and its subsidiaries. An aggregate
total of 1,200,000 shares of the Company's stock may be awarded to participants
under the 1990 Plan at a price of $0.10 per share. The 1990 Plan expires in
1995.
<TABLE>
The following table summarizes restricted stock plan activity for the 1990 Plan
in 1994.
<CAPTION>
Shares of Stock
Unvested Vested Total
<S> <C> <C> <C>
Beginning of period 384,440 184,340 568,780
Awards 101,460 -- 101,460
Vesting (34,660) 34,660 --
Forfeitures (31,976) -- (31,976)
End of period 419,264 219,000 638,264
</TABLE>
The Company awarded 164,800 shares in 1993 and 187,600 shares in 1992 under
the 1990 Plan.
<TABLE>
The Company's 1981 Restricted Stock Plan ("the 1981 Plan") expired in 1990. The
following table summarizes restricted stock plan activity for the 1981 Plan in
1994.
<CAPTION>
Shares of Stock
Unvested Vested Total
<S> <C> <C> <C>
Beginning of period 33,688 1,474,388 1,508,076
Vesting (15,260) 15,260 --
Forfeitures (2,744) -- (2,744)
End of period 15,684 1,489,648 1,505,332
</TABLE>
The participant's right to sell the awarded stock, under both Plans, is
restricted as to 100% of the shares awarded during the first two years
following the award, 60% during the third year and 20% less each year
thereafter. The Company may repurchase unvested restricted shares at $0.10 per
share upon termination of employment.
Awards under both Plans are compensatory, and, accordingly, the difference
between the award price and the market value of the shares under the Plans at
the award date, less the applicable tax benefit, is being amortized on a
straight-line basis over a five year period.
On January 26, 1995, the Company's Board of Directors adopted, subject to
stockholder approval, the 1995 Restricted Stock Plan ("the 1995 Plan"). An
aggregate total of 600,000 shares of the Company's common stock may be awarded
to participants under the 1995 Plan at a price of $0.10 per share. The terms of
the 1995 Plan are substantially the same as those under the 1981 and 1990
Plans.
The Company also has a stock option plan. Under the 1988 Stock Option Plan
("the Option Plan"), options on the Company's stock may be granted to key
employees of the Company, and the Company has reserved an aggregate of 2,400,000
shares for issuance under the Option Plan. Both incentive stock options intended
to qualify under Section 422A of the Internal Revenue Code of 1986 and
non-statutory options not intended to qualify for incentive stock option
treatment ("non-statutory options") may be granted under the Option Plan. The
Option Plan is administered by the Board of Directors or a committee of
disinterested directors designated by the Board ("the Committee"), and unless
the Option Plan is terminated earlier, no option may be granted after August 1,
1998. The option price per share is determined by the Board of Directors or the
Committee, but (i) in the case of incentive stock options, may not be less than
100% of the fair market value of such shares on the date of option grant,
and (ii) in the case of non-statutory options, may not be less than 90% of the
fair market value on the date of option grant. Options issuable under the
Option Plan become exercisable as determined by the Board of Directors or the
Committee not to exceed ten years from the date of grant. Options granted to
date vest over five years at an annual rate of 20% on each anniversary date of
the date of grant.
<TABLE>
The following table summarizes all stock option activity for the three years
ended December 31, 1994:
<CAPTION>
Number of Exercise
shares price per share
<S> <C> <C>
Outstanding at December 31, 1991 1,135,600 $ 4.188-$ 6.00
Granted 440,000 $6.125-$ 7.063
Exercised (4,800) $ 4.188
Outstanding at December 31, 1992 1,570,800 $4.188-$ 7.063
Granted 139,000 $12.00
Terminated (12,000) $ 4.188
Exercised (62,800) $ 4.188
Outstanding at December 31, 1993 1,635,000 $ 4.188-$12.00
Granted 191,500 $15.875-$21.25
Exercised (32,000) $ 4.188
Outstanding at December 31, 1994 1,794,500 $ 4.188-$21.25
</TABLE>
At December 31, 1994, 1,047,800 shares had vested under the Option Plan.
