SOTHEBYS HOLDINGS INC, 10-K, 1995-03-31

SOTHEBYS HOLDINGS INC
10-K, 1995-03-31
BUSINESS SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

(MARK ONE)

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994.

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-9750.

SOTHEBY'S HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MICHIGAN 38-2478409
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

500 NORTH WOODWARD AVENUE, SUITE 100
BLOOMFIELD HILLS, MICHIGAN 48304
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (810) 646-2400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
---------------------------------------- -------------------------------------
Class A Limited Voting Common Stock, New York Stock Exchange
$0.10 Par Value London Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

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 PERIODS 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 (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /

As of March 9, 1995, the aggregate market value of the 36,773,641 shares of
Class A Limited Voting Common Stock held by non-affiliates of the registrant was
$386,123,231, based upon the closing price ($10 1/2) on the New York Stock
Exchange composite tape on such date. (For this computation, the registrant has
excluded the market value of all shares of its Class A Limited Voting Common
Stock reported as beneficially owned by executive officers and directors of the
registrant; such exclusion shall not be deemed to constitute an admission that
any such person is an "affiliate" of the registrant.) As of March 9, 1995, there
were outstanding 37,031,988 shares of Class A Limited Voting Common Stock and
18,804,017 shares of Class B Common Stock, freely convertible into 18,804,017
shares of Class A Limited Voting Common Stock. There is no public market for the
registrant's Class B Common Stock, which is held by affiliates and
non-affiliates of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual shareholders report for the year ended December 31,
1994 are incorporated by reference into Parts I and II.

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<PAGE>
PART I

ITEM 1. BUSINESS

GENERAL

Sotheby's Holdings, Inc. (together with its subsidiaries, unless the context
otherwise requires, the "Company") is the world's preeminent auctioneer of art,
antiques and collectibles, offering property in over 70 collecting categories,
among them paintings, jewelry, decorative arts and books. The worldwide auction
business is conducted through a division known as "Sotheby's" and consists of
three principal operating units: Sotheby's North and South America ("Sotheby's,
Inc."), Sotheby's Europe and Sotheby's Asia. In addition to auctioneering, the
Company is engaged in two other lines of business: art-related financing and the
marketing and brokering of luxury real estate.

The Company believes it is one of the world's leaders in art-related
financing. The Company lends money secured by consigned art to clients in order
to facilitate their bringing property to auction. In addition, a portion of the
Company's loan portfolio consists of loans to collectors, dealers and museums
secured by collections not presently intended for sale.

The Company, through its subsidiary, Sotheby's International Realty, Inc.,
is engaged in the marketing and brokering of luxury residential real estate.

The Company was incorporated in Michigan in August 1983. In October 1983,
the Company purchased Sotheby Parke Bernet Group Limited, which was then a
publicly held company listed on the International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited (the "London Stock Exchange") and
which, through its predecessors, had been engaged in the auction business since
1744. In 1988, the Company sold shares of Class A Limited Voting Common Stock to
the public. The Class A Limited Voting Common Stock is listed on the New York
Stock Exchange and the London Stock Exchange.

Additional information relating to the Company's business segments and the
geographic areas in which the Company operates appears in Note C to the
Company's Consolidated Financial Statements in the Annual Shareholders Report
for the year ended December 31, 1994 (the "Annual Report"), which is
incorporated herein by reference.

THE AUCTION BUSINESS

Transactions in the world art market are effected through numerous dealers,
the two major auction houses and smaller auction houses and also directly
between collectors. Although dealers and smaller auction firms do not report
sales, the Company believes that dealers account for the majority of the volume
of transactions in the world art market.

The Company and Christie's International Plc, a publicly held company in the
United Kingdom ("Christie's"), are the two largest art auction houses in the
world. The Company conducted aggregate auction sales in 1994 of $1.33 billion
(approximately B.P.868 million). Christie's aggregate auction sales in 1994 were
approximately $1.26 billion (B.P.820 million reported). The auction sales of the
next largest art auction house, Phillips Son & Neale, were approximately $140
million (B.P.91 million reported) for the year ended December 31, 1994.

The Company auctions a wide variety of property, including fine art,
jewelry, decorative art and rare books. In an approximate breakdown of 1994
auction sales by type of property, fine art accounted for approximately $613
million, or 46%, of auction sales; decorative art accounted for approximately
$450 million, or 34%, of auction sales; and jewelry, rare books and other
property accounted for approximately $267 million, or 20%, of auction sales.

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Most of the objects auctioned by the Company are unique items, and their
value, therefore, can only be estimated prior to sale. The Company's principal
role as an auctioneer is to identify, evaluate, appraise and authenticate works
of art through its international staff of experts, to stimulate purchaser
interest through professional marketing techniques and to match sellers and
buyers through the auction process.

In its role as auctioneer, the Company normally functions as an agent
accepting property on consignment from its selling clients. The Company conducts
its auctions as agent of the consignor, billing the buyer for property
purchased, receiving payment from the buyer and remitting to the consignor the
consignor's portion of the buyer's payments. The Company frequently releases
property sold at auction to buyers, primarily dealers, before the Company
receives payment. In such event, if the purchased property is not within
Sotheby's control at the time payment is to be made to the seller, the Company
will pay the seller for the net sale proceeds for that property, even if the
Company has not received payment from the buyer.

In addition, on certain occasions, the Company will assure the consignor a
minimum price in connection with the sale of property. The Company must perform
under its assurances only in the event that (a) the property fails to sell at
auction and (b) the consignor prefers to be paid the minimum price rather than
retain ownership of the unsold property. In such event, the Company purchases
the property at the minimum price.

Occasionally, the Company acts as a principal in connection with the sale of
property. For example, the Company acts as a principal through its participation
in Acquavella Modern Art (the "Partnership" or "AMA"), a partnership consisting
of a wholly-owned subsidiary of the Company and Acquavella Contemporary Art,
Inc. ("ACA"). The total net assets of the Partnership consist principally of
inventory. The Company reflects its 50% interest in the net assets of the
Partnership as investment in partnership, which totalled $44.3 million and $45.7
million at December 31, 1994 and 1993, respectively. According to the terms of
the Partnership agreement, each partner has a 50% interest in the earnings of
the Partnership and all cash available for distribution was initially
distributed to the Company until the Company received $270.3 million, together
with a return equal to the prime rate (as defined). Cash distributions now are
being made on a 50-50 basis per the terms of the partnership agreement. To the
extent that the Partnership requires working capital, the Company has agreed to
lend the same to the Partnership. Any amounts loaned to the Partnership by the
Company would bear interest, compounded monthly, at the prime rate, plus 1%. As
of December 31, 1994, no amounts had been loaned to the Partnership. See Note F
to the Consolidated Financial Statements in the Annual Report.

All buyers pay a premium (known as the buyer's premium) to the Company on
auction purchases. The buyer's premium in North America is 15% of the hammer
price on all items sold for $50,000 or less, and 15% of the first $50,000 for
items sold for a price in excess of that amount and 10% on the remainder of the
purchase price. Generally, similar structures apply throughout most of the
remainder of Sotheby's auction operations. Beginning in 1995, as changes in the
Value Added Tax (VAT) are implemented throughout Europe, the Company's
commissions may be adjusted to reflect such changes. A selling commission, which
can vary depending on the sale location, type of seller (for example, dealers)
and the selling price of the property, is charged to the seller. In situations
involving major individual works of art, collections or collectors, the selling
commission tends to be negotiated to a level below that which otherwise would
apply. Christie's recently announced a change in the seller's commission to "a
non-negotiable sliding scale of charges" to clients, depending on the annual
consignment amount. The Company is studyng the implications of these changes.

The Company's operating revenues are significantly influenced by a number of
factors not within the Company's control, including: the overall strength of the
international economy, in particular, the economies of the United States, the
United Kingdom, the major countries of continental Europe and Asia, principally
Japan and Hong Kong; political conditions in various nations; the presence of
export

2
<PAGE>
and exchange controls; taxation of sales and donation of auctioned property;
competition; and the amount of property being consigned to art auction houses.

The Company's business is seasonal, with peak revenues and operating income
generally occurring in the second and fourth quarters of each year as a result
of the traditional spring and fall art auction seasons. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Seasonality" in the Annual Report.

THE AUCTION MARKET

Competition in the world art market is intense. A fundamental challenge
facing any auctioneer or dealer is to obtain high quality and valuable property
for sale. The Company's primary auction competitor is Christie's.

The owner of a work of art wishing to sell it has three options: sale or
consignment to, or private brokerage by, an art dealer; consignment to, or
private sale by, an auction house; or private sale to a collector or museum
without use of an intermediary. The more valuable the property, the more likely
it is that the owner will consider more than one option and will solicit
proposals from more than one potential purchaser or agent, particularly if the
seller is a fiduciary representing an estate or trust.

A complex array of factors influence the seller's decision. These factors
include: the level of expertise of the dealer or auction house with respect to
the property; a prior relationship between the seller and the firm; the
reputation and historic level of achievement by a firm in attaining high sale
prices in the property's specialized category; the amount of cash offered by a
dealer or other purchaser to purchase the property outright compared with the
estimates given by auction houses; the time that will elapse before the seller
will receive sale proceeds; the desirability of a public auction in order to
achieve the maximum possible price (a particular concern for fiduciary sellers);
the amount of commission proposed by dealers or auction houses to sell a work on
consignment; the cost, style and extent of presale marketing and promotion to be
undertaken by a firm; recommendations by third parties consulted by the seller;
personal interaction between the seller and the firm's staff; and the
availability and extent of related services, such as a tax or insurance
appraisal and short-term financing. The Company's ability to obtain high quality
and valuable property for sale depends, in part, on the relationships that
certain employees of the Company, particularly its senior art experts, or
management have established with potential sellers.

It is not possible to measure the entire world art market or to reach any
conclusions regarding overall competition because dealers and smaller auction
firms do not report sales. Based on the reported sales of the Company and
Christie's during each of the last 10 years, the Company has been and remains
the world leader in auction sales of art and related objects.

Regulation

Regulation of the auction business varies from jurisdiction to jurisdiction.
Such regulations do not impose a material impediment to the worldwide business
of the Company.

In February 1990, certain members of the Assembly of the State of New York,
the jurisdiction where the Company's principal U.S. auctions are held, initiated
an inquiry with respect to the business practices of auction houses, museums and
art dealers, including the Company. Each year since 1990, the Assemblymen have
reintroduced proposed legislation which, if enacted, would substantially alter
the manner in which the Company's auction business in New York is conducted. To
date, no legislation has been enacted by the State of New York.

3
<PAGE>
THE FINANCE BUSINESS

The Company arranges financing secured by works of art and other personal
property owned by its customers. The Company's finance operations are conducted
through its wholly-owned subsidiary, Sotheby's Financial Services, Inc.

The Company generally makes two types of art-related loans: (1) advances to
consignors who are contractually committed, in the near term, to sell property
at auction; and (2) term loans to collectors, museums or dealers secured by
property not intended for sale. The loans are generally made with full recourse
to the borrower. In certain instances, consignor advances are made with recourse
limited to the works of art consigned for sale and pledged as security for the
loan, or with recourse limited to the consigned works and to other works of art
owned by the consignor, but not pledged as security. The consignor advance
allows a consignor to receive funds shortly after consignment for an auction
that will occur several weeks or months in the future, while preserving for the
benefit of the consignor the potential of the auction process. The term loan
allows the Company to establish or enhance a mutually beneficial relationship
with major dealers and collectors. Term loans generally have a maturity of one
year. The Company's loans generally are variable interest rate loans.

The Company reviews its loan portfolio on a quarterly basis. Each loan is
categorized based on the current estimated realizable value of collateral
securing the loan. When management believes that the estimated realizable
collateral value has fallen below the principal amount of a loan or when the
borrower is in default, the loan becomes subject to more frequent monitoring.
For financial statement purposes, the Company establishes reserves for certain
loans that the Company believes are under-collateralized and with respect to
which the shortfall may not be collectible from the borrower. With respect to
any such loan, the amount of the applicable reserve is adjusted quarterly to
reflect the portion of the loan that the Company believes may become
uncollectible. See Note D to the Consolidated Financial Statements in the Annual
Report.

The Company funds its finance operations through internally generated funds,
through the issuance of U.S. commercial paper and through its bank credit lines.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources" and Note H to the Consolidated
Financial Statements in the Annual Report.

Competition

A considerable number of conventional lending sources offer loans at a lower
cost to borrowers than those offered by the Company. However, the Company
believes that, with the exception of Christie's, few other lenders are as
willing to accept works of art as sole collateral. The Company believes that its
financing alternatives are attractive to clients who wish to obtain liquidity
from their art assets for various reasons, despite the comparatively higher
interest rates charged by the Company.

THE LUXURY REAL ESTATE BUSINESS

Sotheby's International Realty, Inc. ("SIR") was founded in 1976 as an
outgrowth of Sotheby's auction activities and in response to the requests of
major clients to market estates and other real property that required exposure
beyond a local market. SIR responds to the needs of its clients by (a) acting as
an exclusive marketing agent providing services to licensed real estate
brokerage offices and (b) operating its own real estate brokerage offices in
certain locations.

Competition

SIR's primary competitors are small, local real estate brokerage firms that
deal exclusively with luxury real estate and the "distinctive property"
divisions of large regional and national real estate firms. Competition in the
luxury real estate business takes many forms, including competition in price,
marketing expertise and the provision of personalized service to sellers and
buyers.

4
<PAGE>
Regulation

The real estate brokerage business is subject to regulation in most
jurisdictions in which SIR operates. Typically, individual real estate brokers
and brokerage firms are subject to licensing requirements. SIR is registered to
conduct business in 31 states and maintains real estate brokerage licenses in 12
states. In other jurisdictions, SIR acts as an exclusive marketing agent
providing services to licensed real estate brokers.

PERSONNEL

At December 31, 1994, the Company had 1,558 employees: 646 located in North
America; 661 in the United Kingdom and 251 in the rest of the world. The
following table provides a breakdown of employees by operational areas as of
December 31, 1994:

OPERATIONAL AREA NUMBER OF EMPLOYEES
-------------------------------------------------------- -------------------
Auction................................................. 1,406
Realty.................................................. 54
Other (Corporate, Financial Services, Education,
Restoration)............................................ 98
-----
Total............................................. 1,558
-----
-----

The Company regards its relations with its employees as good.

ITEM 2. PROPERTIES
U.S. PROPERTIES

Sotheby's, Inc. and Sotheby's Financial Services, Inc. are headquartered at
1334 York Avenue, New York, New York (the "York Property"). The Company also
leases office and warehouse space in four other locations in the New York City
area, and leases office and exhibition space in several other major cities
throughout the United States, including Los Angeles, San Francisco, Chicago and
Palm Beach.

The Company currently leases the York Property, comprising approximately
160,500 square feet, from an unaffiliated party under a 30-year lease expiring
in 2009, which contains an option to extend the term for an additional 30 years
until July 31, 2039. The lease also grants the Company a right of first refusal
with respect to the sale of the York Property.

York Avenue Development, Inc. ("York"), a wholly-owned subsidiary of
Sotheby's, Inc., has the right to purchase the fee interest in the York Property
by exercising certain options available through January 31, 1999 and during the
months of August 1999, August 2004 and July 2009.

The Company considers various alternatives for the realization of the value
of the right to purchase the fee interest in the York Property. Additionally,
the Company is studying how best to satisfy its demand for additional office and
auction space.

Under an agreement with Taubman York Avenue Associates, Inc. ("Associates"),
Associates has agreed that it will assist York in developing and financing a
new, mixed-use tower (the "New Tower") over the existing four-story building on
the York Property, should a decision be made to proceed with such development.
Sotheby's, Inc. has structured the transaction to isolate the financial exposure
of the Company with respect to development of the New Tower in one subsidiary,
namely, York. A. Alfred Taubman, the Company's Chairman and largest shareholder,
is presently the sole shareholder of Associates. See Note J to the Consolidated
Financial Statements in the Annual Report.

Sotheby's, Inc. also assigned to York its rights and obligations under a
project services agreement dated November 8, 1985 (the "Project Services
Agreement") between Sotheby's, Inc. and The

5
<PAGE>
Taubman Company ("TTC"), which is an affiliate of A. Alfred Taubman. Under the
Project Services Agreement, TTC agreed to develop the New Tower on behalf of
Sotheby's, Inc. and to provide consultation and advice to Sotheby's, Inc. in
connection with the development of the New Tower, should a decision be made to
proceed with the development.

In connection with the development of the York Property, York has incurred
certain pre-development costs which have been financed in part by a demand note
payable to Associates. See Note H to the Consolidated Financial Statements in
the Annual Report.

SIR leases approximately 10,900 square feet of office space at 980 Madison
Avenue, New York, New York, from unaffiliated parties under leases expiring in
2001. SIR also leases satellite office space at a number of locations, totalling
another 11,200 square feet.

OVERSEAS PROPERTIES

The Company's U.K. operations are centered at New Bond Street, London, where
the main salesrooms and administrative offices of Sotheby's (U.K.) are located.
Additional salesrooms are located in proximity to New Bond Street. The total net
usable floor area amounts to approximately 124,000 square feet. The Company owns
or holds long-term leasehold interests in approximately 75% of these properties
by area, the balance being held on leases with remaining terms of less than 20
years. In addition, 50,000 square feet of warehouse space is leased at King's
House in West London. The Company also owns a salesroom in Sussex where it
conducts satellite auctions.

The Company also leases office space in various locations throughout
continental Europe, including Amsterdam, Frankfurt, Geneva, Madrid, Milan,
Munich, Paris and Zurich; in Asia, including Hong Kong, Seoul, Singapore and
Tokyo; and in South America.

In management's opinion, the Company's worldwide premises are generally
adequate for the current conduct of its business. However, the Company
evaluates, on an ongoing basis, the adequacy of its premises for the
requirements of the present and future conduct of its business, with particular
focus on its major auction locations. The Company has explored different options
for new auction facilities in New York City, including the Alexander's building
in mid-town Manhattan, but there is no assurance that a change will be made. If
there is a change, the Company would use capital resources; and the Company
believes that it has adequate capital resources available from operations,
commercial paper and existing credit facilities.

ITEM 3. LEGAL PROCEEDINGS

The Company becomes involved from time to time in various claims and
lawsuits incidental to the ordinary course of its business. The Company does not
believe that the outcome of any such pending claims or proceedings will have a
material effect upon its business or financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's shareholders during the
fourth quarter of 1994.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SHAREHOLDER MATTERS

Market Information

The principal U.S. market for the Company's Class A Limited Voting Common
Stock, par value $0.10 per share (the "Class A Common Stock"), is the New York
Stock Exchange (symbol: BID). The Class A Common Stock is also traded on the
London Stock Exchange.

The Company also has a Class B Common Stock, par value $0.10 per share,
convertible on a share for share basis into Class A Common Stock. There is no
public market for the Class B Common Stock. Per share cash dividends are equal
for the Class A and Class B Common Stock.

The quarterly price ranges on the New York Stock Exchange of the Class A
Common Stock and dividends per share for 1994 and 1993 are shown in the
following schedules:

<TABLE>
<CAPTION>
1994]
---------------- CASH DIVIDEND
QUARTER ENDED HIGH LOW DECLARED
---------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
March 31...................................... $ 19 1/2 $ 15 3/8 $ .06
June 30....................................... 18 3/8 11 7/8 .06
September 30.................................. 13 1/4 12 .06
December 31................................... 13 10 3/4 .06
</TABLE>

<TABLE>
<CAPTION>
1993
---------------- CASH DIVIDEND
QUARTER ENDED HIGH LOW DECLARED
---------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
March 31...................................... $ 14 1/4 $ 12 1/4 $ .15
June 30....................................... 14 7/8 11 3/8 .15
September 30.................................. 13 1/8 10 3/4 .06
December 31................................... 17 1/4 11 3/4 .06
</TABLE>

The number of holders of record of the Class A Common Stock as of March 9,
1995 was 1,418. The number of holders of record of the Class B Common Stock as
of March 9, 1995 was 40.

ITEM 6. SELECTED FINANCIAL DATA

Selected Financial Data on page 19 of the Annual Report are incorporated
herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

Management's Discussion and Analysis of Results of Operations and Financial
Condition on pages 20 through 24 of the Annual Report is incorporated herein by
reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements on pages 25 through 38 of the Annual
Report are incorporated herein by reference.

The Independent Auditors' Report on page 39 of the Annual Report is
incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

All directors of the Company are elected to hold office until the next
annual meeting of shareholders and until their successors are elected and
qualified. Officers of the Company are appointed by the Board of Directors and
serve at the discretion of the Board. As of March 24, 1995, the directors and
executive officers of the Company (including certain officers of certain
principal subsidiaries and divisions) are as follows:

<TABLE>
<CAPTION>
NAME AGE PRESENT TITLE
------------------------------------------ --- ------------------------------------------
<S> <C> <C>
A. Alfred Taubman......................... 70 Chairman and Director
Max M. Fisher............................. 86 Vice Chairman and Director
Lord Camoys............................... 54 Deputy Chairman and Director
Viscount Blakenham........................ 57 Director
Walter J. P. Curley....................... 72 Director
The Rt. Hon. The Earl of Gowrie........... 55 Director
The Marquess of Hartington................ 50 Director
Leslie H. Wexner.......................... 57 Director
Michael L. Ainslie........................ 51 Director; Chairman, Sotheby's
International Realty
George Bailey............................. 41 Managing Director, Sotheby's Europe
Kevin A. Bousquette....................... 37 Senior Vice President and Chief Financial
Officer
Diana D. Brooks........................... 44 Director; President and Chief Executive
Officer
Simon de Pury............................. 43 Chairman, Sotheby's Europe
William F. Ruprecht....................... 39 Managing Director, Sotheby's North and
South America
R. Julian de la M. Thompson............... 53 Director; Chairman, Sotheby's Asia
Henry Wyndham............................. 41 Chairman, Sotheby's (U.K.)
Mitchell Zuckerman........................ 48 President, Sotheby's Financial Services,
Inc.
</TABLE>

Mr. Taubman is a private investor. Since 1983, Mr. Taubman has been the
largest shareholder, Chairman and a director of the Company. He is Chairman of
Taubman Centers, Inc., a company engaged in the regional retail shopping center
business. Mr. Taubman is also Chairman of the Board of Woodward & Lothrop
Holdings, Inc. and a director of Woodward & Lothrop Incorporated, a department
store company, both of which filed for bankruptcy protection under Chapter 11 of
the U.S. Bankruptcy Code in January 1994. Mr. Taubman is also a director of Live
Entertainment of Canada, Inc.

Mr. Fisher is a private investor and has been Vice Chairman of the Company
since 1986 and a director of the Company since 1983. Mr. Fisher is a director of
Comerica Bank.

Lord Camoys became a director of the Company in October 1993 and assumed the
role of Deputy Chairman of the Company effective April 1, 1994. Since 1989, he
has been Deputy Chairman of Barclays de Zoete Wedd Holdings Limited, the
international investment banking arm of Barclays Group. Lord Camoys is a
director of 3i Group plc, an investment group, and Perpetual Group plc and is
Deputy Chairman of National Provident Institution.

Lord Blakenham became a director of the Company in 1987. Since 1961 he has
served in various executive positions with Pearson plc, a British media company
that serves worldwide information, education and entertainment markets and which
has a substantial interest in the three Lazard investment banking firms. He has
been Executive Chairman of Pearson plc since 1983. Lord Blakenham is a Managing
Director of Lazard Brothers & Co., Limited, an investment banking firm, and the
non-executive Chairman of MEPC, plc, a commercial real estate investment and
development company.

8
<PAGE>
Mr. Curley has been a director of the Company since April 1993. From 1989 to
March 1993, Mr. Curley served as U.S. Ambassador to France. Prior to 1989, Mr.
Curley was U.S. Ambassador to Ireland, was a partner of J.H. Whitney & Co., and
was a principal in his own private venture capital investment firm, W.J.P.
Curley. Mr. Curley is a director of American Exploration Company, an oil and gas
exploration and development company, and The France Growth Fund, a closed end
investment company. He is also a member of the International Advisory Committee
of Compagnie Financiere de Paribas, an international bank, Chairman of the
French American Foundation and President of the Curley Land Company, a family
real estate company.

Lord Gowrie has been a director of the Company since 1985 and served as
chairman of Sotheby's Europe from 1992 through 1993. From 1988 through 1991,
Lord Gowrie served as chairman of Sotheby's (U.K.), which then encompassed the
United Kingdom, Europe, Asia and Australia. Lord Gowrie was appointed chairman
of the Arts Council, effective April 1994 and also serves as a director of the
Ladbroke Group PLC, an entertainment and leisure company.

The Marquess of Hartington became a director of the Company in September
1994. He serves as a director of a number of private companies, including the
management of Chatsworth and estates in Derbyshire, Yorkshire and Sussex. Since
1989, he has been Senior Steward(Chairman) of the Jockey Club. In June 1993, he
was appointed Chairman of the British Horseracing Board.

Mr. Wexner has been a director of the Company since 1983. Since 1963, he has
been President and Chairman of The Limited, Inc., which is one of the leading
women's apparel specialty stores and mail order retailers in the United States.

Mr. Ainslie is the Chairman of Sotheby's International Realty and has been a
director of the Company since 1984. He served as the President and Chief
Executive Officer of the Company from 1984 to April, 1994.

Mr. Bailey was appointed Managing Director of Sotheby's Europe in January
1994. From 1992 through 1993, he served as director of business development,
Sotheby's Europe. From 1987 to 1992, Mr. Bailey was the director of operations,
Sotheby's (U.K.). Mr. Bailey joined Sotheby's in 1979.

Mr. Bousquette has been Senior Vice President and Chief Financial Officer of
the Company since April 1993. From 1985 to 1992, Mr. Bousquette was an executive
at Kohlberg Kravis Roberts & Co., L.P., a merchant banking firm, and a limited
partner of KKR Associates, L.P.

Ms. Brooks was appointed President and Chief Executive Officer of the
Company in April 1994. From March 1993 until April 1994, Ms. Brooks served as
President and Chief Executive Officer of Sotheby's, the Company's worldwide
auction business. She has been Chief Executive Officer of Sotheby's, Inc. since
1990 and President of Sotheby's, Inc., responsible for North and South American
operations, since 1987. Ms. Brooks joined the Company in 1980 and has been a
director since 1992.

Mr. de Pury was appointed Chairman of Sotheby's Europe in January 1994. He
served as Deputy Chairman of Sotheby's Europe from 1992 through 1993. From 1988
to 1991, he served as Deputy Chairman of Sotheby's (U.K.), directly responsible
for European development. Mr. de Pury joined the Company in 1975. From 1975-1979
he performed several functions within the Company, among them opening the Geneva
office. Mr. de Pury rejoined the Company in 1986 as Managing Director, Sotheby's
International, Inc., responsible for all continental European offices.

Mr. Ruprecht was appointed Executive Vice President and Managing Director of
Sotheby's, Inc. in February 1994. From 1992 to February 1995 Mr. Ruprecht served
as Director of Marketing for the Company worldwide and also oversaw a number of
expert departments. From 1986 to 1992, he served as director of marketing for
Sotheby's, Inc. Mr. Ruprecht joined the Company in 1980.

Mr. Thompson has been a director of the Company since 1983 and Chairman of
Sotheby's Asia since 1992. From 1988 to 1991 he was Deputy Chairman of Sotheby's
(U.K.), directly responsible for development in Asia.

9
<PAGE>
Mr. Wyndham became Chairman of Sotheby's (U.K.) in February 1994. Since
prior to 1989, he was a partner of the St. James Art Group, an art dealing
business.

Mr. Zuckerman has been President of Sotheby's Financial Services, Inc.,
since 1988. From June 1986 until 1989, he served as Senior Vice President,
Corporate Development of the Company. Mr. Zuckerman joined the Company in 1979.

Based on the Company's review of the filings made by the Company's directors
and executive officers under Section 16 of the Securities and Exchange Act of
1934, all transactions in and beneficial ownership of the Company's equity
securities were reported in a timely manner, except that Michael Ainslie, Diana
Brooks, Simon de Pury, and Julian Thompson were approximately two weeks late in
making their respective Form 5 filings.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth all compensation paid to the Chief Executive
Officer and each of the four most highly compensated executive officers of the
Company during 1994 for each of the last three years.

SUMMARY COMPENSATION TABLE

<TABLE><CAPTION>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION(15)
----------------------------------------- ------------ ------------
SHARES
UNDERLYING
NAME AND PRINCIPAL OTHER ANNUAL OPTIONS
POSITION YEAR SALARY BONUS(6) COMPENSATION (#)
--------------------------- ---- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Diana D. Brooks............ 1994 $500,000 $276,000(7) $ 7,200(12) 250,000 35,150
President and Chief 1993 400,000 233,000(7) 8,640(12) 250,000 34,250
Executive Officer 1992 280,000 255,000(7) 23,000
Michael L. Ainslie(1)...... 1994 $430,000 $ 0 $ 4,200(12) 23,292
Director and Chairman 1993 430,000 0 16,800(12) 75,000 19,708
Sotheby's International 1992 430,000 101,000 224,325(13) 26,500
Realty
Kevin A. Bousquette(2)..... 1994 $330,000 $104,000 $ 6,000(12) 20,450
Senior Vice President and 1993 239,808 70,000 150,000 7,500
Chief Financial Officer
Simon de Pury(3)........... 1994 $322,142 $160,000(8) $ 10,597(12) 66,000 47,480
Chairman, Sotheby's Europe 1993 243,180 190,000(8) 100,000 30,469
1992 230,106 80,000 14,000 34,515
William F. Ruprecht(4)..... 1994 $225,000 $157,500(9) $ 0 25,500 17,656
Managing Director, 1993 200,000 165,000(9) 0 100,000 17,455
Sotheby's North and South 1992 142,000 112,500(9) 0 12,000 11,925
America
Henry Wyndham(5)........... 1994 $183,960 $137,390(10) $ 46,400(14) 75,000 4,404
Chairman, 1993 150,000(11) 0
Sotheby's (U.K.)
</TABLE>

------------

(1) Mr. Ainslie resigned as President and Chief Executive Officer of the
Company effective April 1, 1994 and as an employee, effective December 31,
1994.

(2) Mr. Bousquette joined the Company in April 1993.

(3) Mr. de Pury served as Deputy Chairman of Sotheby's Europe in 1993. He
assumed the position of Chairman of Sotheby's Europe on January 1, 1994.

(4) Mr. Ruprecht was appointed Executive Vice President and Managing Director
of Sotheby's North and South America in February 1994.

(Footnotes continued on following page)

10
<PAGE>
(Footnotes continued from preceding page)
(5) Mr. Wyndham joined the Company as Chairman, Sotheby's (U.K.), effective
January 1994.

(6) 1994 bonus amounts include cash paid in 1995 in respect of 1994
performance.

(7) The 1994 bonus amount includes a payment of $30,000, representing the
balance of a special bonus awarded to senior officers to reflect the fact
that salaries had been frozen since January 1990 and a deferred bonus of
$46,000 paid for services rendered in connection with the acquisition of
Matisse and the management of AMA. The 1993 bonus amount includes a payment
of $60,000 representing part of such special bonus and a deferred bonus of
$23,000 paid for services rendered in connection with the acquisition of
Matisse and the management of AMA. The 1992 bonus amount includes a payment
of $30,000 representing part of the special bonus and also includes a
deferred bonus of $75,000 paid in connection with the acquisition of
Matisse and the management of AMA.

