Art Partners Presentation MSPWM May 7 2012

art partners
Art | Asset | Class
Fund Presentation May 2012
Introduction
Art Partners is an off shore partnership focused on art as an investment, through selectively building a portfolio of Post War and Contemporary works of art. Art Partners mission statement is to generate attractive returns on its portfolio of investments by deploying the skills of the group of professionals who manage the partnership.
Art Partners I started operating on September 2007 and has thus far returned to its investors approximately 50% of their committed capital.
Art Partners II is a second fund managed by the same team. This presentation is made to potential investors.
May 2012 Art Partners | Confidential
The Art Market
The Art Market at a Glance

3 major categories in 20th - 21st centuries art market : Modern Art
Constantin Brancusi Le Baiser (The Kiss), sold for $3.6M (est. $3-4M) Nov 2005 Christies NY
Henri Matisse Bouquet de fleurs pour le quatorze juillet, sold for $28.6M (est. $18-25M) May 2010 Sothebys NY
Pablo Picasso Dora Maar au chat sold for $95.2M, May 2006 Sothebys NY

3 major categories in 20th - 21st centuries art market : Post-War Art (WWII)
Donald Judd Untitled (in 10 parts) sold for $4.9M (est. $2.5-4.5M) Nov 2009 Christies NY
Andy Warhol Self-Portrait sold for $38.4M (est. $20-30M) May 2011 Christies NY
John Chamberlain Big E sold for $4.6M (est. $2-3M) Nov 2007 Sothebys NY

3 major categories in 20th - 21st centuries art market : Contemporary Art
Jeff Koons Balloon Flower (blue) sold for $16.8M (est. $12-16M) Nov 2010 Christies NY
David Hammons Untitled sold for $1.5M (est. $1.5-2M), May 2007 Phillips de Pury NY
Urs Fischer Untitled (Lamp/Bear) sold for $6.8 May 2011 Christies NY
Market Overview
US & European auction markets of Post War & Contemporary Art increased from $254 million (2000) to $2.1 billion (2011)* Post War & Contemporary Art is the largest growing segment in past decade China becomes second largest art market in the world (holds 23% in value of global art sales) and first in art auction revenues Middle Eastern art market growing, auctions sales totaled $30 million (2010), Qatar & Abu Dhabi museums, Dubai Art Fair, Abu Dhabi Art Fair. Christies: NY sales (November 2011) realized its second highest Post-War and Contemporary evening auction total in its history grossing over $300.00 million. Impressionist & Modern Art evening sales in New York achieved less than low estimates at Sothebys + Christies. In London (June 2011), Christies Evening Sale achieved a remarkable results (Beyeler). Quality is the name of the game London June 2011 Evening Sales returned to the the level of 2008. Sothebys May 2012 sale second highest sale ever.
Market Overview Art Tactic
Market Overview Art Tactic
A Look Ahead
Major transition in geographical reach & structure (Internet, technology, online art fairs, auctions, numerous art fairs worldwide) changes how art is promoted, valued, traded, sold in past few years Strong recovery in the global art market in 2011 helped by strong Asian demand Continued growth of Asian markets (China, HK, India) due to better economic growths Sothebys and Christies HK show 300% sales increase in 2010; China the second largest art market (23% of global art sale by value) Robust demand for high-quality rare works continued to draw high end buyers in the Post War & Contemporary Market throughout 2011
Market Overview Mei & Moses Indexes
Art as an Asset Class

Growth of art market and infrastructure in past 10 years increases interest in art as asset class Private wealth managers show awareness and increasing interest in offering wealth management services related to art and collectibles Well recognized alternative to other investment classes offering:
Investment diversification Low correlation with other investments or asset classes Relative inflation proof
Art outperformed equities in all periods between 2000 2011 (Mei Moses) With industry competition and client demand, the private banking sector focuses on new ideas, constantly evaluating art products
Art as an Asset Class

Art is one of the best performing asset classes in recent years; contemporary art market up an average of 25% against FTSEs 11% and Dow Jones 9%* Over past decade HNWI increased with 51% to 10.9 million, art investment accounts for 22% of HNWIs Passion Investments **
Many passion/emotional investments prove to be resilient in economic downturns