Note 6--Net Capital
As a broker-dealer, the Company is subject to the Securities and Exchange
Commission's ("SEC") regulations and operating guidelines which, among other
things, require the Company to maintain a specified amount of net capital, as
defined, and a ratio of aggregate indebtedness to net capital, as defined, not
exceeding 15 to 1. Net capital and the related ratio of aggregate indebtedness
to net capital may fluctuate on a daily basis. The Company's net capital, as
computed under Rule 15c3-1, was $5,652,825 at December 31, 1994 and $3,149,080
at December 31, 1993, which exceeded required net capital of $611,817 by
$5,041,008 at December 31, 1994 and $861,933 by $2,287,147 at December 31,
1993. The ratio of aggregate indebtedness to net capital at December 31, 1994
was 1.62 to 1 and at December 31, 1993 was 4.11 to 1.
The Company is exempt from the reserve requirements of Rule 15c3-3, since its
broker-dealer transactions are limited to the purchase, sale and redemption of
redeemable securities of registered investment companies. All customer funds are
promptly transmitted and all securities received in connection with activities
as a
23
<PAGE> 24
broker-dealer are promptly delivered. The Company does not otherwise hold
funds or securities for, or owe money or securities to, customers.
Note 7--Benefit Plans
The Company and its subsidiaries have two defined contribution benefit plans
for eligible employees: a retirement benefit plan and a savings and investment
plan ("the Plans") qualified under Section 401(k) of the Internal Revenue Code.
The Company makes contributions to a trustee, on behalf of eligible employees,
to fund both the retirement benefit and the savings and investment plans. The
Company's expenses under the Plans were $1,562,000 in 1994, $1,566,000 in 1993
and $1,556,000 in 1992.
Both of the Company's qualified Plans described above cover all full-time
employees who have met certain age and length of service requirements.
Regarding the retirement benefit plan, the Company contributes an amount which
would purchase a certain targeted monthly pension benefit at the participant's
normal retirement date. In connection with the savings and investment plan,
participants can voluntarily contribute up to 8% of their compensation to the
plan, and the Company will match this contribution up to 2%.
Note 8--Related Party Transactions
Certain officers and/or directors of the Company and its subsidiaries are
officers and/or trustees of the Pioneer Family of Mutual Funds. Investment
management fees earned from the mutual funds were approximately $62,206,000 in
1994, $38,194,000 in 1993 and $31,306,000 in 1992. Underwriting commissions
earned from the sales of mutual fund shares were approximately $12,541,000 in
1994, $7,609,000 in 1993 and $3,014,000 in 1992. Shareholder services fees
earned from the mutual funds were approximately $19,820,000 in 1994,
$17,071,000 in 1993 and $16,749,000 in 1992.
Within the Pioneer Family of Mutual Funds, revenues from Pioneer II were
approximately $31,237,000 in 1994, $30,489,000 in 1993 and $30,001,000 in 1992,
respectively and revenues from Pioneer Fund were approximately $15,281,000 in
1994, $14,434,000 in 1993 and $13,114,000 in 1992, respectively.
Certain partners of Hale and Dorr, the Company's legal counsel, are officers
and/or directors of the Company and its subsidiaries. Amounts paid to Hale and
Dorr consist of legal fees of approximately $1,461,000 in 1994, $1,233,000 in
1993 and $883,000 in 1992.
At December 31, 1994 and 1993, the Company had a receivable from an officer
for $109,000.
Note 9--Commitments
Rental expense for 1994, 1993 and 1992 amounted to $3,242,000, $2,578,000 and
$2,478,000, respectively. Future minimum payments under the leases amount to
$2,937,000 in 1995, $3,051,000 in 1996, $3,129,000 in 1997, $3,220,000 in 1998,
$3,342,000 in 1999 and $8,590,000 thereafter. These future minimum rental
payments include estimated annual operating and tax expenses of approximately
$1,330,000.
In January 1995, a dividend of $0.10 per share was declared (aggregating
approximately $2,500,000) to each shareholder of record on March 1, 1995,
payable March 9, 1995.
The Company is contingently liable to the Investment Company Institute Mutual
Insurance Company for unanticipated expenses or losses in an amount not to
exceed $500,000. Two thirds of this amount is secured by an irrevocable standby
letter of credit with a bank.
In September 1993, TGL executed a commitment letter with the Overseas Private
Investment Corporation ("OPIC") pursuant to which OPIC will provide loan
guarantees for up to $5.0 million. The commitment terminates in December 1995
and carries commitment fees of 0.5% per year on the undisbursed and uncanceled
amount of the guarantee commitment.
