Sotheby's (BID) DEFA14A Additional proxy soliciting materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

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Securities Exchange Act of 1934

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SOTHEBY’S

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)

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April 2014

Forward-looking

Statements:

This

presentation

contains

certain

“forward-looking

statements”

(as

such

term

is

defined

in

Company.  See Statement on Forward-Looking Statements in the Appendix to this presentation.

the

Securities

and

Exchange

Act

of

1934,

as

amended)

relating

to

future

events

and

the

financial

performance

of

the

2

AGENDA

•

Summary Observations

•

Sotheby’s Is a Market Leader with Outstanding Results Driving Superior

Shareholder Returns

•

Sotheby’s Capital Allocation Strategy Creates and Delivers Long Term

Value to Shareholders

•

Sotheby’s Has the Right Board and Leadership to Deliver Shareholder

Value Now and into the Future

•

Third Point Has Made No Case That Change Is Warranted; Mr. Loeb’s

Slate Adds No Incremental Relevant Expertise to Your Board

SUMMARY OBSERVATIONS

4

OVERVIEW OF SOTHEBY’S

Financial Services

(2% of Revenues)

Agency                                                           

(93% of Revenues)

Key Facts

•

High value market maker in the art and

collectibles market place, adding value

through expertise

•

Matches buyers and sellers through

the auction or private sale process

•

Expertise in valuing art and relationships

create opportunities to provide liquidity to

clients

•

Provides art owners with financing secured

by works of art, through near-term auction

advances and general purpose term loans

•

SFS supports activity in the core Agency

business and generated ~10% of Sotheby’s

Agency auction sales during past 5 years

•

Unique market position and

relationships create attractive

investment opportunities

•

Directly purchases and resells works of

art

•

Includes retail wine sales

Revenues by Region¹

Three Business Segments

Note: Percentages do not add to 100% due to Other revenue and rounding.

¹

Revenue by region based on auction sale location.

Sotheby’s Is the Only Publicly Traded Investment Opportunity

in the Art Market and Has No Relevant Public Market Comparables

Revenues by Category

United

States

41%

U.K.

27%

China

18%

France

5%

Switzerland

5%

Rest of

World

4%

Other

Paintings

9%

Old Masters

4%

Contemporary

27%

Impressionist

22%

Asian

17%

Other

11%

Jewelry

10%

•

Strong Prospects for Growth

o

90 locations in 40 countries

o

9 auction sales rooms around the world

o

Received bids from over 100 countries in 2013

•

Industry Leader with Global Presence

o

One of only two global auction franchises and the fastest

growing auction house in 2013 and Q1 2014, following a

diversified path to growth

o

Global, enduring brand serving high net worth individuals

o

No company better positioned as wealth creation leads to

additional collectors

Principal

(4% of Revenues)

5

HISTORY OF DELIVERING SHAREHOLDER VALUE

One Year TSR

Five Year TSR

Ten Year TSR

Source: Bloomberg; market data as of April 4, 2014

Note: Ten year TSR for S&P Global Luxury Index is indexed as of June 30, 2005, when the index began trading

Sotheby’s Has Outperformed All Relevant Indices

Over the Past One, Five and Ten Year Periods

S&P Global

Luxury Index

S&P Midcap

Russell 3000

23%

23%

29%

36%

153%

181%

264%

352%

109%

157%

150%

305%

6

RECENT BOARD & MANAGEMENT ACCOMPLISHMENTS

•

Expanded into key emerging markets with attractive dynamics and growth potential

•

New

offices

and

gallery

spaces

in

key

markets

-

Beijing,

Moscow,

Istanbul,

Doha,

S

2

Gallery

in

London

•

New clients generated approximately one-third of 2013 transaction volume

•

Private sales of art, now one of Sotheby’s most successful channels

o

Private sales of $1.2 billion in 2013, a 30% increase from 2012

•

Growth of art-related financial services business

o

Average loan portfolio of $434 million in 2013 (+180% vs. 2009 average loan portfolio)

•

Major

investments

in

digital

strategy,

including

the

BIDNow™

online

bidding

platform,

which

saw

a

21%

increase in transactions by clients in 2013

•

Implemented new Capital Allocation and Financial Policy Plan

o

$300 million special dividend in March 2014

o

Commenced $150 million share repurchase program

o

Evaluating

near-term

capital

return

from

the

loan

book

and

real

estate

(New

York

headquarters

and

UK New Bond Street flagship property)

–

Began process of debt-financing loans that are eligible collateral under the new SFS ABL, with

a significant level of new loans now meeting 20%+ ROE threshold target

o

New framework for annual return of any excess capital

o

Framework for evaluating investments (15% ROIC target rate in the Agency business and 20% ROE

target in the Financial Services business)

Increased

Global

Footprint

Expansion

Across

Multiple

Channels

Efficient

Capital

Allocation

Board and Management Maintain a Keen Focus on Delivering Shareholder

Value Through Growth Opportunities and Prudent Capital Allocation

|

THIRD PARTIES ARE SUPPORTIVE OF SOTHEBY’S

Recent Commentary Has Acknowledged Sotheby’s

Strong Performance in Key Collecting Categories and Regions

“But Sotheby’s is no slouch in China, despite Loeb’s suggestion to the contrary.

Like

Christie’s, it now runs sales in the PRC. And its record in Hong Kong is illustrious. Including

auctions there, in Beijing and globally, the company’s Asian art sales increased 50

percent in 2013, faster than at Christie’s.”

-

January 22, 2014

“We Believe BID Has a Balanced Approach to Market Share —

In our view, BID is

balancing optionality to go after market share with stronger revenues at the expense of

margins, or to focus the business on profitable growth with a less aggressive revenue

approach…we believe the current focus on greater profitability is more prudent for

BID, & for shareholders.”

-

March 6, 2014

7

-

February 6, 2014

Sotheby's and Christie's. Sotheby's remains our top stock pick.”

“Record

London

Impressionist

Art

evening

sale

results

and

demand

was

exceptionally

robust

across

most

lots

The

art

cycle

is

still

going

strong

as

evidenced

by

recent

results

at

.

8

EFFECTIVE LEADERSHIP AND STRONG GOVERNANCE

FOCUSED ON LONG TERM VALUE CREATION

Independent Board with strong business leaders

Robust Lead Independent Director role

Directors with relevant experience and expertise across sectors and companies

Addition of new directors balances institutional knowledge with new perspectives

Majority

vote

standard

in

uncontested

elections

to

promote

Board

accountability

Strong shareholder engagement program, including specific guidelines to support direct

communications between shareholders and Board members

Ongoing commitment to return capital to shareholders

Close alignment of performance and pay

“360-degree”

evaluations in the Board’s assessment of both individual director

performance and the contributions of Board committees

9

CONSISTENT HISTORY OF SHAREHOLDER ENGAGEMENT

•

Sotheby’s has a long track record and culture of proactive and open dialogue with its shareholders

•

Consistent with this philosophy, Sotheby’s promptly sought meetings with Marcato Capital 

Management and Third Point soon after each announced major holdings

•

Sotheby’s proactively sought input from its shareholders during the development of the Capital

