VIL.

Conclusion

For the foregoing reasons, OPIC concludes that the claim of the Investor is valid, The
amount of compensation to be puid for the leasc coverage for the period April i through
June 30, 2003 is determined to be $1 174,447.41, including interest.

OVERSEAS PRIVATE INVESTMENT CORPORATION

Peter S. Watson

President and Chief Executive Officer

Date: Uh } 0 4



{1). Adjustments to Compensation

The adjustment lo compensation sct forth in Section 7.02.2 of the Contract, which
authorizes OPIC to “reduce its compensation by the amount of any compensation
received by the Insured from any other sources on account of the political violence,” does
not apply, as the Insured has not received any other compensation.

The adjustment to compensation set forth in Section 7.02.3 of the Contract does not
apply, as the Insured has nol leased any other assets to the lessee.

(2). Limitations to Compensation

‘The limitations to compensation set forth in Sections 7.03(a) and (b) of the Contract do
not apply, as the proposed compensation will not exceed the covered amount and the
claim does not include any penalty interest or penalty fees. The active amount is
$822,619. The active amount will be reduced hy the ammount of compensation paid.

(3). Assignment of Leases

Section 8,02 of the Contract, as amended by Section 10.14 requires the Insured to either
ttansfer to OPIC, within ten days after OPIC notifies the Tusured of the amount of
compensation it will pay, the lease agreement in respect of which compensation is to be
paid or, at OPIC’s option, to “transfer to OPIC a beneficial interest in such lease and
related rights.” Because of the continuing nature of the political violence, OPIC is not in
a position to remove the equipment. Additionally, it is possible that the political violence
will cease and the Insured will be able to resume operations. If that were to occur, then
OPIC would be relieved of making further payments pursuant to the Contract. Therefore,
OPIC determined, in the August 2, 2002 MOD, that. it would require an assignment of
rights, rather than an assignment of the leascs, as a condition precedent to payment of
compensation, pursuant to Section 8.02 of the Contract, The Insured entered into that
assignment of rights.

D. The Insured’s Duties Pursuant to the Contract

Article 1X of the Contract establishes the duties of the Insured.

OPIC determines that the Insured has fully complied with all of its obligalions pursuant
to the provisions of Article [x of the Contract, In particular, the Insured is in compliance
with regard to its eligibility. It gave prompt notice to OPIC of the events of political
violence that gave risc to the claim and has taken reasonable measures to preserve the
property. The Insured has fully cooperated with OPIC by giving it complete access to its
books and records, which OPIC has determined to be adequate, and made available for
interviews exccutives and other employees with direct knowledge of the Project, Section
10.18 of Contract No. F074 umended Article IX of the Contract to add additional duties
including, among others, Environmental Compliance and Workers Rights. OPIC, in the
August 2, 2002 MOD determined that the Insured had fully complied with its obligations
with respect lo those duties. The mine has becn closed since, May 19, 2001. Therefore
these provisions are not applicable to the instant determination.



MEMORANDUM OF DETERMINATIONS
Political Violence Claim of Sector Capital Corporation

Contract of Iusurance No. F074

The Claim

By Ictter dated July 1, 2003, (Exhibit A), Sector Capital Corporution (the “Insured” or
“Ipyestor”) filed an application for compensation pursuant to Contract of Insurance No.
F074 for the period April 1 through June 30, 2003. The Insured alleges that an act of
political violence, as more fully described below, occurred on May. 19, 2001, at the site of
the Las Animas precious mincrals mine in the State of Tolima, Colombia (the "“Project”)
and is continuing, The Insured has advised OPIC that, as a result of the political violence,
it has ceased all operations al the Project and has sustained coveted losses.

OPIC has determined that the claim is valid and that compensation is now payable in the
amount of $114,447.41, including intcrest.

‘The Insurance Contract

The Contract of Insurance was entered into with the Insured in 1999.

Contract of Insurance F074, an OPIC Form 234 LP 7-86A PL (Rev. 9/89), (the “Contract”
(Exhibit B) was issued cffective August 18, 1999, to cover the Insured’s $2 million Sease
payments for cquipment used at the Project. The maximum coverage under this policy is
$3,500,000. The active amount of coverage is currently $822,619.

Factual Background

A. The Project and the Insured.

The Project involves the acquisition and expansion of the Las Animas
undergrownd quartz, gold and silver mine (“Las Animas”) in the State of Tolima,
Colombia, Scctor Resources, Jd. (“Sector Resources”), a U.S.owned Cayman
[slands company, has made up to a $3.5 million equity investment into its
Colombian branch (“Sector Resources Colombia”), as well as a $2 million
equipment lease to the Colombian branch through onc of its U.S. affiliates, Sector
Capital Corporation (“Sector Capital").



