Inverworld, Inc., et al. - Page 54

                                                 - 14 -                                                   
            company5 pursuant to the laws of the Cayman Islands.  To maintain                             
            its registration as an exempted company in the Cayman Islands,                                
            LTD submitted on March 4, 1983, November 21, 1983, December 5,                                
            1984, February 18, 1988, November 29, 1988, and December 8, 1989,                             
            an "Annual Return and Declaration" stating, inter alia, that its                              
            operations since its last return have been mainly outside the                                 
            Cayman Islands.                                                                               
                  LTD was a "sister company" of InverMexico; i.e., LTD and                                
            InverMexico were owned by the same persons or entities.  During                               
            the years in issue, no client of LTD was a citizen or resident of                             
            the United States.                                                                            
                  The principals of InverMexico managed a diverse group of                                
            financial services companies in the name of InverMexico and other                             
            entities; such companies were called "Grupo Inver", or the "Inver                             
            Group".  During the late 1970's and early 1980's, in the face of                              
            Mexico's declining oil revenues, the massive devaluation of the                               
            peso, and a growing sense of political instability, wealthy                                   
            Mexicans increasingly sought opportunities outside Mexico's                                   
            borders for investments that were considered safer than domestic                              
            investment opportunities.  In response to such "capital flight",                              
            during those years the Mexican Government placed increasing                                   


            5                                                                                             
                  An "exempted company" is one the operation of which is                                  
            conducted mainly outside the Cayman Islands.  Secs. 179, 181, The                             
            Companies Law of the Cayman Islands.                                                          





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