(8) The 1994 bonus amount includes a payment of $60,000, representing the
balance of a special bonus awarded to senior officers to reflect the fact
that salaries had been frozen since January 1990. The 1993 bonus amount
also includes a payment of $60,000, representing part of such special bonus
awarded.

(9) The 1994 bonus amount includes a payment of $37,500, representing the
balance of a special bonus awarded to senior officers to reflect the fact
that salaries had been frozen since January 1990. The 1993 bonus amount
also includes a payment of $75,000, representing part of such special bonus
awarded. The 1992 bonus amount includes a payment of $37,500, representing
part of the special bonus.

(10) The 1994 bonus amount includes a supplemental payment of $45,990 to be paid
each of the first three years of Mr. Wyndham's employment, in accordance
with the terms of his employment agreement.

(11) The 1993 bonus amount is a one-time signing bonus per Mr. Wyndham's
employment agreement.

(12) Car allowance.

(13) Includes car allowance and, in accordance with the terms of Mr. Ainslie's
employment agreement, a payment of $207,525 in respect of stock options
exercised in 1992 ($0.15 per share).

(14) Housing allowance.

(15) The amounts disclosed in this column for 1994 include:

(a) Company contributions of the following amounts under the Retirement
Savings Plan: $7,500 on behalf of Ms. Brooks, $8,958 on behalf of Mr.
Ainslie, $5,850 on behalf of Mr. Bousquette and $6,481 on behalf of Mr.
Ruprecht.

(b) Company contributions of the following amounts under benefit
equalization agreements: $27,650 on behalf of Ms. Brooks, $14,333 on
behalf of Mr. Ainslie, $14,600 on behalf of Mr. Bousquette and $11,175
on behalf of Mr. Ruprecht.

(d) a Company contribution under the UK pension plan of $4,404 on behalf of
Mr. Wyndham.

Stock Option Plan

In 1987, the Company instituted the 1987 Stock Option Plan, including its
U.K. Sub-Plan (the "Stock Option Plan" or "Plan"), for employees of the Company.
The purposes of the Plan are to provide employees with added incentives to
continue in the employ of the Company, to encourage proprietary interest in the
Company through the acquisition of its stock and to attract new employees with
outstanding qualifications. Options may be granted under the Plan until July 27,
1997, and the Plan expires for all purposes on July 27, 2007.

The Audit and Compensation Committee of the Company's Board of Directors
(the "Committee"), in its discretion (based on each employee's performance and
expected future contribution to the Company), selects the employees eligible to
participate in the Plan. Under the U.K. Sub-Plan, options may only be granted to
a director or employee of the Company, or any of its subsidiaries, who is a U.K.
resident, and only if the resident devotes at least 25 hours per week, in the
case of a director, or 20 hours

11
<PAGE>
per week, in the case of an employee who is not a director, to his or her
duties, subject to certain other limitations.

The Committee, in its discretion, determines the number of options to be
granted to an employee. Under the U.K. Sub-Plan, a U.K. resident may not receive
options for shares under the U.K. Sub-Plan with aggregate exercise prices
(converted to their pound sterling equivalent at the date of grant) exceeding
the greater of B.P.100,000 or four times relevant compensation during the
current or preceding year. The exercise price of an option is determined by the
Committee at the date of grant, and may not be less than the fair market value
of the underlying shares as of the date of grant. Only options on shares of
Class B Common Stock can be granted under the Plan and Class B Common Stock can
be fully converted into shares of Class A Common Stock.

An optionee may exercise an option granted prior to October 1992 to the
extent of one-third of the number of shares subject to the option in each of the
fourth, fifth and sixth years of employment after the date of the grant of the
option on a cumulative basis, although the Committee has the discretion to
accelerate the exercise dates of options to a date, in the case of an option
granted under the U.K. Sub-Plan subsequent to July 3, 1991, not earlier than the
third anniversary of the date of grant and, in the case of any other option, not
earlier than six months and one day after the relevant date of grant.

Effective October 1992, the Committee approved a change in vesting for all
subsequent grants, such that an optionee, except those subject to the U.K.
Sub-Plan, may exercise an option to the extent of one-fifth of the number of
shares subject to the option in each of the second, third, fourth, fifth and
sixth years of employment after the date of the grant on a cumulative basis.
Under the U.K. Sub-Plan, optionees may exercise an option to the extent of
three-fifths of the number of shares subject to the option in the fourth year
and one-fifth in each of the fifth and sixth years of employment after the grant
date.

The following table sets forth information regarding option grants to the
named executive officers in 1994:

OPTION GRANTS IN 1994

<TABLE><CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(3)
--------------------------------------------------- -----------------------
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED 1994 SHARE DATE 5% 10%
------------------------------ ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Diana D. Brooks............... 250,000(1) 27.09% $ 16.50 1/23/04 $2,594,190 $6,574,188

Simon de Pury................. 66,000(1) 7.15% $ 16.50 1/23/04 $ 684,866 $1,735,586

William F. Ruprecht........... 8,000(1) 0.87% $ 16.50 1/23/04 $ 83,014 $ 210,374

Henry Wyndham................. 75,000(2) 8.13% $ 16.50 1/23/04 $ 778,257 $1,972,256
</TABLE>

------------

(1) These options will vest and become exercisable to the extent of one-fifth of
the number of shares subject to the option on each of the first, second,
third, fourth and fifth anniversary of the date of grant.

(2) These options will vest and become exercisable to the extent of three-fifths
of the number of shares subject to the option on the fourth anniversary of
the date of grant and to the extent of an additional one-fifth of the number
of the shares subject to the option on each of the fourth and fifth
anniversaries of the date of grant.

(3) The actual value, if any, that may be realized by each individual will
depend on the closing price of the Class A Common Stock on the NYSE on the
day preceding the exercise date. The option term for these option grants is
ten years. The appreciation rates used in the table are provided to comply

(Footnotes continued on following page)

12
<PAGE>
(Footnotes continued from preceding page)
with Item 402(c) of Regulation S-K and do not necessarily reflect the views
of management as to the potential realizable value of options.

The following table provides information on option exercises in 1994 by the
named executive officers and year-end option values for unexercised options held
by the named executive officers:

AGGREGATED OPTION EXERCISES IN 1994 AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT YEAR-END AT YEAR-END
ON EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Ainslie............... 0 $0 15,000 0 $ 0 $ 0
Kevin A. Bousquette.............. 0 $0 30,000 120,000 $ 0 $ 0
Diana D. Brooks.................. 0 $0 118,000 460,000 $ 0 $ 0
Simon de Pury.................... 0 $0 40,000 160,000 $ 0 $ 0
William F. Ruprecht.............. 0 $0 44,000 50,000 $17,500 $26,250
Henry Wyndham.................... 0 $0 0 75,000 $ 0 $ 0
</TABLE>

See Note K to the Consolidated Financial Statements in the Annual Report for
additional information about the Plan.

Retirement Savings Plan

The Company has a Retirement Savings Plan (the "Retirement Savings Plan")
for employees of the Company and its subsidiaries in the United States.
Employees are eligible to participate in the Retirement Savings Plan as of the
first day of the month following completion of a 90-day waiting period
commencing on the date of employment.

The Company contributes 2% of each participant's compensation to the
Retirement Savings Plan on behalf of the participant. In addition, participants
may elect to save between 2% and 12% of their compensation, up to the maximum
amount allowable under the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations thereunder, on a pre-tax basis. Participants also
may elect to make after-tax contributions, subject to certain limits. Employee
pre-tax savings are matched by a Company contribution of up to an additional 3%
of the participant's compensation. The total amount of contributions for each
participant is subject to certain limitations under the Code, and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").

The receipt of benefits attributable to the Company's contributions
(including the 2% Company contribution and matching contributions) is subject to
vesting and forfeiture provisions of the plan; other amounts are fully vested at
all times. Company contributions to the Retirement Savings Plan made on behalf
of the named executive officers have been included in the Summary Compensation
Table.

U.K. Pension Plan

Sotheby's (U.K.) maintains a funded defined benefit pension plan for its
employees who are U.K. residents.

PENSION TABLE

<TABLE><CAPTION>
YEARS OF SERVICE
REMUNERATION --------------------------------------------------
(B.P.) 15 20 25 30 35
------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
40,000 10,000 13,333 16,667 20,000 23,333
60,000 15,000 20,000 25,000 30,000 35,000
80,000 19,200 25,600 32,000 38,400 44,800
</TABLE>

13
<PAGE>
Henry Wyndham is the only named executive officer who participates in the
plan and has one credited year of service with the Company.

Pension benefits under the plan for employees contributing 4% of salary are
1/60th of the employee's final pensionable salary for every year of service up
to a maximum of 40 years. For participants contributing 2% of salary, the
benefits accrue at half of the rate indicated above. Benefits are paid monthly
commencing at retirement, which is at age 60, although the Company may elect to
continue employment of the individual after that date, and if the Company
agrees, the employee may elect to make further contributions until the age of
65. The compensation covered by the plan is the employee's pensionable earnings
(subject to the limitation described below), which includes "Salary", but
excludes "Bonus" and "Other Annual Compensation" disclosed in the Summary
Compensation Table.

The plan also provides for a death benefit in the amount of four times the
employee's base salary at the time of death plus the refund of the employee's
contributions to the plan and provides for a pension to be paid to the
employee's spouse of 33 1/3%, or proportionately less if the employee has
elected to contribute at the reduced rate, of the employee's base salary at the
date of death.

The above table sets forth the estimated annual benefits (in pounds
sterling) payable upon retirement under the plan assuming the employee
contributes at 4% of base salary. Current Inland Revenue regulations limit the
pensionable salary with respect to which pension benefits may be based to a
maximum of B.P.76,800.

Switzerland Plan

In accordance with the requirements of Swiss law, Sotheby's AG, the
Company's Swiss operating subsidiary, established in 1985 a fully insured
pension plan for its full-time employees whose salaries exceed 22,560 Swiss
francs ("SF"). There are two elements of the plan: a savings element (the
"Savings Plan") and a risk element (the "Risk Plan"). Employees are eligible to
join the Savings Plan as of the January 1 following attainment of age 24 and the
Risk Plan as of the January 1 following attainment of age 17.

Under the Savings Plan, an individual retirement account is established for
each participating employee. Each year, the account is credited with a
percentage of the employee's adjusted salary, which is the employee's annual
salary including bonuses and other allowances reduced by SF 22,560, with a
minimum adjusted salary of SF 2,820. Longer serving employees were made eligible
for additional Company contributions in respect of service with the Company
prior to 1985 and in respect of salary in excess of SF 112,800 for which no
contributions had been made prior to 1993. The percentage of adjusted salary
credited to the account ranges from 7% to 30%, depending on the employees' age,
sex and past service. The Company pays between 66% and 80% of this total
contribution, with the remainder paid by employees. The account is also credited
with interest at a rate fixed by the Federal Council.

At retirement age, which is age 65 for men and age 62 for women, the
employee's account is converted to a life annuity, with provisions for
contingent widow's pension of 60% of the retiree's benefit and immediate
pensions of 20% of the retiree's benefit for certain children of the retiree.
Participants may elect to receive their retirement benefits in a lump sum in
lieu of the annuity.

The Risk Plan provides disability and death benefits to employees, their
widows and certain of their children. Benefits are generally a percentage of the
amount credited to the employee's account, excluding interest. Benefits under
the Risk Plan are funded by insurance premiums, all of which are paid by the
Company.

Mr. de Pury is the only named executive officer who participates in the
plan. A total of SF 65,000 ($47,480) contributed in 1994 by the Company on
behalf of Mr. de Pury is included in the Summary Compensation Table.

14
<PAGE>
Bonuses

The Company's officers are eligible to receive incentive bonuses. Bonuses
are recommended by management and approved by the Committee. Actual awards are a
function of the Company's after-tax worldwide profit and the individual's
performance.

In view of a 36-month salary freeze for senior officers of the Company
beginning in 1990, supplemental compensation was approved in 1992 for selected
officers as an alternative to market-based salary adjustments. Once granted,
these awards were paid in four semiannual payments, with each payment contingent
upon the employee's continued employment. The final payment was made in February
1994. Bonuses awarded to the named executives have been included in the Summary
Compensation Table.

Effective January 1, 1995, the Company has adopted a new bonus program, for
certain employees, based upon the achievement of both Company and individual
objectives. Positions within the Company have been separated into salary grades,
with bonus opportunities (expressed as a percentage of salary) gradually
increased through the grades. Within each grade there is a range from a
"minimum" to a "maximum" bonus target. The bonus amount will be subject to the
overall approval of the Compensation Committee with respect to all participants,
and to specific approval with regard to senior management. Targets will be set
each year by senior management between the "minimum" and "maximum" (100%).
Targets and bonus opportunities will be communicated to employees at the
beginning of each year.

As in the past, every supervisor will conduct an employee review. However,
as part of the review, the supervisor and the employee will determine future
objectives against which the employee's performance will be measured.
Seventy-five percent (75%) of an employee's target will be based upon individual
and departmental performance; the other 25% will be based on the worldwide
corporate performance. If all objectives are met, the employee will receive 100%
of the bonus target amount. If performance exceeds all goals, up to 125% of the
target can be paid. In addition, the program allows the Committee the discretion
to address exceptional performance and unusual circumstances.

Benefit Equalization Agreements

The total annual contributions to the Company's Retirement Savings Plan are
subject to certain limitations under the Code and ERISA for each participant.
Officers (generally senior vice presidents and above) of the Company and its
U.S. subsidiaries who are affected by such limitations may enter into agreements
pursuant to which their salaries will be reduced, and the Company will maintain
accounts on their behalf, in the amount of the difference between (i) the
aggregate amount of contributions that would have been made to the Retirement
Savings Plan in the absence of the limitations, and (ii) the aggregate amount of
contributions actually made to the plan. Amounts deferred are credited with the
same earnings yield credited to contributions made to the fixed income fund
maintained under the Retirement Savings Plan. Benefits under these unfunded
agreements are paid to a participant one year following the participant's
termination of employment with the Company, unless the participant elects to
defer receipt of payment. Amounts deferred by the named executives of the
Company pursuant to benefit equalization agreements in 1994 have been included
in the Summary Compensation Table.

COMPENSATION OF DIRECTORS

Each director of the Company who is not an executive officer of the Company
receives an annual retainer fee of $15,000, plus a fee of $1,000 for each Board
meeting attended by such director, and a fee of $500 for each committee meeting
($1,000 for the chairman of the committee) attended by such director, in
addition to reimbursement of expenses.

CERTAIN EMPLOYMENT ARRANGEMENTS

In October 1993, the Company entered into an agreement with Henry Wyndham
regarding his employment as Chairman of Sotheby's (U.K.), which began on
February 1, 1994. At that time, Mr. Wyndham received a bonus of B.P.100,000. Mr.
Wyndham's annual salary will be up to B.P.130,000 for the first three years, and
thereafter not less than B.P.130,000. In addition, for each of the first three
years, Mr. Wyndham will receive a non-pensionable salary supplement of
B.P.30,000 per year.

15
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 9, 1995
regarding the beneficial ownership of the Company's Class A and Class B Common
Stock by its directors, named executive officers and 5% shareholders. The
Company has relied upon information supplied by its officers, directors and
certain shareholders and upon information contained in filings with the
Securities and Exchange Commission. Each share of Class B Common Stock is freely
convertible into one share of Class A Common Stock. Accordingly, under the
applicable rules of the Securities and Exchange Act of 1934, holders of Class B
Common Stock are deemed to own an equal number of shares of Class A Common
Stock. For purposes of the calculation of the percentage of each class that each
named officer, director and 5% shareholder beneficially owns, the number of
shares of such class deemed to be outstanding is the sum of all outstanding
shares of such class, plus the number of shares that such beneficial owner has,
or is deemed to have, the right to acquire by the exercise of options and/or
conversion.

CLASS A AND CLASS B COMMON STOCK OWNERSHIP OF
DIRECTORS, EXECUTIVE OFFICERS AND 5% SHAREHOLDERS
<TABLE><CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
---------------------- ----------------------
DIRECTORS, EXECUTIVE NUMBER PERCENT NUMBER PERCENT
OFFICERS AND 5% SHAREHOLDERS OF SHARES OF CLASS OF SHARES OF CLASS
------------------------------------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C>
A. Alfred Taubman.................... 13,199,616(1) 26.3% 13,199,516(2) 70.2%
200 E. Long Lake Road
Bloomfield Hills, MI 48304
Max M. Fisher........................ 2,566,545(3) 6.5% 2,509,545(4) 13.6%
2700 Fisher Building
Detroit, MI 48202
Lord Camoys.......................... 3,500 *
c/o Sotheby's
34-35 New Bond Street
London W1 2AA England
Diana D. Brooks...................... 303,000(5) * 303,000(6) 1.6%
c/o Sotheby's, Inc.
1334 York Avenue
New York, New York 10021
Michael L. Ainslie................... 715,200(7) 1.9% 715,000(8) 3.8%
The Seagrams Building
Granite Capital
18th Floor
375 Park Avenue
New York, NY 10152
Viscount Blakenham................... 0 * 0 *
Pearson P.L.C.
Millbank Tower, Millbank
London SW1P 4QZ
Kevin A. Bousquette.................. 39,000(9) * 30,000(10) *
c/o Sotheby's, Inc.
1334 York Avenue
New York, NY 10021
Ambassador Walter J.P. Curley........ 0 * 0 *
885 Third Avenue
Suite 3160
New York, NY 10022
</TABLE>

16
<PAGE>
<TABLE><CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
---------------------- ----------------------
DIRECTORS, EXECUTIVE NUMBER PERCENT NUMBER PERCENT
OFFICERS AND 5% SHAREHOLDERS OF SHARES OF CLASS OF SHARES OF CLASS
------------------------------------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C>
The Rt. Hon.
The Earl of Gowrie................... 28,000(11) * 28,000(12) *
c/o Sotheby's
34-35 New Bond Street
London W1 2AA England
The Marquess of Hartington........... 0 * 0 *
Beamsley Hall
Bolton Abbey, Skipton
North Yorkshire, BD23 6HD
Simon de Pury........................ 92,867(13) * 77,867(14) *
c/o Sotheby's
13 Quai du Mont Blanc
CH-1201 Geneva, Switz
William Ruprecht..................... 49,600(15) * 49,600(16) *
c/o Sotheby's, Inc.
1334 York Avenue
New York, NY 10021
R. Julian de la M. Thompson.......... 99,500(17) * 99,500(18) *
c/o Sotheby's
34-35 New Bond Street
London W1 2AA England
Leslie H. Wexner..................... 540,216(19) 1.5% 393,316 2.1%
The Limited Inc.
P.O. Box 16000
Columbus, OH 43216
Henry Wyndham........................ 0 * 0 *
c/o Sotheby's
34-35 New Bond St.
London, W1 2AA England
Fidelity Management & Research Co.... 4,700,900 12.7%
82 Devonshire Street
Boston, MA 02109
GeoCapital Corporation............... 2,625,225(20) 7.1%
767 Fifth Avenue
New York, NY 10153
State of Wisconsin Investment 3,521,700 9.5%
Board................................
P.O. Box 7842
Madison, WI 53707
Directors and Executive Officers..... 17,091,798(21) 31.7% 16,833,451(21) 89.5%(21)
as a Group
</TABLE>

------------

* Represents less than 1%.

(1) Mr. Taubman owns 100 shares of Class A Common Stock. This figure also
includes 9,730,886 shares of Class A Common Stock that he has, or is deemed
to have, the right to acquire by converting shares of Class B Common Stock
that Mr. Taubman owns as trustee of his grantor trust and also includes
3,468,630 shares of Class A Common Stock that he has the right to acquire
by converting shares of Class B Common Stock owned by Taubman Investments
Limited Partnership, as to which he has sole voting and dispositive
control.

(2) This figure includes 9,730,886 shares of Class B Common Stock owned by Mr.
Taubman and 3,468,630 shares of Class B Common Stock owned by Taubman
Investment Limited Partnership, as to which Mr. Taubman has sole voting and
dispositive control. This figure excludes 792,830

(Footnotes continued on following page)

17
<PAGE>
(Footnotes continued from preceding page)
shares owned by Judith Taubman, his wife. Mr. Taubman disclaims beneficial
ownership of all shares of Class B Common Stock owned by Judith Taubman.
Mr. Taubman and Taubman Investments Limited Partnership have pledged all of
their shares of Class B Common Stock to certain banks. If the banks were to
foreclose on the pledges, a change in control of the Company could take
place under certain circumstances. In the opinion of Mr. Taubman, the
chances of a foreclosure on the pledges are remote.

(3) This figure includes 1,840,921 shares of Class A Common Stock that Mr.
Fisher has, or is deemed to have, the right to acquire by converting shares
of Class B Common Stock. See footnote 4 below. This figure also includes
57,000 shares of Class A Common Stock owned by a charitable foundation of
which Mr. Fisher is a director. Mr. Fisher disclaims beneficial ownership
of all shares of Class A Common Stock other than 1,830,161 shares relating
to the shares of Class B Common Stock held by him as trustee of his grantor
trust. See footnote 4.

(4) This figure includes 10,760 shares of Class B Common Stock owned by various
family trusts of which Mr. Fisher is a co-trustee and 1,830,161 shares of
Class B Common Stock that Mr. Fisher holds as trustee of his grantor trust.
This figure also includes 668,624 shares owned by Martinique Hotel, Inc., a
corporation owned by Mr. Fisher's family. This figure also excludes 56,519
shares of Class B Common Stock owned by various family trusts of which Mr.
Fisher's wife is a co-trustee. Mr. Fisher disclaims beneficial ownership of
all shares other than those held by him as trustee of his grantor trust.

(5) This figure includes 100,000 shares of Class A Common Stock that Ms. Brooks
has the right to acquire by converting shares of Class B Common Stock and
203,000 shares of Class A Common Stock that she has the right to acquire by
exercising options for shares of Class B Common Stock and converting those
shares.

(6) Ms. Brooks owns 100,000 shares of Class B Common Stock. This figure also
includes 203,000 shares of Class B Common Stock that Ms. Brooks has the
right to acquire by exercising options.

(7) This figure includes 200 shares of Class A Common Stock owned by a trust
for Mr. Ainslie's son, of which Mr. Ainslie is a trustee, Mr. Ainslie
disclaims beneficial ownership of such shares. This figure also includes
700,000 shares of Class A Common Stock that Mr. Ainslie has the right to
acquire by converting shares of Class B Common Stock and 15,000 shares of
Class A Common Stock that he has the right to acquire by exercising options
for shares of Class B Common Stock and converting those shares.

(8) Mr. Ainslie owns 700,000 shares of Class B Common Stock. This figure also
includes 15,000 shares of Class B Common Stock that Mr. Ainslie has the
right to acquire by exercising options.

(9) Mr. Bousquette owns 9,000 shares of Class A Common Stock. This figure also
includes 30,000 shares of Class A Common Stock that Mr. Bousquette has the
right to acquire by exercising options of Class B Common Stock and
converting those shares.

(10) This figure includes 30,000 shares of Class B Common Stock that Mr.
Bousquette has the right to acquire by exercising options.

(11) This figure represents 28,000 shares of Class A Common Stock that Lord
Gowrie has the right to acquire by exercising options for shares of Class B
Common Stock and converting those shares.

(12) This figure represents 28,000 shares of Class B Common Stock that Lord
Gowrie has the right to acquire by exercising options.

(13) Mr. de Pury owns 15,000 shares of Class A Common Stock. This figure also
includes 77,867 shares of Class A Common Stock that Mr. de Pury has the
right to acquire by exercising options for shares of Class B Common Stock
and converting those shares.

(14) This figure represents 77,867 shares of Class B Common Stock that Mr. de
Pury has the right to acquire by exercising options.

(15) This figure represents 49,600 shares of Class A Common Stock Mr. Ruprecht
has the right to acquire by exercising options for shares of Class B Common
Stock and converting those shares.

(Footnotes continued on following page)

18
<PAGE>
(Footnotes continued from preceding page)
(16) This figure includes 49,600 shares of Class B Common Stock that Mr.
Ruprecht has the right to acquire by exercising options.

(17) Mr. Thompson owns 75,000 shares of Class B Common Stock. This figure
includes 75,000 shares of Class A Common Stock that Mr. Thompson has the
right to acquire by converting shares of Class B Common Stock and also
includes 24,500 shares of Class A Common Stock that he has the right to
acquire by exercising options for Class B Common Stock and converting those
shares.

(18) This figure includes 24,500 shares of Class B Common Stock that Mr.
Thompson has the right to acquire by exercising options.

(19) Mr. Wexner owns 146,900 shares of Class A Common Stock. This figure
includes 393,316 shares of Class A Common Stock that he has the right to
acquire by converting shares of Class B Common Stock.

(20) This figure includes shares held in third parties' accounts over which
GeoCapital Corporation has investment discretion.

(21) See above notes.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Loan Programs

The Company has two loan programs that are available to certain U.S.
employees at the President's discretion. The first is a loan guarantee program,
whereby the employee borrows from a bank on a demand basis and pays an annual
interest rate equal to the prime rate. All of the repayment obligations of the
employee are guaranteed by the Company. Under the second program, the Company
lends money to certain employees to purchase a residence under term notes
bearing interest at an annual interest rate equal to the prime rate minus 1 to
2%. This program is available to employees at the Company's discretion. Both
programs are terminable if an employee leaves the Company. At March 9, 1995,
Mitchell Zuckerman, an executive officer, had borrowings outstanding guaranteed
under the first program of $14,167 and borrowings outstanding under the second
program of $179,999. At March 9, 1995, William Ruprecht, another executive
officer, had borrowings outstanding under the second program of $833,472. In
addition, in the United Kingdom, the Company has guaranteed a portion of a
mortgage loan to Henry Wyndham, an executive officer. The amount of the
Company's guarantee is $250,400.

In October 1993, Sotheby's (U.K.), a subsidiary of the Company, entered into
an agreement with Henry Wyndham Fine Art Ltd. ("Fine Art"), an art dealing
business in which Henry Wyndham, who has since become Chairman of Sotheby's
(U.K.), has a substantial equity interest. Under the agreement, Sotheby's (U.K.)
agreed to purchase from Fine Art various paintings outright, as well as Fine
Art's partial interest in another painting. Under the terms of the agreement,
Sotheby's (U.K.) paid Fine Art B.P.150,000($225,450) as an advance for a portion
of its interest in such painting in February 1994. Beginning on February 1,
1995, and until such time when Fine Art exercises its right to sell its
remaining interest in such painting to Sotheby's (U.K.) for
B.P.180,000($281,170), the advance bears interest. The original cost to Fine Art
of its ownership-interest in such painting was approximately B.P.300,000
($450,900). However, the fair market value of such interest is deemed by the
Company to be in excess of the purchase price. The various purchase prices were
determined by the Company with reference to recent sale prices of comparable
property.

In addition to the above-described transactions, the Company has entered
into agreements with its largest shareholder and certain of his affiliates
regarding the proposed development of the York Property. See "Properties" and
Notes H and J to the Consolidated Financial Statements in the Annual Report. See
also Notes D and N for additional related party disclosures.

19
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.

(a) (1) and (2)--The response to this portion of Item 14 is submitted as a
separate section of this report.

(3) Listing of Exhibits--The information required by this item is
included in the response to Item 14(c).

(b) Reports on Form 8-K filed in the fourth quarter of 1994--None

(d) Financial Statement Schedules--The response to this portion of Item 14
is submitted as a separate section of this report.

20
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 14(A) (1) AND (2) AND (D)
YEAR ENDED DECEMBER 31, 1994
SOTHEBY'S HOLDINGS, INC.
BLOOMFIELD HILLS, MICHIGAN

21
<PAGE>
FORM 10-K--ITEM 14(A) (1) AND (2)
SOTHEBY'S HOLDINGS, INC., AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statements of Sotheby's Holdings, Inc. and
subsidiaries, included in the annual report of the registrant to its
shareholders for the year ended December 31, 1994, are incorporated by reference
in Item 8:

Consolidated Balance Sheets--December 31, 1994 and 1993

Consolidated Statements of Income--Years ended December 31, 1994, 1993 and 1992

Consolidated Statement of Changes in Shareholders' Equity--Years ended December
31, 1994, 1993 and 1992

Consolidated Statements of Cash Flows--Years ended December 31, 1994, 1993 and
1992

Notes to Consolidated Financial Statements--December 31, 1994

The following consolidated financial statement schedules of Sotheby's Holdings,
Inc. and subsidiaries and the Independent Auditors' Report are included in Item
14(d):

Independent Auditors' Report on Financial Statement Schedule

Schedule II--Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable, and therefore have been omitted.

22
<PAGE>
INDEPENDENT AUDITORS' REPORT

Shareholders and Board of Directors
SOTHEBY'S HOLDINGS, INC.:

We have audited the consolidated financial statements of Sotheby's Holdings,
Inc. and subsidiaries as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994 and have issued our report
thereon dated February 28, 1995; such consolidated financial statements and
report are included in your 1994 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedule of Sotheby's Holdings, Inc. and subsidiaries,
listed in Item 14. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

DELOITTE & TOUCHE LLP
New York, New York
February 28, 1995

23
<PAGE>
SCHEDULE II

SOTHEBY'S HOLDINGS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE><CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------------------------------------------------- ---------- ---------- ---------- --------
ADDITIONS BALANCE
BALANCE AT CHARGED TO AT END
BEGINNING COST AND OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------------------------------------------------- ---------- ---------- ---------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Valuation reserve deducted in the balance sheet
from the asset to which it applies:
Accounts and notes receivable:
1994 Allowance for doubtful accounts........... $ 10,596 $4,196 $ 4,627 $10,165
---------- ---------- ---------- --------
---------- ---------- ---------- --------
1993 Allowance for doubtful accounts........... $ 12,930 $5,499 $ 7,833 $10,596
---------- ---------- ---------- --------
---------- ---------- ---------- --------
1992 Allowance for doubtful accounts........... $ 13,498 $3,836 $ 4,404 $12,930
---------- ---------- ---------- --------
---------- ---------- ---------- --------
Inventory:
1994 Realizable value allowance................ $ 14,334 $1,921 $ 1,260 $14,995
---------- ---------- ---------- --------
---------- ---------- ---------- --------
1993 Realizable value allowance................ $ 18,637 $4,055 $ 8,358 $14,334
---------- ---------- ---------- --------
---------- ---------- ---------- --------
1992 Realizable value allowance................ $ 26,982 $2,311 $ 10,656 $18,637
---------- ---------- ---------- --------
---------- ---------- ---------- --------
</TABLE>

24
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

SOTHEBY'S HOLDINGS, INC.
BY: /S/ DIANA D. BROOKS
--------------------------------
DIANA D. BROOKS
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

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 DATES INDICATED.