The Company acts as a passive, non-bank trustee for retirement plan accounts.
IRS regulations and operating guidelines allow a passive, non-bank trustee to
accept fiduciary accounts only if the trustee's net worth (determined as of the
end of the most recent taxable year) exceeds the greater of (1) $100,000 or (2)
two percent of the net assets of fiduciary accounts. At December 31, 1994, the
Company's net worth of $134.4 million was 3.8% of the net assets of fiduciary
accounts. Note 10--Notes Payable
<TABLE>
Notes payable of the Company consist of the following:
<CAPTION>
December 31,
1994 1993
(Dollars in Thousands)
<S> <C> <C>
Line of Credit $ 10,000 $ --
Small Business Administration ("SBA") financing, notes payable to a bank,
interest payable semi-annually at rates ranging from 6.12% to 9.8%, principal
due in 1998 through 2003 4,950 4,950
Note payable to a bank, guaranteed by the Swedish Export Credits Guarantee
Board, principal payable in semi-annual installments of $812,000 through
March 31, 1997, interest payable at 5.77%, secured by equipment 4,059 4,871
Notes payable to a bank, guaranteed by the Overseas Private Investment
Corporation ("OPIC"), interest payable quarterly at approximately 0.5% in
excess of 91-day T-bill rate set in advance (aggregating 5.41% at
December 31, 1994), principal payable in semi-annual installments of
$1,544,000 through June 30, 1995 1,544 4,633
Note payable to a bank, guaranteed by the Company, principal payable in
semi-annual installments of $214,000 through November 30, 1999, no interest
payable, secured by equipment 2,145 3,136
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
December 31,
1994 1993
(Dollars in Thousands)
<S> <C> <C>
Notes payable to a bank, denominated in Russian rubles, interest payable
monthly at approximately 3% higher than the Russian "prime rate" on the
first note and no interest payable on the second note -- 1,234
Note payable to a supplier, interest
payable at 9.75% -- 466
$ 22,698 $19,290
Less: Current portion (13,597) (5,984)
$ 9,101 $13,306
</TABLE>
The Company received approval from a bank in September 1994 for a $10 million
line of credit. The Company paid interest under such line at either Prime less
0.5% or LIBOR (30, 90 or 180 days) plus 1.25%. The weighted average interest
rate on the line of credit outstanding was 7.6% in 1994.
In December 1991, OPIC certified that all conditions of a Project Completion
Agreement had been satisfied pursuant to which the Company would no longer be
required to guarantee TGL's loan guaranteed by OPIC. Among the conditions was
the establishment of an escrow account covering six months of third-party debt
service payments. OPIC waived the condition of the Project Completion Agreement
at December 31, 1994, which had previously required that TGL maintain the
escrow account balance. The balance of such escrow account was $2.2 million at
December 31, 1993.
In connection with non-SBA borrowings, the Company incurs various fees.
Guaranty fees include an annual 2.65% fee on the outstanding unpaid principal
balance of the notes guaranteed by OPIC. Administration fees include a fee of
0.25% on the outstanding balance of the notes payable to a bank secured by
equipment.
Among other covenants of the non-SBA borrowings, the Company must maintain at
least a 51% ownership interest in TGL and TGL must maintain certain financial
ratios and limit its lease payments to specified levels. In addition, as
certain assets of TGL secure these borrowings, TGL may not sell its assets
except to replace them. Limits also exist regarding the amount of dividends TGL
may pay the Company. These limits are based on certain financial ratios and the
net income of TGL. During 1993 and 1992, OPIC agreed to waive its requirement
that TGL prepay a certain amount of the OPIC guaranteed loans in connection
with the repayment of certain principal and interest owed to the Company.
In 1994, TGL prepaid a note payable to a supplier and a note payable to a bank
with a remaining principal balance of approximately $761,000.