This phenomenon is likely to grow in line with global growth of HNWI More investment vehicles in art and similar assets (wine, diamonds)
SWAG *** (silver, wine, art, gold) professionals imply art could enter mainstream spectrum of alternative assets
* Art Tactic ** Merrill Lynch Cap Gemini World Wealth Report 2010, 2011 *** Investment Week, 23.9.11
Art Partners II
Art Partners II - Profile

Generate attractive returns by investing into Post-War & Contemporary art segment. Capitalizing on art as growing asset class - investment diversification, low correlation with other investments or asset classes. Experienced team of art professionals and venture capital professionals; Investment Committee identical to Art Partners I. Art Partners I initiated on September 2007 with over $10M under management.
Investment Strategy
Use teams extensive premium network to invest in high quality works of art Focus on established/mid-career international artists (80%) and emerging/young artists (20%) diversified investment
Utilize market fluctuation to maximize returns

Establish criteria for art evaluation: auction record, CV, reputation, quality (AAA) Build portfolio provenance - lend, exhibit in high profile art events Average holding period of 5 years Strengthened ability to monitor global economic changes (team of Art Partners now includes Eitan Raff) Co-Investment strategy - on higher value investments
Art Partners II - Team
Gil Brandes
Amalia Dayan
Mark Fletcher
Chemi Peres
Isaac Hillel
Eitan Raff
Vered Gadish
Art Partners II Investment Committee

Gil Brandes Founder, Managing Director and Investment Committee Member
Practices hi-technology law as a partner with Naschitz Brandes & Co
Member of the Acquisition Committee and Co-Chair of Here and Now Acquisition Group of Israeli Art, The Israel Museum Member of the Schiff Prize for Figurative Art Committee, Tel-Aviv Museum Previously served on the Executive Board of Bezalel Academy of Art and Design and Helena Rubinstein Pavilion Committee of Tel-Aviv Museum Collector since 1990, initiated contemporary art collection of over 500 works by acclaimed international and local artists Holds L.L.B degree, University of Buckingham

Amalia Dayan Founder and Investment Committee Member
Co-owner of Luxemburg Dayan, A NY and London private dealership Previously founder and co-owner of the Bortolami Dayan gallery Director of Gagosian Gallery, New York Specialist in Contemporary Art at Phillips, de Pury & Luxembourg Director at Deitch Projects gallery Holds B.A. Art History, Tel Aviv University; M.A. Art Management , New York University

Mark Fletcher Founder and Investment Committee Member
Founded Contemporary Art advisory services, Artha Advisory (1998), providing all aspects of contemporary art collecting and management with international presence in Europe, Asia and the US Previously director of the Anthony d'Offay Gallery, London Director of Barbara Gladstone Gallery, New York Holds M.A in International Management, Ecole des Cadres, Paris

Chemi Peres Investment Committee Member
Managing General Partner and Co-Founder of the Pitango Group Chairman of Al-Bawader Private Equity Fund Serves on the boards of numerous Pitango portfolio companies, including publicly traded ones
Founded Mofet Israel Technology Fund, a VC Fund publicly traded on Tel Aviv Stock Exchange, co-founded IVA (Israel Venture Association) known as HTIA
Chairman of Israel America Chamber of Commerce. Previously held executive positions at DSI (Decision Systems Israel), IAI (Israel Aerospace Industries), board of Koor, board of Ramot Member of the Board of Trustees of Bezalel Academy of Art and Design Holds B.Sc and MBA in Industrial Engineering & Management, Tel Aviv University

Isaac Hillel Investment Committee Member
Managing General Partner, Pitango Venture Capital Focuses on investments in mobile, wireless, e-commerce Over 15 years of experience in executive management, in Europe and US Previously Executive VP, NEC Computers International Established operation of Packard Bell EMEA Extensive board-level experience Holds B.Sc. in Electrical Engineering, Tel Aviv University; MBA, UCLA