<TABLE><CAPTION>
SIGNATURE TITLE DATE
------------------------------------------- ------------------------------ ----------------
<S> <C> <C>
Chairman of the Board
* and Director March 28, 1995
----------------------------------------
A. ALFRED TAUBMAN

* Vice Chairman and Director March 28, 1995
----------------------------------------
MAX M. FISHER

* Deputy Chairman and Director March 28, 1995
----------------------------------------
LORD CAMOYS

President, Chief Executive
/s/DIANA D. BROOKS Officer and Director March 28, 1995
----------------------------------------
DIANA D. BROOKS

Senior Vice President and
/s/KEVIN A. BOUSQUETTE Chief Financial Officer March 28, 1995
----------------------------------------
KEVIN A. BOUSQUETTE

* Director March 28, 1995
----------------------------------------
MICHAEL L. AINSLIE

* Director March 28, 1995
----------------------------------------
VISCOUNT BLAKENHAM

* Director March 28, 1995
----------------------------------------
WALTER J.P. CURLEY

* Director March 28, 1995
----------------------------------------
THE RT. HON. THE EARL OF GOWRIE

* Director March 28, 1995
----------------------------------------
THE MARQUESS OF HARTINGTON

* Director March 28, 1995
----------------------------------------
R. JULIAN DE LA M. THOMPSON

* Director March 28, 1995
----------------------------------------
LESLIE H. WEXNER

Vice President, Controller and
/s/ THOMAS F. GANNALO Chief Accounting Officer March 28, 1995
----------------------------------------
THOMAS F. GANNALO

*By: /s/ KEVIN A. BOUSQUETTE March 28, 1995
----------------------------------------
KEVIN A. BOUSQUETTE
AS ATTORNEY-IN-FACT
</TABLE>

25
<PAGE>
EXHIBIT 14(C) EXHIBITS

<TABLE><CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------ ------------------------------------------------------------------------------ ----
<C> <S> <C>
3(a) --Amended and Restated Articles of Incorporation of Sotheby's Holdings, Inc.,
as amended, incorporated herein by reference to Exhibit 4(b) to Registration
Statement No. 33-26008.
3(b) --Restated By-Laws of Sotheby's Holdings, Inc., as amended, incorporated
herein by reference to Exhibit 3(b) to the Company's Annual Report on Form
10-K for the year ended December 31, 1988 (the "1988 Form 10-K").
4 --See Exhibits 3(a) and 3(b).
10(a) --Issuing and Paying Agency Agreement, dated February 15, 1989, between
Sotheby's Inc. and the Chase Manhattan Bank, N.A. relating to the issuance
of short-term notes ("U.S. Notes") in the U.S. Commercial Paper market,
incorporated herein by reference to Exhibit 10(g) to the 1988 Form 10-K.
10(b) --U.S. Commercial Paper Dealer Agreement, dated February 15, 1989, between
Sotheby's, Inc. and Chase Securities, Inc. relating to the issuance of the
U.S. Notes, incorporated herein by reference to Exhibit 10(h) to the 1988
Form 10-K.
10(c) --U.S. Commercial Paper Dealer Agreement, dated February 15, 1989, between
Sotheby's, Inc. and Merrill Lynch Money Markets, Inc. relating to the
issuance of the U.S. Notes, incorporated herein by reference to the Exhibit
10(i) of the 1988 Form 10-K.
10(d) --Lease, dated as of July 25, 1979, among The Benenson Capital Company,
Lawrence A. Benenson, Raymond E. Benenson (collectively, "Benenson") to
Sotheby Parke Bernet Inc., and amendments thereto, all relating to 1334 York
Avenue, New York, New York (the "York Avenue Property"), incorporated herein
by reference to Exhibit 10(g) to Registration Statement No. 33-17667.
10(e) --Option Agreement with Form of Exchange Agreement, dated July 25, 1979, among
Benenson and 089 Nosidam Corp. (as nominee of Sotheby Parke Bernet Inc.)
assignments thereof and amendments thereto, all relating to the York Avenue
Property, incorporated herein by reference to Exhibit 10(h) to Registration
Statement No. 33-17667.
10(f) --Exchange Agreement, dated October 27, 1986, among Benenson and York Avenue
Development, Inc., and Letter, dated October 27, 1986, from Benenson to
Sotheby's, Inc. and York Avenue Development, Inc., concerning zoning matters
and security relating to the York Avenue Property, incorporated herein by
reference to Exhibit 10(i) to Registration Statement No. 33-17667.
10(g) --Guarantee, made November 6, 1986, by A. Alfred Taubman in favor of Benenson
relating to the York Avenue Property (the "Taubman Guarantee"), incorporated
herein by reference to Exhibit 10(j) to Registration Statement No. 33-17667.
10(h) --Letter from Sotheby's, Inc. and York Avenue Development, Inc., dated October
27, 1986, agreeing to indemnify A. Alfred Taubman from all liabilities,
damages, losses and judgments arising under the Taubman Guarantee,
incorporated herein by reference to Exhibit 10(k) to Registration Statement
No. 33-17667.
10(i) --Project Services Agreement (the "Project Agreement"), dated November 8,
1985, between Sotheby's, Inc. and The Taubman Company, Inc. relating to the
proposed development of the York Avenue Property, incorporated herein by
reference to Exhibit 10(1) to Registration Statement No. 33-17667.
10(j) --Financing and Guaranty Agreement (with exhibits), dated as of October 1,
1987, among Sotheby's Inc., York Avenue Development, Inc., and Taubman York
Avenue Associates, Inc., relating to the proposed development of the York
Avenue Property, incorporated herein by reference to Exhibit 10(m) to
Registration Statement No. 33-17667.
10(k) --Memorandum of Option Agreement, dated January 31, 1981, among Benenson and
089 Nosidam Corp., relating to the York Avenue Property, incorporated herein
by reference to Exhibit 10(hh) to Registration Statement No. 33-17667.
</TABLE>

26
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NO.
------ ------------------------------------------------------------------------------ ----
<C> <S> <C>
10(l) --Letter Agreement, dated October 27, 1986, among Benenson and York Avenue
Development, Inc. relating to the York Avenue Property, incorporated herein
by reference to Exhibit 10(ii) to Registration Statement No. 33-17667.
10(m) --Assignment, Assumption Agreement and Release, dated as of October 1, 1987,
among Sotheby's Inc., York Avenue Development, Inc. and the Taubman Company,
Inc. relating to the assignment of the Project Agreement, incorporated
herein by reference to Exhibit 10(jj) to Registration Statement No.
33-17667.
10(n)* --Sotheby's Inc. 1988 Benefit Equalization Plan, incorporated herein by
reference to Exhibit 10(t) to Registration Statement No. 33-17667.
10(o)* --Sotheby's Holdings, Inc. 1987 Stock Option Plan as amended and restated
effective June 1, 1994.
10(p) --Agreement of Partnership of Acquavella Modern Art, dated May 29, 1990,
between Sotheby's Nevada, Inc. and Acquavella Contemporary Art, Inc.,
incorporated herein by reference to Exhibit 10(b) to the Form 8-K.
10(q) --Amendment, dated as of April 19, 1991, between The Benenson Capital Company,
Lawrence A. Benenson and Raymond E. Benenson and York Avenue Development,
Inc. to Amendment to Option Agreement and to Related Agreements,
incorporated herein by reference to Exhibit 10(kk) to the 1991 Form 10K.
10(r) --Restated Mortgage Note, dated November 5, 1991, from Mitchell Zuckerman and
Joanne Zuckerman in favor of Sotheby's, Inc., incorporated herein by
reference to Exhibit 10(ll) to the 1991 Form 10K.
10(s) --Adjustable Rate Note, dated May 24, 1994, from Sotheby's Inc. to William
Ruprecht and Elizabeth Ruprecht.
10(t) --Credit Agreement dated as of August 3, 1994, among Sotheby's Holdings, Inc.,
Sotheby's Inc., Oatshare Limited, Sotheby's, and Chemical Bank, incorporated
herein by reference to Exhibit 4 to the Second Quarter Form 10-Q for 1994.
10(u)* --Letter Agreement, dated October 25, 1993, between Sotheby's (U.K.) and Henry
Wyndham setting forth certain terms and agreements of his employment.
10(v)* --Letter Agreement, dated October 13, 1993, between Sotheby's (U.K.) and Henry
Wyndham Fine Art Ltd., an art dealing business, setting forth certain terms
and agreements of the purchase of inventory.
10(w) --Guarantee Agreement, dated June 2, 1994, from Sotheby's Holdings, Inc. to
Henry Wyndham.
13 --Annual Report to Shareholders for the year ended December 31, 1994
21 --Subsidiaries of the Registrant
23 --Consent of Deloitte & Touche
24 --Powers of Attorney
27 --Financial Data Schedule
</TABLE>

------------

* A compensatory agreement or plan required to be filed pursuant to Item 14(c)
of Form 10-K.

Exhibit 10(o)

AMENDMENT TO UK SUB-PLAN OF

SOTHEBY'S HOLDINGS, INC.

1987 STOCK OPTION PLAN

THIS AMENDMENT (this "Amendment"), dated the 1st day of June,

1994, is adopted by Sotheby's Holdings, Inc. (the "Corporation").

RECITALS:

A. The Corporation adopted the Sotheby's Holdings, Inc. 1987

Stock Option Plan (the "Plan") on July 31, 1987, which Plan was modified by

the UK Sub-Plan of Sotheby's Holdings, Inc. 1987 Stock Option Plan (the "UK

Sub-Plan") for employees who are resident in the United Kingdom and which UK

Sub-Plan was subsequently amended on June 15, 1989, August 8, 1991,

August 13, 1992 and June 17, 1993.

B. Pursuant to Section 11 of the Plan, the Corporation desires

to and does hereby amend such Plan, as hereinafter set forth, for the purpose

of clarifying Clause 3 of the UK Sub-Plan.

NOW, THEREFORE, the Sotheby's Holdings, Inc. 1987 Stock Option

Plan is hereby amended as follows:

1. Clause 3 of the UK Sub-Plan is hereby amended by

substituting the following:

"3. Any Option granted under the UK Sub-Plan to a UK

resident shall be limited and take effect so that immediately following

such grant the aggregate Exercise Prices of shares subject to such person's

Outstanding Options (converted to their Sterling Equivalents at the date of

such grant) shall not exceed the greater of 100,000 Pounds or four times

the amount of the Relevant Emoluments of such person for the current or

preceding Year of Assessment (whichever of those years gives the greater

amount) or, if there were no Relevant Emoluments for the preceding Year of

Assessment, four times the amount of the Relevant Emoluments for the period

of 12

<PAGE>

months beginning with the first day during the current Year of

Assessment in respect of which there are Relevant Emoluments.

2. This Amendment shall be submitted to the U.K. Inland

Revenue for approval and shall be effective as of June 1, 1994 (the date on

which the Amendment is approved by the

U.K. Inland Revenue).

IN WITNESS WHEREOF, this Amendment is hereby executed as of the

day and year first above written.

SOTHEBY'S HOLDINGS, INC.

By:

Its: President

<PAGE>

SOTHEBY'S HOLDINGS, INC. 1987 STOCK OPTION PLAN

(As Amended and Restated Effective June 1, 1994)

A. Background.
----------

The Sotheby's Holdings, Inc. 1987 Stock Option Plan

(the "Plan") was adopted on July 31, 1987. The Plan was subsequently

amended by the creation of a UK Sub-Plan, applicable to employees of

Sotheby's Holdings, Inc. (the "Corporation") and its Subsidiaries and

branches who are resident in the United Kingdom (the "UK Sub-Plan"). The

Plan was further amended on June 15, 1989; August 8, 1991; August 13,

1992; and June 17, 1993.

B. Amendment and Restatement.
-------------------------

The Plan, as so amended from time to time, is hereby

amended and restated, effective June 1, 1994 (the "Restatement Effective

Date") for the sole purpose of incorporating all amendments made to the

Plan subsequent to the original adoption of the Plan and prior to the

Restatement Effective Date.

1. PURPOSE.
-------

The Plan is intended to provide incentives to employees of the

Corporation and its Subsidiaries, to encourage proprietary interests in the

Corporation, to encourage such employees to remain in the employ of the

Corporation and its Subsidiaries, and to attract new employees with

outstanding qualifications. Options granted under the Plan are not intended

to be "incentive stock options", as defined in Code Section 422A, or to

provide any United States income tax benefits to any

Optionee.

2. DEFINITIONS.
-----------

(a) "Board" shall mean the Board of Directors of the
-----

Corporation.

(b) "Code" shall mean the United States' Internal Revenue Code
----

of 1986, as amended from time to time.

<PAGE>

of the Board of Directors.

(d) "Class A Common Stock" shall mean the class of common stock
--------------------

of the Corporation with one (1) vote per share.

(e) "Class B Common Stock" shall mean the class of common stock
--------------------

of the Corporation with ten (1 O) votes per share.

(f) "Corporation" shall mean Sotheby's Holdings, Inc., a
-----------

Michigan corporation.

(g) "Disability" shall mean a physical or mental condition
----------

resulting from any medically determinable physical or mental impairment

which renders an Employee incapable of engaging in any substantial gainful

employment and which can be expected to result in death or which has lasted

or can be expected to last for a continuous period of not less than three

hundred sixty-five (365) days. Notwithstanding the foregoing an Employee

shall not be deemed to be Disabled as a

result of any condition which

(i) was contracted, suffered, or incurred while the

Employee was engaged in, or resulted from the Employee having engaged

in, a felonious enterprise,

(ii) resulted from addiction to narcotics or an intentionally

self-inflicted injury, or

(iii) resulted from service in the Armed Forces of the United

States for which the Employee received a disability benefit or pension

from the United States, or from service in the armed forces of any

other country irrespective of any disability benefit or pension.

-2-

<PAGE>

The Disability of an Employee shall be determined solely by the Committee,

in accordance with uniform principles consistently applied, upon the basis

of such evidence as the Committee deems necessary and desirable. The

Committee shall have the right to require an Employee to submit to an

examination by a physician or physicians and to submit to such

reexaminations as the Committee shall require to make a determination

concerning the Employee's physical or mental condition; provided, however,

that an Employee may not be required to undergo a medical examination more

often than once each one hundred eighty (180) days nor at any time after

the normal date of the Employee's Retirement, and that the fees and

expenses of any such medical examination(s) shall be considered expenses of

administering the Plan. If any Employee engages in any occupation or

employment (except for rehabilitation as determined by the Committee) for

remuneration or profit, which activity would be inconsistent with the

finding of Disability, or if the Committee determines on the bases of a

medical examination that an Employee no longer has a Disability, or if an

Employee refuses to submit to any medical examination properly requested by

the Committee hereunder, then in any such event the Employee shall be

deemed to have recovered from such Disability.

(h) "Effective Date" and "Restatement Effective Date" shall
-------------- --------------------------

mean the date on which the Plan originally became effective and the date on

which this amendment and restatement of the Plan becomes effective,

respectively, pursuant to Section 3 hereof.

(i) "Employee" shall mean an individual who is and continues to
--------

be employed (within the meaning of Code Section 3401 and the regulations

thereunder) by the Corporation or a Subsidiary (while a corporation

continues to be a Subsidiary),

- 3 -

<PAGE>

including officers (whether or not they may also be directors) of the

Corporation or a Subsidiary.

(j) "Exercise Price" shall mean the price per share of Option
--------------

Stock at which an Option may be exercised, as determined by the Committee.

(k) "Fair Market Value" shall mean the value of each share of
-----------------

Option Stock made the subject of any Option granted under the Plan,

determined for a particular date, as follows:

(i) if the Class B Common Stock is listed or admitted for

trading on any United States national securities exchange, the value

of each share of the Class B Common Stock shall be the closing price

per share on such exchange on the day before the relevant date

hereunder as reported in any newspaper of general circulation; or

(ii) if the Class B Common Stock is not traded on any United

States national securities exchange, but is quoted on the National

Association of Securities Dealers, Inc. Automated Quotation System

(the "NASDAQ System") or any similar system of automated dissemination

of quotations of securities prices in common use, the value of each

share of the Class B Common Stock shall be the price per share equal

to the mean between the closing high bid and the low asked quotations

on such system on the relevant date hereunder; or

(iii) if neither clause (i) nor clause (ii) above is

applicable with respect to the Class B Common Stock, but either clause

(i) or clause (ii) is applicable with respect to the Class A Common

Stock, the value of each share of the Class B Common Stock shall be

the closing price as described in clause (i) above or the mean between

the closing high bid and the low asked

-4-

<PAGE>

quotations as described in clause (ii) above, respectively, of the

Class A Common Stock; or

(iv) if neither clause (i) nor clause (ii) nor clause (iii)

above is applicable, the value of each share of the Class B Common

Stock shall be the fair market value as determined solely by the

Committee, in good faith in accordance with uniform principles

consistently applied, on the last day of the relevant Fiscal Year

immediately preceding the relevant date hereunder. Such uniform

principles shall be the same principles determined and applied by the

Shares Valuation Division of the UK Inland Revenue in determining the

Initial Fair Market Value of the Class B Common Stock.

Such determination shall be conclusive and binding on all persons.

(I) "Fiscal Year" shall mean the fiscal year of the
-----------

Corporation.

(m) "Initial Fair Market Value" shall mean the fair market value
-------------------------

of the Class B Common Stock, valid as of the Effective Date of the Plan,

as determined in accordance with the provisions of Part VIII of the UK

Capital Gains Tax Act, 1979, and agreed with the Shares Valuation Division

of the UK Inland Revenue.

(n) "Initial Grant" shall mean those grants of the Options
-------------

designated as such by the Committee.

(o) "Option" shall mean any stock option granted pursuant to
------

the Plan.

(p) "Optionee" shall mean an Employee or a former Employee who
--------

has received an Option.

(q) "Option Stock" shall mean those shares of Class B Common
------------

Stock made the subject of any Option granted pursuant to the Plan.

-5-

<PAGE>

(r) "Plan" shall mean this Sotheby's Holdings, Inc. 1987 Stock
----

Option Plan, as amended and restated, as it may be amended from time to

time.

(s) "Retirement" shall mean the voluntary termination of
----------

employment by an Employee upon the attainment of the age of sixty-five (65)

years or upon such earlier date as required by local law or as otherwise

determined by the Committee.

(t) "Sole and Absolute Discretion" shall mean the Committee's
----------------------------

unfettered authority to allow the exercise of any Option prior to the time

the Optionee would otherwise have been able to exercise the Option under

the Plan, which discretion may or may not be exercised on one or more

occasions with no obligation, if such discretion is exercised, to exercise

such discretion or any other occasion, and which discretion may be

exercised differently for Employees in similar situations.

(u) "Subsidiary" shall mean any corporation at least fifty
----------

percent (50%) of the total combined voting power of which is owned by the

Corporation or another Subsidiary.

3. EFFECTIVE DATE AND RESTATEMENT EFFECTIVE DATE.
----------------------------------------------

The Effective Date of the original Plan was July 27, 1987.

Restatement Effective Date of the Plan is June 1, 1994.

4. ADMINISTRATION.

The Plan shall be administered by the Committee. The Committee

may establish an Option Committee (whose members may, but are not required

to, be members of the Committee), to which it may delegate its rights and

obligations to administer the Plan and which will be subject to the same

requirements imposed on the Committee under the Plan.

The Committee shall from time to time, at its discretion, select

the Employees who are to be granted Options and determine the number of shares

-6-

<PAGE>

Option Stock to be optioned to each Optionee. In the event that a Committee

member is also an Employee, said Committee member shall abstain with

respect to any determination relating to Options held by or to be granted

to him or her as an Employee. The interpretation and construction by the

Committee of any provisions of the Plan or of any Option granted hereunder

shall be final. No member of the Committee shall be liable for any action

or determination made in good faith with respect to the Plan or any Option

granted hereunder.

5. ELIGIBILITY.
------------

The Optionees shall be such persons as the Committee may select

from among the Employees (who may include officers, whether or not they are

directors) of the Corporation or a Subsidiary, provided that, in the case

of the Initial Grant only, they no longer maintain an account under, or

otherwise participate in, the Sotheby's Deferred Bonus Plan.

6. OPTION STOCK.
------------

The Option Stock to be made the subject of Options granted under

the Plan shall be shares of the Corporation's authorized but unissued or

reacquired Class B Common Stock. The aggregate number of shares of Option

Stock which may be issued upon the exercise of Options under the Plan shall

not exceed sixteen million five hundred seven thousand seventy-six

(16,507,076)shares of Class B Common Stock. The number of shares of Option

Stock to be made the subject of Options outstanding at any time shall not

exceed the relevant number of shares of Class B Common Stock remaining

available for issuance under the Plan. In the event that any outstanding

Option for any reason expires or is terminated, the shares of Option Stock

allocable to the unexercised portion of such Option may again be made

subject to an Option under the Plan. The limitations established by this

Section 6 shall be subject to adjustment

-7-

<PAGE>

in the manner provided in Section 9 hereof upon the occurrence of an event

specified therein.

7. TERMS AND CONDITIONS OF OPTlONS.
-------------------------------

(a) Stock Option Agreements.
-----------------------

Options shall be evidenced by written stock option

agreements in such form as the Committee shall from time to time determine.

Such agreements shall comply with and be subject to the terms and

conditions set forth in this Section 7 and

elsewhere in the Plan.

(b) Vesting.
-------

(i) Options Granted Before October 19, 1992.
---------------------------------------

Except in the case of the death, Disability, or

Retirement of an Optionee, an Option shall vest and become exercisable

pursuant to subparagraph (c)(i) below only after the date on which the

Optionee has completed three (3) years of employment with the Corporation

or a Subsidiary after the date of the grant of the Option (or with respect

the Initial Grant, after the date on which the Optionee has

completed three (3) years of employment with the Corporation or Subsidiary

after the date of the first (1st) Initial Grant to any Optionee under the

Plan).

(ii) Options Granted On or After October 19 1992.
-------------------------------------------

Except in the case of death, Disability, or Retirement of an

Optionee, an Option granted after October 19, 1992, shall vest

and become exercisable pursuant to subparagraph (c)(ii) below

only after the date on which the Optionee has completed one (1)

year of employment with the Corporation or a Subsidiary after the

date of the Grant of the Option.

-8-

<PAGE>

Notwithstanding paragraphs (i) and (ii) above, the

Committee, in its Sole and Absolute Discretion, may allow the

exercise, in whole or in part, of any Option held by an Optionee

at any time, as determined by the Committee in its Sole and

Absolute Discretion, more than six (6) months after the date of

grant. Neither the Corporation nor any Subsidiary shall have any

obligation to retain the Optionee in its employ for any period,

and nothing in this Plan shall affect the right of the

Corporation or a Subsidiary to terminate the Optionee's

employment at any time with or without cause, it being

acknowledged, unless expressly provided otherwise in writing,

that the employment of the Optionee is "at will".

(i) Options Granted Before October 19, 1992.
---------------------------------------

Except in the case of death, Disability or Retirement of an

Optionee, each Option granted under this Plan before October 19, 1992,

shall become exercisable (i) on the third (3rd) anniversary date of the

date of grant of such Option, to the extent of one-third (1/3) of the

number of shares made subject to such Option; (ii) on the fourth (4th)

anniversary date of the date of grant of such Option, to the extent of an

additional one-third (1/3) of the shares made subject to such Option; and

(iii) on the fifth (5th) anniversary of the date of grant, to the extent of

all of the shares made subject to such Option.

(ii) Options Granted On or After October 19, 1992.
--------------------------------------------

Except in the case of death, Disability, or Retirement of an

Optionee, each Option granted under this Plan after October 19,

1992,

-9-

<PAGE>

shall become exercisable (i) on the first (1st) anniversary date

of the date of grant of such Option to the extent of twenty

percent (20%) of the number of shares made subject to such

Option, and (ii) on the second (2nd) anniversary date and each

subsequent anniversary date of the date of grant of such Option

to the extent of an additional twenty percent (20%) of the number

of shares made subject to such Option until such Option is 100%

vested and exercisable.

Notwithstanding paragraphs (i) and (ii) above, the

Committee, in its Sole and Absolute Discretion, may allow the

exercise, at any time, as determined by the Committee in its Sole

and Absolute Discretion, more than six (6) months after the date

of grant, of any Option, in whole or in part, held by an Optionee

that has not previously become exercisable. In addition, in

each of the fifth (5th) through the tenth (10th) years after the

date of the grant of the Option (or with respect to the Initial

Grant, in each of the fifth (5th) through tenth (10th) years

after the date of the first (1st) Initial Grant to any Optionee

under the Plan), the Optionee shall be entitled to exercise the

Option with respect to any shares of Option Stock made subject to

the Option which have previously become exercisable but which

have not yet been exercised. Notwithstanding any other provision

of the Plan, no Option shall be exercisable after the expiration

of ten (10) years after the date on which it was granted. (d)

Number of Shares.
----------------

Each Option shall state the number of the shares of Option

Stock to which it pertains and shall provide for the adjustment thereof in

accordance with the provisions of Section 9 hereof.

- 10-

<PAGE>

(e) Exercise Price.
--------------

Each Option shall state the Exercise Price for the Option

Stock made the subject of the Option, which shall be not less than the Fair

Market Value on the date of the grant of the Option; provided, however,

with respect to the Initial Grant of the Options, the Exercise Price shall

be equal to the Initial Fair Market Value.

(f) Payment.
-------

The Exercise Price times the number of shares of the

Option Stock being exercised under the Option shall be payable in full in

cash in United States dollars upon the exercise (in whole or in part) of

the Option. The Corporation may require the Optionee to deliver payment of

all withholding taxes (in addition to the Exercise Price times the total

number of such shares) in cash in United States dollars with respect to the

difference between the Exercise Price and the Fair Market Value at the time

of exercise, times the total number of shares of the Option Stock acquired

upon exercise, or in an amount as may be otherwise determined and required

by the U.S. Internal Revenue Service for withholding purposes. The

Corporation may also withhold amounts otherwise due to the Optionee if and

to the extent that such withholding is required to satisfy completely such

withholding tax requirements.

(g) Nontransferability of Options.
-----------------------------

During the lifetime of the Optionee, the Option shall

be exercisable only by the Optionee or by the Optionee's guardian or other

legal representative and shall not be assignable or transferable. In the

event of the Optionee's death, the Option shall be transferable from the

Optionee only by will or by the laws of descent and distribution.

- 11 -

<PAGE>

(h) Termination of Employment (Except by death, Disability, or
----------------------------------------------------------
Retirement) Before Accruing a Vested Right to A Stock
-----------------------------------------------------
Options.
-------

Except in the case of the death, Disability, or Retirement of an

Optionee, if the Optionee ceases to be an Employee for any reason within

three (3) years after the date of the grant (for Options granted prior to

October 19, 1992) or within one (1) year after the date of the grant (for

Options granted on or after October 19, 1992) to the Optionee of an Option

under the Plan (or with respect to the Initial Grant, if the Optionee

ceases to be an Employee for any reason within three (3) years after the

date of the first (1st) Initial Grant to any Optionee under the Plan), the

Optionee's right to exercise the Option or any part thereof shall be

forfeited immediately and permanently. Notwithstanding the foregoing, the

Committee may, in its Sole and Absolute Discretion, provide that any

Optionee who has held an Option for more than six (6) months after the date

of grant shall not forfeit all or a portion of the Option (at the

Committee's Sole and Absolute Discretion) but may exercise such Option or

portion thereof at any time within ninety (90) days after his or her

termination of employment.

(i) Termination of Employment Except by Death Disability or
-------------------------------------------------------
Retirement After Accruing a Vested Right to A Stock Option.
----------------------------------------------------------

If an Optionee ceases to be an Employee for any reason

whatsoever, other than his or her death, Disability, or Retirement, more

than three (3) years (one (1 ) year for Options granted on or after October

19, 1992) after the date of the grant to him or her of such Option under

the Plan (or with respect to the Initial Grant, if the Optionee ceases to

be an Employee for any reason whatsoever, other than his or her death,

Disability, or Retirement, more than three (3) years after the date of the

first (1st) Initial Grant to any Optionee under the Plan), the Optionee

shall have the right, subject to the restrictions of subparagraphs (c),

(g), and (o) of this Section 7, to exercise the Option to acquire shares of

Class B Common Stock at any time within

-12-

<PAGE>

ninety (90) days after his or her termination of employment, but only to

the extent that, at the date of such termination of employment, the

Optionee's right to exercise such Option had accrued pursuant to the terms

of the applicable option agreement and had not previously been exercised.

Notwithstanding the foregoing, the Committee may, in its Sole and Absolute

Discretion, allow the exercise, in whole or in part, of any Option held by

an Optionee for more than six (6) months after the date of grant, at any

time within ninety (90) days after his or her termination of employment.

Notwithstanding anything in this subparagraph (i) to the

contrary, the Option shall cease to be exercisable and shall be forfeited

immediately and Permanently on the date of the Optionee's termination of

employment if such termination is for cause. For purposes of the Plan,

"cause" shall mean gross misconduct or unacceptable behavior as determined

by the Committee. Likewise, for the purposes of the Plan, the employment

relationship shall be treated as continuing intact while the Optionee is on

military leave, sick leave, or other authorized temporary leaves of absence

(to be determined in the sole discretion of the Committee).

(j) Death of Optionee.
-----------------

If an Optionee dies while an Employee and has not fully

exercised the Option, then the Option shall vest immediately and fully and

the Optionee's executor, administrator, or other personal representative of

the Optionee's estate or any heir, successor, assign, or other transferee

of the Optionee by will or by the laws of the descent and distribution

shall have the right, subject to the restrictions of subparagraphs (c),

(g), and (o) of this Section 7, to exercise the Option in full to acquire

shares of Class B Common Stock at any time within three hundred sixty-five

(365) days after the Optionee's death.

-13-

<PAGE>

(k) Disability of Optionee.
----------------------

If an Optionee ceases to be an Employee at any time by reason of

Disability and has not fully exercised the Option, then the Option shall

vest immediately and fully and the Optionee or his or her guardian or other

legal representative shall have the right, subject to the restrictions of

subparagraphs (c), (g), and (o) of this Section 7, to exercise the Option

in full to acquire Shares of Class B Common Stock at any time within three

hundred sixty-five (365) days after the Optionee's termination of

employment by reason of Disability.

(l) Retirement of Optionee.
----------------------

If an Optionee ceases to be an Employee at any time by reason of

Retirement and has not fully exercised the Option, then the Option shall

vest immediately and fully and the Optionee shall have the right, subject

to the restrictions of subparagraphs (c), (g), and (o) of this Section 7,

to exercise the Option in full to acquire shares of Class B Common Stock at

any time within the later of three hundred sixty-five (365) days after the

date of the Optionee's termination of employment by reason of Retirement or

forty-two (42) months after the date of grant (and with respect to the

Initial Grant, the Optionee shall have the right, subject to the above

restrictions, to exercise the Option as stated above at any time within the

later of three hundred sixty-five (365) days after the date of the

Optionee's termination of employment by reason of Retirement or forty-two

(42) months after the date of the first (1st) Initial Grant to any Optionee

under the Plan).

(m) Optionee to Have No Rights as a Stockholder.
-------------------------------------------

An Optionee, or a transferee of an Optionee, shall have no rights

as a stockholder of the Corporation (including, without limitation, voting

rights and dividends) with respect to the shares of the Option Stock

covered by his or her Option

- 14 -

<PAGE>

until the date of the issuance of a stock certificate(s) for such shares

upon the Optionee's exercise of the Option. No adjustment shall be made for

dividends (ordinary or extraordinary, whether in cash, securities, or other

property), distributions, or other rights for which the record date is

prior to the date on which such stock certificate(s) is/are issued, except

as provided in Section 9 hereof.

(n) Modification, Extension, and Renewal of Options.
-----------------------------------------------

Subject to the approval of a majority of the Corporation's

stockholders as required, the Board, or the Committee in the case of those

modifications within the Committee's discretion as described in

subparagraphs (b), (c), (h), and (i) of this Section 7, may modify, extend,

or renew outstanding Options, or accept the cancellation of outstanding

Options (to the extent not previously exercised) for the granting of new

Options in substitution therefor. The foregoing notwithstanding, no

modification of an Option shall, without the consent of the Optionee, alter

or impair any rights or obligations under any Option previously granted.