<TABLE>
Maturities of notes payable at December 31, 1994 for each of the next five
years and thereafter are as follows (dollars in thousands):
<S> <C>
1995 $13,597
1996 2,052
1997 1,241
1998 1,629
1999 429
Thereafter 3,750
$22,698
</TABLE>
On February 28, 1995 the Company entered into an agreement with a commercial
bank providing for a $30 million unsecured line of credit. Advances under the
line bear interest at the Company's option at the higher of the bank's base
lending rate or the federal funds rate plus 0.50%, the London Interbank Offered
Rate plus 1.10% or at a money market rate set by the bank. The Company is
required to pay additional interest to the bank at the rate of 0.25% per year
of the unused portion of the line. The proceeds from this line were used in
part to repay the balance outstanding to another bank under a line of credit
which had been operational since September 1994. At March 10, 1995 the Company
had $10,000,000 outstanding on the new line. The new line expires February 27,
1996.
Note 11--Major Customers
During the year ended December 31, 1994, gold sales aggregated $67.6 million.
During 1994, gold shipments from TGL in Ghana to two unaffiliated European
refiners accounted for $43.6 million and $24.0 million, respectively,
representing 100% of such total sales.
During the year ended December 31, 1993, gold sales aggregated $59.2 million.
During the last three quarters of 1993, gold shipments from TGL in Ghana to two
unaffiliated European refiners accounted for $38 million and $6.8 million of
total sales, respectively, representing 100% of such total sales. Note
12--Acquisition of Mutual of Omaha Fund Management Company
<TABLE>
On December 1, 1993, the Company completed its acquisition of Mutual of Omaha
Fund Management Company ("FMC"). The Company financed the acquisition through
working capital. Results of operations are included in the accompanying
consolidated statement of income commencing December 1, 1993. This transaction
was accounted for under the purchase method. Pro forma unaudited results of
operations assuming the acquisition had occurred on January 1, 1993 are as
follows (dollars in thousands except per share amounts):
<CAPTION>
1993
<S> <C>
Revenues $144,935
Net income $ 19,306
Earnings per share $ 0.77
</TABLE>
The Company also agreed to pay up to an additional $3 million in three years
if certain conditions, as defined in the purchase agreement, are met.
25
<PAGE> 26
Note 13--Dealer Advances
During 1994, certain of the Pioneer Family of Mutual Funds introduced a
multi-class share structure, whereby the participating funds offer both the
traditional front-end load shares and back-end load shares (B-shares). B-shares
do not require the investor to pay any sales charge unless there is a
redemption before the expiration of the minimum holding period which ranges
from three to six years. However, the Company pays upfront sales commissions
(dealer advances) to broker-dealers ranging from 2% to 4%. The Company
capitalizes and amortizes dealer advances for book purposes over periods which
range from three to six years depending on the participating fund. The Company
deducts the dealer advances in full for tax purposes in the year such advances
are paid. In 1994, the Company paid dealer advances in the amount of $4.7
million.
Note 14--Financial Information by Business Segment
<TABLE>
Total revenues and income (loss) before income taxes by business segment,
excluding intersegment transactions, were as follows (dollars in thousands):
<CAPTION>
Mutual Fund Venture
Investment Underwriting Capital Shareholder Gold
Management and Other Investments Services Mining Other Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31,
1994:
Revenues and sales $64,677 $ 18,983 $ 574 $19,884 $ 67,584 -- $171,702
Income (loss) before
income taxes $44,465 $(19,363) $ (1,472)** $ 3,601 $ 21,713* $(1,302)*** $ 47,642
Depreciation and
amortization $ 870 $ 3,721 $ 86 $ 1,029 $ 12,961 $ 13 $ 18,680
Capital expenditures $ 245 $ 3,095 $ 11 $ 2,575 $ 16,147 $ 5,653 $ 27,726
Identifiable assets at
December 31, 1994 $33,924 $ 36,518 $ 25,849 $ 5,817 $ 75,666 $24,735 $202,509
Year ended December 31, 1993:
Revenues and sales $40,259 $ 12,295 $ 546 $17,152 $ 59,151 -- $129,403
Income (loss) before
income taxes $ 27,813 $(15,631) $ 613** $ 3,418 $ 20,184* $ (1,945)*** $ 34,452
Depreciation and
amortization $ 842 $ 1,069 $ 85 $ 775 $ 13,062 -- $ 15,833
Capital expenditures $ 947 $ 1,293 $ 29 $ 959 $ 25,142 -- $ 28,370
Identifiable assets at
December 31, 1993 $ 42,359 $ 36,398 $ 25,755 $ 4,157 $ 61,893 $ 1,733 $172,295
Year ended December 31, 1992:
Revenues and sales $ 32,913 $ 7,683 $ 553 $ 16,880 $ 43,773 -- $101,802
Income (loss) before
income taxes $ 22,600 $(12,234) $ 1,195** $ 2,898 $ 13,788* $ (712)*** $ 27,535
Depreciation and
amortization $ 665 $ 581 $ 75 $ 914 $ 8,837 -- $ 11,072
Capital expenditures $ 615 $ 918 $ 74 $ 942 $ 8,075 -- $ 10,624
Identifiable assets at
December 31, 1992 $ 29,023 $ 30,302 $ 21,985 $ 3,530 $ 49,430 $ 435 $134,705
<FN>
* Net of minority interest, interest expense related to third parties, and interest expense related to the Company of approximately
$2,120, $548 and $0, respectively, for the year ended December 31, 1994, $1,234, $690 and $289, respectively, for the year ended
December 31, 1993 and $863, $1,085 and $1,400, respectively, for the year ended December 31, 1992.
