Yil.

Conclnsion
For the foregoing reasons, OPIC concludes that the claim of the Investor is valid, The

amount of compensation to be paid for the lease coverage for the period January 1
through March 31, 2003 is determined to be $114,419.43, including interest.

OVERSEAS PRIVATE INVESTMENT CORPORATION

By. THe nies bs KE
Peter S. Watson

President and Chief Executive Officer

Date: af7}os



(1). Adjustments te Compensation

The adjustment to compensation set forth in Section 7.02.2 of the Contract, which
authorizes OPIC to “reduce its compensation by the amount of any compensation
seceived by the Insured from any other sources on account of the political violence,” does
not apply, 35 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 not 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
$1,12,885. The active amount will be reduced by the amount of compensation paid.

(3). Assignment of Leases

Section 8.02 of the Contract, as amended by Section 16.14 requires the Insured to either
transfer to OPIC, within ten days after OPIC notifies the Insured 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
yelated rights.” Because of the continuing ature 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. [f that were to occur, then
OPIC would be relieved of making further payments pursuant to {he Contract. Therefore,
OPIC determined, in the August 2, 2002 MOD, that, it would require an assignment of
tights, rather than an assignment of the leases, 35 8 condition precedent to payment of
compensation, pursuant to Section 8.02 of the Contract. The Insured entered into that
assignment of tights.

b. The Jnsured’s Duties Pursuant to the Contract
Article IX of the Contract establishes the duties of the Insured.

OPIC determines that the Tnsured has fully complied with all of its obligations pursuant
to the provisions of Article IX 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 rise 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 executives and other employees with direct knowledge of the Project. Section
10.18 of Contract No. F074 amended Amiicle 1X 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 been closed since, May 19, 2001. Therefore
these provisions are not applicable to the jnstant determination.



Ik

TD.

MEMORANDUM OF DETERMINATION is
Political Violence Claim of Sector Capital Corporation

Contract of Insutance No. F074

The Claim

By letter dated March 25, 2003, (Exhibit A), Sector Capital Corporation (the “Insured” or
“Inyestor”) filed an application for compensation pursuant to Contract of Insurance No.
F074 for the period January | through March 31,2003. The Insured alleges that an act of
political violence, as morc fully described below, occurred on May 19, 2001, at the site of
the Las Animas precious minerals mine in the State of Tolima, Colombia (the "Project”}
and is continuing. The Insured has advised OPIC that, as 2 result of the political violence,
ithas ceased all operations at the Project and has sustained covered losses.

OPIC has determined that the claim is valid and (hat compensation is now payable in the
amount of $114,419.42 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 effective August 18, 1999, wo cover the Tnsured’s $2 million lease
payments for equipment used at the Project. The maximum coverage under this policy is
$3,500,000. The active amount of coverage is currently $1,122,885.

Factual Background

A. The Project and the Insured.

The Project involves the acquisition and expansion of the Las Animas
underground quartz, gold and silver mine (“Las Animas”) in the State of ‘Tolima,
Colombia. Sector Resources, Ltd. (“Sector Resources”), a U.S.-owned Cayman
Jslands 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 one of its U.S. affiliates, Sector
Capital Corporation (“Sector Capital").



Iv.

A complete discussion of the factual background of the Project, the cvents
triggering the political violence, the remedial steps taken by the Insured and the
Tnsured’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 Insured would be entitled to receive
additional compensation pursuant to the Contract for claims for defaults on lease
payments, which claims were (o be submitted quarterly. OPIC 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 lease 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 salisfy al! the clements 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 stated above, the August 2, 2002 MOD concluded that the loss was due to
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 defaults 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 February 3, 2003. The Insured submitted a statement that the political
violence is continuing and further states that it is seeking meetings with the
Government of Colombia to establish a “military presence in the zone so Sector
can reactivate the mining project”. The United States Embassy in Bogota 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 seeking
assistance to arrange meetings with Colombian Government officials.
Accordingly, OPIC has no hasis for determining thal 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 farther determined that the
Insured fulfilled its duties under Lhe Contract, and compensation should now be
paid in the total amount of $1 14,419.43.

b. Section 6,01 of the Contract.- ‘That the loss was due to political violence.



vi.

(a) The evidence submitted by the Insured regarding the activities of the
FARC clearly 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 has been the direct and
immediate cause of defaults on scheduled lease payments.

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

3. Section 6.02 of the Contract — That none 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 clearly demonstrates that it
engaged 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
satisfied, OPIC shall pay compensation in the amount of the insured portion of the
scheduled payment in default “plus interest accruing from the later of (i) the date of the
scheduled payment or (ii) the date occurring one month prior to the date of receipt by
OPIC of the completed application for political violenec 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 thirteen separate lease contracts with different commencement 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,
accrued basis. This procedure avoids the Insured 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 with fewer burdens on both the
Insured and OPIC.

Analysis of the Compensation Claimed

a. Application of the Contract to the Clabm

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 of 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 $360.43 computed at the average daily federal funds rate for the
period as required by the Contract, for a total of $114,419.43,