(o) Automatic Conversion of Class B Common Stock to Class A
-------------------------------------------------------
Common Stock
------------

Notwithstanding any other provision of the Plan, the right of an

Optionee to hold shares of Class B Common Stock, pursuant to paragraphs

(i), (j), (k), or (I) of this Section 7 or otherwise under the Plan, shall

be subject to the provisions of Section 2.E.(6) of Article III of the

Amended and Restated Articles of Incorporation of the Corporation, which

provide as follows:

"Exercise of Stock Option. In the event that any person who is
not an employee acquires shares of Class B Common Stock pursuant
to the exercise of an option described in Section 2.E.(1 )(iv) of
this Article III, such shares shall, immediately after issuance
to such person, be converted to an equal number of shares of
Class A Common Stock, without any action on the part of anyone."

-15-

<PAGE>

Any amendment of the above quoted provisions of the Corporation's

Amended and Restated Articles of Incorporation shall be given

full effect for the purposes, and shall likewise be considered an

amendment, of the Plan.

(P) Other Provisions.
----------------

The stock option agreements authorized under the

Plan may contain such other provisions as are not inconsistent

with the terms of the Plan (including, without limitation,

restrictions upon the exercise of the Option) as the Committee

shall deem advisable.

8. TERM OF PLAN.
------------

Options may be granted pursuant to the Plan during the

period expiring on July 27, 1997. The Plan shall expire for all

purposes on July 27, 2007.

9 RECAPITALIZATION TAKEOVERS AND LIQUIDATIONS.
-------------------------------------------

(a) Subject to any required action by the stockholders

of the Corporation, the number of shares of Option Stock covered

by the Plan as provided in Section 6 hereof, the number of shares

covered by each outstanding Option, and the Exercise Price for

such shares shall be Proportionately adjusted for

(i) any increase or decrease in the number of issued

shares of either Class A Common Stock or Class B Common Stock or

both resulting from a subdivision or consolidation of such

shares;

(ii) the Payment of a stock dividend of either

Class A Common Stock or Class B Common Stock or both;

(iii) any reorganization, consolidation, dissolution,

liquidation, merger, exchange, recapitalization, stock split, or

reverse stock split; or

- 16-

<PAGE>

(iv) any other increase or decrease in the number of

issued shares of either Class A Common Stock or Class B Common

Stock or both, effected without receipt of consideration by the

Corporation.

(b) Subject to any required action by the

stockholders of the Corporation, if the Corporation is the

surviving corporation in any merger or consolidation, each

outstanding Option shall pertain and apply to the securities to

which a holder of the number of shares of Class B Common Stock

made the subject of the Option would have been entitled. A

dissolution or liquidation of the Corporation, or a merger or

consolidation in which the Corporation is not the surviving

corporation shall automatically and without further action cause

each outstanding Option, which has not yet vested, to terminate,

unless the agreement of merger or consolidation otherwise

provides.

described in subparagraphs (a) and (b) of this Section 9 relate

to securities of the Corporation, such adjustments shall be made

by the Committee, whose determination shall be conclusive and

binding on all persons, subject to obtaining the agreement of the

Corporation's auditors to such adjustments.

(d) Except as expressly provided in this Section 9,

the Optionee shall have no rights by reason of any subdivision or

consolidation of shares of stock of any class, the payment of any

stock dividend, or any other increase or decrease in the number

of shares of stock of any class, or by reason of any

reorganization, consolidation, dissolution, liquidation, merger,

exchange, recapitalization, stock split, reverse stock split, or

any spin-off of assets or stock of another corporation. Any

issuance by the Corporation of shares of stock of any class other

than the Class A Common Stock and the Class B Common Stock, or

securities convertible into shares

-17-

<PAGE>

of stock of any class, shall not affect, and no adjustment by

reason thereof shall be made with respect to, the number or the

Exercise Price of the shares of Option Stock made the subject of

an Option.

(e) The grant of an Option pursuant to the Plan shall

not affect in any way the right or power of the Corporation to

make adjustments, reclassifications, reorganizations, or changes

of its capital or business structure, to merge or consolidate,

or to dissolve, liquidate, sell, or transfer all or any part of

its business or assets.

10. SECURITIES LAW REQUIREMENTS.
---------------------------

(a) Legality of the Initial Grant to U.S. Employees.
-----------------------------------------------

With respect to all Employees who are citizens and/or

residents of the United States and who are eligible as Optionees

for the Initial Grant, no shares of Class B Common Stock shall be

granted to such Employees under the Plan unless and until the

Plan and all of the shares of Class B Common Stock to be issued

thereunder have been registered under the United States

Securities Act of 1933, as amended (the "Act"), or have been

exempted from the registration requirements thereof.

Notwithstanding the foregoing, to the extent that it is legally

permitted to do so, the Corporation may unilaterally commit to

make the Initial Grant of the Options to such Employees prior and

subject to such registration or the perfection of such exemption

and subject to such Employees being eligible at the time of the

Initial Grant.

(b) Legality of Issuance to U.S. Employees.
--------------------------------------
With respect to all Optionees who are citizens and/or

residents of the United States, no shares of Class B Common Stock

shall be issued upon the exercise of any Option unless and until

the Corporation has determined that:

-18-

<PAGE>

(i) it and the Optionee have taken all actions

required to register such shares under the Act or to perfect an

exemption from the registration requirements thereof;

(ii) any applicable listing requirement of any stock

exchange on which such shares are listed has been satisfied; and

(iii) any other applicable provision of state or

federal law has been satisfied.

Optionee; Legends.
-----------------

With respect to all Optionees, regardless of whether

the offering and sale of shares of Class B Common Stock under the

Plan have been registered under the Act or have been registered

or qualified under the securities laws of any state, the

Corporation may impose restrictions upon the sale, pledge, or

other transfer of such shares (including the placement of

appropriate legends on stock certificates) if, in the judgment of

the Corporation and its counsel, such restrictions are necessary

or desirable in order to achieve compliance with the provisions

of the Act, the securities laws of any state, or any other law.

In the event that the sale of such shares under the Plan is not

registered under the Act but an exemption is available which

requires an investment representation or other representation,

each Optionee shall be required to represent that such shares are

being acquired for investment, and not with a view to the sale or

distribution thereof, and to make such other representations as

are deemed necessary or appropriate by the Corporation and its

counsel. Stock certificates evidencing such shares acquired under

the Plan pursuant to an unregistered transaction shall bear the

following restrictive legend and such other restrictive legends

as are required or deemed advisable under the provisions of any

applicable law:

"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
'ACT').

-19-

<PAGE>

ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A
REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO
SUCH TRANSFER OR, IN THE OPINION OF COUNSEL FOR THE ISSUER,
SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH
TRANSFER TO COMPLY WITH THE ACT."

Any determination by the Corporation and its counsel in

connection with any of the matters set forth in this Section 10

shall be conclusive and binding on all persons.

(d) Registration or Qualification of Securities.
-------------------------------------------

The Corporation may, but shall not be obliged to,

under the Act or any other applicable law. The Corporation shall

not be obliged to take any affirmative action in order to cause

the sale of such shares under the Plan to comply with any law.

(e) Exchange of Certificates.
------------------------

If, in the opinion of the Corporation and its counsel,

any legend placed on a stock certificate representing shares of

Class B Common Stock sold under the Plan is no longer required,

the holder of such certificate shall be entitled to exchange such

certificate for a certificate representing the same number of

such shares but lacking such legend.

11. AMENDMENT OF THE PLAN.
---------------------

The Board may from time to time, with respect to any

shares of Class B Common Stock at the time not made the subject

of Options, suspend or discontinue the Plan or revise or amend it

in any respect whatsoever, except that, without the approval of a

majority of the voting power of the Corporation's stockholders,

no such revision or amendment shall:

(i) increase the number of shares of Class B

Common Stock subject to the Plan;

-20-

<PAGE>

(ii) change the designation in Section 5 hereof

with respect to the persons eligible to receive Options; or

(iii) amend this Section 11 to defeat its purpose.

12. APPLICATION OF FUNDS.
--------------------

The proceeds received by the Corporation from the sale

of shares of Class B Common Stock pursuant to the exercise of an

Option will be used for general corporate purposes.

13. APPROVAL OF STOCKHOLDERS.
------------------------

The Plan shall be subject to the approval of a majority

of the voting power of the Corporation's stockholders. Prior to

such approval, the Options may be granted but shall not be

exercisable. Any amendment requiring stockholder approval

described in Section 11 hereof shall also be subject to approval

by a majority of the voting power of the Corporation's

stockholders.

14. STATEMENT TO OPTIONEES.
----------------------

Within a reasonable time after the last day of each

Fiscal Year, the Committee shall furnish to each Optionee a

statement setting forth the Optionee's total number of shares of

the Option Stock made the subject of an Option(s) under the Plan,

the date on which such Option(s) was/were granted, the Fair

Market Value of such shares as of the date of the grant, the Fair

Market Value of such shares as of the last day of such Fiscal

Year, and such other information as the Committee shall deem

advisable to furnish.

15. INSPECTION OF RECORDS.
---------------------

Copies of the Plan, records reflecting each

Optionee's Option(s), and any other documents and records which

an Optionee is entitled by law to inspect shall be

-21 -

<PAGE>

open to inspection by the Optionee and his or her duly authorized

representative(s) at the office of the Committee at any

reasonable business hour.

16. EXECUTION.
---------

To record the adoption of the Plan, as amended and

restated, by the Board of Directors of the Corporation, the

Corporation has caused its authorized officers to affix the

Corporation's corporate name and seal thereto as of _____ 1994.

SOTHEBY'S HOLDINGS, INC.

By:

Its: President

-22-

<PAGE>

UK SUB-PLAN OF

SOTHEBY'S HOLDINGS, INC. 1987 STOCK OPTION PLAN
(As Amended and Restated Effective June 1, 1994)

A. Background.
----------

The 1987 Stock Option Plan (the "1987 Plan") of Sotheby's
Holdings, Inc. (the "Company") was adopted on July 31,1987 and
amended by the creation of a UK Sub-Plan, applicable to
employees of the Company and its subsidiaries and branches who
are resident in the United Kingdom (the "UK Sub-Plan"). The UK
Sub-Plan was subsequently amended on June 15, 1989; August 8,
1991; August 13, 1992; June 17, 1993; and June 1, 1994.

B. Amendment and Restatement.
-------------------------

The 1987 Plan was amended and restated effective June 1,
1994. The UK Sub-Plan is hereby amended and restated, also
effective June 1, 1994 (the "Restatement Effective Date") to
incorporate all amendments made to the UK Sub-Plan subsequent
to the original adoption of the UK Sub-Plan and prior to the
Restatement Effective Date.

C. Operative Provisions.
--------------------

The rules of the UK Sub-Plan shall be the rules of the 1987
Plan, as amended and restated effective June 1, 1994, amended as
follows:

1. The following terms shall have the following meanings:

Associated Company the meaning as in Section
302 of the Taxes Act;

Company Sotheby's Holdings, Inc.;

Control the meaning as in Section
534 of the Taxes Act;

Fair Market Value the fair market value of
the relevant shares at the
relevant date, as
determined in accordance
with the provisions of
Part VIII of the UK
Capital Gains Tax Act,
1979, and agreed with the
Shares Valuation Division
of the UK Inland Revenue;

Outstanding Options all options granted under
the UK Sub-Plan, and all
options granted under any
other scheme approved
under Schedule 10 and
established by the
Company or any Associated
Company thereof, which
have not been exercised
and have not lapsed at
the relevant time;

<PAGE>
Relevant Emoluments the meaning which the
term bears for the
purposes of sub-paragraph
(2) of paragraph 5 of
Schedule 10 by virtue of
sub-paragraph (5) of that
paragraph;

Schedule 10 Schedule 10 to the UK
Finance Act, 1984;

Shares shares of Class B Common
Stock in the Company,
which satisfy the
provisions of paragraphs
7 through 11 of Schedule
10;

Sterling Equivalent in relation to U.S.
dollars: the amount
obtained from applying
the mid-market rate of
exchange for spot
sterling at the close of
business in New York on
the relevant date to the
relevant amount; and in
relation to any other
currency: the amount of
sterling required to
purchase the relevant
amount of that currency
at the mid-market spot
rate of exchange for that
currency at the close of
business in London on the
relevant date;

Taxes Act the Income and
Corporation Taxes Act
1970 of the United
Kingdom;

Year of Assessment a year beginning in any 6
April and ending on the
following 5 April.

2. An Option under the UK Sub-Plan may be granted only to
a UK resident who is a director or employee of the
Company or a Subsidiary; who is required to devote to
his duties not less than 25 hours (or in the case of an
employee not a director of the Company or a Subsidiary,
20 hours) per week (excluding meal breaks); who is not
precluded by paragraph 4(1 )(b) of Schedule 10 from
participating in the UK Sub-Plan; and, in the case of
the Initial Grant only, who no longer maintains an
account under, or otherwise participates in, the
Company's Deferred Bonus Plan.

3. Any Option granted under the UK Sub-Plan to a UK
resident shall be limited and take effect so that immediately
following such grant the aggregate Exercise Prices of shares
subject to such person's Outstanding Option (converted to their
Sterling Equivalents at the date of such grant) shall not exceed
the greater of 100,000 Pounds or four times the amount of the
Relevant Emoluments of such person for the current or preceding
Year of Assessment (whichever of those years gives the greater
amount) or, if there were no Relevant Emoluments for the
preceding Year of Assessment, four times the amount of the
Relevant Emoluments for the period of 12 months beginning with
the first day during the current Year of Assessment in respect of
which there are Relevant Emoluments.

4. No option granted under the UK Sub-Plan may be
exercised if at the time of the proposed exercise the
person is precluded by paragraph 4(1 )(b) of Schedule
10 from participating in the UK Sub-Plan.

-2-
<PAGE>
5. The Exercise Price of any option granted under the UK
Sub-Plan shall not be manifestly less than the Fair
Market Value at the date the option is granted or the
nominal value of the Shares.

6. On the death of an employee, any unexercised option
granted to him under the UK Sub-Plan may be exercised
after his death by his personal representatives only.

7. No modification (as referred to in paragraph 7(n) of the
1987 Plan) or adjustment (as referred to in paragraphs 9(a),
(b) or (c) of the 1987 Plan) may be made to options granted
under the UK Sub-Plan without the prior consent of the Board
of the UK Inland Revenue.

8. No revision or amendment (as referred to in paragraph 11 of
the 1987 Plan) may be made to the UK Sub-Plan without the prior
consent of the Board of the UK Inland Revenue.

9. The Company shall within 30 days of receipt of all
documents, information and payments which are due on
exercise of an option issue to the employee exercising the
option certificates representing the number of Shares
purchased on exercise, and shall pay all original issue or
transfer taxes and all other fees and expenses incidental to
such delivery.

10. The Company shall maintain sufficient Shares to meet all
Outstanding Options under the UK Sub-Plan and all Shares in
respect of which any Option is exercisable under the UK
Sub-Plan shall rank equally and rateably with all issued
Shares of the same class in the Company.

11. This rule applies if at any time that shares of any class of
the Company's capital stock are listed on a national
securities exchange, the rules of such exchange or of any
governmental agency of the United States of America require
the delisting of such shares if the Company issues Shares.
In that event, on the exercise of Outstanding Options
granted after June 15, 1989 (unless holders of Outstanding
Options granted prior to such date agree to the application
of this rule), the Company shall treat a notice of exercise
as a notice to the Company to deliver the same number of
shares of Class A Limited Voting Common Stock as the number
of Shares which the Company would otherwise have been
required to deliver. Accordingly, Rules 3 and 5 of the UK
Sub-Plan shall be operated first on the basis that an option
granted under the UK Sub-Plan is simply in respect of Shares
and shall in addition be operated on the basis that the
relevant option is instead in respect of Class A Limited
Voting Common Stock.

12. The Committee shall not exercise its discretion under
subparagraph 7(b), 7(c), 7(h) or 7(i) of the Plan (A) to
provide that any Option granted under the UK Sub-Plan may be
exercised less than three years after the date of grant or
(B) with respect to any Option granted under the UK Sub-Plan
on or prior to July 3, 1991.

13. Except in the case of death, Disability, or Retirement, each
Option granted under the UK Sub-Plan on or after October 19,
1992, shall become exercisable (i) on the third (3rd)
anniversary date of the date of grant of such Option to the
extent of sixty percent (60%) of the number of shares made
subject to such Option, (ii) on the fourth anniversary date
of the date of grant of such Option to the extent of an
additional twenty percent (20%) of the number of shares made
subject to such Option, and (iii)

-3-

<PAGE>

on the fifth (5th) anniversary date of the date of grant of
such Option to the extent of an additional twenty percent
(20%) of the number of shares made subject to such Option.

SOTHEBY'S HOLDINGS, INC.

By:
Its: President

-4-

ADJUSTABLE RATE NOTE

THIS NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES
IN MY INTEREST RATE AND MY ANNUAL PAYMENT

$850,000.00 Greenwich, Connecticut May 24, 1994

WILLIAM F. RUPRECHT AND ELIZABETH B. RUPRECHT, residing at 80
Sherwood Avenue, Greenwich, Connecticut ("Borrower").

1. BORROWER'S PROMISE TO PAY

In return for a loan that we have received, we promise to
pay U.S. $850,000.00 (this amount is called "Principal"), plus
interest, to the order of SOTHEBY'S, INC., a New York corporation
(the "lender"). The principal will be disbursed in two parts, a
First Portion of $300,000.00 ("First Portion") and a Second
Portion of $550,000.00 ("Second Portion") which in the aggregate
shall be referred to in this document as Principal. We
understand the Lender may transfer this Note. The Lender or
anyone who takes this Note by transfer and who is entitled to
receive payments under this Note is called the "Note Holder".

2. INTEREST

Interest will be charged on the unpaid Principal until the
full amount of Principal has been paid. We will pay interest
initially at a yearly rate of five and one-quarter (5.25%)
percent. The interest rate we will pay may change in accordance
with Section 4 of this Note.

The interest rate required by this Section 2 and Section 4
of this Note is the rate we will pay before any default described
in Section 5 or Section 8(a) of this Note. After any default
described in Section 5 or Section 8(a), we will pay interest on
the unpaid principal amount at a rate of two (2%) percentage
points higher than the rate of interest we were paying at the
time of the default ("Default Rate").

3. PAYMENTS

(a) Time and Place of Payments

(i) First Portion: Beginning on June 15, 1994 and
on the fifteenth day of each month thereafter until the Maturity
Date described below, we will make monthly payments of interest
only. Beginning on April 1, 1995 we will make these annual
payments of principal. We will make payments on the first day of
every April thereafter until the Maturity Date described below.

(ii) Second Portion: Beginning on April 1,
1994, we will make annual payments of principal and interest. We

<PAGE>

will make these payments on the first day of every April
thereafter until the Maturity Date described below.

(iii) Application of Payments: Our payments in
(i) and (ii) above will be applied first to any charges or other
expenses described below that we may owe under this Note, then to
interest and then to principal. If, on May 24, 2009, we still
owe amounts under this Note, we will pay those amounts in full on
that date, which is called the "Maturity Date".

(iv) Application of Excess Bonus: In any year
where 50% of the Net Bonus ("Net Bonus") earned by William
Ruprecht is in excess of the payments required in (i) and (ii)
above, such excess shall be applied to reduce the Principal. The
reduction shall be applied first to the Second Portion of the
loan and when that has been repaid to the First Portion of the
loan. The Net Bonus is the gross bonus amount earned less any
applicable federal, state and local income taxes due on account
of the bonus.

(v) Place of Payments: We will make our payments
at 1334 York Avenue, New York, New York, 10021, or at a different
place if required by the Note Holder.

(b) Amount of Our Annual Principal Payments

(i) First Portion: Each of our annual principal
payments will be in the amount of U.S. $10,000.00.

(ii) Second Portion: Each of our annual
principal payments shall be in the amount of U.S. $18,333.33.

Changes in our total monthly and annual payments will
reflect changes in the unpaid principal of our loan and changes
in the interest rate that we must pay. The Note Holder will
determine our new interest rate and the changed amount of our
total monthly and annual payments in accordance with Section 4 of
this Note.

4. INTEREST RATE AND ANNUAL PAYMENT CHANGES

(a) Change Dates

The interest rate we will pay on both the First and
Second Portions may change on the first day of every April, July,
October and January. Each date on which our interest rate could
change is called a "Change Date".

(b) The Interest Rate

Our interest on the unpaid principal balance of this
Note shall be computed at a rate that is equal to two (2%)

<PAGE>

percent below the prime commercial lending rate as announced on
the date hereof by The Chase Manhattan Bank, N.A., at its
principal office in New York City ("CMB's Prime Rate"), which
rate is not necessarily the lowest rate offered from time to time
by CMB.

Our rate of interest may be increased or decreased,
without limitation, at every Change Date during the term of this
Note depending on fluctuations in CMB's Prime Rate. Such
adjustments to our interest rate will be made and become
effective on each Change Date during the term of this Note. If,
for any reason, CMB no longer announces a "prime" rate of
interest, the "prime" rate of interest for purposes of this Note
shall be the "prime" rate of interest as published in the Wall
----
Street Journal, Eastern Edition.
--------------

The Note Holder will deliver or mail to us a notice of
any change in our interest rate upon the effective date of any
change. The notice will include information required by law to
be given us and also the title and telephone number of a person
who will answer any question we may have regarding the notice.

(d) Notice of Annual Payment Amount

The Note Holder will calculate the amount of interest
on the unpaid principal that has accrued and is payable on the
fifteenth day of each month for the First Portion beginning on
June 15, 1994 and on the first day of April of each year
beginning April 1, 1995, and will notify us in a Loan Statement
issued by the Personnel Department during the first quarter of
the fiscal year of the total amount of principal and interest
due.

5. ACCELERATION

The full amount of the unpaid principal balance of this Note
together with all accrued interest shall be due and payable to
the Note Holder, at its option, on the earlier to occur of the
following events:

(i) Ninety (90) days after the date on which William
Ruprecht's employment with the Lender is terminated, for any
reason, including his retirement or the involuntary termination
of his employment;

(ii) The sale or other transfer of the Property described in
the mortgage given to secure this Note;

(iii) Failure to furnish to Lender, within thirty (30)
days of the receipt of written demand, any documentation
requested pursuant to the Guarantee of Compliance executed by us;

<PAGE>

(iv) One hundred eighty (180) days after William Ruprecht's
death or disability;

(v) Six (6) months after notice, for any reason, from the
Note Holder; or

(vi) The granting of any additional mortgage, lien or
security interest in the Property.

From the time of a default until all of our obligations
under the Note are paid in full, we will pay interest at the
Default Rate.

6. BORROWER'S RIGHT TO REPAY

We have the right to make payments of principal at any time
before they are due. A payment of the principal only is known as
a "prepayment". When we make a prepayment, we will tell the Note
Holder in writing that we are doing so.

7. LOAN CHANGES

If a law, which applies to this loan and which sets maximum
loan charges, is finally interpreted so that the interest or
other loan charges collected or to be collected in connection
with this loan exceed the permitted limits, then: (i) any such
loan charge shall be reduced by the amount necessary to reduce
the charge to the permitted limit; and (ii) any sums already
collected from us which exceeded permitted limits will be
refunded to us. The Note holder may choose to make this refund
by reducing the principal we owe under this Note or by making a
direct payment to us. If a refund reduces principal, the
reduction will be treated as a partial prepayment.

8. BORROWER'S FAILURE TO PAY AS REQUIRED

(a) Default

If we do not pay the full amount of each monthly and annual
payment on the date it is due, we will be in default.

(b) Notice of Default

If we are in default, the Note Holder may send us a written
notice telling us that if we do not pay the overdue amount by a
certain date, the Note Holder may require us to pay immediately
the full amount of principal which has not been paid and all the
interest that we owe on that amount. That date must be at least
thirty (30) days after the date on which the notice is delivered
or mailed to us. From the date of default until we pay all
amounts due, in full, we will pay interest at the Default rate.

<PAGE>

Even if, at a time when we are in default, the Note Holder
does not require us to pay immediately in full as described
above, the Note Holder will still have the right to do so if we
are in default at a later time.

(d) Payment of Note Holder's Costs and Expenses

If the Note Holder has required us to pay immediately in
full as described above, the Note Holder will have the right to
be paid back by us for all of its costs and expenses in enforcing
this Note to the extent not prohibited by applicable law. Those
expenses include, for example, reasonable attorney's fees.

9. GIVING OF NOTICES

Unless applicable law requires a different method, any
notice that must be given to us under this Note will be given by
delivering it or by mailing it by first class mail to us at the
Property address in Section II below or at different address if
we give the Note Holder notice of our different address.

Any notice that must be given to the Note Holder under this
Note will be given by mailing it by first class mail to the Note
Holder at the address stated in Section 3(a) above or at a
different address if we are given notice of that different
address.

10. Waivers

We waive the rights of presentment and notice of dishonor.
"Presentment" means the right to require the Note Holder to
demand payment of amounts due. "Notice of dishonor" means the
right to require the Note Holder to give notice to other persons
that amounts due have not been paid.

11. SECURITY

This Note is secured by a mortgage on our property known as
80 Sherwood Avenue, Greenwich, Connecticut (the "Property").

/s/ William F. Ruprecht
----------------------------------
William F. Ruprecht, Borrower

/s/ Elizabeth B. Ruprecht
----------------------------------
Elizabeth B. Ruprecht, Borrower

EXHIBIT 10(u)

SOTHEBY'S
Founded 1744

1334 York Avenue
New York, New York 10021
Telephone: (212) 606-7366
FAX: (212) 606-7015

Diana D. Brooks
President and Chief Executive Officer

October 25, 1993

Mr. Henry Wyndham
The Old Rectory
Southease Near Lewes
East Sussex, England

Dear Henry:

Following our meeting last week, I thought it best to set out in one
letter an outline of the terms we discussed so that we are certain to be in
agreement on the essential points.

1. Subject to the ratification of the Board of Directors, you would
join Sotheby's in London on February 1, 1994 as Chairman of Sotheby's in the
U.K. In that capacity, you would report to me as President and Chief
Executive Officer of Sotheby's Worldwide Auction Operations. In addition to
the Chairmanship of Sotheby's in the U.K., you would also become a member of
the Worldwide Management Committee and, subject to ratification of the Board
of Directors of Sotheby's Europe, you will also report to the Board of
Directors of Sotheby's Holdings, Inc. to assist in Sotheby's related matters
as is directed from time to time.

2. Your base pensionable salary will be L100,000 per annum, payable
monthly by bank transfer in arrears at the end of each month. At the
completion of the first three year period of employment, we agree that your
yearly pensionable salary shall be no less than L130,000. Your pensionable
salary will be reviewed each year of your employment, or as is otherwise
consistent with company policy. In addition, for your first three years of
employment, you will receive a non-pensionable salary supplement of L30,000
per annum, payable in two equal installment of L15,000 on the first of
February of each such year and the first of August of each such year. These
payments will only be made if you are employed by Sotheby's on the dates
payments are due.

3. We agree to pay you a signing bonus of L100,000 on February 1, 1994
in cash or otherwise in a method to be mutually

<PAGE>

agreed. You will also be eligible for a bonus which, as with other company
employees, is purely discretionary.

4. We will recommend at the next meeting of the Audit and Compensation
Committee of Sotheby's Holdings, Inc. on October 28, 1993 that you be
granted, effective your date of hire (February 1, 1994), 75,000 stock options
under the term of Sotheby's Stock Option Plan and we will let you know as
soon as possible after that meeting whether that recommendation has been
approved. You will also be eligible for annual share option grants at the
discretion of the Board of Directors of Sotheby's Holdings, Inc. If you wish
to trade in any of these options, you will be subject to the same rules and
regulations as all other employees of Sotheby's.

5. You will receive a business development and travel allowance of
L15,000 per annum. Details of the company's travel and entertainment
policies are available for your review.

6. Upon joining Sotheby's, you will be eligible for the following
benefits:

(a) Sotheby's Pension Scheme. This is a final salary scheme.
Pension benefits accrue at 1/60th of your final salary for each year of
membership until retirement at age 65. Your contribution is 4% of your
pensionable salary, up to the statutory earning cap (currently at L75,000 per
annum). No pension benefit will accrue for any portion of your future base
pensionable salary above the then prevailing earnings cap, or on any non-
pensionable salary. The terms and conditions of Sotheby's Pension Scheme is
available for your review and constitutes a part of the Agreement.

(b) Life Assurance cover. This benefit, in the event of death
during the course of employment, is equal to four times your basic
pensionable salary up to the statutory earnings cap then in effect.
Information on Sotheby's Life Assurance plan is available and also
constitutes a part of this Agreement.

(c) Private Health Insurance. Upon joining Sotheby's, you and
your family would be eligible for Sotheby's medical coverage. The medical
plans of Sotheby's are available for your review and constitute a part of
this Agreement.

(d) Holidays. In addition to any bank or governmental holidays
the company recognizes, you will be entitled to 25 working days per annum to
be taken between September 1 and the following August 31. Any vacation days
not taken during those dates can be deferred until the 31 of December
immediately following. Thereafter, unused holidays are automatically
forfeited. Information on Sotheby's holiday policy is available and
constitutes a part of this Agreement. Also available for your information is
Sotheby's Company Rules and Conditions of Employment in accordance with the
Employment Protection

<PAGE>

(Consolidation Act 1978). Sotheby's Company Rules and Conditions also
constitute a part of this Agreement.

7. In the event you are interested in making purchases or selling your
property at Sotheby's or any of its affiliated companies, you must follow
company policy. Sotheby's Rules for Buying and Selling, and Sotheby's
Conflict of Interest Policy are both available for your review and constitute
a part of this Agreement.

8. You and we agree that subject to a resolution of its shareholders,
Dawnrace will be dissolved on or as soon as is reasonably practicable after
January 1, 1994. If unanticipated expenditures arise at a date subsequent to
this Agreement in respect of the dissolution, we agree to discuss those
expenses with you, but will agree to assume up to L30,000 of approved legal
expenses for you and Phillip Hook.

9. We both agree that this Agreement may be terminated from and after
February 1, 1994 by either of us giving to the other not less than six months
written notice to the other party hereto, such notice to expire on or at any
time after August 1, 1994.

10. You may be required in the future to work for a Sotheby's
affiliated company, and possibly at another location (reasonably close to
your present location). Sotheby's reserves the right to require you to work
in a different job or capacity, provided it is at the same rate of pay as
your then current position.

11. After you have completed six months of employment, you and I have
agreed that we will review your housing and entertainment needs in London.

12. In consideration of your employment at Sotheby's, we have, by
separate letter (a copy attached), made an offer to purchase some of the
inventory of your present business. We await your response to our proposal.

13. Upon joining Sotheby's, you will be required to sign a
confidentiality agreement relating to the company's proprietary information
and the future use of such information if you leave Sotheby's employment. If
you would like to review this form of agreement, it is available, but it also
constitutes a part of the terms of employment.

We are very excited about your joining Sotheby's. I think you will be a
fantastic addition and look forward to speaking with you later today. If I
have inadvertently omitted any issues, please let me know. Otherwise, I
would appreciate your signing a copy of this letter which specifies the
material terms of our arrangements.