** Net of minority interest and interest expense related to third parties of approximately $9 and $457 for the year ended December
31, 1994, $175 and $337 for the year ended December 31, 1993 and $306 and $342 for the year ended December 31, 1992.
*** Net of interest expense related to third parties and expenses related to the Company of $300 and $977 for the year ended
December 31, 1994, $1,361 and $608 for the year ended December 31, 1993, and $0 and $359 for the year ended December 31, 1992. These
expenses were related to the Company's Russian ventures. Information Relating to Shares
</TABLE>
26
<PAGE> 27
<TABLE>
The common stock is quoted in the National Association of Securities Dealers
automated quotations system under the symbol PIOG. At March 1, 1995, The Pioneer
Group, Inc. had approximately 4,000 shareholders. The price range of the common
stock and the dividends paid on shares of The Pioneer Group, Inc. during each
quarter of the last two years were as follows:
PRICE RANGE OF COMMON STOCK*
<CAPTION>
1994 1993
High Low High Low
<S> <C> <C> <C> <C>
January--March $21-5/8 $12-11/16 $ 9 $ 7- 1/16
April--June 21 18- 1/8 9-13/16 7-11/16
July--September 24-1/2 18- 1/4 12- 1/4 9-13/16
October--December 25-3/8 21- 1/4 13-3/16 11-3/16
<FN>
* Prices calculated as closing price resulting from the Company's participation in the National Market System.
</TABLE>
<TABLE>
DIVIDENDS ON COMMON STOCK
<CAPTION>
Per Share
Record Date Payable Date Amount**
<S> <C> <C>
March 1, 1993 March 10, 1993 $ .0525
June 1, 1993 June 10, 1993 .0525
September 3, 1993 September 15, 1993 .06
December 1, 1993 December 10, 1993 .06
March 1, 1994 March 10, 1994 .06
June 1, 1994 June 10, 1994 .075
September 1, 1994 September 9, 1994 .08
December 12, 1994 December 19, 1994 .10
March 1, 1995 March 9, 1995 .10
<FN>
** Adjusted for December 1, 1994 and September 1, 1993 2-for-1 stock splits effected in the form of 100% dividends.
</TABLE>
27
<PAGE> 28
THE PIONEER GROUP, INC. AND SUBSIDIARIES
60 State Street, Boston Massachusetts 02109
<TABLE>
Directors and Executive Officers*
<S> <C>
Philip L. Carret, Trustee Emeritus of certain of the Pioneer Family of Mutual Funds; Director of Pioneering
Director Management Corporation; Founder Chairman of Carret & Company.
John F. Cogan, Jr., Chairman of the Board, President and Trustee or Director of each of the Pioneer Family of Mutual Funds;
Chairman of President and Director of Pioneer Plans Corporation, Pioneer Investments Corporation, Pioneer
the Board, International Corporation and Pioneer Metals and Technology, Inc.; Director of Pioneer Capital
Director and Corporation, Pioneer Management (Ireland) Limited, Joint-Stock Company Pioneer Investments and
President Pioneering Services Corporation; Chairman of the Board and Director of Pioneering Management
Corporation, Pioneer Funds Distributor, Inc., Joint-Stock Company Pioneer Metals International,
Joint-Stock Company Forest Starma and Teberebie Goldfields Limited; Chairman, President and of Pioneer
Goldfields Limited; Chairman of the Supervisory Board of Pioneer Fonds Marketing GmbH; Member of
Supervisory Board of Pioneer First Polish Trust Fund Joint Stock Company S.A.; Chairman and Partner,
Hale and Dorr.