Allocation and Financial Policy Review (CAR)

o

Upon initiating the CAR, members of Sotheby’s management reached out to top shareholders to

discuss the process and solicit feedback

o

In

particular,

Sotheby’s

reached

out

to

both

Marcato

Capital

Management

and

Third

Point

to

offer

an opportunity to sign an NDA, see advanced drafts of the CAR and offer their input and advice

o

Sotheby’s

briefed

Marcato

and

Third

Point

on

the

preliminary

conclusions

of

the

review

and

considered each investor’s feedback in the development of the final framework

o

In late January, Sotheby’s published the results of the CAR and again reached out to top

shareholders to review the materials

•

Throughout 2014, Sotheby’s continued its engagement with Marcato on the Company’s approach to

capital allocation and return

•

Sotheby’s has also maintained an active dialogue with Third Point, and in early 2014 offered Dan Loeb

a board seat in an attempt to reach a settlement and avoid a distracting proxy contest

Sotheby’s Has Consistently Engaged In an

Active and Open Dialogue with Shareholders

10

SOTHEBY’S BOARD IS COMMITTED TO PURSUING

THE

BEST

INTERESTS

OF

ALL

SHAREHOLDERS

•

Sotheby’s held numerous discussions with Third Point to learn and understand its views

•

Sotheby’s entered into a non-disclosure agreement with Third Point in January 2014 to discuss

Capital Allocation and Financial Policy Review

•

Before Sotheby’s announced the Capital Allocation and Financial Policy Review results, Mr. Loeb

indicated to management that he supported the plan and thought it was well done

•

Sotheby’s offered Mr. Loeb a Board seat and membership on three key board committees to reach a

resolution and avoid a costly and disruptive proxy contest and Mr. Loeb indicated he was inclined to

accept the offer

•

However, Mr. Loeb abruptly launched his proxy campaign in the midst of constructive dialogue,

casting doubt on his ability to work effectively as a Board member

•

The

Board

has

concluded

that

Mr.

Loeb

and

his

nominees

would

add

no

incremental,

relevant

skills,

experience or expertise to the Sotheby’s Board

•

The Board is concerned Mr. Loeb and his nominees would be advocates only for Mr. Loeb’s interests

rather

than

those

of

ALL

shareholders

based

on:

o

Mr. Loeb’s behavior with Sotheby’s and the fact that he has not articulated any reason for change

o

His history as a short time Board member at other companies

o

The self-interested transaction he executed to sell shares back to Yahoo!

SOTHEBY’S IS A MARKET LEADER WITH OUTSTANDING

RESULTS DRIVING SUPERIOR SHAREHOLDER RETURNS

12

SOTHEBY’S HAS DELIVERED STRONG FINANCIAL PERFORMANCE

•

Consolidated

Sales:

$6.3

billion

•

Aggregate

Auction

Sales:

$5.1

billion

•

Revenues:

$854 million

•

Revenue

Growth:

11.1%

•

EBITDA:

$245 million¹

•

EBITDA

Margin:

28.7%¹

•

Financial

Services

Loan

Portfolio:

$474

million

•

Loan

Portfolio

Growth:

11.6%

Market

Valuation

Financial

Performance

(2013)

•

Share Price:

$42.89

•

Market

Capitalization:

~$3.0

billion

•

10 Year TSR:

305%

Source: Bloomberg and company filings; market data as of April 4, 2014

Note: Balance sheet data as of 31-Dec-2013

¹

EBITDA and EBITDA Margin are non-GAAP measures. See non-GAAP reconciliation in the Appendix to this presentation.

Capital

Return

•

Regular

Quarterly

Dividend:

$0.10

•

Special

Dividend:

$4.34

(paid

March

17)

•

Share

Repurchases

(year-to-date):

$25

million

•

Commitment to return excess capital to

shareholders annually

13

VIBRANT AND GROWING GLOBAL ART MARKET

•

The global art market was estimated at $64 billion in 2013, up from $36 billion in

2001, an approximately 80% increase

•

In 2013, the combined auction sales of Sotheby’s and Christie’s reached $11.0

billion, up from $5.9 billion in 2003

•

An annual growth rate of approximately 6% over the 10 year period

Source: TEFAF Art Market Report 2014 and 2002

Note: Art market figures converted from euros to dollars at 1.35.

$15.4 billion

$12.8 billion

$3.8 billion

$24.3 billion

Sotheby’s Platform and Footprint Designed to

Reach All Key Channels and Regions in a Growing Market

Global Art Market

$64 billion

Auction Sales

$11 billion

•

The

private

sales

market

is

currently

estimated

at

approximately

53%

of

the

global art market, which approximates historic levels

Private Sales

53% of Art Market

Sales by Key Country

United States

China

England

France

14

UNIQUELY POSITIONED TO CAPTURE OPPORTUNITY

FROM CONTINUED WEALTH ACCUMULATION

Global Ultra High Net Worth

Population Is Growing …

…

Creating Tremendous Business

Opportunities that Sotheby’s is Seizing

•

Significant growth forecasted from 2013 to

2023,

with particularly robust growth within

new markets covered by Sotheby’s global

footprint

•

Ultra high net worth population has grown

59% over last decade

•

In 2007-2012, even through the financial

crisis, high net worth individual investable

wealth grew at 2.6% CAGR, above 1.6%

GDP CAGR

Asia

•

Sotheby’s is uniquely positioned to capture

this opportunity due to deep expertise,

longstanding relationships, and strength of

brand across the art world

+43%

Latin America

+42%

Middle East

+35%

Source: Knight Frank, The Wealth Report 2014.

o

Private Sales.

In-depth knowledge of

owners and keen ability to connect

them with interested buyers

o

Geographic Growth.

Expansion into

key markets across the world,

including emerging markets in Asia,

the Middle East, Russia and Latin

America

o

Contemporary Art.

Record auction

results in 2013 supported by significant

market expertise and experience

15

RAPID EXPANSION AND PRESENCE IN GROWING ASIAN MARKET

•

Over the last five years, the Chinese art market has been the fastest

growing

art

market

in

the

world,

reaching

$15

billion

in

2013

•

The emerging Chinese art market presents new opportunities to drive

global sales by engaging and educating a growing population of wealthy

collectors

•

In September 2012, Sotheby’s became the first international auction

house to establish a presence in Beijing

•

Celebrating 40 years in Hong Kong, Sotheby’s October 2013 sales

series

generated

$538

million,

the

highest

total

ever

for

any

global

auction

house

in

Asia,

and

over

100%

higher

than

the

prior

year

total

of $262 million

•

In December 2013, Sotheby’s first commercial auction in mainland China

raised

$37

million

and

set

a

record

for

Chinese-French

artist

Zao

Wou-Ki in Beijing

•

Sotheby's

Spring

Hong

Kong

sales

totaled

$438

million,

a

56%

increase over the prior year, with three works bringing over HKD$100

million and auction records for Jadeite Jewelry, Chinese Ceramics and

any Southeast Asian Artist

Source: TEFAF Art Market Report 2014

Note: Art market figures converted from euros to dollars at 1.35.