Eitan Raff Chairman of the Advisory Board
Member of the Board of Directors of VeriFone Holdings Inc. Senior Advisor of Morgan Stanley, Chairman of Aeronautics, Chairman of Jarvinia Member of the Board of Directors and Member of Audit of Israel Corporation Ltd; Director and Chairman of EPiC Ltd.; Director of ITS Telecom Ltd.
Previously Chairman of Boards of Directors, Bank Leumi Israel, Bank Leumi UK and Bank Leumi US (95-2010), Chairman of Board of Directors Yozma Venture Capital (93-95), Director of Israel Chemical Industries (90-92), Accountant General (Treasurer) Ministry of Finance of the Government of Israel (79-83), Director of El-Al Israel Airlines (79-83)
Chairman of Management Committee, Hebrew University Holds BA in Economics and Political Science and MBA, Hebrew University

Vered Gadish - Senior Advisor
Director of Outset Contemporary Art Fund, a philanthropic Israeli foundation with foundations based in UK, Germany, India and Israel Art Consultant based in Tel Aviv Previously a curator of Doron Sebbag Art Collection ORS Ltd
Worked at Guggenheim Museum New York at the Public Affairs Dept.; Museum of Modern Art at the Development & Membership Dept.; Christies Tel Aviv
Holds B.A Art History, Tel Aviv University; M.A. Art Management , New York University
Art Partners II - Investment Activity

Two main levels of investments $150,000 600,000; $750,000 1,500,000
Frequent visits to art fairs, auctions, dealers, exhibitions previews across the world
Monitoring professional database tools that analyze international art markets Routine operational aspects: legal, accounting, finance / professional crating, shipping / storage / insurance / loaning policy Monitor exit alternatives for each portfolio investment and enhanced value during holding period
Art Partners II - Key Terms

Target Fund size: US$20.0M - $25.0M [Israel/ROW discussion]
Term of fund: 10 Years

Investment Period: up to 5 years Annual Management Fee: 2.5% Carried Interest: 20% Institutional Investment: US$1,000,000 Private/Individual Investment: US$250,000 Deploy capital on call
Art Partners I Overview
Art Partners I Track Record

14 art works by international artists purchased since closing for: $8.45M Average Acquisition Price ~ $600,000
5 successful exits (see portfolio) 3 exits made in 2011

Average return on capital 1.54 IRR on works sold (calculated as a group) 31.3%
Proceeds from sales equal to $5.9M

Distribution to investors $4.35M + $386,000 (capital commitment reduction) with reinvested $1.15M Two co-investments (Damien Hirst, Urs Fischer) Value of current portfolio - $4.7M (cost basis of current portfolio $4.5M) John Chamberlain recently sold at Sothebys Nov 2011 Sale for $1.5M
Art Partners I Portfolio Analysis
Art Partners I - Return Analysis for Sold/Consigned works