<PAGE>

Very truly yours,

/s/ Diana D. Brooks
-------------------------
Diana D. Brooks
President and Chief Executive Officer

ACCEPTED AND AGREED:

By: /s/ Henry Wyndham
------------------------
Henry Wyndham

Dated: 2/10/93
-------------------

EXHIBIT 10(v)

SOTHEBY'S
Founded 1744

1334 York Avenue
New York, New York 10021
Telephone: (212) 606-7366
FAX: (212) 606-7015

Diana D. Brooks
President and Chief Executive Officer

October 13, 1993

Mr. Henry Wyndham
Henry Wyndham Fine Art, Ltd.
91 Jermyn Street
London, SW1 Y61B
England

Dear Henry,

I have outlined below what we are prepared to commit to you in
terms of acquiring your current inventory. I have not placed
values on all the pictures because we are still awaiting
transparencies on the astericked ones. However, I can tell you
that on the nine paintings which we have valued for auction
purposes, we have arrived at an aggregate value which is more
than L60,000 lower than your cost price. (This excludes an
evaluation of the Canaletto, Bellotto, Millais, Early Peploe,
Zoffany and Lavery.) This percentage reduction will probably
continue throughout the yet to be appraised pictures because of
the dramatic downturn in the Contemporary, Modern British and
Scandinavian markets over the past three years. Additionally, it
is our view that certain pictures such as the Philpot and the
Ilstead may not be able to be sold at even our reduced values for
a long time to come.

I have tried to provide you with a proposal which is fair and at
the same time shows you that we are willing to make a significant
capital investment (with writeoffs as well as carrying costs)
that reflect our desire to have you join us as our U.K. Chairman.

1. We will acquire all of your 100% owned inventory (20
pictures) on February 1, 1994 for L92,050 (100% cost). (This
figure will be adjusted downward by the cost prices of any
inventory you may sell before February 1, 1994).

2. We will acquire 15 of your jointly owned paintings (see
appendix B) for L184,060 (100% cost) on February 1, 1994 (to be
adjusted downward by any pictures sold before February 1, 1994).

<PAGE>

3. We will consider buying your L19,000 interest in the Burra
once we have seen a transparency of it.

4. On February 1, 1994 we will lend you L150,000 interest free
for one year against your 2/3 interest in Canaletto (Pittoni,
Cimaroli's): "The Tomb of Archbishop Tillotson". If you should
---------------------------------
sell it during that time, you will reimburse us for our interest
at the Chase Bank Prime Rate if you have made a profit on the
picture.

If the picture is not sold within a year, at your option, we
will agree to buy 2/3 interest for L330,000.

5. We are not willing to acquire your interest in the Bellotto.
As a public company, it is difficult for us to make such a major
investment in a picture with so little ownership control
(regardless of the fact that it may have enormous upside
potential).

6. You will retain your ownership interest in the Zoffany
(#10), Early Peploe (#29), Lavery (#27), and Millais (#34).

On February 1, 1994 we will wire transfer to you L426,110 (or an
adjusted figure should any pictures be sold). This will
represent the purchase of your interest in 35 paintings as well
as the loan against the Canaletto. By February 1, 1994 we will
either take physical possession of the paintings or will be
provided with a listing of where absent paintings are with an
assurance that they are being properly insured.

Meanwhile, I continue to be extremely enthusiastic about you
joining us. I apologize for keeping you so late on Monday night,
but I think we resolved a lot of outstanding issues and hopefully
came one step closer to getting you to Sotheby's.

Take care and call me about this should you have any questions.

With warm regards,

/s/ Diana D. Brooks
------------------------
Diana D. Brooks

ACCEPTED AND AGREED:

By: /s/ Henry Wyndham
------------------------
Henry Wyndham

Dated: 10/26/93
-------------------

DATED 2 June 1994
-----------------------------------------------------------------

SOTHEBY'S HOLDINGS, INC. (1)
----------------------------

COUTTS FINANCE CO. (2)
----------------------

DEED OF GUARANTEE
-----------------

Farrer & Co.
------------

66 Lincoln's Inn Fields
-----------------------

London WC2a 3LH
---------------

Ref: NSB/eah
------------

Exhibit 10W
-----------

<PAGE>

THIS DEED OF GUARANTEE is made the 2nd day of June 1994

BETWEEN:
--------

(1) SOTHEBY'S HOLDINGS, INC. (a company incorporated under the laws of the
State of Michigan) whose registered office is at [
] ("the Guarantor") and

(2) COUTTS FINANCE CO. (registered number 908417 in England) whose
registered office is at 15 Lombard Street, London EC3V 9AU ("the
Lender")

WHEREAS:
--------

(A) The Lender has at the request of the Guarantor agreed to lend to
Henry Wyndham ("the Borrower") a principal sum of an amount not
exceeding L550,000 ("the advance") upon the terms set out in a
------------
Mortgage Offer ("the Loan Agreement") dated 24 May 1994 to the
-------------- ------
Borrower from the Lender.

(B) The Guarantor has agreed to guarantee payment to the Lender of the
liabilities of the Borrower in respect of the Loan Agreement upon the
terms set out in this deed.

NOW THIS DEED WITNESSETH as follows:
------------------------

(1) THE Guarantor hereby represents and warrants to the Lender as follows:

(a) This Guarantee constitutes legal, valid, binding (and
enforceable) obligations of the Guarantor and the performance of
its obligations under and performance of the provisions of this
Guarantee by the Guarantor will not contravene, conflict with or
breach any material provisions of any law, regulation, ordinance,
--------
statute, judgement, decree or permit it is subject to.

(b) All material actions, licenses, consents, exemptions,
--------
registrations and filings with all governmental or other
regulatory body, authority or agency required for the validity,
performance and enforceability of the Guarantee will be obtained
or made promptly and are and will be in full force and effect.

2.1 THE Guarantor hereby irrevocably and unconditionally guarantees the
payment to the Lender of all and any sum or sums due and payable by the
Borrower to the Lender and all liabilities of the Borrower to the
Lender under or in respect of the Loan Agreement Provided that:

<PAGE>

(a) the total amount recoverable from the Guarantor hereunder shall
not in any circumstances exceed L160,000 ("the Maximum Amount")
and any sum in respect of interest on such amount and/or costs
--------------
due under subclause 2 of this Clause.

(b) on any repayment made by the Borrower to the Lender applied by
the Lender in or towards reduction of the Advance (a repayment so
applied being hereinafter called a "capital reduction"), the
Maximum Amount shall thereupon be reduced by an amount equal to
16/55ths of the capital reduction so made.

2.2 In the event that any amount due from the Borrower to the Lender under
the terms of the Loan Agreement shall not have been paid by the
Borrower forthwith on demand therefor by the Lender on the Borrower,
the Guarantor will forthwith upon demand therefor by the Lender on the
Guarantor subject to the terms of sub-clause 1 of this Clause pay to
---------
the Lender the amount stated in such demand and interest thereon from
the date of such demand until full discharge, such interest to be
chargeable at the rate of interest payable or deemed to be payable by
the Borrower (whether before or after judgement) as calculated and
compounded in accordance with terms of the Loan Agreement together with
all legal and other costs and expenses (on a full indemnity basis)
howsoever incurred by the Lender in connection with this Deed of
Guarantee.

2.3 The costs and expenses referred to herein shall include (for the
avoidance of doubt) all verifiable and documented amounts the Lender
-------------------------
may from time to time require to compensate it for its internal
management and administrative costs and expenses incurred in
connection with the enforcement of this Guarantee and recovery of the
liabilities secured by it.

3.1 The Lender may without consent from the Guarantor and without
affecting the Guarantor's liability hereunder, renew, vary or
determine any accommodation given to the Borrower, hold over, renew,
modify or release any security or guarantee now or hereafter held from
the Borrower or any other person in respect of the liabilities hereby
secured and grant time or indulgence to or compound with the Borrower
or any such person and this Guarantee shall not be discharged nor
shall the Guarantor's liability under it be affected by anything which
would not have discharged or affected the Guarantor's liability if the
Guarantor had been a principal debtor to the Lender instead of a
guarantor.

3.2 This Guarantee shall be additional to any other guarantee or security
now or hereafter held in respect of the liabilities hereby secured.

<PAGE>

3.3 This Guarantee shall be a continuing security and shall not, save in
respect of any reduction referred to in Clause 2.1(a) hereof, be
satisfied, discharged or affected by any intermediate payment or
settlement of account by or on behalf of the Borrower.

4.1 THIS Guarantee shall apply to all sums specified in Clause 2.1 due
-----------------------
from and liabilities of the Borrower to the Lender and shall not
(except as provided herein) be affected by any fluctuation in or
--------------------------
intermediate discharge of such liabilities and until liabilities have
been discharged in full the Guarantor shall not be entitled to share
any security held or money received by the Lender on account of such
liabilities or to stand in the place of the Lender in respect of any
security or money nor until such liabilities have been discharged in
full shall the Guarantor take any step to enforce any right or claim
against the Borrower in respect of any moneys paid by the Guarantor to
the Lender hereunder or have or exercise any right as surety in
competition with the Lender.

4.2 Any moneys received by the Lender in connection with this Guarantee
may be placed to the credit of a suspense account and such receipt
shall not affect the right of the Lender to claim or prove against the
Borrower (or any other person liable) for the entire amount of the
liabilities of the Borrower. Such moneys or any part may at the
Lender's option be applied in or towards discharge of such liabilities
of the Borrower in respect of the Loan Agreement as the Lender may in
its absolute discretion determine.

5. THIS Guarantee shall not be discharged nor shall the Guarantor's
liability be affected by reason of any failure or irregularity in any
security given by or on behalf of the Borrower in respect of the
moneys or liabilities hereby secured nor by any legal limitation, bar
or restrictions, disability, incapacity or want of any borrowing powers
of the Borrower or want of authority of any person appearing to be
acting for the Borrower in any matter in respect of the moneys or
liabilities hereby secured or by any supervening matters rendering the
performance of the obligations of the Borrower illegal in any
jurisdiction and such moneys or liabilities will be recoverable by the
Lender from the Guarantor as sole or principal debtor.

6.1 ANY settlement or discharge between the Guarantor and the Lender shall
be conditional upon no security or payment to the Lender by the
Borrower or any other person being avoided or reduced for any reason
and the Lender shall be entitled (subject to the limit specified in
Clause 2 hereof in the total amount recoverable under this Guarantee)
to recover the value or amount of any such security or payment from
the

<PAGE>

Guarantor subsequently as if such settlement or discharge had not
occurred.

6.2 This Guarantee is and will remain the property of the Lender.

7.1 PAYMENT shall be in the currency in which the liabilities of the
Borrower were owing or incurred or (if currency is other than
sterling) at the option of the Lender in sterling, such other
currency being converted into sterling at the spot rate of exchange of
the Lender for purchasing such currency with sterling prevailing on
the date of actual payment and the Guarantor hereby agrees to
indemnify the Lender against the full sterling price (including all
costs, charges and expenses).

7.2 All sums payable by the Guarantor under this Guarantee shall be paid:

(i) free of any restriction or condition whatsoever;

(ii) free and clear of and (except for the extent required by
law) without any deduction or withholding on account of any
tax; and

(iii) without deduction or without (except to the extent required
by law) on account of any other amount by way of set-off or
otherwise.

7.3 If at the date of receipt by the Guarantor of a demand under Clause
2.2 hereof the Guarantor is required by any law or regulation to make
any deduction or withholding (whether of tax or otherwise) from the
sum payable or transferable by the Guarantor in respect of such demand
or request then the sum so payable by the Guarantor in respect of
which such deduction, withholding or payment is required to be made
shall be increased to the extent necessary to ensure that after such
deduction, withholding or payment the Lender receives, free from any
deduction, withholding or payment so as to yield a net sum equal to
the sum which the Lender of such account would have received had no
such deduction, withholding or payment been made but so that the
aggregate of the sum or transferred, the amount of such deduction,
withholding or payment thereon and all other amounts paid or
transferred hereunder shall not in any circumstances exceed the
Maximum Amount.

8. A verifiable and documented certificate by an officer of the Lender as
-------------------------
to the amount for the time being due from the Borrower to the Lender as to
the interest after demand from time to time payable hereunder or as to its
applicable spot of exchange shall be evidence for all purposes against the
Guarantor.

<PAGE>

9.1 ANY notice or other communication required to be given:

9.1. to the lender under this Guarantee shall be addressed and delivered
to the Lender at 15 Lombard Street, London EC3V 9AU;

9.1.2 to the Guarantor shall be addressed and delivered to [
];

or in either such case at such other address and marked for such other
attention as may be notified by the relevant party to the other party from
time to time for this purpose.

9.2 Any notice or other communication to be given under this Guarantee may
be given by personal delivery or first class prepaid post, telex or
cable or facsimile transmission and shall be effective on receipt.
The Lender shall be entitled to act upon (and the Guarantor shall be
bound accordingly by) any notice or other communication reasonably
believed by the Lender to be given or made by the person or persons
duly authorized to give or make the same.

10. NO failure or delay by the Lender in exercising any right, power or
privilege under this Guarantee shall impair the same or operate as a
waiver of the same nor shall any single or partial exercise of any
right, power or privilege preclude any further exercise of the same or
the exercise of any right, power or privilege. The rights and
remedies provided in this Guarantee are cumulative and not exclusive
of any rights and remedied provided by law.

11.1 THIS deed shall be governed by and construed in accordance with
English law and it is irrevocably agreed for the exclusive benefit of
the Lender that the Courts of England are to have jurisdiction to
settle any disputes which may arise out of or in connection with this
Guarantee and that accordingly any suit, action or proceeding arising
out of or in connection with this Guarantee (in this Clause referred
to as "proceedings") may be brought in such Courts. Nothing in this
Clause shall limit the right of the Lender to take proceedings against
the Guarantor in any other court of competent jurisdiction nor shall
the taking of proceedings in one or more jurisdictions preclude the
taking of proceedings in any other jurisdiction whether concurrently
or not.

11.2 The Guarantor irrevocably appoints Sotheby's, 34-35 New Bond Street,
London, England, as its agents for the service of any proceedings in
England.

IN WITNESS WHEREOF the Guarantor has caused this Guarantee to be executed
------------------
as its deed on the day and year first before written.

<PAGE>

[THE COMMON SEAL of
SOTHEBY'S HOLDINGS INC.
was hereunto affixed in the
presence of:

/s/ Diana D. Brooks

Officer

Secretary]

[Executed as a Deed by
SOTHEBY'S HOLDINGS INC.

acting by:

/s/ Diana D. Brooks
-------------------------------
Officer
Diana D. Brooks, President

--------------------------------
Name in full

/s/ Jeffrey H. Miro
--------------------------------
/Secretary

Jeffrey H. Miro
--------------------------------
Name in full]

EXHIBIT 13

GRAPHIC APPENDIX:

Description of illustrations:

Front cover:

1.) A Six-fold Japanese Gold Screen Depicting Kabuki Dancers
sold in London for $1.6 million, setting a record for a
single Japanese screen.

2.) A double magnum of Chateau Petrus 1961 sold in London
for $13,930.

3.) Edouard Manet's Un Bar aux Folies-Bergere sold in London
for $6.8 million.

4.) A Fine and Rare Early Chippendale Carved and Figured
Mahogany Scroll-Top Highboy from the Estate of Wilbur Ross
Hubbard sold in New York for $151,000.

5.) The Autographed Manuscript of Schumann's Second Symphony
sold in London for $2.3 million, setting a record for a
manuscript of a single musical work.

6.) Childe Hassam's Poppies sold in New York for $2.6
million.

7.) Aelbert Cuyp's Orpheus Charming the Animals sold in
London for $6.5 million, setting an auction record for the
artist and a record for a Dutch Old Master landscape.

8.) A Rare and Magnificent Emerald-Cut Blue Diamond (20.17
carats) sold in New York for $9.9 million, the highest price
ever paid for a blue diamond at auction.

9.) Pablo Picasso's La Minotauromachie sold in London for
$784,150, an auction record for a Picasso print.

Inside front cover:

Sotheby's London headquarters.

Page 2:

1.) Above left: Diana D. Brooks, President and Chief
Executive Officer
A. Alfred Taubman, Chairman

2.) Below left: John L. Marion, Honorary Chairman, Sotheby's
North and South America

Page 3:

Sotheby's Holdings, Inc. Board of Directors:
Diana D. Brooks,
A. Alfred Taubman,
Max M. Fisher,
Lord Camoys,
Ambassador Walter P. Curley,

<PAGE>
The Marquess of Hartington,
The Rt. Hon. the Earl of Gowrie.

Page 4:

1.) Above left: Pie chart of geographic distribution of
auction sales in 1994.

2.) Center left: Pie chart of 1994 pre-tax income of
business segments.

3.) Lower left: Pie chart of departmental distribution of
auction sales in 1994.

4.) Upper right: Map of Sotheby's worldwide locations.

Page 5:

1.) Above: Table of selected financial highlights.

2.) Center left: Bar chart of net income over five years
($20.3 million for 1994).

3.) Center middle: Bar chart of cash dividends declared per
share over five years (.24 in 1994).

4.) Center right: Bar chart of auction revenues as percent
of auction sales (18.0% in 1994).

5.) Below: Line graph of Sotheby's twenty year auction sale
annual growth rate of 10%.

Page 6:

John Singer Sargent's Spanish Dancer from the Estate of
Wendell Cherry, established a record price for the artist at
our New York auction of American Paintings in May.

Page 7:

1.) Left: A portrait of John Sotheby, the nephew of
Sotheby's founder, Samuel Baker.

2.) Right: Claude Monet's Peupliers au Bord, de l Epte,
Effet du Soir brought $7.5 million in London in June.

Page 8:

1.) Center: Aelbert Cuyp's Orpheus Charming the Animals sold
in London in July for the record price of $6.5 million.

2.) A Standard Grip Testing Machine from the Smith
Collection of Antique Penny Arcade Machines and Related
Memorabilia sold in New York in September for $107,000.

Page 9:

<PAGE>
Sotheby's team of auctioneers:
Simon de Pury,
Melanie Clore,
William W. Stahl, Jr.,
William F. Ruprecht,
Robert C. Woolley,
Julian de la M. Thompson.

Page 10:

1.) Above: George Wachter, Head of Old Master Paintings in
New York
Warren P. Weitman, Jr., Worldwide Head of Sotheby's Business
Development.

2.) Left: Sotheby's senior Americana specialists:
Leslie Keno,
Nancy Druckman,
William Stahl,
Wendell Garrett.

3.) Right: An 18th Century K'ang-Hsi Porcelain Vase from the
Collection of Baron Guy de Rothschild sold in Monaco.

Page 11:

1.) Above center: View of drawing room from Stokesay Court.

2.) Above right: Henry Wyndham, Chairman of Sotheby's United
Kingdom

3.) Lower right: View of Palazzo Corsini in Florence, Italy.

Page 12:

1.) Above: Gustav Klimt's Dame Mit Facher sold for $11.7
million, a record for the artist.

2.) Left: Dunwalke East, the Somerset County Estate of C.
Douglas Dillon sold by Sotheby's International Realty.

Page 13:

1.) Above: A pair of lavishly crafted soup tureens (one
shown) made for the First Baron Montfort of Cambridgeshire
established a world auction record with their sale in
November in London for $1.6 million.

2.) Lower left: An Attic Red-figure Amphora of Panathenaic
Form was sold in December to the Louvre for $541,500.

3.) Lower right: A detail of the Attic Red-figure Amphora.

<PAGE>
Page 14:

1.) Above right: Joseph Shoemaker Russell's View of Union
or Main Street New Bedford from the Little Collection
estimated at $6/8,000 sold in New York for $123,500.

2.) Lower right: A double magnum of Chateau Petrus 1961 sold
in London for $13,930.

3.) Left: A group of photographs illustrating several
marketing initiatives.

Page 15:

1.) Above: Zhang Daqian's Dawning Light in Autumn Gorges
sold in Hong Kong in March for $1.1 million.

2.) Center: A Six-fold Japanese Gold Screen Depicting Kabuki
Dancers sold in London for $1.6 million, setting a record
for a single Japanese screen.

Page 16:

1.) Above right: John D. Block, Head of Jewelry in New York
Dede Brooks.

2.) Lower left: Thomas Gainsborough's Portrait of Georgiana,
Duchess of Devonshire from the Estate of Mabel Satterlee
Ingalls was purchased by the Chatsworth House Trust.

Page 17:
1.) Diamond necklace by Harry Winston sold for $4.4 million
in New York, setting a world record for a necklace.

2.) Inset: David Bennett, Head of Jewelry in Europe.

Page 18:

1.) Above (clockwise):
Annibale Carracci's Boy Drinking which brought $2.2 million.
Diego Rivera's Couteau et Fruit devant la Fenetre brought
$2.2 million
Childe Hassam's Poppies sold for $2.6 million
The Nicholas Biddle Family Chippendale Carved Mahogany
Lowboy sold for $387,500

2.) Lower Left: The Autographed Manuscript of Robert
Schumann's Second Symphony, Opus 61 sold in London in
December for $2.3 million.

Inside back cover:

Sotheby's New York headquarters.

Back cover:

<PAGE>
1.) A Standard Grip Testing Machine by the Beverly Machine
Company from the Smith Collection of Antique Penny Arcade
Machines and Related Memorabilia sold in New York for
$107,000.

2.) John Orne Johnson Frost's The March into Boston from
Marblehead April from the Little Collection sold in New York
for $486,500, setting an auction record for the artist.

3.) Edward Steichen's A Bee on a Sunflower sold in New York
for $112,500, an auction record for the artist.

4.) An Attic Red-figure Amphora of Panathenaic Form
attributed to the Berlin Painter sold in New York for
$541,500.

5.) The sale of the contents of Stokesay Court in Shropshire
brought $6.7 million.

6.) The Koloman Moser Cabinet sold in London for $540,690,
setting an auction record for any piece of Vienna 1900
furniture.

7.) John Singer Sargent's Spanish Dancer sold in New York
for $7.6 million, setting an auction record for the artist.

8.) Joseph Shoemaker Russell's View of Union or Main Street
New Bedford from the Little Collection sold in New York for
$123,500.

9.) A Pair of Lavishly Crafted Silver Soup Tureens (one
shown) belonging to Henry Bromley, First Baron Montfort of
Horseheath Hall Cambridgeshire, sold in London for $1.6
million.

10.) David Smith's Cubi V sold in New York for $4.1 million,
setting an auction record for the artist.

<PAGE>

Sotheby's Holdings, Inc.1994 ANNUAL REPORT

Table of contents
2 Letter to Shareholders
4 Sotheby's Worldwide Information
7 Sotheby's Franchise
14 Sotheby's Franchise in
the Future
40 Sotheby's Holdings, Inc. Officers and
Worldwide Auction Locations
41 Sotheby's Worldwide Management
42 Shareholder Information

Financials
19 Selected Financial Data
20 Management's Discussion and Analysis
of Results of Operations and Financial
Condition
25 Consolidated Balance Sheets
26 Consolidated Statements of Income
27 Consolidated Statement of Changes in
Shareholders' Equity
28 Consolidated Statements of Cash Flows
29 Notes to Consolidated Financial
Statements
39 Independent Auditors' Report
39 Report of Management
39 Audit and Compensation Committee Chairman's
Letter

A Standard Grip Testing Machine by the Beverly Machine Company
from the Smith Collection of Antique Penny Arcade Machines and
Related Memorabilia sold in New York for $107,000.

John Orne Johnson Frost's The March into Boston from Marblehead
April from the Little Collection sold in New York for $486,500,
setting an auction record for the artist.

Edward Steichen's A Bee on a Sunflower sold in New York for
$112,500, an auction record for the artist.

An Attic Red-figure Amphora of Panathenaic Form attributed to the
Berlin Painter sold in New York for $541,500.

The sale of the contents of Stokesay Court in Shropshire brought
$6.7 million

The Koloman Moser Cabinet sold in London for $540,690,
setting an auction record for any piece of Vienna 1900 furniture.
Edward Steichen's A Bee on a Sunflower sold in New York for
$112,500, an auction record for the artist.

An Attic Red-figure Amphora of Panathenaic Form attributed to the
Berlin Painter sold in New York for $541,500.

<PAGE>

The sale of the contents of Stokesay Court in Shropshire brought
$6.7 million

The Koloman Moser Cabinet sold in London for $540,690,
setting an auction record for any piece of Vienna 1900 furniture.

David Smith's Cubi V sold in New York for $4.1 million, setting
an auction record for the artist.

A Six-Fold Japanese Gold Screen depicting Kabuki Dancers sold in
London for $1.6 million, setting a record for a single Japanese
screen.

A Double Magnum of Chateau Petrus 1961 sold in London for
$13,930.

Edouard Manet's Un Bar Aux Folies-Bergere sold in London for
$6.8 million.

A Fine and Rare Early Chippendale Carved and Figured Mahogany
Scroll-Top Highboy from the Estate of Wilbur Ross Hubbard sold in
New York for $151,000.

The Autographed Manuscript of Schumann's Second Symphony sold in
London for $2.3 million, setting a record for a manuscript of a
single musical work.

Childe Hassam's Poppies sold in New York for $2.6 million..

Aelbert Cuyp's Orpheus Charming the animals sold in London for
$6.5 million, setting an auction record for the artist and a
record for a Dutch Old Master landscape.

A Rare and Magnificent Emerald-Cut Blue Diamond (20.17 carats)
sold in New York for $9.9 million, the highest price ever paid
for a blue diamond at auction.

Pablo Picasso's La Minotauromachie sold in London for $784,150,
an auction record for a picasso print .

2
<PAGE>

To Our Shareholders

This year marked our 250th Anniversary in the auction
business. While this important milestone gave us an opportunity
to reflect on the history of the Company, it also enabled us to
focus on the future of Sotheby's. Our first auction in 1744, a
sale of books, was conducted by our founder Samuel Baker, and
since those modest beginnings Sotheby's has developed into a
company which now conducts auctions in over 70 collecting
categories with $1.3 billion in annual auction sales. Today we
are a world-class franchise with global name recognition that
extends beyond the 40 countries in North and South America,
Africa, Asia, Europe and the Middle East in which we have a
presence. While our extensive worldwide network allows us to
participate in many markets, our success is really made possible
through our international expertise, strong and creative
management and commitment to quality client service. 1994 also
marked a year of new beginnings for the leadership of the
Company. Our new management team, under the direction of Diana
D. Brooks, who became President and Chief Executive Officer in
April 1994, has developed over the last two years into an
integrated multi-national team whose broad experience and strong
leadership will direct our company into the 21st century.

Our clients are crucial to our success and it is essential
that we maintain the same standard of excellence in client
service throughout the world. Sotheby's goal is to have an
international approach to client services so that a client can go
into our office in Tokyo or Los Angeles or Paris and receive a
consistently high level of professionalism and service that draws
on our internationalism, yet remains sensitive and responsive to
local customs and needs.

This year also marked another major milestone in Sotheby's
history. In December, John L. Marion announced his decision to
retire as Chairman of Sotheby's North and South America. John
enjoyed a celebrated 35-year career with the Company holding a
number of key positions, most notably as our American Chairman
and principal auctioneer. Throughout his career, John managed
many important client relationships and was committed to making
the auction business more accessible and understandable to the
general public. We extend our gratitude to John for his many
years of service and contributions to the Company and we are
pleased that he will continue as Honorary Chairman of Sotheby's
North and South America and as a member of our international
Advisory Board. We look forward to many future years of
association with him, and we are grateful that his high standards
of both professionalism and auctioneering are an inspiration to
the talented next generation of Sotheby's staff around the world.

We were pleased to welcome the Marquess of Hartington to our
Board of Directors in September 1994. With his experience in
business and knowledge and appreciation of art we believe that he
will be an invaluable addition to Sotheby's.

<PAGE>

We are happy to report that we increased our profitability
in 1994 given that our auction sales increased by a modest $5
million for the year. Net income was $20.3 million ($33.8
million pre-tax) and earnings per share were $0.36, compared to
$19.3 million, or $0.35 per share in 1993. The Board of
Directors declared four quarterly dividends of $0.06 per share,
totaling $0.24 per share for the year compared to $0.33 per share
declared with respect to 1993.

Growth in auction sales in 1994 throughout a wide variety of
collecting categories in the fine and decorative arts confirmed
signs of continued recovery in the international art auction
market. Sotheby's combined sales in all categories, excluding
Impressionist and Modern art and Jewelry, grew by over 13% this
year. This, despite a combined decrease of 22% in sales of these
two major categories, enabled us to maintain the same level of
auction sales in 1994. Strength in auction sales in two
geographic areas also contributed to growth, with sales in the
United Kingdom up 11% and Asian auction sales improving by 30%.
Successful single-owner collections made a significant
contribution to 1994 auction sales, among them the Wendell Cherry
Collection ($39.2 million), the Bertram K. and Nina Fletcher
Little Collection ($12.3 million), the Estate of Mr. and Mrs. H.
Gates Lloyd ($21.7 million), the House Sale at Stokesay Court
($6.7 million) and the Peter Jay Sharp Collection ($19.3
million).

We are optimistic about prospects for the 1995 spring
season. The year has begun well, with strong sales that include
Property from The New-York Historical Society. In May we will
sell American art, Latin American art, Contemporary art and 19th
Century European paintings from the IBM Foundation.
Additionally, we have secured important Impressionist, Modern and
American art for our spring sales, including outstanding
paintings from the Stralem Collection and the Estate of Mrs. John
Barry Ryan, which we hope will inject renewed strength into the
Impressionist and Modern art market. We are encouraged by the
level of commitments we have already received at this early stage
of 1995 for other exciting auctions that we will hold throughout
the year.

As we begin this new and exciting era of Sotheby's history
we are committed to providing excellent service to our clients
throughout the world, creating a stimulating and rewarding
environment for our employees and to increasing shareholder
value. We are grateful to all of them and to you, our
shareholders, for your continued support.

A. Alfred Taubman Diana D. Brooks
Chairman, Sotheby's Holdings, Inc. President and Chief Executive
Officer,
Sotheby's Holdings, Inc.

<PAGE>

Sotheby's Worldwide Information

Since its establishment in 1744, Sotheby's has become a world
renowned franchise with global name recognition in a unique
industry. In addition to becoming a preeminent
auctioneer of art and objects, Sotheby's is engaged in
art-related financing and the marketing and brokering of luxury
real estate. The following pages provide selected information
about the Sotheby's franchise, 1994 financial facts, and a
summary of Sotheby's Holdings, Inc. five-year financial history.

Sotheby's Reach

Today, our reach extends to 43 countries worldwide and we have 17
auction locations.

Auction Information

In 1994 we held over 530 auctions worldwide in 76 collecting
categories. We sold 163,000 lots with an average lot price of
$8,200 and 82% of the total lots sold were below $5,000. Over the
last ten years our sales have exceeded $15 billion and we have
sold 1.5 million lots.

Sotheby's Specialists

Our specialist staff numbers approximately 400 of our total
staff. Our specialist department heads have an average of nearly
20 years of experience at Sotheby's.

Year ended December 31, 1994 1993 1992 1991 1990
(Thousands of dollars,
except per share data)
Results of Operations:
<S> <C> <C> <C> <C> <C>
Auction sales $1,330,001 $1,325,334 $1,131,601 $1,104,391 $2,446,453
Auction revenues $238,770 $234,972 $200,883 $193,905 $347,216
Auction income before
taxes 34,043 34,233 4,021 18,896 154,351
Consolidated revenues
259,565 252,330 224,970 222,358 378,424
Consolidated income
before taxes 33,765 32,157 6,491 21,498 154,561
Net income $20,259 $19,294 $3,960 $13,114 $94,682
Earnings per share $0.36 $0.35 $0.07 $0.25 $1.66
Balance sheet:
Net debt $1,416 $(53,257) $5,157 $54,400 $3,675
Shareholders' equity
211,052 194,632 198,195 246,328 278,199
</TABLE>

Sotheby's Franchise

Tradition, Strength and Service. . .