•

In 2013, Private Sales increased by 30% or $272.5

million and now represent nearly 20% of Sotheby’s

Consolidated Sales and 50% market share with

traditional competitor

•

Leverage existing expertise and knowledge to

enhance Sotheby’s Private Sales initiatives

•

Opened dedicated private sales galleries in New

York, London and Hong Kong

Approximately 215%

Growth in Private

Sales

since

2008

(~26% CAGR)

Over the Past Several Years Sotheby’s Has Dedicated Significant Management

and Specialist Talent to the Rapidly Growing Private Sales Arena

RAPIDLY EXPANDING PRESENCE IN THE PRIVATE SALES MARKET

16

Countries that participated in Sotheby’s Contemporary Art sales last year

SOTHEBY’S EXCELLENCE IN CONTEMPORARY ART

~$381m

200%

13

67

26

34%

11

Total sales at the November

2013 Evening Sale, the highest

ever in Company history

Increase in activity among Asian

collectors in Sotheby’s Contemporary

Art sales last year

Contemporary works over $20 million

sold at auction in 2013, nearly double

the 2012 figure

Contemporary specialists with a

decade or more at Sotheby’s

Buyers in Sotheby’s 2013

Contemporary sales participating for

the first time

Consecutive Contemporary Art

Evening Auctions with a sell-through

rate exceeding 80%

Sotheby’s

Contemporary

Art

Sales

Have

Increased

by

528%

Over

the

Last

Ten

Years

17

Sotheby’s Commands a Large Share of the Contemporary Art Market and Continues

to

Win

Many

of

the

Most

Sought

After

and

Profitable

Works

of

Art

in

This

Space

Andy Warhol, Silver Car Crash

(Double Disaster)

Sold at Auction in 2013 for $105.5mm

Mark Rothko, No 1

Sold at Auction in 2013

for $75.1mm

•

Sotheby’s BIDnow™

live auction platform enables bidders to participate in

auctions from anywhere, at any time and on nearly any smart device

•

Audubon’s ‘Birds of America’

achieved new record for online purchase in a live

Sotheby’s auction at $3.5 million

•

Continuous

enhancement

of

BIDnow™

drove

significant

increase

in

client

usage

in 2013 including:

o

45%

increase

in

online

bidding

vs.

2012

o

50%

increase

in

Asian

client

traffic

o

25%

increase

in

time

spent

on

mobile

devices

•

BIDNow™

regularly registers bids over $1 million

•

In 2013, 33% of online bidders were new to Sotheby’s

•

In the last year, digital delivery tripled the distribution of catalogues

•

Sotheby’s actively engages across social media platforms to attract and retain

clients

•

Original content –

a key differentiator –

is read by clients in more than 180

countries

•

Sotheby’s is aggressively exploring collaborations and additional innovations to

expand our digital business

In 2013, Sotheby’s Achieved a 45% Increase in Online Bidding Through the

Company’s BIDnow™

Platform Regularly Registering Bids Exceeding $1 Million

82,500+

Followers

33,000+

Followers

17,500+

Followers

57,500+

Followers

SUCCESSFUL STRATEGY FOR DIGITAL CLIENT ENGAGEMENT

ACROSS ONLINE AND SOCIAL MEDIA PLATFORMS

Significant Investment in Digital Strategy to Increase

Global Client Engagement and Build New Audiences in Key Markets

18

SOTHEBY’S CAPITAL ALLOCATION STRATEGY CREATES AND

DELIVERS LONG TERM VALUE TO SHAREHOLDERS

Upfront Capital

Return (March 2014)

•

Distributed excess available cash to

shareholders via a special dividend

of $300 million paid in March 2014

•

$25

million

accelerated

share

repurchase completed in March

2014

SOTHEBY’S ONGOING COMMITMENT TO CREATE LONG TERM VALUE

AND RETURN CAPITAL TO SHAREHOLDERS

Near-Term

Initiatives

–

Loan

Book

•

Began process of debt-financing

loans that are eligible collateral

under new SFS ABL

•

Significant level of new loans now

meeting 20%+ ROE threshold

target

•

A majority of ~$150-200 million to

be available by March 2015

Ongoing Value Creation

and Return of Capital

Note: See Statement on Forward-Looking Statements in the Appendix to this presentation.

Initial Return + Potential Near Term Capital Return from Loan Book and Real Estate + Annual Return of Excess

Capital = Meaningful Long Term Value Creation and Return for Shareholders

20

•

Annual return of excess

capital primarily via a special

dividend

•

Annual share repurchases

primarily to offset employee

stock dilution

•

Disciplined investments in

growth opportunities

Near-Term

Initiatives –

Real Estate

•

York Avenue Headquarters

Review process to

conclude in 2014

•

UK flagship New Bond

Street review

underway

Consider prudent leverage targets for the Company’s core Agency business (adjusted debt

to EBITDA of 3.5x to 4.0x through-the-cycle)

Assess and recalibrate sources and uses of capital reserves / liquidity annually, taking into

account relevant changes in the business

Target a minimum of 15% ROIC on growth opportunities (20% ROE for Sotheby’s Financial

Services) and allocate capital to initiatives that provide an appropriate rate of return

Execute annual share repurchase program primarily to offset employee stock dilution

All excess capital will be returned to shareholders primarily via annual special dividends

FRAMEWORK FOR RETURNING CAPITAL TO SHAREHOLDERS

Through Our Capital Allocation and Financial Policy Review Process, We

Have

Established

Key

Principles

to

Determine

Amounts

and

Process

for

Returning

Excess Capital to Shareholders on an Ongoing Basis

Note: EBITDA is a non-GAAP measure. Adjusted Debt to EBITDA would reflect typical ratings agency adjustments to both debt and EBITDA for debt-like items, such as underfunded

pensions and operating leases.

•

Any special dividend will be disclosed in conjunction with the release of full year results

and paid shortly thereafter

•

Management retains flexibility to review appropriate means for returning capital to

shareholders (e.g. special dividends vs. share repurchases)

1

2

3

4

5

21

22

FRAMEWORK FOR EVALUATING INVESTMENTS

•

Threshold Test.

o

15% return on invested capital threshold over the life of the investment.  Investment

opportunities must strengthen the core Agency business or provide unique opportunities

to expand into adjacencies

o

20% return on equity threshold for Sotheby’s Financial Services

•

Basis

for

Thresholds.

The

threshold

ROIC

rate

is

based

on

an

approximation

of

Sotheby’s

weighted average cost of capital over time

•

Capital

Allocation

Decision.

Investments

that

meet

the

thresholds

will

be

evaluated

further

and capital will be allocated to those projects offering the highest risk-adjusted returns

Sotheby’s Will Evaluate Potential Investments

According to a Targeted Return Requirement

“The review undertaken looks thorough…concluded that the firm’s art auction

and private sales business should be funded separately from its art lending

activities. Using more outside leverage for the finance side will help release cash

to pay the dividend...it’s all rational and laid out with unusual clarity, which

pleased analysts on Wednesday’s conference call.”

-

January 29, 2014

“We are impressed with BID’s new plan which we believe thoughtfully

separates BID’s Agency & Financial Services businesses, adds leverage to

each, and specifies BID’s commitment to return capital to shareholders

primarily via Annual Special Dividends.”

-

January 29, 2014

“We believe this was a good step (the company is becoming more

shareholder-focused and more transparent)”

-

January 29, 2014

SOTHEBY’S RECEIVED WIDESPREAD PRAISE REGARDING

THE RESULTS OF THE CAPITAL ALLOCATION REVIEW

In

Conversations

With

Management,

Mr.