HOLDING PERDIOD ARTWORKS DETAILS INVESTMENT DATE COST BASIS SALES PROCEEDS DATE OF SALE ROC GROSS IRR
SOLD SOLD SOLD SOLD
Rudolf Stingel Untitled Takashi Murakami Pity Cindy Sherman Untitled Film Stills Takashi Murakami Bokan SUBTOTAL SOLD
Oct-07 Dec-07 Oct-07 Feb-09
$620,000 $935,000 $396,000 $962,000 $2,913,000
$988,000 $1,500,000 $550,000 $1,400,000 $4,438,000
Feb-08 Nov-08 May-11 May-11
1.59 1.60 1.39 1.46 1.53
246.9% 52.6% 9.8% 18.2% 35.9%
Recently Sold
John Chamberlain Blue Flushing SUBTOTAL CONSIGNED TOTAL
Jun-09
$935,000
$1,500,000
Nov-11
1.60
21.6%
$935,000
$1,500,000
$3,848,000
$5,938,000
1.54
31.3%
Art Partners I Portfolio Highlights
Works sold (2011)
Takashi Murakami Bokan - camouflage pink, 2009 Acrylic on canvas 300x300cm Purchase: $962,000 Feb/09 Sold: $1,400,000, May/11 Sothebys NY ROC: 1.46 IRR: 18.2%
Works sold (2011)
Cindy Sherman Untitled (Film Still #5), 1977 Black and white photograph 76x101cm Purchase: $396,000, Oct/07 Sold: $550,000, May/11 Sothebys NY ROC: 1.39 IRR: 9.8%
Works sold (2011)
John Chamberlain Blue Flushing, 1975 Painted and chromium-plated steel 140x75x158cm Purchase: $935,000, Jun/09 Sold: $1,500,000, Nov/11 Sothebys NY ROC: 1.60 IRR: 21.6%
- Continued
John Chamberlain early welded-iron sculpture was heavily influenced by Abstract Expressionism. In 1957 he moved to New York where he made his first works out of crushed car parts, a practice for which he became immediately recognized and recognizable. Much discussion surrounding his work has centered upon his sympathy for the objet trouv and his chance inventions, elements common to the art of Marcel Duchamp, John Cage and others. The relationship between his use of cultural waste and the implied violence of his constructions is an issue which harmonizes equally well with his perceived allegiance to modern American painting. -Museum of Modern Art, New York
Works sold (2008)
Rudolf Stingel Untitled, 2004 Oil & enamel on canvas, 240x200cm Purchase: $620,000 Oct/07 Sold: $988,000 Feb/08 Cs London ROC: 1.59 IRR: 246.9%
Takashi Murakami Pity, 1997 Acrylic on canvas 61x50.8 each (5 panels) Purchase: $935,000 , Dec/07 Sold: $1,500,000 Nov/08 Sothebys NY ROC: 1.60 IRR: 52.6%
Works acquired (2011)
David Hammons Untitled, 2009 Mixed media 233.7x183cm Purchase: $915,750 Mar/11
Works acquired (2011)
Urs Fischer To be Titled (Foxmask/Green Chair), 2010 Silkscreen print on mirror-polished stainless steel sheets, edition 4 parts:2x120.7x108.1x162.9cm; 2x 107x81.6x89.9cm Purchase: $395,000, Dec/10 Co-investment
Previously acquired works
Damien Hirst Serenity, 2007 butterflies and household gloss on canvas 223.5cm framed diameter Purchase: $1,540,000, Apr/08 Co-investment
- continued
The first artist to have a 3-part solo auction at Sothebys London with 100% lots sold on September 2008 (Eve of LB collapse) Expected to have major Retrospective exhibition at Tate, London 2012
Damien Hirsts wide-ranging practice installations, sculpture, painting and drawing has sought to challenge the boundaries between art, science and popular culture. His energy and inventiveness, and his consistently visceral, visually arresting work, has made him a leading artist of his generation. -White Cube Gallery, London
Donald Judd Untitled (89-49 Ballantine), 1989 Douglas Fir plywood wall boxes 4 units, 50x100x50cm/each Purchase: $1,100,000, Jul/08
- continued
One of the most significant American artists of the Post-War period, Donald Judd changed the course of modern sculpture. Judd became known as one of the key exponents of Minimalism, but it was a label that he strongly rejectedhe preferred to describe his own work as the simple expression of complex thought. Judd broke new ground in his exploration of volume, interval, space and color. By encouraging concentration on the volume and presence of the structure and the space around it, Judds work draws particular attention to the relationship between the object, the viewer, and its environment. Tate Modern, London
Franz West Untitled, 2007 papier-mch, paint, metal 126x109x74cm base: 46x102x77cm Purchase: $247,500, Feb/08
Wall drawing #1185, Scribbles 1 October, 2005 Graphite on wall 305x305cm (loan Centre Pompidou Metz) Purchase: $385,000, Oct/09
Sol LeWitt
Anselm Reyle Untitled, 2008 Mixed media on canvas 250.2x199x25cm Purchase: $264,000, Apr/08
- continued
For Anselm Reyle, revisiting Modernism opens a wealth of possibilities. Resurrecting the styles, genres, and concepts of 20th century art history, Reyle adopts formalism whole-heartedly, embracing both the integrity of the original movements, as well as their contemporary renditions in the form of graphic design and Ikea dcor. Addressing the commodification of culture, Reyle reclaims the clich and the kitsch to create his own brand of authenticity, meeting the shifting aspects lifestyle and art industry demands. -Saatchi Gallery, London
Portfolio Highlights Israeli works
Avner Ben Gal Power Plant, 2007 Acrylic on canvas 180x220x3cm
Purchase: $30,000, May/09