Since our founding in London as a bookseller in 1744,
Sotheby's has steadily grown, diversified and strengthened to

<PAGE>

become the world's preeminent auction company. Today we conduct
more than 500 auctions annually throughout the world in over 70
collecting areas. Yet our role in the art world extends far
beyond that of international auctioneer into such complementary
fields as real estate, financial services, restoration, museum
services, educational studies, appraisals, and trust and estate
services.

The international art market is complex and highly
sophisticated, blending together very different cultural,
aesthetic and professional sensibilities. As a company with an
international presence, we understand these very different
perspectives and are responsive to changes. Our goal is to
operate the Company with a multinational approach, providing our
clients with consistent service throughout the world, while
retaining an appreciation for and responding to local needs.

As we reflect upon our 250-year history we remain committed
to the same high level of integrity, depth of knowledge and
client service that inspired us back in the eighteenth century.
With our new worldwide management team working together as an
integrated unit to provide the highest quality services to our
clients throughout the world, we are confident of continuing this
long tradition, thus ensuring our preeminence in the global art
market of the future.

Auction Performance. . .

Over the last ten years Sotheby's has sold property at
auction worth more than $15 billion, with the total number of
lots sold in excess of 1.5 million and an average annual sales
growth of 9%. We have established the records for the
highest-ever sales in such important fields as Impressionist and
Modern art, Contemporary art and Jewelry, and in 1994 we
established the highest sale totals in the fields of Latin
American art and Americana. We hold a long list of diverse
auction records for such renowned artists as Pierre-Auguste
Renoir, Paul Cezanne, Willem DeKooning, Claude Monet and Jasper
Johns as well as the highest price ever paid for an American
painting. Sotheby's holds the world auction records for a
diamond, ruby, sapphire, emerald and pearls and in 1994 set
records for a blue diamond and a necklace.

Diversity. . .

Our diversity enables us to offer clients, both buyers and
sellers alike, the widest range of collecting categories and
supporting auction-related services to fully serve their most
demanding needs. For the buyer, we can offer auctions throughout
the world of property as varied as Old Master paintings and Penny
Arcade machines. For the seller, we can provide a complete
appraisal of their property, perform restoration work as needed
and then offer their works for sale at the most appropriate
specialized Sotheby's auction. We can also arrange financing for

<PAGE>

the seller as well as the services of our International Realty
Company.

The international art market is made up of many individual
markets which operate independently within the larger overall art
market. A variety of economic and other factors affects each of
these markets, creating an environment in which specific markets
may fluctuate at different times. Our diversification across so
many collecting categories allows us to maintain financial
stability despite these changes within individual sectors of the
overall art market. An excellent example of this stability was
provided during the past year. While sales in the Impressionist
and Modern art and Jewelry categories declined by a combined 22%,
other areas such as Old Master paintings, American paintings,
19th Century paintings and Latin American art increased by more
than enough to offset this decline.

-Auctioneering. . .

Auctioneering has a noble tradition at Sotheby's. The long
history of our firm is written in memorable sales and great
auctioneers. We have built a strong international team of
auctioneers, many of whom are senior specialists with extensive
knowledge of the clients as well as the property. This senior
team has a combined total of over 250 years of service at
Sotheby's, and their skill and professionalism in the rostrum are
often cited as key factors to the success of our sales. Because
of their outstanding skills, we are able to provide excellent
auctioneers for our many sales throughout the world.

-Expertise. . .

Knowledge and expertise are the core of our business. Our
specialist staff throughout the world numbers in excess of 400
and our worldwide department heads have been with Sotheby's on
average nearly twenty years. Many hold doctorates and are
renowned authors and lecturers. Their relationships with clients
as well as other professionals in the art world are an invaluable
part of our success and franchise value.

The quality and variety of great works of art which pass
through our galleries every season rival most museums. The vast
numbers of objects seen by our specialists over time enable them
to constantly develop their area of expertise and provide an
excellent training ground for future specialists. The importance
of professionally illustrating and footnoting works of art in the
sale catalogue is increased by the fact that some of these works
may never be seen in public again. For collectors, dealers and
museums alike, our catalogues provide an absorbing and vital
source of information and reference.

Single-owner collections, which often represent a lifetime
of acquiring artwork in a particular field, have tremendous
appeal in the marketplace and can define the character and

<PAGE>

success of a particular auction season. Sotheby's has an
outstanding record in selling single-owner collections. We have
conducted seven of the ten largest single-owner sales in auction
history, including the record-setting Dorrance Collection in
1989, which brought $135.3 million.

In 1994 single-owner collections again made a significant
contribution to our sales. Among the many outstanding
collections offered during the year, in a wide range of
collecting areas, were the Wendell Cherry Collection (French and
English furniture and decorations), the Collection of Mr. and
Mrs. H. Gates Lloyd (Modern and Contemporary art), the Collection
of Madame Helene Beaumont (Jewelry), the Peter Jay Sharp
Collection (Old Master paintings), the Property of Baron Guy de
Rothschild (furniture and decorations), the Bertram K. and Nina
Fletcher Little Collection (Americana) and the Dr. Otto Schafer
Collection (Italian books). Some of these sales, like the Little
Collection, represented the finest collections of their kind ever
to appear at auction.

Looking forward to 1995, we have already secured a number of
major collections which we believe will help us continue our
tradition in this important area. Among the major highlights of
our spring season, for example, will be the auctions of property
from the IBM Foundation, which will be sold in May in four
important collecting categories: American art, Latin American
art, Contemporary art and 19th Century European paintings.
Featured in our Impressionist and Modern art auction this spring
is the Estate of Mrs. John Barry Ryan and the Stralem Collection
of Impressionist, early Modern and American art, one of the most
important and attractive groups of Impressionist and Modern
paintings to appear on the market in the last five years. Through
innovative marketing and promotion, the kind that can
dramatically transform a sale into an exciting auction event, we
hope to continue building and broadening our presence in the
world art market by offering the finest collections.

-House Sales . .

Sotheby's inaugurated country house sales in 1929, when we
sold the contents of Kinmel Park, a baronial mansion in Wales
with no fewer than fifty-seven bedrooms. Through the years we
have continued this tradition with many other landmark house
sales that have provided not only an important source of revenue
but have attracted considerable publicity, sometimes
internationally, thus bringing new clients to the firm. In
Europe these sales have included the contents of Baron Lionel
Nathan de Rothschild's London residence in 1937 as well as the
contents of Mentmore Towers, the spectacular Buckinghamshire
home of the Earl of Rosebery, which took place over ten days in
1977 and brought $10.9 million, by far the highest figure for a
house sale at the time. Memorable house sales in America have
included Mrs. Geraldine Rockefeller Dodge's estate in New Jersey

<PAGE>

and the Estate of Colonel and Mrs. Garbisch in Maryland, Pokety
Farms.

Following the tremendous success of the nine-day von Thurn
und Taxis house sale in Bavaria which brought $19.3 million in
1993, Sotheby's continued its tradition of house sales in 1994
with an important auction of more than 5,000 objects from
Stokesay Court, one of Britain's grandest 19th century mansions.
In preparing for the sale, Sotheby's reassembled the rooms of
Stokesay Court as closely as possible to their original
furnishing and decoration, with the help of old photographs as
well as an 1898 inventory. Another major house sale of 1994
involved property that had been stored for many years at the
Palazzo Corsini in Florence. Conducted on the instructions of
the Prince and Princess Corsini, with the proceeds earmarked for
restoration, the sale achieved $4.4 million, more than double its
high estimate of $1.6 million. We are now planning additional
house sales for 1995. One of these, the Deyerle Collection of
Americana, will be conducted in Charlottesville, Virginia, and
promises to be one of the most important house sales ever held in
America.

-Broader Reach Through Realty Services. . .

By their very nature, the collectors who visit Sotheby's
salerooms are often the same people who are searching for
beautiful homes in which to house their works of art. Sotheby's
International Realty was founded in 1976 to meet this
requirement, specializing in properties of distinction across a
broad price range. Today, Sotheby's Realty operates in 17
countries, with 8 regional or representative offices, and
maintains a network of 192 affiliates around the globe, making it
one of the largest and most prominent realty firms in the world.
Sotheby's Realty's sales for the last five years totaled $2.2
billion, and the average sale price in 1994 was $1.25 million,
the highest average since 1990. Sotheby's International Realty
had a very profitable year in 1994, with pre-tax income of $3.0
million.

With the addition in 1995 of a direct brokerage office in
Beverly Hills, California, we believe that this segment of our
business will continue to grow. The new office, which will share
our new and enlarged auction company premises, will represent a
significant expansion of our realty operations in the United
States, strengthening our commitment to the Los Angeles area. In
1995, Sotheby's Realty will also open an office in Hong Kong, our
first in Asia, which will operate mainly as a referral office.
We believe that this new realty office will provide another
important means of broadening our client base in that region of
the world.

-Flexibility in Financial Services.

Sotheby's Financial Services continues to be an important
and profitable adjunct to our main activity of fine art
auctioneering. Through it we are able to enhance our client

<PAGE>

services and gain important consignments by offering advance
funding for works of art to be sold at Sotheby's. We will also
provide loans for collectors, museums and dealers secured by
works of art not intended for sale. We pioneered this service in
the auction business and continue to operate it in a very
conservative and careful manner. As the art market continues to
grow we believe that demand for financing will also increase,
making this area one of future growth potential for Sotheby's.

-Sotheby's Franchise In the Future
Growth Opportunities
In the United States...

The United States represents an extraordinary opportunity
for growth in the art auction market, and Sotheby's continues to
seek ways of strengthening our presence in this region. The
United States has a large population of wealthy individuals with
no experience in buying works of art at auction. Additionally,
more than 80% of our lots sell for less than $5,000, an amount
which we believe is within the reach of many individuals.

We believe that we can make the auction business more
accessible to a much larger number of individuals in the United
States. In the United Kingdom, by comparison, there is a more
established tradition of collecting and of participating at
auction, and hence broader and deeper support of the auction
market. We believe the same could become true of the U.S.
market. Through creative marketing programs we believe we can
stimulate broader participation in the auction process, thus
creating a large growth opportunity in this market. Such special
marketing initiatives as our Young Collectors Group,
Conversations at Sotheby's, as well as numerous educational
programs and field trips, help us to build this market. This
year we began accepting the American Express Card for payment at
our auctions throughout the world and have launched a number of
marketing initiatives with American Express. Sotheby's has long
been a marketing innovator in the auction world, and we feel
certain of our success in this venture over time. We have
recently appointed a new worldwide marketing director, Suzanne
McMillan, who has a strong background in specialized retail
marketing, to strengthen our position in this area.

In Continental Europe...

In Continental Europe, where over many centuries great
collections have been formed and dispersed, there is a tradition
of collecting through auctions. We believe there remains ample
opportunity for growth across all countries and in all fields of
collecting. Sotheby's is increasingly recognized throughout
Europe as a franchise synonymous with excellence. The continued
strengthening of our franchise in Europe will enable us to expand
on our successes in this region and to develop new initiatives by
holding more house sales, similar to those held in England,
Germany and Italy in the last few years, and by building on the
strong sales we have held in Switzerland, notably our

<PAGE>

record-breaking $68.5 million Jewelry auction. In France, where
current restrictions on non-French companies prohibit us from
holding sales, the potential market for Sotheby's is vast. In
1994, for example, the Paris auction market generated in excess
of $600 million in sales. We look forward to participating in
this important market once these restrictions have been lifted.

Throughout Asia. . .

Sotheby's was the first major auction house to enter the
Asian market twenty years ago, and we have taken several steps to
increase our name recognition in this region. Our Asian
philosophy is to build a strong leadership team in the Far East
who can manage the local needs and respond to opportunities in
the region while preparing for the future by configuring
operations in key locations in the most cost-efficient manner.

Asia is extremely important as a source of new buyers in the
art market. In 1994, we took several strategic marketing
initiatives to broaden our opportunities in this region. These
included teleconferencing our Hong Kong auctions to Singapore and
expanding the knowledge of and exposure to Western Jewelry
auctions through jewelry exhibitions in Malaysia. We also
appointed new representatives in Malaysia and Shanghai in 1994 as
well as a new associate in Seoul, thus strengthening our
representation in Asia.

In Japan...

Japan has a large economy with a population of individuals
who have demonstrated an affinity toward collecting Western art,
but who are not currently participating in the market. Japanese
buying in the 1980s represented an important component of our
sales, both in the number of lots purchased and in the number of
individual purchasers. While the Japanese have withdrawn from
the auction market at the 1980's level, most notably in the area
of Impressionist and Modern art, we expect that Japanese
participation will grow as Japan recovers from economic
recession.

We have recently named a new Managing Director of our
Japanese operations, Tetsuji Shibayama, who comes to Sotheby's
with an impressive range of business experience both in Japan and
the United States. With this addition to the strong team we
already have in place in Japan, we believe that we are well
positioned for future growth in this market. Additionally, in
1994, we opened new and larger premises in Tokyo which will
enable us to host more frequent exhibitions and special events.

Jewelry...

We believe that Jewelry, a field in which we have a long and
successful tradition, represents a vital opportunity sector for
Sotheby's. Our Jewelry sales reached record-breaking levels in
1993 - more than $200 million. While Jewelry sales results for

<PAGE>

1994 were not quite as high as 1993, totaling more than $180
million, the market remained strong, especially in New York.

Jewelry has been an important market for Sotheby's
historically and our record-breaking performances in recent
years, combined with our ability to successfully offer
collections such as that of Helene Beaumont in Geneva and Mrs.
Harry Winston in New York, have enabled us to develop
considerable name recognition in this field. With its steady,
often spectacular growth in sales over the years, Jewelry has now
become the second-highest collecting category at Sotheby's.

Fine Arts...

Historically, overall art market sales growth has been
driven by an expansion in the paintings categories, and the fine
arts continue to make significant contributions to our sales
growth. In 1994, paintings categories comprised $595 million of
our total sales, greatly surpassing their performance in the
previous year. In several cases, our various-owners sales were
much enhanced by our ability to simultaneously attract a major
single-owner collection, such as the property of Mr. and Mrs. H.
Gates Lloyd in the field of Modern and Contemporary art, thus
greatly adding to the bidding environment.

The breadth and diversity of our paintings categories
enables us to maintain balanced overall results. For example, in
1993, the Impressionist and Modern art sector grew 71% to $258.0
million, while all of the other fine art categories remained
unchanged. By contrast, our sales in Impressionist and Modern
art declined by 27% in 1994, while several other paintings
categories grew at impressive rates, thus offsetting the decline
in Impressionist sales.

Decorative Arts...

Sotheby's has always been committed to maintaining the
highest level of expertise in the decorative arts, a sector of
the art market that includes such diverse property as
Antiquities, Furniture, Art Nouveau and Art Deco, Asian art,
Porcelain, Rugs, Silver and Tribal art. Our sales in these
categories have traditionally provided underlying stability to
our overall auction sales, and this continued to be true in 1994
when the decorative arts increased by 7% over 1993.

During the year several categories had a significant
increase over the prior year, notably Chinese works of art (up
22%) and all of the furniture categories (up 19%). Single-owner
collections, such as the French and English furniture and
decorations from the Estate of Wendell Cherry and French
furniture, Renaissance bronzes and books from the Estate of Peter
Jay Sharp, were extremely successful. Most notable was our
performance in Americana, where we offered the Bertram K. and
Nina Fletcher Little Collection. To build excitement in this

<PAGE>

historic sale, Sotheby's presented an extensive educational
studies program on the Little Collection, and the lavishly
illustrated catalogue was hailed as a landmark in Americana
scholarship. As an example of Sotheby's marketing expertise, the
Little sale drew together Sotheby's resources and strengths in a
manner that not only paid fitting tribute to a great collection
but also helped yield the greatest financial return.

-Building For the Future. . .

Drawing on the experience of our long tradition, Sotheby's
is ideally positioned for growth throughout the world. We
believe that the strength of the Sotheby's franchise in the
present will be enhanced in the future by our talented management
team, by creative and innovative initiatives and by our extensive
global reach. As we enter our 251st year of business, we are
enthusiastic about the future of our firm and feel confident that
the programs we have put into place will strengthen the Sotheby's
franchise in years to come.

<PAGE>

Year ended December 31, 1994 1993 1992 1991 1990
(Thousands of dollars,
except per share data)
<S> <C> <C> <C> <C> <C>
Results of Operations:
Auction
Auction sales $1,330,001 $1,325,334 $1,131,601 $1,104,391 $2,446,453

Revenues 238,770 $234,972 $200,883 $193,905 $347,216
Restructuring charge (4,855)
Operating income (loss) 30,208 31,466 (1,993) 12,079 139,077
Income before taxes 34,043 34,233 4,021 18,896 154,351

Financial Services
Revenues 9,246 7,600 14,462 20,620 23,085
Income before taxes 3,676 2,803 5,211 7,807 8,053

Real Estate
Revenues 11,549 9,758 9,625 7,833 8,123
Income before taxes 3,002 2,071 2,091 312 52
Corporate operating
expenses (6,792) (7,370) (6,177) (5,545) (7,204)
Other non-operating
income (expense) (164) 420 1,345 28 (691)

Consolidated
Revenues 259,565 252,330 224,970 222,358 378,424
Operating income
(loss) 30,094 28,970 (868) 14,653 139,978
Income before taxes 33,765 32,157 6,491 21,498 154,561

Net Income $20,259 $19,294 $3,960 $13,114 $94,682
Earnings Per Share $0.36 $0.35 $0.07 $0.25 $1.66
Cash dividends
declared per share $0.24 $0.42 $0.60 $0.95 $1.45

December 31, 1994 1993 1992 1991 1990
(Thousands of dollars)

Balance Sheet:
Working capital1 $104,961 $94,616 $148,947 $186,932 $144,357
Total assets1 557,084 559,356 577,657 650,286 826,051
Commercial paper 27,500 34,000 86,400 82,670 40,000
Shareholders' equity 211,052 194,632 198,195 246,328 278,199

Auction sales represent sales at the hammer price plus buyer's premium.

1 Prior year amounts have been restated to conform to current year's
presentation.
</TABLE>

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION

Results of Operations
Years Ended December 31, 1994 and 1993

Auction Sotheby's Holdings, Inc. (together with its subsidiaries, the
"Company") is the world's leading fine art auctioneer, specializing in
paintings, jewelry, decorative art, collectibles and a wide range
of other property. Auction sales for the Company totaled $1,330.0 million
during 1994, an increase of $4.7 million over the prior year. Decreases in
sales of Impressionist and Modern art as well as Jewelry were offset by
combined growth of 13% from other collecting categories. Auction sales
recorded by the Company's foreign operations were positively affected by
translation to U.S. dollars which increased auction sales by $21.9 million,
or 2%.

Following is a geographical breakdown of the Company's auction sales for
1994 and 1993 (in thousands):

1994 1993

North America $ 666,301 $ 654,984
Europe 608,291 627,475
Asia 55,409 42,875
Total $ 1,330,001 $ 1,325,334

Sales in the United Kingdom ("U.K.") and North America improved modestly
during 1994, with sales growth of $41.7 million (11%) and $11.3 million
(2%), respectively. Auction sales totaled $430.4 million in the U.K. for
1994 compared to $388.7 million in the prior year. Excluding the impact of
foreign currency movements, sales in the U.K. increased by $28.8 million,
or 7%. Sales growth in the U.K. resulted largely from sales of Old Master
paintings in London. The modest increase in North American auction
sales was principally due to improvements in a broad range of collecting
categories as well as single-owner sales offset, in part, by a decline in
the sale of Impressionist and Modern art. Sales in Asia grew by $12.5
million, or 29%, as a result of increased sales in Hong Kong and Taiwan.
Sales in continental Europe (the "Continent") declined $60.9 million, or
26%, during 1994. Excluding the favorable impact of currency movements,
sales on the Continent declined $69.2 million, or 29%, due mostly to
lower Jewelry sales in Switzerland.

Worldwide revenues from auction operations ("Auction") increased $3.8
million, or 2%, compared to the prior year. Auction revenues were positively
affected by increased commissions (which are principally buyer's premium,
vendor's commission and expense recoveries). The increase in commissions is
largely due to a change in the relative mix of sales toward property with
lower average values which yield higher average commission rates. Reductions
in other non-commission revenue categories partially offset the impact of
increased commissions. Excluding the impact of translating revenues outside
North America into U.S. dollars, Auction revenues were essentially flat
when compared to the prior year.

<PAGE>

Direct costs of services, consisting largely of catalogue production,
distribution and mailing costs, increased by $1.3 million during 1994, or
3%, when compared to 1993. Most of this increase was due to movements in
currency. Direct costs of services as a percentage of sales was 3.7% in 1994
compared to 3.6% in 1993.

Salaries and related costs increased $6.9 million, or 9%, in 1994. Excluding
the impact of foreign currency movements, salaries and related costs increased
$5.8 million, or 7%. This increase is largely due to salary increases
following several years of very restrained compensation growth and, to a
lesser extent, to modest increases in staff.

General and administrative expenses decreased $1.0 million during 1994, or
approximately 1% when compared to the prior year. Excluding the impact of
foreign currency movements, general and administrative costs actually
declined 3% year to year. This decrease reflects lower levels of various
provisions for reserves in 1994 when compared to 1993 as well as continued
cost control efforts.

Inventory and other auction-related activities generated pre-tax income of
$1.4 million in 1994, compared to a pre-tax loss of $0.9 million in the
prior year. These activities include: net gains on sales of inventory
(including gains on sales of inventory obtained as a result of the auction
process); the Company's share of earnings from its investment in the
Acquavella Modern Art Partnership ("AMA"); net revenue earned from
guarantees; and provisions for write-downs of inventory to estimated
realizable value. The year-to-year increase is mostly due to lower levels
of inventory provisions for write-downs to estimated realizable value.

Auction recorded operating income of $30.2 million in 1994, a decrease of
$1.3 million compared to operating income of $31.5 million for 1993.
Excluding the favorable impact of currency movements, Auction operating
income declined $2.1 million when compared to 1993. The decrease is
principally due to increased operating expenses, most notably salaries and
related costs, as discussed above.

Auction's interest income, which is earned on short-term investments of
surplus cash, declined by $0.2 million in 1994 compared to 1993 due
primarily to a lower level of invested funds when compared to the
prior year. Interest expense is incurred on borrowings to fund short-term
cash requirements, including the client loan portfolio of the Company's
subsidiary, Sotheby's Financial Services, Inc. ("Financial Services"). The
decrease of $0.3 million in the current year is largely due to a lower
average level of commercial paper borrowings compared to 1993, offset, in
part, by higher average interest rates.

16
<PAGE>

As noted above, Auction funds a portion of the client loan portfolio of
Financial Services. Net interest charged to Financial Services on borrowings
from Auction totaled $2.9 million and $2.0 million in 1994 and 1993,
respectively (see Note C to the Consolidated Financial Statements). The 1994
amount of $2.9 million represents interest income of $4.0 million on
borrowings by Financial Services from Auction, net of interest expense on
special financing programs of $1.1 million charged by Financial Services to
Auction. The increase during 1994 is largely due to a higher level of
auction funding required for the Financial Services loan portfolio, and,
to a lesser extent, higher interest rates in 1994. These factors
were partly offset by an increase in loans under special financing programs
provided by Financial Services to Auction.

Financial Services Revenues from Financial Services increased to $9.2
million in 1994 from $7.6 million in 1993 due to an increase in the average
outstanding loan portfolio as well as higher rates of interest earned on
outstanding loans. Average month-end portfolio balances for the years ended
December 31, 1994 and 1993 were approximately $125.9 million and $112.2
million, respectively.

Income before taxes increased $0.9 million, or 31%, in 1994 due to the
higher level of revenues discussed above as well as lower levels of various
general and administrative expenses.

Real Estate Revenues from Real Estate increased to $11.5 million in 1994
from $9.8 million in 1993. The increase reflects a higher level of property
sales when compared to the prior year. Operating expenses also increased
during the current year, from $7.7 million in 1993 to $8.5 million in 1994,
due mostly to increased marketing costs as well as salaries and related
costs. Income before taxes increased $0.9 million to $3.0 million in
1994.

Corporate Corporate operating expenses of $6.8 million during 1994 were
$0.6 million lower than 1993. This decrease is largely due to costs
associated with severance in 1993 which did not recur in the current year
as well as a reduction in professional fees, which include audit, tax,
legal, consulting and other professional fees.

Income Taxes The Company's income taxes for the year ended December 31, 1994
increased $0.6 million due to the slightly higher level of earnings in 1994
when compared to 1993. Higher earnings during 1994 in certain jurisdictions
were offset by lower earnings in others (see Note I to the Consolidated
Financial Statements).

Net Income and Earnings Per Share Net income for 1994 was $20.3 million, a
5% increase when compared to net income of $19.3 million for 1993. Excluding
favorable movements in foreign currencies, net income increased less than
1%. Earnings per share increased from $0.35 per share in 1993 to $0.36 per

<PAGE>

share in 1994. The percentage increase in earnings per share was slightly
less than the 5% increase in net income due to an increase in the number
of weighted average shares in 1994 when compared to 1993.

Results of Operations
Years Ended December 31, 1993 and 1992

Auction Auction sales for the Company totaled $1,325.3 million during 1993,
an increase of $193.7 million, or 17%, over the previous year. Higher sales
volume was responsible for $148.0 million of the increase, while the
remaining $45.7 million of growth resulted from the increase in the rate of
buyer's premium. Prior to 1993, in most locations the buyer's premium had
been 10% of the hammer price on any lot sold. Effective January 1, 1993,
the buyer's premium increased to 15% on lots sold for $50,000 or less in
North America. On lots of higher value, 15% is charged on the first $50,000
and 10% thereafter. Generally, similar structures were simultaneously
implemented throughout most of the rest of Sotheby's auction operations.
The increase in 1993 auction sales was driven by increased sales of
Impressionist and Modern art and unusually strong sales of Jewelry, which
increased by approximately $107.4 million and $80.4 million, respectively,
compared to 1992.

Following is a geographical breakdown of the Company's auction sales for
1993 and 1992 (in thousands):

1993 1992

North America $ 654,984 $ 551,075
Europe 627,475 531,072
Asia 42,875 49,454
Total $ 1,325,334 $ 1,131,601

Market improvements were seen during 1993 in both North America and Europe
with sales growth of $103.9 million (19%) and $96.4 million (18%),
respectively, while Asian sales declined $6.6 million, or 13%. Auction
sales for Europe and Asia were negatively affected by translation to U.S.
dollars, which reduced total auction sales by $56.1 million. The increase
in North American auction sales was due primarily to the higher level of
sales of Impressionist and Modern art in New York. The growth in European
auction sales resulted largely from Jewelry sales in Geneva and sales of
Impressionist and Modern art in London. In addition, European sales
benefited from the sale of art and precious objects from the von Thurn und
Taxis collection held in Germany. The decline in Asian sales was due to a
reduction in the number of sales held in Asia compared to the prior year
due to the elimination of auctions in Japan and India and the cancellation
of a sale in Taiwan.

Worldwide revenues from auction operations increased $34.1 million, or 17%,
to $235.0 million. The unfavorable impact of translating revenues outside

<PAGE>

North America into U.S. dollars reduced 1993 auction revenues by $12.6
million. The increase in Auction revenues was primarily attributable to
increased commissions. The growth in commissions resulted from the increase
in the rate of buyer's premium, as discussed above, and, to a lesser extent,
from the greater volume of auction sales. The increase in commissions was
mitigated, in part, by declines in the realized rate of vendor's commission
and other commission revenue areas. The lower vendor's commission rate
resulted from pressures to price competitively as well as from a change
in the relative mix of auction sales. During 1993, an increasing proportion
of the Company's sales were by departments that have historically generated
lower than average vendor's commissions. During 1993, the Company continued
to review its worldwide business structure, with particular emphasis
on operations in Europe and Asia. As a result of this review, the Company
recorded non-recurring reorganization charges of over $2.4 million during
1993 (of which $2.0 million related to Auction). These charges were
principally for costs associated with changes in personnel.

Direct costs of services decreased by $3.2 million, or 6%, from 1992 in
spite of the greater volume of sales. Translating these expenses into U.S.
dollars accounted for $1.9 million of the decrease. Direct costs of
services as a percentage of sales, excluding the impact of foreign currency
movements, was 3.6% in 1993 compared to 4.5% in 1992.

Salaries and related costs increased by $4.3 million, or 6%, in 1993. This
increase reflects incentive compensation, merit adjustments and increased
overtime resulting from the higher level of sales activity, as well as a
majority of the reorganization charges discussed above. These factors were
partially offset by the impact of foreign currency translation, which
reduced salaries and related costs by $4.5 million.

General and administrative expenses increased by $1.6 million, or 2%, in
1993. After eliminating the impact of foreign currency translation, general
and administrative expenses increased by $7.8 million over 1992. This
increase reflects balance sheet strengthening and increases in various other
expenses associated with the higher level of sales, as well as modest
reorganization costs associated with the realignment of certain overseas
locations.

Inventory and other auction-related activities generated a pre-tax loss of
$0.9 million in 1993, compared to pre-tax income of $1.8 million in 1992.
In 1993, earnings continued to be generated from AMA and other sales of
inventory, but at very modest levels which were lower than the prior year.
A provision for the write-down to estimated realizable value of inventory
relating to a single isolated transaction more than offset these earnings
in 1993.

During 1992, the Company recorded a $4.9 million restructuring charge to
provide for staff termination and other reorganization costs relating to
a full-scale restructuring to streamline operations, with

<PAGE>

particular emphasis on the European auction operation.

Auction recorded operating income of $31.5 million in 1993, an increase of
$33.5 million compared to an operating loss of $2.0 million in 1992. The
increase in operating income is due to the increase in the rate of the
buyer's premium and greater sales volume, offset by reductions in vendor's
commissions, expense recoveries and various other revenues.

Auction's interest income declined by $1.7 million in 1993 compared to 1992
largely due to lower average rates of interest earned on invested funds.
The decrease of $1.9 million in interest expense is largely due to a lower
average level of borrowed funds in Europe.

Net interest charged to Financial Services on borrowings from Auction
totaled $2.0 million and $5.4 million in 1993 and 1992, respectively
(see Note C to the Consolidated Financial Statements). The 1993 amount
represents interest income of $2.5 million on borrowings by Financial
Services from Auction, net of interest expense on special financing
programs of $0.5 million charged by Financial Services to Auction. The
$3.4 million decrease in net interest income from financial services
results from the lower level of Auction funding required for the smaller
Financial Services loan portfolio and, to a lesser extent, lower interest
rates in 1993.

Financial Services Revenues from Financial Services decreased to $7.6
million in 1993 from $14.5 million in 1992 due to a decrease in the
average outstanding loan portfolio and, to a lesser extent, to lower
rates of interest earned on outstanding loans. Average month-end portfolio
balances for the years ended December 31, 1993 and 1992 were approximately
$112.2 million and $163.2 million, respectively. The average interest rate
charged to borrowers decreased to 6.8% in 1993 from 9.2% in 1992.

Income before taxes declined $2.4 million, or 46%, compared to the prior
year. The decrease is principally a result of the smaller client loan
portfolio, partially offset by reduced provisions for loan losses.

Real Estate Revenues from Real Estate increased to $9.8 million in 1993
from $9.6 million in 1992, while operating expenses increased slightly.
The increase in revenues reflects a higher level of property sales
partially offset by lower commission rates. Income before taxes of $2.1
million was unchanged compared to the prior year.