A complete discussion of the factual background of the Project, the events
triggering the political violence, the remedial steps taken by the Insured and the
Insured’s compliance with the Contract are contained in the August 2, 2002
Memorandum of Determinations (the “MOD”). The MOD considered and
approved the initial claim by the Insured for the period May 19, 2001 through
May 18, 2002. The MOD found the claim to be valid and, at page 10, concluded
that, if the political violence continued, the Insuted would be entitled to receive
additional compensation pursuant to the Contract for claims for defaults on lease
payments, which claims were to be submitted quarterly. OP! IC retained the
accounting firm of Deloitte & Touche (“Deloitte”) to assist it in analyzing the
insured's initial claim. Deloitte prepared a report to OPIC. That report included an
analysis and model of the least claims throughout the term of all thirteen leases
with payment schedules on an actual and accrued basis.

Determinations Under the Contract

A determination under an OPIC insurance contract addresses threc categories of issues:
(1) whether the acts complained of satisfy all the elements required to bring them within
the scope of coverage; (2) the amount of compensation payable; and (3) whether the
insured fulfilled its duties under the insurance contracts.

As staled above, the Angust 2, 2002 MOD concluded that the Joss was due lo
political violence. Accordingly, as the instant application alleges a consecutive
default arising from a continuation of the political violence, Section 8.01(c) of
the Contract provides that OPIC shall be liable for subsequent consecutive
defaults unless it determines that the latter defiults were not caused by political
violence. OPIC also paid a subsequent claim for defaulted lease payments for the
periods May 19 through September 30, 2002 and October 1 through December
31. 2002 pursuant to separate Memoranda of Determinations dated October 25,
2002 and Februury 3, 2003. The Insured subinitted a statement that the political
violence is continuing and (urther states that it is seeking meetings with the
Government of Culombia to estublish a “military presence in the zone so Sector
can reactivate the mining project”. The United States Embassy in Bogoté has
confirmed that political violence is continuing in the area where the Project is
located and that the Insured has been in contact with the Embassy secking
assistance to arrange meetings with Colombian Goverunent officials.
Accordingly, OPIC has no basis for determining that the continuing closure of the
Project and losses covered under the Contract were not the result of political
violence, As will be discussed, more fully, below, it is further determined that the
Insured fulfilled its duties under the Contract, and compensation should now be
paid in the total amount of $114,447.41.

1, Section 6.01 of the Contract — That the loss was duc lo political violence



YI.

(a) The evidence submitted by the Insured regarding the activities of the
PARC clcarly satisfies all of the elements required to bring them within the scope
of the definition of “political violence” set forth in Section 6.01 of the Contract.

2. Section 6.01 of the Contract - that political violence bus been the direct and
immediate cause of dcfaults on scheduled lease payments.

(a) The requirement of coverage pursuant to the provisions of Section 6.01
of the Contract “Ss the direct and immediate cause of a default on a scheduled
payment and such default continues for one month.” Accordingly, the scope of
coverage condition has clearly been met.

4. Section 6.02 of the Contract - That nonc of the Exclusions applies.

{a) The Contract has, as a single exclusion, provocation on the part of the
Insured. The evidence submitted by the Insured cleatly demonstrates that it
cngaged in no activity that would bring it within the Exclusions provisions of
Section 6.02 of the Contract.

Basis of Compensation Under the Contract

Section 7.01 of the Contract provides that, assuming the requirements of Article VI are
gatisticd, OPIC shall pay compensation in the amount of the insured portion of the
scheduled payment in default “plus interest accruing trom the later of (i) the date of the
scheduled payment or (ii) the datc occurring one month prior (o the date of reccipt by
OPIC of the completed application for political violence compensation, through the date
of payment of compensation by OPIC, at the average daily federal funds rate in effect for
such period.”

Because there are thirtecn separate lease contracts with different cornmencement and
payment dates, OPIC, for its administrative convenience, and with the consent of the
Insured, concluded that it would consider applications for compensation on a quarterly,
acerned basis. This procedure avoids the Insurcd having to submit, and OPIC to consider,
a multiplicity of small claims, While this procedure is not consistent with the language of
Section 7.01 of the Contract, it reaches the same result sith fewer burdens on both the
Insured and OPIC.

Analysis of the Compensation Claimed

u. Application of the Contract to the Claim

‘The Insured is entitled to compensation, pursuant to Section 7.01, in the amount of
$126,732, the insured portion of lease payments for the period in default. Attached hereto
as Exhibit C is a schedule of lease payments prepared on an accrual! basis through the
term vf each of the thirtecn leases. From that amount OPIC will deduct $12,673, which
represents the 10% self-insurance requirement of the Contract. To that will ‘be added
interest in the amount of $388.41 computed at the average daily federal funds rate for the
period as required by the Contract, for a total of $1114,447.41.