Gil Marco Shani Untitled, 2008-9 Acrylic and marker on canvas 240x190cm Purchase: $17,500 , Mar/09
Yehudit Sasportas The Last Name, 2008 Ink on MDF (diptych) 200x150cm (each) Purchase: $38,000 , Oct/09
Shai Azolay Hammock #3, 2010 Oil on canvas 192x208cm
Purchase: $14,500 Feb/11

Art Partners I - Summary

Art Partners I invested in 14 art works by international artists purchased $8.45M
5 successful exits with proceeds of $5.9M (return on capital for the works sold equal to x1.54 and Gross IRR 31.3%)
Distribution to investors $4.35M + $386,000 commitment reduction, reinvested $1.15M
John Chamberlain sold at Sothebys November 2011 sale for $1.5M

Art as investment valid investment tool, a growing asset class with relatively low risk compared to other liquid and non-liquid assets Market becoming more transparent with steady research published Experienced professional team with track record and strong connections continue to lead the fund
Art Partners II - Investors Program

Exclusive access to active database upon request (password protected area in funds website, Artnet, ArtTactic periodical conference call with ArtTactic CEO), periodical newsletters, online events calendar (available on funds website) Annual investors events in conjunction with a major artistic event (Gallery Weekend Berlin, Venice Biennale, Fresh Paint Art Fair) On-line information and newsletter about major art events & galleries recommendations Invitations to major art events and programs
Art Partners - Summary

Art as investment valid & secured investment tool, a growing asset class
Relatively low risk compared to non-liquid assets, in general low correlation to other asset classes
Market is getting more confident and solid. Better visibility, optimistic forecast Experienced professional team with track record and strong connections continue to lead Art Partners Like in the first fund, continue to invest in works by recognized artists, many of whom with proven auction record
Making money is art and working is art and good business is the best art -Andy Warhol
www.artfunds.com
Thank You!
The Art Market Key Players

100 influential artists: Damien Hirst, Jeff Koons, Cindy Sherman, Ai Weiwei, Takashi Murakami, Franz West, Marina Abramovic 50 influential galleries mostly in NYC and London (over $10M annual) Gagosian branches in New York (3), LA, London (2), Rome, Paris, Athens, Geneva and office/representation in HK and Israel Hauser & Wirth - branches in London (2), Zurich, New York Pace Gallery branches in NY (4), Beijing, Pace Prints/Primitive 10 dominant museums directors: Hans Ulrich Obrist, Glenn Lowry, Sir Nicholas Serota, Adam Weinberg, Jeffrey Deitch
15 key collectors: Eli Broad, Franois Pinault, Charles Saatchi, Dakis Joannou, Steven Cohen, Victor Pinchuk
5 major international art exhibitions: Venice Biennale, Whitney Biennial, Documenta, Sao Paulo Biennial, Istanbul Biennial
Art Market Major Trade Fairs

4 Major Art Fairs
Art Basel premier international art fair (1969) each June. In 2010 nearly 300 galleries from around the globe, more than 2,500 artists, attendance 62,500 visitors Art Basel Miami Beach sister fair to Art Basel every December. In 2010 showing 250 galleries, 2,000 artists with 46,000 visitors
The Armory Show New York art fair (1998) taking place every March. In 2010 nearly 290 galleries and 60,000 visitors
Frieze Art Fair London art fair (2003) every October. In 2010 showing 173 galleries, 1,000 artists and over 60,000 visitors FIAC, ARCO, VOLTA, , Art Cologne, HK Art Fair, Art Forum, Art Dubai
Art Market Major Auction Houses