Loeb

Characterized

the

Company’s

Capital

Allocation

and

Financial

Policy

Plan

as

the

“Right

Approach,”

Striking

a

Balance

Between

Returning

Capital

to

Shareholders

and

Continuing

to

Invest

in

the

Business

23

SOTHEBY’S ONGOING COST STRUCTURE REVIEW & PROGRESS

Sotheby’s Annual Planning Process Identified Opportunities for

Savings of $22 million in 2014, Equivalent to ~10% of 2013 Operating Income

•

Expects

to

reduce

professional

fees

by

approximately

$9

million,

or

15%,

in

2014

Note: Savings of $22 million in 2014 includes reduction of direct costs of auction services that would equate to $5 million in savings based on a similar level of Net Auction Sales as

2013.

Professional

Fees

•

Reduce

marketing

expenses

by

approximately

$4

million,

or

17%,

in

2014,

reflecting a more targeted approach to spending on core strategic priorities

Other General

and

Administrative

Expenses

•

Spending

reductions

of

approximately

$4

million

across

other

categories

of

general and administrative expenses

Direct Costs

of Auction

Services

•

Reduce

direct

costs

of

auction

services

as

a

Percent

of

Net

Auction

Sales

by

approximately

10

basis

points

in

2014

Marketing

Expenses

Cost

Saving

Is

a

Priority

and

the

Board

and

Management

Have

Made

Significant

Progress to Date and Will Vigorously and Continuously Pursue Additional Efficiencies

24

•

Behind the Sotheby’s brand is a 270 year history of providing

exceptional service to clients worldwide through art, auctions, real

estate and more

•

The Sotheby’s brand connotes a reputation of expertise, credibility,

trust and prestige

•

In addition to core auction, financial services, and private sales

business, the Sotheby’s brand has also been applied to:

o

Sotheby’s International Realty through a licensing agreement

o

High-end retail wine sales

o

Diamond retail sales

o

Sotheby’s Institute of Art, which continues to expand its global

presence and relevance in key art markets

o

Sotheby’s Imprint, which offers print management and distribution

services for premiere brands

•

In 2013, Domenico De Sole joined as Lead Independent Director, with

luxury brand expertise from his time at Tom Ford and Gucci

•

In 2014, Alfredo Gangotena joined as Chief Marketing Officer, with an

accomplished record of defining, managing and promoting global

brands such as MasterCard Worldwide, Hutchison-Priceline, and

Henkel Group

25

Sotheby’s is Enormously Protective of the Brand and Carefully Evaluates Brand

Usage

Opportunities

Against

the

Potential

Value

and

Risk

to

the

Overall

Business

SOTHEBY’S IS ONE OF THE MOST

RECOGNIZED LUXURY BRANDS IN THE WORLD

26

Investment Opportunities

•

Increased investment in private sale initiatives

•

Increased loan portfolio at Sotheby’s Financial Services

•

Opportunistic principal activities

•

Expansion into new collecting categories

•

Further investment in emerging markets

•

Continued expansion of digital engagement

•

Leverage Sotheby’s brand in complementary products or

Pursue Opportunities that Strengthen the Core Agency Business;

Increase Exposure to Fast Growing New Markets;

Expand the Breadth and Profitability of the Sotheby’s Brand

services

STRATEGY FOR CONTINUED GROWTH

SOTHEBY’S HAS THE RIGHT BOARD AND LEADERSHIP TO

DELIVER SHAREHOLDER VALUE NOW AND INTO THE FUTURE

28

CONSISTENT HISTORY OF SHAREHOLDER ENGAGEMENT

AND SHARP FOCUS ON DELIVERING VALUE

Sotheby’s Board and Management Have Demonstrated a Long, Unwavering

Commitment to Shareholder Value and Shareholder Engagement, and Continue to

be Responsive to Feedback

•

Shaped in 2013 with input solicited from a number of investors

•

After results were announced early in 2014, Sotheby’s again engaged top

shareholders, who provided positive feedback on framework and policy

Capital

Allocation

Review

Executive

Compensation

Corporate

Governance

•

In 2013, Sotheby’s solicited feedback from investors on executive

compensation

and

made

significant

changes

to

improve

the

program

and

address shareholder concerns

•

Engaged in substantial outreach to the majority of shares outstanding

•

Continuous review and enhancement of governance guidelines, including

recent changes to support direct communication between shareholders and

Board members

•

A Board focused on constant renewal and improvement, including “360

degree”

director evaluation, with a balanced set of experience and skills

relevant to our business and building shareholder value

29

SOUND CORPORATE GOVERNANCE POLICIES AND PRACTICES

Independent Board with New Perspectives

•

•

•

•

Sound Governance Practices

•

•

•

•

Recently Enhanced Corporate Governance Guidelines

•

•

•

•

•

•

¹

Source: Spencer Stuart Board Index 2013

²

Source: Wall Street Journal

Robust Lead Independent Director role; new Lead Independent Director, Domenico De Sole, was appointed in December 2013

Average

tenure

of

~7.1

years

versus

an

average

of

~8.6

years

for

the

S&P

500¹

and

~10.8

years

for

the

S&P

1500²

Board members recognized as respected leaders in their fields

Annually elected directors

Majority vote standard for election of directors

Majority vote standard to amend bylaws/charter and approve M&A transactions

Engage regularly with shareholders and seek feedback

shareholders and facilitating director evaluations

Mandatory retirement guidelines for non-management directors

Guidelines to support direct communication between shareholders and members of the Board

Updated director stock ownership guidelines to require periodic review

Revisions to executive compensation program intended to make equity awards more long term focused

“360 degree”

evaluation in the Board’s assessment of both individual directors and Board committees

Sotheby’s Is Committed to Effective Independent Board Leadership and

Governance Practices Focused on Shareholder Value Creation

10

of

12

directors

are

independent;

five

new

independent

directors

will

have

been

added

since

2011

Expanded

responsibilities

Director,

codifying

practices,

including

existing

of

Lead

Independent

on

engaging

with

30

BOARD WITH DISTINCT KNOWLEDGE AND EXPERTISE

CRITICAL TO THE COMPANY’S SUCCESS

12 Highly Qualified Directors; 10 Independent Directors;

5 Will Have Been Added Since 2011

Jessica Bibliowicz

Former Chairman and 

Chief Executive 

Officer of National 

Financial Partners

Domenico De Sole

Chairman of Tom Ford 

International

The Duke of Devonshire

Chancellor of the 

University of Derby

Daniel Meyer

President of Union 

Square Hospitality Group 

(incl. Shake Shack and 

Union Square Café)

Allen Questrom

Former CEO of 

Federated Department 

Stores, Neiman 

Marcus, Barney’s and 

J.C. Penney

Marsha E. Simms

Partner at Weil, Gotshal 

& Manges until 

retirement in 2010

Diana L. Taylor

Former Superintendent 

of Banks of New York 

State

Dennis M. Weibling

Managing Director of 

Rally Capital and 

Former President of 

Eagle River

Note: Shading indicates new directors since 2011. Jessica Bibliowicz and Kevin Conroy are new nominees in 2014.