Corporate Corporate expenses of $7.4 million in 1993 were $1.2 million
higher than 1992. This increase is largely due to an increase in costs
associated with severance and worldwide marketing and promotion.

Income Taxes The consolidated effective tax rate increased to 40% for the
year ended December 31, 1993 from 39% during 1992. The increased tax rate

<PAGE>
reflects the net impact on the Company of the Omnibus Budget Reconciliation
Act of 1993 which was enacted during the third quarter of 1993.

Net Income and Earnings Per Share Net income for 1993 was $19.3 million, an
increase of $15.3 million over 1992. Earnings per share increased $0.28
per share to $0.35 per share in 1993. These increases were driven by the
growth in 1993 auction revenue which resulted principally from the increase
in the rate of buyer's premium and auction sales compared to 1992. The
effect of foreign currency translation on net income and earnings per
share was not material.

Liquidity and Capital Resources

The Company's net debt position (total debt, which includes short-term
borrowings and commercial paper, less cash and cash equivalents) totaled
$1.4 million at December 31, 1994, compared to a net cash position of
$53.3 million at December 31, 1993 and a net debt position of $5.2 million
at December 31, 1992. Working capital (current assets less current
liabilities) at December 31, 1994 was $105.0 million, compared to $94.6
million and $148.9 million at December 31, 1993 and 1992, respectively.

The Company's client loan portfolio, consisting of loans which generally
have a maturity of one year or less, increased to $131.3 million at
December 31, 1994 from $98.4 million and $117.6 million at December
31, 1993 and 1992, respectively.

The Company relies on internally generated funds and borrowings to meet
its financing requirements. The Company may issue up to $200 million of
short-term notes pursuant to its U.S. commercial paper program,
of which $27.5 million was issued and outstanding at December 31, 1994.
The Company supports any short-term notes issued under its U.S. commercial
paper program with committed credit facilities. Prior to August 3, 1994,
the Company had $175 million available under committed revolving credit
facilities; these arrangements were discontinued effective August 3, 1994,
at which date the Company entered into a new Bank Credit Agreement which
provides $300 million of committed available financing to January 31,
1998 (see Note H to the Consolidated Financial Statements).

During 1994, the Company's primary sources of liquidity were derived from
available cash balances supplemented by short-term borrowings and
operations. The most significant cash uses during 1994 were net funding of
the client loan portfolio ($48.1 million) and shareholder dividends. The
Company paid dividends to shareholders of $13.4 million in 1994 (of which
$3.3 million was declared and paid in 1994 with respect to 1993). In the
first quarter of 1995, the Company declared and paid dividends of $3.4
million in respect of the fourth quarter of 1994. During 1993, in addition
to $70.3 million generated from operations, a major source of liquidity was

<PAGE>

net collections on the client loan portfolio which totaled $16.7 million.
The most significant uses of cash in 1993 were net repayments of commercial
paper borrowings, which totaled $52.4 million, and shareholder dividends.
In 1993, the Company paid dividends to shareholders of $23.2 million
(of which $8.3 million was declared and paid in 1993 with respect to
1992). During the third quarter of 1993, the Company announced a reduction
in the quarterly dividend on common shares to $0.06 per share. In 1992, net
collections on the client loan portfolio of $62.8 million and cash
generated from operations of $35.3 million were key sources of liquidity
for the Company; the most significant uses were shareholder dividends and
net reductions in short-term borrowings. The Company paid $31.8 million in
dividends during 1992 (of which $7.7 million was declared and paid in 1992
with respect to 1991).

Capital expenditures, consisting primarily of office and auction facility
refurbishment and the acquisition of computer equipment, totaled $7.9
million for 1994, $8.3 million for 1993 and $9.9 million for 1992.

In certain instances, consignor advances are made with recourse limited
only to the works of art consigned for sale and pledged as security for
the loan, or with recourse limited to the consigned works and to other
works of art owned by the consignor but not pledged as security. As of
December 31, 1994, $3.0 million of these advances were outstanding.

From time to time, the Company has off-balance sheet commitments which
include short-term commitments to consignors that property will sell at a
minimum price and legally binding lending commitments in conjunction with
the client loan program (see Note O to the Consolidated Financial
Statements). The Company does not believe that material liquidity risk
exists relating to these commitments.

The Company believes that the working capital requirements of AMA will
be adequately satisfied by sales of its inventory. In spite of the
slowdown in the volume of sales, the Company expects that the sale of
the remaining inventory will provide a source of cash over the next
several years as the art market continues to recover.

Outlook

Although overall auction sales remained relatively unchanged during 1994
when compared to 1993, combined sales of all categories, excluding
Impressionist and Modern art and Jewelry, rose 13%. The Company is
encouraged by this growth and is optimistic about the prospects for the
1995 auction season. On an ongoing basis, the Company reviews opportunities
in the marketplace and, in the first quarter of 1995, purchased inventory.

<PAGE>

The Company believes that operating cash flows will be adequate to meet
normal working capital requirements and that the commercial paper program
and credit facilities will continue to be adequate to fund the Company's
client loan program, peak working capital requirements and other short-term
commitments to consignors.

The Company evaluates, on an ongoing basis, the adequacy of its premises for
the requirements of the present and future conduct of its business. Any
significant alteration to its principal auction premises may require use of
additional capital which the Company believes is adequately available.

Seasonality
The worldwide art auction market has two principal selling seasons, spring
and fall. During the summer and winter, sales are considerably lower. The
table below demonstrates that at least 80% of the Company's auction sales
are derived from the second and fourth quarters of the year (see Note Q to
the Consolidated Financial Statements).

Percentage of Annual
Auction Sales
1994 1993 1992

January-March 12% 10% 12%
April-June 40 38 38
July-September 8 6 8
October-December 40 46 42
100% 100% 100%

Future Impact of Recently Issued
Accounting Standards

In November of 1992, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 112,
"Employers" Accounting for Postemployment Benefits, which was
adopted by the Company in the first quarter of 1994. Adoption of this
standard did not have a material impact on the Company's financial
statements.

In May of 1993, the FASB issued SFAS No. 114, "Accounting by Creditors
for Impairment of a Loan," which must be adopted by the Company by 1995.
The impact of implementing the new standard, which the Company will
adopt effective January 1, 1995, is not expected to materially affect
the financial statements.

In October of 1994, the FASB issued SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments".
The Company's policy is to enter into derivative financial contracts
for the purpose of hedging its foreign exchange or interest rate risk
exposures related to conducting its worldwide auction, financial services
and real estate brokerage business. As of December 31, 1994, there were no
outstanding derivative financial instruments. The impact on net earnings

<PAGE>

related to the settlement of derivative contracts for the years ended
December 31, 1994, 1993, and 1992 was not material.

<PAGE>

December 31, 1994 1993
(Thousands of dollars)
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 34,987 $ 91,840
Accounts and notes receivable, net of allowance
for doubtful accounts of $10,165 and $10,596 - Note D
Auction operations 180,521 166,962
Finance operations 131,294 98,419
Other 13,442 12,670

Total Accounts and Notes Receivable, Net 325,257 278,051
Inventory, net - Note E 20,330 17,417
Deferred income taxes - Note I 12,053 8,675
Prepaid expenses - Note M 12,053 11,880
Total Current Assets 404,680 407,863
Properties, less allowance for depreciation
and amortization of $53,464 and $51,100 - Notes G and J 66,825 65,078
Intangible assets, less allowance for
amortization of $28,051 and $25,866 29,054 29,633
Investment in partnership - Note F 44,281 45,657
Other assets - Note N 12,244 11,125
Total Assets $ 557,084 $ 559,356
Liabilities and Shareholders' Equity
Current Liabilities
Due to consignors - Notes D and N $ 199,758 $ 205,873
Short-term borrowings - Note H 8,903 4,583
Accounts payable and accrued liabilities 60,428 63,271
Deferred revenues 6,173 6,165
Accrued income taxes - Note I 24,457 33,355
Total Current Liabilities 299,719 313,247
Long-term Liabilities
Commercial paper - Note H 27,500 34,000
Deferred income taxes - Note I 18,423 17,256
Other long-term obligations 390 221
Total Liabilities 346,032 364,724

Shareholders' Equity - Note K:
Common stock, $.10 par value:
Authorized shares - 125,000,000 of Class A and 75,000,000 of Class B
Issued and outstanding shares 36,730,771 and 35,399,497 of Class A,
and 19,093,071 and 20,096,469 of Class B at December 31, 1994
and 1993, respectively 5,582 5,550
Additional paid-in capital 83,538 80,509
Retained earnings 136,517 129,637
Foreign currency translation adjustments (14,585) (21,064)
Total Shareholders' Equity 211,052 194,632
Total Liabilities and Shareholders' Equity $ 557,084 $ 559,356

See accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE><CAPTION>

Year ended December 31, 1994 1993 1992
(Thousands of dollars, except per share data)
<S> <C> <C> <C>
Auction
Revenues $ 238,770 $ 234,972 $ 200,883

Direct costs of services (48,659) (47,352) (50,556)
Salaries and related costs - Note M (85,941) (79,030) (74,763)
General and administrative expenses - Note J (67,391) (68,391) (66,742)
Depreciation and amortization (7,986) (7,846) (7,731)
Income (loss) from inventory and other auction-
related activities - Notes B, E, and F 1,415 (887) 1,771
Restructuring charge - Note L (4,855)
Operating income (loss) - Auction 30,208 31,466 (1,993)

Interest income 4,900 5,082 6,786
Interest expense - Note H (4,013) (4,281) (6,156)
Net interest charged to Financial Services - Note C 2,948 1,966 5,384
Income before taxes - Auction 34,043 34,233 4,021
Financial Services
Revenues 9,246 7,600 14,462
General and administrative expenses (2,622) (2,831) (3,867)
Net interest expense from Auction - Note C (2,948) (1,966) (5,384)
Income before taxes - Financial Services 3,676 2,803 5,211

Real Estate
Revenues 11,549 9,758 9,625
Operating expenses (8,547) (7,687) (7,534)
Income before taxes - Real Estate 3,002 2,071 2,091
Corporate operating expenses (6,792) (7,370) (6,177)
Other non-operating income (expense) (164) 420 1,345
Consolidated
Revenues 259,565 252,330 224,970

Operating income (loss) 30,094 28,970 (868)
Net interest income 3,835 2,767 6,014
Other non-operating income (expense) (164) 420 1,345
Income before taxes 33,765 32,157 6,491
Income taxes - Note I (13,506) (12,863) (2,531)
Net Income $ 20,259 $
19,294 $ 3,960
Earnings Per Share $ 0.36 $ 0.35 $ 0.07

</TABLE>

See accompanying Notes to Consolidated Financial Statements

<PAGE>

<TABLE><CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Foreign
Additional Currency
Common Paid-in Retained Translation
Stock Capital Earnings Adjustment

(Thousands of dollars)
<S> <C> <C> <C> <C>
Balance at December 31, 1991 $ 5,151 $ 64,292 $ 161,342 $ 15,543
Stock options exercised 332 4,748
Tax benefit associated with exercise
of stock options 8,554
Foreign currency translation (33,967)
Net income 3,960
Dividends (31,760)
Balance at December 31, 1992 $ 5,483 $ 77,594 $ 133,542 $ (18,424)

Stock options exercised 67 1,985
Tax benefit associated with exercise
of stock options 930
Foreign currency translation (2,640)
Net income 19,294
Dividends (23,199)
Balance at December 31, 1993 $ 5,550 $ 80,509 $ 129,637 $ (21,064)
Stock options exercised 32 2,224
Tax benefit associated with exercise
of stock options 805
Foreign currency translation 6,479
Net income 20,259
Dividends (13,379)
Balance at December 31, 1994 $ 5,582 $ 83,538 $ 136,517 $ (14,585)

See accompanying Notes to
Consolidated Financial Statements

</TABLE>

<PAGE>

<TABLE><CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31, 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
Operating Activities:
Net income $ 20,259 $ 19,294 $ 3,960
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 8,444 8,294 8,172
Deferred income taxes (2,211) 1,227 (1,662)
Tax benefit of stock option exercises 805 930 8,554
Asset provisions 6,117 9,554 6,147
Other 263 (428) (557)

Change in assets and liabilities,
net of effects from business acquired:
Decrease (increase) in prepaid expenses (173) 1,805 1,904
Decrease (increase) in accounts receivable (8,035) (9,079) 29,742
Decrease in inventory 2,202 1,206 7,264
Increase (decrease) in due to consignors (6,115) 34,538 (8,781)
Decrease in accrued income taxes (8,898) (4,345) (10,978)
Increase (decrease) in other current liabilities (2,835) 7,263 (8,464)
----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 9,823 70,259 35,301

Investing Activities:
Finance operation loans (128,523) (119,915) (49,965)
Collections on finance operation loans 80,383 136,581 112,794
Capital expenditures (7,897) (8,344) (9,924)
Payment for business acquired, net of cash acquired - Note P 1,146
Increase in investment in affiliate (1,394)
Decrease in investment in partnership 1,376 1,264 2,425
----------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by investing activities (54,661) 9,586 55,082

Financial Activities:
Increase (decrease) in commercial paper (6,500) (52,400) 3,730
Increase (decrease) in short-term borrowings 4,320 114 (10,615)
Proceeds from exercise of stock options 2,256 2,052 5,080
Dividends paid (13,379) (23,199) (31,760)
----------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (13,303) (73,433) (33,565)

Effect of exchange rate changes on cash 1,288 (275) (14,383)
----------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (56,853) 6,137 42,435
Cash and Cash Equivalents at Beginning of Year 91,840 85,703 43,268
----------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 34,987 $ 91,840 $ 85,703
----------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A--Organization and Business

The primary line of business of Sotheby's Holdings, Inc. (together with its
subsidiaries, the "Company") is conducting auctions and private sales of fine
art, jewelry and decorative art. Auction activities occur primarily in New
York and London, but are also conducted elsewhere in North America, Europe
and Asia. In addition, the Company is engaged in art-related financing and
in marketing and brokering luxury real estate.

Note B--Summary of Significant Accounting Policies

Principles of Consolidation The Consolidated Financial Statements include
the accounts of Sotheby's Holdings, Inc. and its wholly-owned subsidiaries.
The Company's investment in the Acquavella Modern Art Partnership ("AMA") is
accounted for under the equity method.

Revenue Recognition Auction commission revenue is generally recognized at
the date of the related sale. Financial Services interest income is
recognized using the interest method. Commissions on real estate
transactions are recognized when received. Catalogue subscription revenue
is recognized over the twelve-month period of the subscription from the
date of receipt of the proceeds. Other revenue is recognized at the time
service is rendered by the Company.

Properties Properties, consisting primarily of buildings and improvements,
furniture and fixtures and equipment, are stated on the cost basis.
Depreciation is computed principally on the straight-line method over
estimated useful lives for financial reporting purposes and by accelerated
methods for income tax purposes. Leaseholds and leasehold improvements are
amortized over the lesser of the life of the lease or the estimated useful
life of the improvement. Amortization of leased assets is included in
depreciation and amortization expense.

General and administrative expenses include repairs and maintenance and the
cost of computer software in the year of purchase.

Direct Costs of Services Direct costs of services primarily include the
costs of obtaining and marketing property for auctions.

Income (Loss) from Inventory and Other Auction-Related Activities These
activities include net gains on sales of inventories, including the
Company's share of earnings from its investment in AMA, income earned from
guarantees, and provisions for write-downs of inventories to estimated
realizable value.

Cash Equivalents Cash equivalents are liquid investments, comprised
primarily of bank and time deposits with an original maturity of less than
three months. These investments are carried at cost, which approximates
market value.

Financial Instruments The carrying amounts of cash and cash equivalents,
accounts receivable, short-term borrowings, due to consignors, accounts
payable and accrued liabilities, and commercial paper are a reasonable
estimate of their fair value. The fair value of notes receivable from
finance operations is estimated using the current rates at which similar
loans would be made to borrowers for the same remaining maturities.

Inventory Inventory consists principally of objects obtained as a result
of the auction process and is valued at the lower of cost or management's
estimate or realizable value.

Intangible Assets Intangible assets include goodwill, lease rights and
subscriber lists. Goodwill is being amortized over forty years. The
amounts assigned to the other intangible assets are amortized on a
straight-line basis over periods not to exceed twenty-five years.

Earnings Per Share Earnings per share is based on the weighted average
number of outstanding shares of common stock and common stock equivalents
(stock options). Weighted average number of shares for the earnings per

<PAGE>

share computation were as follows: 1994-56,158,933; 1993-55,861,424; and
1992-54,387,412. Fully diluted earnings per share, assuming the maximum
dilutive effect of stock options, has not been presented because the
effects are not material. Weighted average number of shares for the fully
diluted earnings per share computation were as follows: 1994-56,158,933;
1993-55,909,007; and 1992-54,393,960.

Foreign Currency Translation Assets and liabilities of foreign subsidiaries
are translated at year-end rates of exchange. Income statement amounts are
translated using monthly average exchange rates for the year. Gains and
losses resulting from translating foreign currency financial statements are
accumulated in a separate component of shareholders' equity until the
subsidiary is sold or substantially liquidated.

Reclassifications Certain amounts in the 1993 and 1992 financial
statements have been reclassified to conform with the 1994 presentation.

Note C--Business Segment and Geographic Data

The Company operates in three business segments -- Auction, Financial
Services and Real Estate. Through its Auction segment, the Company
conducts auctions and private sales of fine art, jewelry and decorative
art. Through its Financial Services segment, the Company makes loans on a
regular basis to consignors, dealers and collectors. Through its Real
Estate segment, the Company is engaged in marketing and brokering luxury
real estate.

Certain industry segment information relating to operating revenues and
profitability required to be included pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 14 is included in the Consolidated
Statements of Income. In the Consolidated Statements of Income, income
before taxes for Financial Services and Real Estate is also operating
income as defined by the Statement.

Financial Services recognizes revenue at the contractual rates for loans
and advances. For special financing arrangements with below market
interest rates, Auction is charged the differential and Financial Services
realizes rates approximating market. Financial Services reports interest
expense at a rate of interest approximating the Company's actual short-term
borrowing rates. Amounts borrowed from Auction are based on the average
loan portfolio balance less an assumed level of capital in Financial
Services.

In the Consolidated Financial Statements, the captions identifying
intersegment transactions represent interest on borrowings by Financial
Services from Auction and interest on special financing programs charged by
Financial Services to Auction.

A summary of information about the Company's operations by business segment
and by geographic area follows:

Business Segment Data
December 31 1994 1993 1992
--------------------------------------------------------------------------------
(Thousands of dollars)

Indentifiable Assets
Auction $408,717 $444,604 $443,411
Financial Services 131,294 98,419 117,600
Real Estate 2,480 1,513 2,483
Corporate 14,593 14,820 14,163
--------------------------------------------------------------------------------
Total $557,084 $559,356 $557,657
--------------------------------------------------------------------------------
Depreciation and Amortization
Auction $ 7,986 $ 7,846 $ 7,731
Real Estate 196 186 179
Corporate 262 262 262
--------------------------------------------------------------------------------
Total $ 8,444 $ 8,294 $ 8,172
--------------------------------------------------------------------------------
Capital Expenditures
Auction $ 7,820 $ 8,099 $ 9,596
Real Estate 77 245 328
--------------------------------------------------------------------------------
Total $ 7,897 $ 8,344 $ 9,924
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

30
<PAGE>

Geographic Data In the following table (which includes Auction, Financial
Services, Real Estate and Corporate), North America includes the United
States and Canada; Europe includes the United Kingdom, Ireland and
continental Europe; and Asia primarily includes operations in Hong Kong,
Taiwan, Japan and Australia.

Year ended December 31, 1994 1993 1992
--------------------------------------------------------------------------------
(Thousands of dollars)

Revenues
North America $133,080 $127,813 $108,722
Europe 116,214 116,396 107,647
Asia 10,271 8,121 8,601
--------------------------------------------------------------------------------
Total $259,565 $252,330 $224,970
--------------------------------------------------------------------------------
Operating Income (Loss)
North America $ 28,677 $ 26,081 $ 13,577
Europe 9,888 11,003 (8,229)
Asia (1,679) (744) (39)
Corporate (6,792) (7,370) (6,177)
--------------------------------------------------------------------------------
Total $ 30,094 $ 28,970 $ (868)
--------------------------------------------------------------------------------
Identifiable Assets
North America $326,975 $ 291,361 $292,245
Europe 205,859 258,883 272,039
Asia 24,250 9,112 13,373
--------------------------------------------------------------------------------
Total $557,084 $ 559,356 $577,657
--------------------------------------------------------------------------------

Note D--Accounts and Notes Receivable and Due to Consignors

Accounts and notes receivable consist of the following:

December 31 1994 1993
<S> <C> <C>
(Thousands of dollars)
Auction operations:
Auction receivables $185,438 $170,490
Advances for consignors 1,455 2,201
Other receivables 783 767
Allowance for doubtful accounts (7,155) (6,496)

180,521 166,962

Finance operations:
General purpose secured loans 113,020 61,366
Cash advances to consignors 10,688 30,667
Other guaranteed loans 9,878 10,000
Allowance for doubtful accounts (2,292) (3,614)

131,294 98,419

Other:
Other receivables 14,160 13,156
Allowance for doubtful accounts (718) (486)

13,442 12,670

Total $325,257 $278,051

31
</TABLE>
<PAGE>

Auction receivables included $1.9 million and $5.3 million at December 31,
1994 and 1993, respectively, relating to the purchase of art objects at
auction by employees, officers, directors and other related parties.

Under the standard terms and conditions of the Company's auction sales,
the Company is not obligated to pay consignors if it has not been paid by
the purchaser. If the purchaser defaults on payment, the Company may cancel
the sale and return the property to the owner, re-offer the property at
public auction or contact other bidders to negotiate a private sale.

In certain situations, when the purchaser takes possession of the property
before payment is made, the Company is liable to the seller for the net sale
proceeds. As of December 31, 1994 and 1993, accounts and notes receivable
included approximately $85.9 million and $80.1 million, respectively, of
such sales. Amounts outstanding in the prior year which remained outstanding
at December 31, 1994 totaled $0.8 million. Management believes that adequate
allowances have been established to provide for potential losses on these
amounts.

The average interest rates charged on finance receivables were 7.4% and 6.8%
at December 31, 1994, and 1993, respectively.

The estimated fair value of finance receivables was $129.8 million and
$97.2 million at December 31, 1994 and 1993, respectively.

Approximately 37% of the Company's loan portfolio at December 31, 1994 was
extended to one borrower. The Company's general policy in relation to
secured loans is to obtain collateral with a low estimated auction value
equivalent to or greater than 200% of the secured loan. The low auction
estimate of the collateral for this secured loan exceeded the Company's
general policy requirements at December 31, 1994. No other individual
loan amounted to more than 5% of total assets.

In May of 1993, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," which
must be adopted by the Company by 1995. Under SFAS No. 114, impairment
is generally measured based on the present value of expected future
principal and interest cash flows, discounted at the loan's effective
interest rate, and a valuation allowance is established relating to those
impaired loans. Impairment may also be measured based on the fair value
of the collateral, if the loan is collateral dependent. A loan is
considered impaired under the Statement when, based on current information
and events, it is probable that the Company will be unable to collect all
amounts due. Presently, credit losses on the client loan portfolio are
accounted for through the allowance for doubtful accounts, which
is adequate to absorb losses inherent in this portfolio. The impact of
implementing the new standard, which the Company will adopt effective
January 1, 1995, is not expected to materially affect the financial
statements.

Note E--Inventory
Inventory consists principally of objects obtained as a result of the
auction process primarily as a result of honoring authenticity claims of
purchasers, foreclosing on accounts receivable after the consignor has been
paid and purchasing property at the minimum price assured by the Company.
The inventory and related allowances to adjust the cost of inventory to
management's estimated realizable value are as follows:

December 31 1994 1993
(Thousands of dollars)

Inventory, at cost $35,325 $31,751
Realizable value allowances (14,995) (14,334)
Total $20,330 $17,417

32
<PAGE>

Note F--Investment in Partnership

On May 23, 1990, the Company purchased the common stock of the Pierre
Matisse Gallery Corporation ("Matisse") for approximately $153 million.
The assets of Matisse consisted of a collection of fine art (the "Matisse
inventory"). Upon consummation of the purchase, the Company contributed
the Matisse inventory to AMA and entered into the AMA partnership
agreement with Acquavella Contemporary Art, Inc. to sell the Matisse
inventory. The Company accounts for its investment in AMA under the equity
method of accounting in the Consolidated Financial Statements, including
its share of AMA's income in income (loss) from inventory and other
auction-related activities. The total net assets of the partnership
consist principally of the inventory described above. The Company
reflects its 50% interest in the net assets of the partnership as
investment in partnership, which totaled $44.3 million and $45.7 million at
December 31, 1994 and 1993, respectively. For the years ended December 31,
1994, 1993 and 1992, income earned from AMA totaled $0.7 million. $0.6
million and $1.3 million, respectively.

According to the terms of the partnership agreement, each partner has a
50% interest in the earnings of AMA and all cash available for distribution
was initially distributed to the Company until the Company received $270.3
million, together with a return equal to the prime rate (as defined). Cash
distributions now are being made on a 50-50 basis pursuant to the terms of
the partnership agreement. Cash distributed to the Company in accordance
with the partnership agreement totaled $281.5 million through December 31,
1994. To the extent that the partnership requires working capital, the
Company has agreed to lend the same to the partnership. As of December 31,
1994, no such amounts are outstanding.

Note G--Properties

Properties consist of the following:

December 31, 1994 1993
(Thousands of dollars)
Land $170 $170
Building and building improvements 32,893 32,000
Leaseholds and leasehold improvements 36,774 34,480
Furniture, fixtures and equipment 45,217 44,887
Other 5,235 4,641
120,289 116,178
Less: Accumulated depreciation (53,464) (51,100)
Total $66,825 $65,078

Note H--Credit Arrangements

Short-term borrowings consist of the following:

December 31, 1994 1993
(Thousands of dollars)

Bank lines of credit $5,266 $1,238
Note payable 3,622 3,336
Other short-term obligations 15 9
Total $8,903 $4,583

Bank Lines of Credit At December 31, 1994 and 1993, $5.2 million and $1.2
million, respectively, were outstanding under lines of credit at weighted
average interest rates of 6.57% and 10.84%, respectively.

Note Payable York Avenue Development, Inc. ("York") has signed a demand
note payable to Taubman York Avenue Associates, Inc. (see Note J).
Interest on the original note was prime plus 1%. During the fourth quarter
of 1994, the note was renegotiated and the interest rate was retroactively
reduced to prime minus 1/2%. The note was paid in full and cancelled
in January 1995.

<PAGE>

Commercial Paper The Company may issue up to $200 million in notes under
its U.S. commercial paper program. At December 31, 1994 and 1993, commercial
paper borrowings amounting to $27.5 million and $34.0 million, respectively,
have been classified on the Consolidated Balance Sheets as long-term
liabilities based on the Company's ability to maintain or refinance these
obligations on a long-term basis. The notes do not bear interest but are
issued at a discount, which is negotiated by the Company and purchaser
prior to each issuance. The weighted average interest rates on these notes
was 6.21% and 3.54% at December 31, 1994 and 1993, respectively. During
1993 the Company had a Euro-commercial paper program available to issue up
to $200 million in notes. This program was discontinued in March of 1994.

Bank Credit Facilities During 1994 the Company entered into a $300 million
Bank Credit Agreement (the "Credit Agreement"). Borrowings under the Credit
Agreement are permitted through January 31, 1998 in either U.S. dollars or
U.K. pounds sterling. Under the terms of the Credit Agreement, interest is
calculated based on the London Interbank Offering Rate, "LIBOR", and a
facility fee of 0.15% per annum is charged on the amount of the commitment.
Commitment fees totaled $0.2 million in 1994. The Agreement contains
certain financial covenants including limitations on the Company's ability
to incur debt. The Credit Agreement contains no restriction on the payment
of dividends. However, the Company is required to maintain consolidated
tangible net worth, as defined, of at least $150 million. At December
31, 1994, consolidated tangible net worth, as defined, was $196.6 million.

Prior to August 1994, the Company had an aggregate of $175 million
available under various Bank Credit Facilities. Borrowings under these
facilities were based on one of several interest rates, at the option of
the Company. Commitment fees on the unused portion of the facilities totaled
$0.2 million, $0.4 million, and $0.3 million for the years ended December
31, 1994, 1993, and 1992, respectively.

Interest paid on borrowings totaled $4.1 million, $4.5 million and $6.2
million in the years ended December 31, 1994, 1993 and 1992, respectively.

Note I--Income Taxes

Year ended December 31, 1994 1993 1992
(Thousands of dollars)

Income Before Taxes:
Domestic $19,880 $17,180 $8,981
Foreign 13,885 14,977 (2,490)
Total $33,765 $32,157 $6,491

Income Taxes:
Current:
Federal $ 5,401 $3,877 $2,450
State and local 3,090 3,340 998
Foreign 7,226 4,419 745
$15,717 $11,636 $4,193
Deferred:
Federal (1,070) 1,227 850
Foreign (1,141) (2,512)
(2,211) 1,227 (1,662)
Total $13,506 $12,863 $2,531

As required by SFAS No. 109, which was adopted by the Company effective
December 31, 1992, the components of deferred income tax assets and
liabilities are disclosed below:

December 31, 1994 1993
(Thousands of dollars)

Current Deferred Tax Assets:
Taxable loss carryforwards $2,922 $2,874
Asset provisions and
accrued liabilities 9,131 5,801

<PAGE>

Total $12,053 $8,675
Non-Current Deferred Tax Liabilities:
Basis difference in
partnership assets $15,667 $16,089
Depreciation 2,756 1,167
Total $18,423 $17,256

The effective tax rate varied from the statutory rate as follows:

Year ended December 31, 1994 1993 1992
(Thousands of dollars)

Statutory federal income
tax rate 35.0% 35.0% 34.0%
State and local taxes, net of
federal tax benefit 6.0 6.8 10.1
Foreign taxes at rates greater
(less) than U.S. rates 3.6 (2.6) (14.2)
Taxable foreign source
income (0.9) 4.9 6.6
Other (3.7) (4.1) 2.5

Effective income tax rate 40.0% 40.0% 39.0%

Undistributed earnings of foreign subsidiaries included in consolidated
retained earnings at December 31, 1994 and 1993 amounted to $12.7 million
and $15.3 million, respectively. Such amounts are considered to be
reinvested indefinitely or will be distributed from income that would not
incur a significant tax consequence and, therefore, no provision has been
made for taxes that would be payable upon distribution of these earnings.

Total income tax payments, net of refunds, during 1994, 1993 and 1992 were
$4.7 million, $9.2 million and $5.2 million, respectively.

Taxing authorities periodically challenge positions taken by the Company on
its tax returns. On the basis of information presently available, it is the
opinion of management that any assessments resulting from current tax
audits will not have a material adverse effect on the financial position of
the Company.

In 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes."
SFAS No. 109 establishes financial accounting and reporting standards for
the effects of income taxes that result from activities during the current
and preceding years. The Statement requires an asset and liability approach
for financial accounting and reporting for income taxes. It also requires
the Company to adjust its deferred tax balances in the period of enactment
for the effect of enacted changes in tax rates. The effect of this change
was not material for the year ended December 31, 1992.

