Wally Findlay Galleries International, Inc. and Subsidiaries - Page 4

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               The French subsidiary also handled shipping and customs                
          clearance for paintings acquired in Europe for the U.S. art                 
          galleries.  Although a resident manager oversaw operations, all             
          major decisions concerning the French subsidiary were made by the           
          officers of WFGI.                                                           
               The principal asset of the French subsidiary was a long-term           
          lease for the premises it used for its business.  The premises              
          comprised a handsome 18th-century townhouse at 2, Avenue                    
          Matignon, and space in the basement and first floor of an                   
          adjoining building at 48, Avenue Gabriel.  The leased property              
          was located in a prestigious district of the city and enjoyed               
          high security owing to the proximity of the French president's              
          residence.  Although the stated term of the lease was 9 years,              
          owing to restrictions under French law on the landlord's ability            
          to withhold his consent to renewal, it was effectively renewable            
          indefinitely at the lessee's option.  The rent was adjusted once            
          in every 3-year period, or trimester, according to a statutory              
          formula based on the cost of living.  Presumably because of legal           
          restrictions on the rental market, the fair-rental value of                 
          desirable commercial space in Paris tended substantially to                 
          exceed the rent.  Thus, to acquire its premium lease in 1969, the           
          French subsidiary paid the prior tenant FF 1,445,250, or $262,773           
          at the then-current exchange rate of 5.5 francs per U.S. dollar.            
          The French subsidiary made extensive renovations and structural             

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