John M. Angelo

Chief Executive Officer 

of Angelo, Gordon & 

Company

Kevin Conroy

President of Univision 

Interactive and 

Enterprise 

Development

Robert S. Taubman

Chairman, President and 

CEO of Taubman Centers

Member, University of 

Michigan Investment 

Advisory Committee

William F. Ruprecht

President and Chief 

Executive Officer of 

Sotheby’s

31

Law

Banking

Digital, Media, Advertising,

Communications and Marketing

Leading and profitably growing

public and private companies

(Current / Former CEOs)

Experience in key growth

markets for Sotheby’s

SOTHEBY’S BOARD HAS UNIQUE, BROAD AND

COMPLEMENTARY RANGE OF EXPERTISE AND CAPABILITIES

Sotheby’s Current Board Has the Relevant Experiences and Qualifications

Necessary to Continue to Deliver Effective and Independent Oversight and Direction

Art World Relationships

Capital Markets

High-End Luxury Goods

Real Estate

Client Service

International Management

Corporate Governance

Entrepreneurship

Capital Allocation

Value Creation

Money Management

32

SOUND COMPENSATION PRACTICES

SHAPED BY A RESPONSIVE BOARD

Sotheby’s Board Proactively Engages with Shareholders and

Provides Solutions to Address Shareholder Concerns

After

last

year’s

annual

“say-on-pay”

vote,

the

Compensation

Committee

led

a

thorough

review of pay practices and CD&A disclosure

•

Our Compensation Committee engaged in substantial outreach to Sotheby’s largest

shareholders, who represented more than the majority of shares outstanding, to fully understand

shareholder concerns and solicit input on Sotheby’s pay practices

•

Our Compensation Committee worked intensively with independent compensation experts

Semler Brossy on a top-to-bottom review, with shareholder comments integral to the process

In response to shareholder feedback, Sotheby’s Compensation Committee took the following

actions:

Expanded disclosure on performance measures, calculation of Sotheby’s incentive

compensation pool, market check for compensation decisions, and individual incentive payout

rationale

Eliminated retesting for long term incentive grants

vest of long term awards rather than annual vest

Modified executive equity award structure to be more long term focused with three-year cliff

33

SOTHEBY’S SHAREHOLDER RIGHTS PLAN

Sotheby’s

shareholder

rights

plan

is

shareholder

friendly

•

One-year term automatically expiring in October 2014

•

Shareholder approval is required to extend rights plan beyond October 2014

•

Permits passive investors to accumulate as much as 20%

•

Does not apply to majority-approved third-party bids to acquire the whole company

The

shareholder

rights

plan

is

an

important

tool

to

ensure

ALL

Sotheby’s

shareholders

are

treated 

fairly, including in the context of rapid accumulations by 13D filers and certain short-term focused

holders

•

Allows the Board and shareholders time to make informed judgments after considering the interests of all

shareholders

Sotheby’s

Board

and

Management

View

the

Shareholder

Rights

Plan

as

an

Important

Tool

to

Ensure

ALL

Shareholders

Are

Treated

Fairly;

Mr. Loeb Has Made Clear That He Seeks Relief from the Rights Plan to Buy Shares

with Votes After the Record Date in Order to Win the Proxy Contest

“To win a proxy battle, Third Point would start with the 10% it can vote, but for the remainder of their

vote they would need to convince their fellow stockholders…if activists can’t do that without

acquiring more voting power for themselves, then it seems to me they are essentially admitting that to

win they need the very elements of control–without paying a control premium–which the pill is

legitimately designed to prevent being bought at a bargain price.”

-

Wall Street Journal, 01-April-2014

THIRD POINT HAS MADE NO CASE THAT CHANGE IS WARRANTED;

MR. LOEB’S SLATE ADDS NO INCREMENTAL RELEVANT EXPERTISE

TO YOUR BOARD

35

SUMMARY OF INTERACTIONS WITH THIRD POINT

•

Between August 2013 and February 2014, Board members and management had six in-person

meetings and numerous conference calls with Mr. Loeb

•

Offered to allow Mr. Loeb to review our capital allocation plan in depth if he agreed to a non-disclosure

agreement

in

January

2014;

he

agreed

and

indicated

to

management

that

he

supported

the

plan

and

thought it was well done

•

During

discussions

with

members

of

the

Board

and

management,

Mr.

Loeb

reiterated

his

desire

to

join

the Board

•

Mr.

Loeb

also

expressed

that

he

was

“willing

to

work”

with

Mr.

Ruprecht

•

Mr. Loeb also commended Sotheby’s on the Capital Allocation Review and results

Meetings

with

Management

•

Third Point has held shares in Sotheby’s for approximately one year

•

Third Point initially filed a 13D in August 2013, disclosing a 5.7% stake

•

In October 2013, Third Point sent an open letter disclosing a 9.3% stake and destabilizing demands:

o

Resignation of and search for new CEO

o

Addition of “several”

new directors

o

“Revamped”

strategy

Ownership

and Letter to

Board

•

Sotheby’s engaged in multiple discussions with Third Point in February 2014 in an effort to reach a

resolution and avoid a costly and disruptive proxy battle

•

Mr. Loeb was offered a seat on the Board, recognizing his ownership position and signaling an attempt

at an amicable resolution

Sotheby’s

Attempt at a

Resolution

Proxy Fight

Launch

•

In the midst of a constructive settlement negotiation, which your Lead Independent Director pursued

aggressively with the full support of the Board, Mr. Loeb launched an abrupt proxy contest for three

directors

36

THIRD POINT NOMINEES

Daniel S. Loeb

•

•

•

Mr. Loeb’s Nominees Add No Incremental Experience to the Board

Harry J. Wilson

•

•

Olivier Reza

•

•

•

•

Art/Auction Expertise:

•

Luxury Expertise:

•

Digital Media/Communications:

•

Client Service:

•

Art/Auction Expertise:

•

Luxury Expertise:

•

Digital Media/Communications:

•

Client Service:

•

Art/Auction Expertise:

•

Luxury Expertise:

•

Digital Media/Communications:

•

Client Service:

No experience   

Limited experience

Current

position:

CEO

of

Third

Point

LLC

Experience:

Asset

management

Public

company

board

service:

No

current

boards;

average

tenure

of

one

to

two years on previous boards

Current

position:

Chairman

&

CEO,

MAEVA

Group

Experience:

Restructuring

(notably

in

relation

to

auto

industry

bankruptcies)

Public

company

board

service:

Visteon

(auto

parts

company)

since

soon

after company emerged from bankruptcy. Served briefly as member of Yahoo!

board (nominated by Third Point) and resigned when Yahoo! repurchased

Third Point stake. Additional Third Point associations include Loeb being

among top 20 contributors to Wilson’s failed 2010 campaign for New York

State Comptroller

Current

position:

Managing

Partner

of

Myro

Capital,

providing

services

to

his

family members and associated entities including those associated with the

jewelry business of Alexandre Reza (his father)

Experience:

Most

of

career

in

investment

banking;

recently

joined

family’s

jewelry business

Public

company

board

service:

None

•

37

MR. LOEB’S BOARD EXPERIENCE

Company

Tenure

Overview

<1 Year

•

Third Point announced that it would nominate 6 directors to the Board in February

2007

•

Pogo agreed to expand the Board from 8 to 10 directors and appointed Mr. Loeb and

an associate to the Board on July 1, 2007

•

Pogo subsequently announced acquisition by Plains on July 17, 2007

~1 Year

•

Joined Board along with two other nominees in May 2012

•

Stepped down in July 2013 after negotiating a private transaction under which Yahoo!

agreed to repurchase ~40mm of Loeb’s shares

~1 Year

•

Loeb appointed to Board in May 2006 following proxy fight, resigned in June 2007

•

During that period, shares of Massey declined more than 30%, underperforming the

S&P 500 by nearly 50%; in the six months following his resignation, shares of

Massey

outperformed

the

S&P

500

by

~30%

1

1

Measured from May 16, 2006, the date of the Massey annual meeting, through June 13, 2007, the date of Mr. Loeb’s resignation letter.

