Art Partners Presentation MSPWM May 7 2012

art partners

Art | Asset | Class

Fund Presentation

May 2012

May 2012 Art Partners | Confidential

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.

Introduction


The Art Market

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 Christie’s NY

Henri Matisse Bouquet de fleurs pour le quatorze juillet, sold for $28.6M (est. $18-25M) May 2010 Sotheby’s NY

Pablo Picasso Dora Maar au chat sold for $95.2M, May 2006 Sotheby’s NY


The Art Market at a Glance


Post-War Art (WWII)

Donald Judd Untitled (in 10 parts) sold for $4.9M (est. $2.5-4.5M) Nov 2009 Christie’s NY

Andy Warhol Self-Portrait sold for $38.4M (est. $20-30M) May 2011 Christie’s NY

John Chamberlain Big E sold for $4.6M (est. $2-3M) Nov 2007 Sotheby’s NY




Contemporary Art

Jeff Koons Balloon Flower (blue) sold for $16.8M (est. $12-16M) Nov 2010 Christie’s 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 Christie’s NY




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.

Christie’s: 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 Sotheby’s + Christies. In London (June 2011), Christie’s 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. Sotheby’s

May 2012 sale second highest sale ever.

Market Overview


Market Overview – Art Tactic


Market Overview – Art Tactic


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 – Sotheby’s and Christie’s 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

A Look Ahead


Market Overview – Mei & Moses Indexes


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 FTSE’s 11% and Dow Jones 9%*

Over past decade HNWI increased with 51% to 10.9 million, art investment

accounts for 22% of HNWI’s 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 as an Asset Class


Art Partners II

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.

Art Partners II - Profile



Use team’s 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

Investment Strategy

Gil Brandes Amalia Dayan Mark Fletcher


Chemi Peres Isaac Hillel Eitan Raff Vered Gadish

Art Partners II - Team

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

Art Partners II – Investment Committee


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.; Christie’s Tel Aviv

Holds B.A Art History, Tel Aviv University; M.A. Art Management , New York

University



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 - Investment Activity


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 II - Key Terms



Art Partners I Overview


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 Sotheby’s Nov 2011 Sale for $1.5M

Art Partners I – Track Record


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 GROSSIRR

SOLD Rudolf Stingel Untitled

Oct-07

$620,000 $988,000 Feb-08 1.59 246.9%

SOLD Takashi Murakami Pity

Dec-07 $935,000 $1,500,000 Nov-08 1.60 52.6%

SOLD Cindy Sherman Untitled Film Stills

Oct-07 $396,000 $550,000 May-11 1.39 9.8%

SOLD Takashi Murakami Bokan

Feb-09 $962,000 $1,400,000 May-11 1.46 18.2%

SUBTOTAL SOLD $2,913,000 $4,438,000 1.53 35.9%

Recently Sold

John Chamberlain Blue Flushing

Jun-09 $935,000 $1,500,000 Nov-11 1.60 21.6%

SUBTOTAL CONSIGNED

$935,000 $1,500,000

TOTAL

$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 Sotheby’s 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 Sotheby’s 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 Sotheby’s NY ROC: 1.60 IRR: 21.6%


‘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 trouvé 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


- Continued

Rudolf Stingel Untitled, 2004 Oil & enamel on canvas, 240x200cm Purchase: $620,000 Oct/07 Sold: $988,000 Feb/08 C’s 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 Sotheby’s NY ROC: 1.60 IRR: 52.6%


Works sold (2008)

Works acquired (2011)

David Hammons Untitled, 2009 Mixed media 233.7x183cm Purchase: $915,750 Mar/11 May 2012 Art Partners | Confidential

Works acquired (2011)

Urs Fischer To be Titled (Foxmask/Green Chair), 2010 Silkscreen print on mirror-polished stainless steel sheets, edition ½ 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 May 2012 Art Partners | Confidential

The first artist to have a 3-part

solo auction at Sotheby’s

London with 100% lots

sold on September 2008

(Eve of LB collapse)

Expected to have major

Retrospective exhibition at

Tate, London 2012

‘‘Damien Hirst’s 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


- continued


Donald Judd Untitled (89-49 Ballantine), 1989 Douglas Fir plywood wall boxes 4 units, 50x100x50cm/each Purchase: $1,100,000, Jul/08


‘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 rejected…he 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, Judd’s work draws particular attention to the relationship between the object, the viewer, and its environment.’ Tate Modern, London


- continued


Franz West Untitled, 2007 papier-mâché, paint, metal 126x109x74cm base: 46x102x77cm Purchase: $247,500, Feb/08



Sol LeWitt

Wall drawing #1185, Scribbles 1 October, 2005 Graphite on wall 305x305cm (loan Centre Pompidou Metz) Purchase: $385,000, Oct/09



Anselm Reyle Untitled, 2008 Mixed media on canvas 250.2x199x25cm Purchase: $264,000, Apr/08


‘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 décor.

Addressing the commodification of culture, Reyle reclaims the cliché and the kitsch to create his own brand of ‘authenticity’, meeting the shifting aspects lifestyle and art industry demands.’ -Saatchi Gallery, London

- continued


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 May 2012 Art Partners | Confidential


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 Sotheby’s 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 I - Summary

Exclusive access to active database upon request (password protected area in

fund’s website, Artnet, ArtTactic – periodical conference call with ArtTactic CEO),

periodical newsletters, online events calendar (available on fund’s 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 II - Investors Program


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

Art Partners - Summary


‘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, François Pinault, Charles Saatchi, Dakis Joannou,

Steven Cohen, Victor Pinchuk

5 major international art exhibitions: Venice Biennale, Whitney Biennial,

Documenta, Sao Paulo Biennial, Istanbul Biennial


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 Market– Major Trade Fairs

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 …


Sotheby’s

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)

Art Market – Major Auction Houses


Christie’s

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


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


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

Documents

glance3 major categories

low risk compared

donald judd untitled

strong connections continue

growing asset class

tel aviv university

previously acquired works

largest art market