Robert L. Butler, President and Director of Pioneer Funds Distributor, Inc.; Director of Pioneering Management
Director and Executive Corporation, Pioneering Services Corporation, Pioneer International Corporation, Pioneer Management
Vice President (Ireland) Limited and Pioneer Investments Corporation; Vice Chairman of Supervisory Board of Fonds
Pioneer Marketing GmbH; Member of Supervisory Board of Pioneer First Polish Trust Fund Joint Stock Company S.A.
Maurice Engleman, President of FAX International, E.T. Software and IMS Processing; Principal, Maurice Engleman Associates.
Director
Jaskaran S. Teja, Senior Vice President of Pioneer International Corporation. Director of Joint-Stock Company Forest
Director Starma.
David D. Tripple, Executive Vice President and Trustee or Director of each of the Pioneer Family of Mutual Funds;
Director and Executive President and Director of Pioneering Management Corporation; Director of Pioneer Capital
Vice President Corporation, Pioneer Investments Corporation, Pioneer International Corporation, Pioneer SBIC
Corp.,
Pioneer Management (Ireland) Limited, Joint- Stock Company Pioneer Investments and Pioneer Funds
Distributor, Inc. Member of Supervisory Board of Pioneer First Polish Trust Fund Joint Stock Company S.A.
John H. Valentine, Director of Pioneer Capital Corporation; Director of Entrepreneurial Management of Health Policy
Director Institute; Director of Visualization Technology, Inc. and M.D.I. Instruments, Trustee of Hurricane
Island/Outward Bound School and Thompson Island Outward Bound Education Center, Chairman of the
Board of Boston University Medical Center Hospital.
William H. Keough, Treasurer of each of the Pioneer Family of Mutual Funds, Treasurer of Pioneering Management
Senior Vice President, Corporation, Pioneering Services Corporation, Pioneer Capital Corporation, Pioneer SBIC Corp.,
Chief Financial Officer Pioneer Funds Distributor, Inc., Pioneer Investments Corporation, Pioneer International Corporation,
and Treasurer Pioneer Metals and Technology, Inc., and Pioneer Goldfields Limited; Director and Treasurer of
Pioneer Plans Corporation.
Lucien Girard, Director and Managing Director of Pioneer Goldfields Limited and Teberebie Goldfields Limited.
Vice President Director of Pioneer Metals and Technology, Inc.
John F. Lawlor, Vice President of Pioneering Management Corporation, Director of Pioneer Goldfields Limited,
Vice President Teberebie Goldfields Limited, Pioneer Management (Ireland) Limited, Joint-Stock Company Pioneer
Metals International and Joint-Stock Company Forest Starma.
Alicja K. Malecka, President of Pioneer First Polish Trust Fund Joint Stock Company S.A. and Pioneer Investment Poland Ltd.,
Vice President Vice President of Pioneer International Corporation.
Frank M. Polestra, President and Director of Pioneer Capital Corporation and Pioneer SBIC Corp.
Vice President
William H. Smith, Jr., President and Director of Pioneering Services Corporation, Director and Vice President of Pioneer
Vice President International Corporation, Director of Pioneer Management (Ireland) Limited.
Joseph P. Barri, Secretary of each of the Pioneer Family of Mutual Funds, Pioneering Management Corporation, Pioneer
Secretary Capital Corporation, Pioneer Plans Corporation, Pioneer Funds Distributor, Inc., Pioneering Services
Corporation, Pioneer Investments Corporation, Pioneer International Corporation, Pioneer Metals and
Technology, Inc., Pioneer Associates, Inc. Partner, Hale and Dorr.
General Counsel Transfer Agent Independent Public Accountants
Hale and Dorr State Street Bank and Arthur Andersen LLP
Boston, Massachusetts Trust Company Boston, Massachusetts
Boston, Massachusetts
<FN>
* As defined pursuant to Section 16 of the Securities Exchange Act of 1934.
</TABLE>
28
<PAGE> 1
Exhibit 21
----------
<TABLE>
THE PIONEER GROUP, INC.