Mr. Loeb’s Board Experience Highlights the Short-Term Nature of His

Representation of Shareholders as a Director

38

Company

Tenure

Overview

~1 Year

•

No publicly disclosed activism

•

Third Point was granted one Board seat

~2 Years

•

Mr. Loeb was appointed to the Board in December 2005 and resigned in March 2007

•

During Mr. Loeb’s tenure as a Board member, Ligand shares remained at

approximately

the

same

price

and

underperformed

the

S&P

500

by

~12%

1

~2 Years

•

Mr. Loeb had been a member of the Board of Directors of the private Company since

May 2006

•

Mr. Loeb disclosed a 30.4% stake in the Company on June 26, 2007, purchasing

shares

through

a

private

placement

completed

simultaneously

with

the

close

of

the

Company’s IPO on June 19, 2007

•

From the close of the Company’s IPO to Mr. Loeb’s resignation effective March 11,

2008, shares of Biofuel underperformed the S&P 500 by over ~40%

MR. LOEB’S BOARD EXPERIENCE (CONT’D.)

1

Measured from December 8, 2005 through March 1, 2007.

Mr. Loeb’s Board Experience Highlights the Short-Term Nature of His

Representation of Shareholders as a Director

39

THIRD POINT HAS MADE NO CASE THAT CHANGE IS WARRANTED

Independent Board with

Diverse Perspectives

•

10

of

Sotheby’s

12

directors

are

independent,

with

5

new

independent

directors

to

be

added since 2011

•

Sotheby’s Board provides unique, broad, and complementary expertise in art, luxury

goods, digital media, international business and operations

Leader in High Growth

Asian Art Market

•

In September 2012, Sotheby’s became the first international auction house to

establish a presence in Beijing

•

Celebrating 40 years in Hong Kong, Sotheby’s October 2013 sales generated $538

million, the highest total ever for any global auction house in Asia

Increased Private Sales

•

Private sales have increased approximately 315% since 2008 and by ~30% in 2013

alone, and represent almost 20% of consolidated sales

Leader in Contemporary Art

Auction Market

•

Sotheby’s Contemporary Art sales have increased by over 500% since 2003

•

In November 2013, Sotheby’s Contemporary Evening sale set numerous records

Robust Online Presence

•

45%

increase

in

online

bidding

through

the

company’s

BIDnow™

platform

•

Aggressively exploring opportunities for collaboration and innovation to drive future

growth in digital platform

Brand Leverage

•

Sotheby’s has successfully leveraged its brand for a variety of activities including retail

wine sales, retail diamond sales and realty

Focus on Cost Saving

and Efficiency

•

Management has identified $22 million of cost savings in 2014 and is aggressively

pursuing additional efficiencies

•

Board is committed to continuous cost improvement

Shareholder Friendly

Rights Plan

•

Shareholder friendly rights plan, with a one year term expiring in October 2014

•

Mr. Loeb wants relief from the rights plan to buy votes

40

MR. LOEB’S SELF-INTERESTED TRANSACTION WITH YAHOO!

Gabelli & Company -

July 23, 2013

“This deal looks bad. We believe Yahoo’s aggressive share repurchase program will likely add shareholder value at current

prices and large, privately negotiated share repurchases, executed at market, are not in themselves questionable. However,

this transaction is colored by Third Point’s insider status…Moreover, Third Point is giving up its Board representation as part

of this deal, which smacks of greenmail. Why didn’t Yahoo just tender for 40 million shares and allow all shareholders to

participate? Perhaps Yahoo could have received a better price.”

Source:  Gabelli & Company Research, New York Times

New York Times -

July 23, 2013

“The share repurchase has the whiff of greenmail, with Business Insider’s Henry Blodget going as far as to call it “insider

trading”…the sale is arguably suspect in terms of its timing. Right now, Yahoo’s valuation is floating on two pontoons. The

first and biggest driver of Yahoo’s share gains over the last few years has been its stake in the Chinese Internet

giant Alibaba Group

gaining from the unexpected Alibaba rise but not the restructuring he advocated, leaving just before things get hard

and the wave crashes. Mr. Loeb’s exit raises the question of whether he was out to create true value or merely stir

the pot to get a quick hit and $600 million in profit so far from Yahoo. Mr. Loeb’s promise at the beginning was to

provide

“all-star

directors,”

not

all-star

directors

for

about

a

year…

via a corporate stock buyback, he would have been unlikely to get the same price. In addition, the volume would have meant

that trading costs would have whittled away at some of his profit.”

…In this light, Mr. Loeb’s departure is being viewed as riding the wave of hype over Yahoo. He is

Had Mr. Loeb sold directly in the market rather than

41

SOTHEBY’S HAS THE RIGHT BOARD, LEADERSHIP TEAM AND

STRATEGY IN PLACE TO DELIVER VALUE FOR ALL SOTHEBY’S

SHAREHOLDERS NOW AND OVER THE LONG TERM

Sotheby’s Is a Market Leader with Outstanding Results

and Superior Shareholder Returns

•

Sotheby’s benefits from a solid financial foundation

•

Our Board is independent and has the strength, diversity, experience and

qualifications to continue to provide excellent oversight and continue

delivering value for shareholders

•

Our Board is committed to sound corporate governance practices

•

Sotheby’s has engaged frequently with Third Point and other shareholders,

and our Board is committed to aggressively pursuing the best interests of

ALL

Sotheby���s shareholders.  We believe shareholders should question

whether Mr. Loeb will do the same

•

Sotheby’s Board has concluded that Mr. Loeb’s nominees add no relevant

skills, experience or expertise that is not already effectively represented on

the Board

•

Through his interactions with Sotheby’s Board, Mr. Loeb has shown that

he would be a disruptive director

Your Vote Is Important -

We Encourage You to Vote Your Shares in

Support of Your Board on the GREEN Proxy Card

APPENDIX

*

*

*

*

*

*

*

*

*

43

APPENDIX –

NON-GAAP MEASURES

•

GAAP

refers

to

generally

accepted

accounting

principles

in

the

United

States

of

America.

In

this

presentation,

financial

measures

are

presented

in

accordance

with

GAAP

and

also

on

a

non-GAAP

basis.

Non-GAAP

measures

are

intended

to

supplement,

not

substitute

for,

GAAP

comparable

measures.

Investors

are

urged

to

consider

carefully

the

comparable

GAAP

measures

and

reconciliations

provided

herein.