Sothebys
Established in 1744 in London, a publicly traded auction house, operates in 40 countries with 4 major centers (NY, London, Paris, HK). Stock now fully recovered (from $6.50 during Q1 2009 to over $50.00 during Q1 2011)
2010 brought best financial results for Sotheby's in its 267-year history, apart from 2007 Contemporary Evening Art sales:
Nov/11 New York - totaled $315.8M Oct/11 London 17.8M / $28M June/11 London - 108.8M / $174M (versus June last year - 90.7M) May/11 New York - $128.1M Feb/11 London 44M / $71M Nov/10 New York - $222.4M (versus November last year - $134.4M)

Christies
Established in 1766 in London, a privately owned auction house, operates in 32 countries with 10 salesrooms In 2009 consolidates sales totaled $3.3 Billion The First half of 2010 sales totaled $2.57 Billion Contemporary Evening Art sales:
Nov/11 New York - totaled $247.6M Oct/11 London 55.6M / $87.6M June/11 London 78.8M / $125.8M (versus June last year - 45.6M)
May/11 New York $301.6M

Feb/11 London 61.3M / $99M Nov/10 New York - $272.8M (versus November last year - $74.1M)

Phillips De Pury & Company
Established in 1776 in London
In 1999 bought by Bernard Arnault (LVMH), merged with private dealers

Since 2008 owned by Mercury Group (Russian luxury retail); operations in 6 countries around the world Focuses on emerging, younger artists, design, editions Contemporary Evening Art sales:
June/11 London totaled 11.2M / $16.9M (versus June of last year - 4M) May/11 New York $98.8M (versus May of last year-$38M -3 times higher than May/09)
Feb/11 London 5.4M / $8.7M

Nov/10 New York $19.9M + $117M for Carte Blanche sale (191% more than Nov/09)

Art Partners Presentation MSPWM May 7 2012

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art partners

Art | Asset | Class

Fund Presentation May 2012

May 2012 Art Partners | Confidential

The Art Market

May 2012 Art Partners | Confidential

The Art Market at a Glance

May 2012 Art Partners | Confidential

The Art Market at a Glance

May 2012 Art Partners | Confidential

The Art Market at a Glance

May 2012 Art Partners | Confidential

Market Overview Art Tactic

May 2012 Art Partners | Confidential

Market Overview Art Tactic

May 2012 Art Partners | Confidential

May 2012 Art Partners | Confidential

Market Overview Mei & Moses Indexes

May 2012 Art Partners | Confidential

Art as an Asset Class

May 2012 Art Partners | Confidential

Art as an Asset Class

Many passion/emotional investments prove to be resilient in economic downturns

May 2012 Art Partners | Confidential

May 2012 Art Partners | Confidential

Art Partners II - Profile

May 2012 Art Partners | Confidential

Utilize market fluctuation to maximize returns

May 2012 Art Partners | Confidential

Art Partners II - Team

Art Partners II Investment Committee

May 2012 Art Partners | Confidential

Art Partners II Investment Committee

May 2012 Art Partners | Confidential

Art Partners II Investment Committee

May 2012 Art Partners | Confidential

Art Partners II Investment Committee

Art Partners II Investment Committee

May 2012 Art Partners | Confidential

Art Partners II - Team

Art Partners II - Team

May 2012 Art Partners | Confidential

Art Partners II - Investment Activity

May 2012 Art Partners | Confidential

Art Partners II - Key Terms

Term of fund: 10 Years

May 2012 Art Partners | Confidential

Art Partners I Overview

May 2012 Art Partners | Confidential

Art Partners I Track Record

5 successful exits (see portfolio) 3 exits made in 2011

Proceeds from sales equal to $5.9M

Art Partners I Portfolio Analysis

May 2012 Art Partners | Confidential

Art Partners I - Return Analysis for Sold/Consigned works

SOLD SOLD SOLD SOLD

Oct-07 Dec-07 Oct-07 Feb-09

$620,000 $935,000 $396,000 $962,000 $2,913,000

$988,000 $1,500,000 $550,000 $1,400,000 $4,438,000

Feb-08 Nov-08 May-11 May-11

1.59 1.60 1.39 1.46 1.53

246.9% 52.6% 9.8% 18.2% 35.9%

John Chamberlain Blue Flushing SUBTOTAL CONSIGNED TOTAL