DIRECT AND INDIRECT SUBSIDIARIES
<CAPTION>
Name Jurisdiction of Organization
---- ----------------------------
<S> <C>
Pioneering Management Corporation State of Delaware
Pioneer Funds Distributor, Inc. Commonwealth of Massachusetts 1
Pioneering Services Corporation Commonwealth of Massachusetts
Pioneer Capital Corporation Commonwealth of Massachusetts
Pioneer Associates, Inc. Commonwealth of Massachusetts 2
Pioneer SBIC Corp. Commonwealth of Massachusetts 2
Pioneer Plans Corporation State of Delaware
Pioneer Metals and Technology, Inc. State of Delaware
Pioneer Investments Corporation Commonwealth of Massachusetts
Pioneer Goldfields Limited Channel Islands
Glencar Explorations (U.K.) Limited United Kingdom 3
Teberebie Goldfields Limited Republic of Ghana 3
Pioneer International Corporation State of Delaware
Pioneer Fund Management Company State of Nebraska
Pioneer Fonds Marketing GmbH Germany 4
Pioneer First Polish Trust Fund Joint-Stock Company Poland 5
Joint-Stock Company Pioneer Metals International Russian Federation 6
Joint Stock Company Pioneer Investments Russian Federation 7
Pioneer Investment Poland, Ltd. Poland 5
Pioneer Ventures Limited Partnership Commonwealth of Massachusetts 8
Joint-Stock Company Forest-Starma Russian Federation 9
Pioneer Management (Ireland) Limited Ireland
Pioneer Exploration Limited Delaware
Pioneering Management (Jersey) Ltd. Channel Islands 5
Pioneer Poland U.S. (Jersey) Ltd. Channel Islands 5
Pioneer Poland U.K. Ltd. United Kingdom 5
Pioneer Czech Investment Co. a.s. Czech Republic 5
</TABLE>
<PAGE> 2
__________________
1 Pioneer Funds Distributor, Inc. is a wholly-owned subsidiary of Pioneering
Management Corporation.
2 Pioneer Associates, Inc. and Pioneer SBIC Corp. are wholly owned
subsidiaries of Pioneer Capital Corporation.
3 Teberebie Goldfields Limited is a 90% owned, and Glencar Explorations (U.K.)
Limited is a wholly owned subsidiary of Pioneer Goldfields Limited.
4 Pioneer Fonds Marketing GmbH is a wholly owned subsidiary of Pioneer Funds
Distributor, Inc.
5 Pioneer First Polish Trust Fund Joint Stock Company, Pioneer Investment
Poland, Ltd., Pioneering Management (Jersey) Ltd., Pioneer Poland U.S.
(Jersey) Ltd., Pioneer Poland U.K. Ltd. and Pioneer Czech Investment Co. a.s.
are wholly owned subsidiaries of Pioneer International Corporation.
6 Joint-Stock Company Pioneer Metals International is a wholly owned subsidiary
of Pioneer Metals and Technology, Inc.
7 Joint-Stock Company Pioneer Investments is a 55% owned subsidiary of The
Pioneer Group, Inc.
8 Pioneer Ventures Limited Partnership is an 89.5% owned subsidiary of Pioneer
SBIC Corp.
9 Joint-Stock Company Forest Starma is a 57% owned subsidiary of The Pioneer
Group, Inc. (50% direct and 7.4% indirect).
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 10-K of our report dated March 10, 1995
included in Registration Statement File No. 33-61932.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF PIONEER GROUP, INC. FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1.00000
<CASH> 23,118
<SECURITIES> 6,458
<RECEIVABLES> 21,966
<ALLOWANCES> 0
<INVENTORY> 11,881
<CURRENT-ASSETS> 66,119
<PP&E> 99,075
<DEPRECIATION> (39,517)
<TOTAL-ASSETS> 202,509
<CURRENT-LIABILITIES> 36,642
<BONDS> 0
<COMMON> 2,470
0
0
<OTHER-SE> 131,952
<TOTAL-LIABILITY-AND-EQUITY> 202,509
<SALES> 0
<TOTAL-REVENUES> 171,702
<CGS> 0
<TOTAL-COSTS> 118,678
<OTHER-EXPENSES> 4,077
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,305
<INCOME-PRETAX> 47,642
<INCOME-TAX> 14,182
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,460
<EPS-PRIMARY> 1.320
<EPS-DILUTED> 1.320
</TABLE>