•

Sotheby's

defines

EBITDA

as

net

income

(loss),

excluding

income

tax

expense

(benefit),

interest

expense,

interest

income,

and

depreciation

and

amortization

expense.

Sotheby’s

defines

Adjusted

Debt

as

total

debt,

plus

an

estimate

of

debt-like

items

typically

included

in

debt

calculations

of

rating

agencies,

such

as

unfunded

pensions

and

operating

leases.

For

the

purposes

of

this

presentation,

the

target

Adjusted

Debt

to

EBITDA

ratio

for

the

Agency

business

was

contemplated

by

management

by

including

the

impact

of

such

ratings

agency

adjustments

to

total

debt

and

EBITDA.

•

We

caution

investors

that

amounts

presented

in

accordance

with

Sotheby’s

definitions

of

EBITDA,

Adjusted

Debt,

and

the

target

Adjusted

Debt

to

EBITDA

ratio

for

the

Agency

business

may

not

be

comparable

to

similar

measures

disclosed

by

other

companies

because

not

all

companies

and

analysts

calculate

such

measures

in

the

same

manner.

Management

believes

that

EBITDA,

Adjusted

Debt,

and

the

target

Adjusted

Debt

to

EBITDA

ratio

for

the

Agency

business

provide

important

supplemental

measures

of

Sotheby's

performance

and

that

these

measures

may

be

used

by

securities

analysts,

investors,

financial

institutions,

and

other

interested

parties

in

the

evaluation

of

Sotheby's.

Management

also

utilizes

EBITDA

in

analyzing

Sotheby's

performance

and

in

the

determination

of

annual

incentive

compensation.

44

APPENDIX

(US$ in millions)

EBITDA

2013

GAAP Net income (loss)

$130

Adjustments

:

Income tax expense (benefit) related to continuing operations

$56

Income tax expense related to discontinued operations

-

Income tax benefit related to cumulative effect of accounting change

-

Income tax expense (benefit) related to equity in earnings of investees

-

Interest income

(3)

Interest expense

43

Depreciation and amortization expense

19

EBITDA

$245

45

APPENDIX

INDUSTRY / MARKET DATA:

Industry

and

market

data

used

in

this

presentation

have

been

obtained

from

industry

publications

and

sources

as

well

as

from

third-party

research

reports

prepared

for

other

purposes.

The

data

obtained

from

these

sources

has

not

been

independently

verified

and

no

guarantee

is

made

of

the

data’s

accuracy

and

completeness.

FORWARD LOOKING STATEMENTS:

This

presentation

contains

certain

forward

looking

statements,

as

such

term

is

defined

in

Section

21E

of

the

Securities

Exchange

Act

of

1934,

as

amended,

relating

to

future

events

and

the

financial

performance

of

the

Company.

Such

statements

are

only

predictions

and

involve

risks

and

uncertainties,

resulting

in

the

possibility

that

the

actual

events

or

performance

will

differ

materially

from

such

predictions.

As

such,

readers

are

cautioned

not

to

place

undue

reliance

on

forward-

looking

statements,

which

speak

only

as

to

management’s

plans,

assumptions

and

expectations

as

of

the

date

hereof.

Major

factors

which

the

Company

believes

could

cause

the

actual

results

to

differ

materially

from

the

predicted

results

in

the

forward

looking

statements

include,

but

are

not

limited

to,

the

risks

identified

below

under

“Risk

Factors,”

which

are

not

ranked

in

any

particular

order.

In

addition

to

the

considerations

and

factors

referred

to

under

“Risk

Factors”

and

in

prior

filings

and

releases,

major

factors

which

the

Company

believes

could

cause

actual

events

to

differ

materially

include,

but

are

not

limited

to,

the

overall

strength

of

the

international

economy

and

financial

markets,

political

conditions

in

various

nations,

competition

with

other

auctioneers

and

art

dealers,

the

success

of

the

Company’s

risk

reduction

and

margin

improvement

efforts,

the

amount

of

quality

property

being

consigned

to

art

auction

houses,

the

marketability

at

auction

of

such

property,

the

success

of

the

Company’s

future

auction

sales

and

the

reception

of

the

results

from

the

Company’s

announced

capital

allocation

and

financial

review

and

other

initiatives,

including

but

not

limited

to

its

cost

reduction

initiatives,

review

of

its

real

estate

portfolio

and

related

alternatives

and

its

plans

and

framework

for

returning

capital

to

stockholders

and

optimizing

its

capital

structure

and

financial

policies.

The

Company

disclaims

any

duty

to

update

or

alter

any

forward-looking

statements,

except

as

required

by

applicable

law.

RISK FACTORS:

The

global

economy

and

the

financial

markets

and

political

conditions

of

various

countries

may

negatively

affect

Sotheby's

business

and

clients,

as

well

as

the

supply

of

and

demand

for

works

of

art.

The

international

art

market

is

influenced

over

time

by

the

overall

strength

and

stability

of

the

global

economy

and

the

financial

markets

of

various

countries,

although

this

correlation

may

not

be

immediately

evident.

In

addition,

global

political

conditions

and

world

events

may

affect

Sotheby's

business

through

their

effect

on

the

economies

of

various

countries,

as

well

as

on

the

willingness

of

potential

buyers

and

sellers

to

purchase

and

sell

art

in

the

wake

of

economic

uncertainty.

Sotheby's

business

can

be

particularly

influenced

by

the

economies,

financial

markets

and

political

conditions

of

the

U.S.,

the

U.K.,

China

and

the

other

major

countries

or

territories

of

Europe

and

Asia

(including

the

Middle

East).

Accordingly,

weakness

in

those

economies

and

financial

markets

can

adversely

affect

the

supply

of

and

demand

for

works

of

art

and

Sotheby's

business.

Furthermore,

global

political

conditions

may

also

influence

the

enactment

of

legislation

that

could

adversely

impact

Sotheby's

business.

46

APPENDIX

RISK

FACTORS

(CONTINUED):

Government

laws

and

regulations

may

restrict

or

limit

Sotheby's

business

or

impact

the

value

of

its

real

estate

assets.

Many

of

Sotheby's

activities

are

subject

to

laws

and

regulations

including,

but

not

limited

to,

import

and

export

regulations,

cultural

property

ownership

laws,

data

protection

and

privacy

laws,

anti-money

laundering

laws,

antitrust

laws,

copyright

and

resale

royalty

laws,

laws

and

regulations

involving

sales,

use,

value-added

and

other

indirect

taxes,

and

regulations

related

to

the

use

of

real

estate.

In

addition,

Sotheby's

is

subject

to

local

auction

regulations,

such

as

New

York

City

Auction

Regulations

Subchapter

M

of

Title

6

§§

2-121-2-125,

et.

seq.

Such

regulations

currently

do

not

impose

a

material

impediment

to

the

worldwide

business

of

Sotheby's,

but

do

affect

the

art

market

generally.

A

material

adverse

change

in

such

regulations,

such

as

the

Equity

for

Visual

Artists

bill

introduced

in

the

U.S.

Congress

which

would

impose

a

7%

resale

royalty

on

sales

of

art

through

large

auction

houses,

could

affect

Sotheby's

business.