Note J--Lease Commitments

The Company conducts its business on premises leased in various locations
under long-term operating leases expiring through 2060. Net rental
payments under operating leases amounted to $11.3 million, $11.1 million and
$12.0 million, respectively, for the years ended December 31, 1994, 1993
and 1992.

Properties under capital leases, which relate primarily to computer and
office equipment, are not material. Future minimum lease payments under
noncancelable operating leases in effect at December 31, 1994 are as
follows:
Operating
Leases
(Thousands of dollars)

35
<PAGE>

1995 $9,233
1996 7,556
1997 6,350
1998 4,635
1999 4,009
Thereafter 51,226
Total future minimum lease payments
$83,009

In addition to the above rentals, under the terms of certain of the leases,
the Company pays real estate taxes, utility costs and other increases
based on a price-level index.

Operating leases include a lease expiring in 2009 (which can be extended
until 2039) on the North American headquarters building in New York City
(the "York Property"). York Avenue Development, Inc. ("York"), a
wholly-owned subsidiary of Sotheby's, Inc. (itself a wholly-owned subsidiary
of the Company), holds a purchase option on the York Property. The option
can be exercised anytime until January 31, 1999 for ten times the rent at
the date the option is exercised plus a profit-sharing arrangement of from
$5 million to $10 million, or at defined dates in 1999, 2004 and 2009 for
ten times the rent at the date the option is exercised, subject to certain
limitations.

The Company has reached an agreement with Taubman York Avenue Associates,
Inc. ("Associates") under which Associates will assist York in developing
and financing a new mixed-use tower (the "New Tower") over the existing
four-story building on the York Property, if the Company chooses to
develop the New Tower. Associates is controlled by the largest shareholder
and Chairman of the Company. Under the Agreement:

(i) York will be responsible at its sole cost and expense for developing
the New Tower (but without recourse to the Company or any of its other
subsidiaries);

(ii) The investment of Sotheby's, Inc. in the development of the New Tower
totaled $5.7 million at December 31, 1994.

(iii) Associates will lend funds and provide certain guarantees, including
guarantees that may be required by any construction lender in order to
provide the necessary resources for the development of the New Tower; and

(iv) York will indemnify Associates against liabilities arising from the
construction of the New Tower and any guarantees given by Associates.

If the New Tower is developed, under the agreement with Associates,
Sotheby's, Inc. will either acquire a condominium to be composed of the
existing building and the first floor of the New Tower (the "Condominium")
for $1.00 or lease the Condominium from York for $1.00 per year under a
long-term lease. In addition, York is entitled to receive 10% of the first
$15.0 million of the cash profits plus 25% of any cash profits in excess of
$15.0 million from the development of the New Tower. Associates will receive
the remainder of the cash profits from the development of the New Tower.

If construction does not begin on or before September 30, 1997, Associates'
arrangements with Sotheby's Inc. and York will terminate.

Note K--Shareholders' Equity

Common Stock and Public Offering Effective May 13, 1988, 11,006,214 shares
of Class A Common Stock were sold in an initial public offering. Effective
June 30, 1992, an additional 11,000,000 shares of Class A Common Stock were
sold in a secondary public offering. All proceeds from the sales were
received by the selling shareholders in exchange for the shares sold. The
Class A Common Stock is traded on stock exchanges in both the United States
and the United Kingdom.

36
<PAGE>

Each share of Class A Common Stock is entitled to one vote and each share
of Class B Common Stock is entitled to ten votes. Both classes of Common
Stock share equally in dividend distributions.

Preferred Stock In addition to Class A and B Common Stock outstanding, the
Company has the authority to issue 50,000,000 shares of Preferred Stock,
no par value. No such shares were issued and outstanding at December 31,
1994 and 1993.

1987 Stock Option Plan At December 31, 1994, the Company has reserved
9,711,000 shares of Class B Common Stock for issuance in connection with
the 1987 Stock Option Plan (the "Plan").

Pursuant to the Plan, options are granted with an exercise price equal to
or greater than fair market value at the date of grant. For options
granted through September 1992, options vest and become exercisable ratably
during each of the fourth, fifth and sixth years after the date of grant.
For options granted subsequent to September 1992, options vest and become
exercisable ratably in each of the second, third, fourth, fifth and
sixth years after the date of grant (except in the U.K. where options
vest three-fifths in the fourth year and one-fifth in each of the fifth
and sixth years after the date of grant). The options are exercisable
into shares of Class B Common Stock, which are either authorized but
unissued shares or reacquired shares. The shares of Class B Common Stock
issued upon exercise are convertible into an equivalent number of
shares of Class A Common Stock. Under the current rules of the New York
Stock Exchange, substantially all options granted after April 1988 may
only be exercised if the optionee agrees to convert Class B shares to Class
A shares.

At December 31, 1994 and 1993, there were outstanding options for the
purchase of 5,504,915 and 5,229,977 shares, respectively, at prices ranging
from $1.50 to $22.62 per share. Stock option transactions during 1994,
1993 and 1992 are summarized as follows (shares in thousands):

Shares Reserved for Options Outstanding
-------------------
Issuance under the Plan Shares Prices

Initial grant
September 1, 1987 12,507 7,628 $1.50
Balance at
December 31, 1991 10,028 6,359 $1.50-22.62
Options granted 919 $10.62-13.25
Options canceled (136) $1.50-13.25
Options exercised (3,325) (3,325) $1.50-12.19
Balance at
December 31, 1992 6,703 3,817 $1.50-22.62
Options granted 2,350 $12.50-13.38
Options canceled (273) $10.50-15.50
Options exercised (664) (664) $1.50-13.38
Increase in shares reserved 4,000
Balance at
December 31, 1993 10,039 5,230 $1.50-22.62
Options granted 923 $12.25-18.00
Options canceled (320) $1.50-16.50
Options exercised (328) (328) $1.50-15.50
Balance at
December 31, 1994 9,711 5,505 $1.50-22.62

In February 1995, the Company approved an additional aggregate grant of
800,000 options pursuant to the 1987 stock option plan.

Stock Repurchase Program During 1990, the Company authorized a stock
repurchase program (the "repurchase program") to acquire up to 3,000,000
shares of its outstanding Class A common stock through open market or
other transactions. As of December 31, 1994, one million shares had been
repurchased under this program. The program has been discontinued by the
Company.

Note L--Restructuring Charge

<PAGE>

During 1992, the Company incurred costs in its auction operations as a
result of certain restructuring activities. These included termination costs
related to staff reductions ($3.2 million), reorganization costs ($1.2
million) and lease cancellations and accelerated depreciation of capital
improvements ($0.5 million).

Note M--Pension and Incentive Bonus Arrangements

The Company has a U.S. defined contribution plan that covers employees
after 90 days of service. The Company contributes 2% of each participant's
compensation to the plan. In addition, participants may elect to contribute
between 2% and 12% of their compensation, up to the maximum amount
allowable under IRS regulations, on a pre-tax basis. Employee savings are
matched by a Company contribution of up to an additional 3% of the
participant's compensation. The Company's contributions amounted to $1.5
million, $1.4 million and $1.2 million for the years ended December 31,
1994, 1993 and 1992, respectively.

The Company also has a defined benefit pension plan covering employees in
the United Kingdom. The U.K. pension plan covers substantially all U.K.
employees and contributions to the plan are funded annually.

The components of the net pension expense for the U.K. pension plan are
as follows:

Year ended December 31, 1994 1993 1992
(Thousands of dollars)
Service cost $3,031 $2,582 $3,472
Interest cost on projected
benefit obligations 4,837 4,546 5,317
Actual return on plan assets (2,485) (20,327) (2,504)
Net amortization and
deferral (4,417) 14,105 (4,331)

Net pension expense $966 $906 $1,954

The funded status of the plan is as follows:

December 31, 1994 1993
(Thousands of dollars)

Accumulated vested
benefit obligations $61,428 $54,609
Effect of future salary increases 4,497 6,832
Total projected benefit obligations 65,925 61,441
Plan assets at fair market value,
primarily stocks and bonds 85,739 79,566
Excess of plan assets over
projected benefit obligations 19,814 18,125
Unrecognized net transition asset (3,741) (3,978)
Unrecognized prior service cost 3,342
Unrecognized net gain (16,773) (11,815)
Prepaid pension cost recognized in
consolidated balance sheet $2,642 $2,332

The weighted-average discount rate used in determining actuarial values for
the U.K. pension plan was 8.0% in 1994 and 7.5% in 1993; the increase in
future compensation levels was 7.0% in 1994 and in 1993; and the expected
weighted-average long-term rate of return on plan assets was 9.0% in 1994
and 1993.

Note N--Related Party Transactions

Members of the Board of Directors, the Advisory Board and employees are
not charged the vendor's commission on property sold at auction for their

<PAGE>

benefit. Due to consignors included $4.2 million at December 31, 1994
relating to the sale of art objects at auction by employees, officers,
directors and other related parties. In addition, the Company has a
term loan program whereby the Company lends money to certain officers
and staff to purchase a residence under term notes bearing interest at an
annual rate equal to 1 to 2 percentage points below the prime rate. This
program is available to employees at the Company's discretion. Outstanding
under this program were loans amounting to $5.2 million and $4.2 million at
December 31, 1994 and 1993, respectively. See Notes D, H, O and J for
additional related party disclosure.

Note O--Commitments and Contingencies

Legal Actions The Company, in the normal course of business, is a defendant
in various legal actions.

Lending and Other Contingencies In conjunction with the client loan
program, the Company enters into legally binding arrangements to lend, on
a collateralized basis, to potential consignors and other individuals who
have collections of fine art or other objects. Unfunded commitments to
extend additional credit were approximately $25.7 million and $16.0 million
at December 31, 1994 and February 28, 1995, respectively.

The Company has a mortgage guarantee program available to certain
employees whereby the employee borrows directly from a bank on a demand
basis and pays an annual interest rate equal to the prime rate. All of the
repayment obligations of the employee are guaranteed by the Company.
These obligations totaled $2.3 million at December 31, 1994. In the U.K.,
the Company has guaranteed a portion of a mortgage loan. The amount of the
guarantee was $0.3 million at December 31, 1994.

On certain occasions, the Company will guarantee to the consignor a minimum
price in connection with the sale of property. The Company must perform
under its guarantee only in the event that (a) the property fails to sell
at auction and (b) the consignor prefers to be paid the guarantee price
rather than retain ownership of the unsold property. In such event, the
Company purchases the property at the guaranteed price. At December 31,
1994, there were no outstanding guarantees. At March 28, 1995, outstanding
guarantees totaled approximately $37.9 million, covering property having
a mid-estimate sales price of $49.6 million. Under the guarantees, the
Company participates in a share of the profit if the property under
guarantee sells above a minimum price.

In the opinion of management, the commitments and contingencies described
above currently are not expected to have a material adverse effect on the
Company's financial statements.

Note P--Supplemental Cash Flow Information

In 1992, the Company purchased a business for $4.8 million. In conjunction
with the acquisition, liabilities were assumed as follows (in thousands):

Fair value of assets acquired $12,620
Cash paid 4,845
Liabilities assumed $7,775

Note Q--Quarterly Results (Unaudited)
<TABLE><CAPTION>

First Second Third Fourth
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
1994
Auction
Auction sales $161,281 $530,799 $105,154 $532,767
Revenues 34,659 87,591 24,976 91,544
Operating income (loss) (9,354) 30,999 (20,059) 28,622
Income (loss) before taxes (8,322) 31,225 (19,193) 30,333

39
<PAGE>

Financial Services
Revenues 1,676 2,358 2,550 2,662
Income before taxes 742 1,208 996 730

Real Estate
Revenues 2,617 3,459 2,903 2,570
Income before taxes 509 1,231 695 567

Corporate operating expenses (1,505) (1,727) (1,686) (1,874)
Other non-operating income (expense) 98 (163) 24 (123)

Consolidated
Operating income (loss) (9,608) 31,711 (20,054) 28,045
Income (loss) before taxes (8,478) 31,774 (19,164) 29,633
Net Income (Loss) $(5,087) $19,065 $(11,499) $17,780
Earnings (Loss) Per Share $(0.09) $0.34 $(0.21) $0.31

1993
Auction
Auction sales $129,585 $505,653 $84,667 $605,429
Revenues 31,882 82,637 20,768 99,685
Operating income (loss) (9,600) 27,035 (21,184) 35,215
Income (loss) before taxes (8,620) 27,636 (20,409) 35,626

Financial Services
Revenues 2,305 1,732 1,760 1,803
Income before taxes 920 525 726 632

Real Estate
Revenues 2,359 3,035 2,152 2,212
Income before taxes 486 880 433 272

Corporate operating expenses (1,639) (1,418) (2,049) (2,264)
Other non-operating income (expense) 345 (36) 108 3

Consolidated
Operating income (loss) (9,833) 27,022 (22,074) 33,855
Income (loss) before taxes (8,508) 27,587 (21,191) 34,269
Net Income (Loss) $(5,190) $16,637 $(12,714) $20,561
Earnings (Loss) Per Share $(0.09) $0.30 $(0.23) $0.36

</TABLE>

INDEPENDENT AUDITORS' REPORT

To the Directors and Shareholders of
Sotheby's Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Sotheby's
Holdings, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, changes in shareholders' 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,

<PAGE>

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, such consolidated financial statements present fairly, in
all material respects, the financial position of Sotheby's Holdings, Inc.
and subsidiaries at 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.

Deloitte & Touche LLP
New York, New York
February 28, 1995

REPORT OF MANAGEMENT

The Company's consolidated financial statements were prepared by
management, which is responsible for their integrity and objectivity. The
financial statements have been prepared in accordance with generally
accepted accounting principles and, as such, include amounts based on
management's best estimates and judgments.

Management is further responsible for maintaining a system of internal
control structure and related policies and procedures designed to
provide reasonable assurance that assets are adequately safeguarded
and that the accounting records reflect transactions executed in
accordance with management's authorization.

Kevin A. Bousquette
Senior Vice President and
Chief Financial Officer

Thomas F. Gannalo
Vice President, Controller and
Chief Accounting Officer

<PAGE>

AUDIT AND COMPENSATION
COMMITTEE CHAIRMAN'S LETTER

The Audit and Compensation Committee (the "Committee") of the Board of
Directors consisted of three independent Directors. Information as to
these persons, as well as the scope of duties of the Committee, is provided
in the Proxy Statement. During 1994, the Committee met six times and
reviewed with Deloitte & Touche LLP, the Director of the Internal Audit
Department and management the various audit activities and plans, together
with the results of selected internal audits. The Committee also reviewed
the reporting of consolidated financial results and the adequacy of
internal controls. The committee recommended the appointment of Deloitte &
Touche LLP as independent public accountants and considered factors related
to their independence. Deloitte & Touche LLP and the Director of the
Internal Audit Department met privately with the Committee on occasion to
encourage confidential discussion as to any auditing matters.

Max M. Fisher
Chairman, Audit and
Compensation Committee

SOTHEBY'S HOLDINGS, INC.

BOARD OF DIRECTORS

A. Alfred Taubman,
Chairman

Max M. Fisher,
Vice Chairman

Lord Camoys,
Deputy Chairman

Diana D. Brooks,
President and Chief Executive Officer,

Michael L. Ainslie

Viscount Blakenham,
Executive Chairman, Pearson PLC

Ambassador Walter J. P. Curley,
Chairman, The French American Foundation

The Rt. Hon. The Earl of Gowrie,
Chairman,The Arts Council

The Marquess of Hartington

R. Julian de la M. Thompson,
Chairman, Sotheby's Asia

<PAGE>

Leslie H. Wexner,
President and Chairman,
The Limited, Inc.

CORPORATE OFFICERS

Diana D. Brooks,
President and Chief Executive Officer

Kevin A. Bousquette,
Senior Vice President and
Chief Financial Officer

Susan Alexander,
Senior Vice President, Human Resources

Suzanne McMillan,
Senior Vice President, Marketing

Diana Phillips,
Senior Vice President, Public Relations

Marjorie E. Stone,
Senior Vice President, General Counsel

John S. Brittain, Jr.,
Vice President and Treasurer

Richard J. Cody,
Vice President and Director of Taxes

Thomas F. Gannalo,
Vice President, Controller and
Chief Accounting Officer

Joseph A. Williams,
Vice President, Information Systems

Jeffrey H. Miro,
Secretary

ADVISORY BOARD

Giovanni Agnelli

Her Royal Highness The Infanta
Pilar de Borbon, Duchess of Badajoz

Ann Getty

Emilio Gioia

Alexis Gregory

<PAGE>

Anne Ford Johnson

Sir Quo-Wei Lee

Graham D. Llewellyn

John L. Marion

The Hon. Sir Angus Ogilvy, K.C.V.O.

Carroll Petrie

William Pitt

Mrs. Charles H. Price

Prof. Dr. Werner Schmalenbach

Baron Hans Heinrich Thyssen-Bornemisza de Kaszon

WORLDWIDE AUCTION LOCATIONS

Sotheby's North and South America
---------------------------------

United States

Atlanta
Baltimore
Boston
Beverly Hills
Chicago
Dallas
Fort Worth
Honolulu
Houston
Miami
Minneapolis
New Orleans
New York
North Carolina
Palm Beach
Philadelphia
St. Louis
San Francisco
Virginia
Washington, D.C.

Canada

Toronto
Vancouver
Victoria B.C.
Argentina

44
<PAGE>

Buenos Aires
Brazil
Rio de Janiero
Sao Paulo

Mexico

Mexico City
Monterrey

Venezuela

Caracas

Sotheby's Europe
----------------

United Kingdom
and Ireland

Cheltenham
Chester
Derbyshire
Devon
Hampshire
Harrogate
Kent
Lincolnshire
London
Norfolk
Suffolk
Sussex
Wiltshire
Yorkshire
Scotland and Border Counties
Aberdeenshire
Edinburgh
Glasgow
Newcastle-upon-Tyne

Northern Ireland
Newtonards, Co. Down

Ireland
Dublin

Channel Islands
Guernsey, C.I.
Jersey

Austria
Graz
Klagenfurt
Vienna

45
<PAGE>

Belgium
Brussels

Cyprus
Nicosia

Czech Republic
Prague

Denmark
Copenhagen

Finland
Helsinki

France
Bordeaux
Montpellier
Paris
Strasbourg

Germany
Berlin
Cologne
Frankfurt
Hamburg
Karlsruhe
Lower Saxony
Munich
Stuttgart

Greece

Holland
Amsterdam

Hungary
Budapest

Iceland
Reykjavik

India
New Delhi

Israel
Tel Aviv

Italy

Florence
Milan
Rome
Turin

46
<PAGE>

Liechtenstein

Luxembourg

Monaco

Norway
Oslo

Portugal
Lisbon

Spain
Barcelona
Madrid

Sweden
Gothenburg
Stockholm

Switzerland

Basel
Geneva
Lugano
Zurich

Syria and Jordan

Sotheby's Asia
--------------

Australia
Melbourne
Sydney

Hong Kong

Taiwan
Taipei

China
Shanghai

Japan
Tokyo

Malaysia
Kuala Lumpur

South Korea
Seoul

Singapore

47
<PAGE>

17 Salerooms
43 Countries

SOTHEBY'S WORLDWIDE OPERATIONS

NORTH AND SOUTH AMERICA
BOARD OF DIRECTORS

Diana D. Brooks,
President and Chief Executive Officer,
Sotheby's Holdings, Inc.

Richard E. Oldenburg,
Chairman, Sotheby's North and South America

William F. Ruprecht,
Managing Director, Sotheby's North and South America

John D. Block,
Executive Vice President, Head of Jewelry and Precious Objects

David J. Nash,
Executive Vice President, Worldwide Head of Impressionist and Modern Art

Warren P. Weitman, Jr.,
Executive Vice President, Worldwide Head of Business Development

Robert C. Woolley,
Executive Vice President, Decorative Arts

Susan Alexander,
Senior Vice President, Worldwide Head of Human Resources,
Sotheby's Holdings, Inc.

Kevin A. Bousquette,
Senior Vice President and Chief Financial Officer, Sotheby's Holdings, Inc.

Suzanne McMillan
Senior Vice President, Marketing, Sotheby's Holdings, Inc.

Thierry Millerand,
Senior Consultant, European Furniture

Diana Phillips,
Senior Vice President, Worldwide Head of Public Relations,
Sotheby's Holdings, Inc.

David N. Redden,
Senior Vice President, Worldwide Head of Books and Manuscripts and Collectibles

William W. Stahl, Jr.,
Senior Vice President, Head of Decorative Arts

Marjorie E. Stone,
Senior Vice President, General Counsel, Sotheby's Holdings, Inc.

48
<PAGE>

Mitchell Zuckerman,
President, Sotheby's Financial Services

EUROPE
SOTHEBY'S BOARD OF DIRECTORS

Simon de Pury,
Chairman, Sotheby's Europe

Henry Wyndham,
Chairman, Sotheby's United Kingdom

George Bailey,
Managing Director, Sotheby's Europe

Diana D. Brooks,
President and Chief Executive Officer, Sotheby's Holdings, Inc.

Princess de Beauvau Craon,
Chairman, Sotheby's France

David W. Bennett, F.G.A.,
Senior Director, Head of Jewelry and Precious Objects

Paul M. Cervino,
Chief Financial and Administrative Officer, Sotheby's Europe

Melanie Clore,
Senior Director, Head of Impressionist and Modern Art

Dr. Christoph Graf Douglas,
Chairman, Sotheby's Germany

Paul J. Mack,
Senior Director, Head of Furniture and Books

James Stourton,
Senior Director, Head of European Business Development

Michel Strauss,
Senior Director, Impressionist and Modern Art

Simon Taylor,
Senior Director, Head of Paintings

R. Julian de la M. Thompson,
Chairman, Sotheby's Asia

SOTHEBY'S FINANCIAL SERVICES

Mitchell Zuckerman,
President

49
<PAGE>

SOTHEBY'S INTERNATIONAL REALTY

Michael L. Ainslie,
Chairman

Stuart N. Siegel,
President

ASIA
BOARD OF DIRECTORS

R. Julian de la M. Thompson,
Chairman, Sotheby's Asia

Tetsuji Shibayama,
Managing Director, Sotheby's Japan

Diana D. Brooks,
President and Chief Executive Officer, Sotheby's Holdings, Inc.

Robert Bleakley,
Chairman, Sotheby's Australia

Lisa Hubbard,
Senior Vice President, Head of Jewelry and Precious Objects

Peter Huggler,
Chairman, Sotheby's Japan

Mee Seen Loong,
Director, Sotheby's Hong Kong

Colin Mackay,
Senior Director, Head of Chinese Works of Art, Sotheby's London

Suzanne Mitchell,
Senior Vice President, Japanese Business Development, Sotheby's North America

John Tancock,
Senior Vice President, Impressionist and Modern Art, Sotheby's
North America and Japan

Suzanne Tory,
Southeast Asian, Business Development, Sotheby's Singapore

Rita Wong,
Managing Director, Sotheby's Taiwan

Administrative Offices
c/o Sotheby's Service Corporation
301 Merritt 7
Norwalk, Connecticut 06851

Transfer Agents
Mellon Securities Trust Company
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660

<PAGE>

The Royal Bank of Scotland plc
Registrar's Department
P.O. Box 82
Caxton House, Redcliffe Way
Bristol BS99 7NH England

Common Stock Information
Sotheby's Holdings, Inc. Class A Common Stock is listed
on the New York Stock Exchange (symbol: BID) and the London Stock Exchange.

Annual Meeting
The Annual Meeting of Shareholders will be held at
Sotheby's, 34-35 New Bond Street, London, on Thursday,
June 15, 1995, at 10:00 AM.

Form 10-K and Shareholder Information
The 1994 annual report filed with the Securities and Exchange Commission and
other investor information may be obtained by writing to:

Investor Relations
Debbie Murray
Jeffrey Pierne
Sotheby's
1334 York Avenue
New York, New York 10021
(212) 606-7507

U.K. Corporate Secretary's Office
Sotheby's
34-35 New Bond Street
London W1A 2AA
071-408-5257

Certified Public Accountants
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281

Common Stock Price
The quarterly price ranges and dividends per share of Class A Common Stock
in 1994 and 1993 were as follows:

1994 High Low Cash
Dividends
Per Share

First $ 19-1/2 $ 15-3/8 $ 0.06
Second 18-3/8 11-7/8 0.06
Third 13-1/4 12 0.06

51
<PAGE>

Fourth 13 10-3/4 0.06

1993 High Low Cash
Dividends
Per Share

First $ 14-1/4 $12-1/4 $ 0.15
Second 14-7/8 11-3/8 0.15
Third 13-1/8 10-3/4 0.06
Fourth 17-1/4 11-3/4 0.06

The Company also has Class B Common Stock convertible on a share-for-share
basis into Class A Common Stock. There is no public market for the Class
B Common Stock. Cash dividends are payable equally on the Class A and B
Common Stock.

The number of holders of record of the Class A Common Stock as of March 9,
1995 was 1,418. The number of holders of record of the Class B Common Stock
as of March 9, 1995 was 40.

EXHIBIT 21

SUBSIDIARIES OF SOTHEBY'S HOLDINGS, INC.

The subsidiaries of Sotheby's Holdings, Inc., which are wholly owned except
where indicated, are as follows:

JURISDICTION OF
INCORPORATION
---------------
Sotheby's Holdings, Inc. ................................... Michigan
Sotheby Parke Bernet Stamp Auction, Inc. ................. Connecticut
Sotheby's Art Sales Corp. ................................ New York
Sotheby's (Canada), Inc. ................................. Canada
Sotheby's Financial Services, Inc. ....................... Nevada
SFS California, Inc. ................................... Nevada
Sotheby's International Realty, Inc. ..................... Michigan
Sotheby's International Realty Affiliates, Inc. ........ New York
Sotheby's International Realty of Colorado, Inc. ....... Michigan
Sotheby's International Realty Ltd. .................... United Kingdom
Sotheby's International Realty S.A. .................... Spain
Sotheby's Service Corporation............................. Delaware
SPTC, Inc. ............................................... Nevada
Sotheby's Nevada, Inc. ................................. Nevada
Acquavella Modern Art (50%)........................... Nevada
SFS Holdings, Inc. ....................................... Delaware
Fine Art Insurance Ltd. ................................ Bermuda
Sotheby's Inc. ........................................... New York
Edmund Peel Fine Art Ltd................................ Jersey
Edmund Peel Fine Art S.L................................ Spain
Edmund Peel y Asociados S.A......................... Spain
Etablissement Sotheby................................... Liechtenstein
Oatshare Limited........................................ United Kingdom
International Art & Antique Loss Register Ltd. (20%).. United Kingdom
Sotheby International Travel Limited.................. United Kingdom
Sotheby's............................................. United Kingdom
Art Development (India) Ltd. ....................... United Kingdom
Sotheby's India Pvt. Ltd. (India) (50%)........... United Kingdom
The Bond Street Kiosk Ltd. ......................... United Kingdom
Clark Nelson Limited (USA).......................... New York
Lexbourne Limited (50%)............................. United Kingdom
Parke & Co. Limited (55%)........................... United Kingdom
Parke & Co. Investments, Ltd. ...................... United Kingdom
Sotheby's London.................................... United Kingdom
Sotheby's Espana S.A. .............................. Spain
Suitlast Ltd. ...................................... United Kingdom
Sotheby's Financial Services Ltd...................... United Kingdom
Sotheby Parke Bernet, Inc. ............................. Delaware
Sotheby Parke Bernet Nederland B.V. .................... Netherlands
Sotheby Mak van Waay B.V. .......................... Netherlands
Sotheby's Israel, Ltd. ............................. Israel
Sotheby's A.G. ......................................... Switzerland
Sotheby's Scandinavia A.B. ......................... Sweden
Sotheby's Italia s.r.l. ............................ Italy
Sotheby's Asia, Inc. ................................... Michigan
Sotheby's Japan Ltd. ............................... Japan
Sotheby's Hong Kong, Ltd. .......................... Hong Kong
Sotheby's Australia Pty Ltd. (50.25%................ Australia
Sotheby's Asia Ltd. ................................ Bermuda
Sotheby's Monaco S.A.M. .......................... Monaco
Sotheby's Taiwan Ltd. ............................ Taiwan
Sotheby's Australia Pty Ltd. (49.75%)............. Australia
Sotheby's Deutschland GmbH........................ West Germany
Sotheby's Kunstauktionen G.m.b.H. .................... Austria
Sotheby's Hungary Ltd. ............................. Hungary
Sotheby's France S.A.R.L. .............................. France
Sotheby's Holdings International, Inc. ................. Michigan
Sotheby's International, Ltd. ........................ United Kingdom
Sotheby's Special Sales, Inc. .......................... Delaware
Advisory Services S.A. ............................. Argentina
York Avenue Development, Inc. .......................... New York

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration
Statement No. 33-26008 of Sotheby's Holdings, Inc. on Form
S-8 of our reports dated February 28, 1995, appearing in and
incorporated by reference in the Annual Report on Form 10-K
of Sotheby's Holdings, Inc. for the year ended December 31,
1994.

DELOITTE & TOUCHE LLP

New York, New York
March 31, 1995

Exhibit 24

POWER OF ATTORNEY

The undersigned, a Director of Sotheby's Holdings, Inc., a
Michigan corporation (the "Company"), does hereby constitute and
appoint each of Diana D. Brooks and Kevin A. Bousquette, with
full power of substitution, as his true and lawful attorney and
agent to execute in his name and on his behalf, as a Director of
the Company, the Company's Annual Report on Form 10-K, and any
and all amendments thereto to be filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended. Each such attorney or agent shall have, and
may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 10 day of March, 1995.
-- -----

/s/
---------------------------------
Leslie H. Wexner

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 28th day of February, 1995.
---- --------

/s/
-------------------------------
R. Julian de la M. Thompson

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 14th day of March, 1995.
---- -----

/s/
-----------------------------------
A. Alfred Taubman

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 3rd day of March, 1995.
--- -----

/s/
--------------------------------
Max M. Fisher

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 22nd day of February, 1995.
---- --------

/s/
-----------------------------------
Walter J.P. Curley

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 25th day of February, 1995.
---- --------

/s/
-----------------------------------
Lord Camoys

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 28th day of February, 1995.
---- --------

/s/
-----------------------------------
Diana D. Brooks

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 12th day of March, 1995.
---- -----

/s/
-----------------------------------
Viscount Blakeman

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 13th day of March, 1995.
---- -----

/s/
-----------------------------------
The Rt. Hon. The Earl of Gowrie

<PAGE>

POWER OF ATTORNEY

IN WITNESS WHEREOF, the undersigned has hereunto subscribed
his signature this 28th day of February, 1995.
---- --------

/s/
-----------------------------------
The Marquess of Hartington

<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 34,987
<SECURITIES> 0
<RECEIVABLES> 325,257
<ALLOWANCES> 10,165
<INVENTORY> 20,330
<CURRENT-ASSETS> 404,680
<PP&E> 66,825
<DEPRECIATION> 53,464
<TOTAL-ASSETS> 557,084
<CURRENT-LIABILITIES> 299,719
<BONDS> 27,500
<COMMON> 5,582
0
0
<OTHER-SE> 205,470
<TOTAL-LIABILITY-AND-EQUITY> 557,084
<SALES> 0
<TOTAL-REVENUES> 259,565
<CGS> 0
<TOTAL-COSTS> 50,157
<OTHER-EXPENSES> 98,541
<LOSS-PROVISION> 1,965
<INTEREST-EXPENSE> 4,013
<INCOME-PRETAX> 33,765
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<NET-INCOME> 20,259
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<EPS-DILUTED> 0.36

</TABLE>