Additionally,

export

and

import

laws

and

cultural

property

ownership

laws

could

affect

the

availability

of

certain

kinds

of

property

for

sale

at

Sotheby's

principal

auction

locations,

increase

the

cost

of

moving

property

to

such

locations,

or

expose

Sotheby's

to

legal

claims

or

government

inquiries.

Foreign

currency

exchange

rate

movements

can

significantly

impact

Sotheby's

results

of

operations

and

financial

condition.

Sotheby's

has

operations

throughout

the

world,

with

approximately

59%

of

its

revenues

earned

outside

of

the

U.S.

in

2013.

Additionally,

Sotheby's

has

significant

assets

and

liabilities

denominated

in

the

Pound

Sterling,

the

Euro,

and

the

Swiss

Franc.

Revenues,

expenses,

gains,

and

losses

recorded

in

foreign

currencies

are

translated

using

the

monthly

average

exchange

rates

prevailing

during

the

period

in

which

they

are

recognized.

Assets

and

liabilities

recorded

in

foreign

currencies

are

translated

at

the

exchange

rate

on

the

balance

sheet

date.

Accordingly,

fluctuations

in

foreign

currency

exchange

rates,

particularly

for

the

Pound

Sterling,

the

Euro,

and

the

Swiss

Franc

can

significantly

impact

Sotheby's

results

of

operations

and

financial

condition.

Competition

in

the

international

art

market

is

intense

and

may

adversely

impact

Sotheby's

results

of

operations.

Sotheby's

competes

with

other

auctioneers

and

art

dealers

to

obtain

valuable

consignments

to

offer

for

sale

either

at

auction

or

through

private

sale.

The

level

of

competition

is

intense

and

can

adversely

impact

Sotheby's

ability

to

obtain

valuable

consignments

for

sale,

as

well

as

the

commission

margins

achieved

on

such

consignments.

Sotheby's

cannot

be

assured

of

the

amount

and

quality

of

property

consigned

for

sale,

which

may

cause

significant

variability

in

its

financial

results.

The

amount

and

quality

of

property

consigned

for

sale

is

influenced

by

a

number

of

factors

not

within

Sotheby's

control.

Many

major

consignments,

and

specifically

single-owner

sale

consignments,

often

become

available

as

a

result

of

the

death

or

financial

or

marital

difficulties

of

the

owner,

all

of

which

are

unpredictable

and

may

cause

significant

variability

in

Sotheby's

financial

results

from

period

to

period.

The

demand

for

art

is

unpredictable,

which

may

cause

significant

variability

in

Sotheby's

results

of

operations.

The

demand

for

art

is

influenced

not

only

by

overall

economic

conditions,

but

also

by

changing

trends

in

the

art

market

as

to

which

collecting

categories

and

artists

are

most

sought

after

and

by

the

collecting

preferences

of

individual

collectors,

all

of

which

are

difficult

to

predict

and

which

may

adversely

impact

the

ability

of

Sotheby's

to

obtain

and

sell

consigned

property,

potentially

causing

significant

variability

in

Sotheby's

results

of

operations

from

period

to

period.

47

APPENDIX

RISK FACTORS (CONTINUED):

The

loss

of

key

personnel

could

adversely

impact

Sotheby's

ability

to

compete.

Sotheby's

is

largely

a

service

business

in

which

the

ability

of

its

employees

to

develop

and

maintain

relationships

with

potential

sellers

and

buyers

of

works

of

art

is

essential

to

its

success.

Moreover,

Sotheby's

business

is

unique,

making

it

important

to

retain

key

specialists

and

members

of

management.

Accordingly,

Sotheby's

business

is

highly

dependent

upon

its

success

in

attracting

and

retaining

qualified

personnel.

The

strategic

initiatives

being

implemented

by

Sotheby's

may

not

succeed.

Sotheby's

strategic

initiatives

are

focused

on

extending

the

breadth

and

depth

of

its

relationships

with

its

most

valuable

clients,

developing

a

presence

in

China

and

other

emerging

markets,

growing

private

sales,

and

leveraging

and

growing

the

Finance

segment

client

loan

portfolio.

Sotheby's

future

operating

results

are

dependent,

in

part,

on

management's

success

in

implementing

these

and

other

strategic

initiatives.

Furthermore,

the

inability

of

Sotheby's

to

successfully

implement

its

strategic

initiatives

could

result

in,

among

other

things,

the

loss

of

clients,

the

loss

of

key

personnel,

the

impairment

of

assets,

and

inefficiencies

from

operating

in

new

and

emerging

markets.

Also,

Sotheby's

short-term

operating

results

and

liquidity

could

be

unfavorably

impacted

by

the

implementation

of

its

strategic

plans.

Sotheby's

joint

venture

in

China

is

a

foreign-invested

enterprise

under

Chinese

law.

As

such,

enforcement

of

certain

of

Sotheby's

rights

within

the

joint

venture

are

subject

to

approval

from

the

Chinese

government,

which

could

limit

the

ability

of

the

joint

venture

to

operate

and

succeed.

In

September

2012,

Sotheby's

received

approval

from

the

Chinese

government

to

form

and

operate

a

10-year

equity

joint

venture

with

Beijing

GeHua

Art

Company

in

China,

which

management

believes

will

strategically

enhance

Sotheby's

long-term

presence

in

mainland

China

and

allow

it

to

capitalize

on

the

opportunities

presented

by

the

Chinese

art

market.

Because

the

joint

venture

is

a

foreign-invested

enterprise

under

Chinese

law,

all

changes

in

shareholding

and

constitution

of

the

joint

venture

will

be

subject

to

approval

by

the

Chinese

government,

including

in

the

event

Sotheby's

is

seeking

to

terminate

the

joint

venture

agreement,

exercise

its

put

option,

or

wind-up

the

joint

venture.

Accordingly,

Sotheby's

ability

to

successfully

operate

the

joint

venture

and

enforce

the

joint

venture

agreement

provisions

could

be

constrained

by

the

Chinese

government

and

other

unforeseen

circumstances.

Sotheby's

is

currently

in

negotiations

with

the

Chinese

government

to

obtain

the

license

required

to

operate

as

a

Foreign-Invested

Commercial

Enterprise

in

order

to

establish

a

wholly-owned

subsidiary

in

China.

Sotheby's

negotiations

to

obtain

the

license

required

to

operate

as

a

Foreign-

Invested

Commercial

Enterprise

in

China

may

not

be

successful.

Sotheby's

establishment

of

a

wholly-owned

subsidiary

in

China

is

subject

to

the

receipt

of

a

license

from

the

Chinese

government.

Sotheby's

may

not

be

successful

in

obtaining

this

license,

which

could

delay

or

inhibit

its

ability

to

further

implement

its

strategic

initiatives

in

China.

48

APPENDIX

RISK

FACTORS

(CONTINUED):

Sotheby's

capital

allocation

and

financial

policies

may

impact

its

liquidity,

financial

condition,

market

capitalization

and

business,

and

Sotheby's

ongoing

ability

to

return

capital

to

its

shareholders

(and

the

size

and

timing

of

such

return)

is

subject

to

ongoing

business

variables.

In

September

2013,

the

Board

of

Directors

announced

a

review

of

Sotheby's

capital

allocation

and

financial

policies

in

an

effort

to

evaluate

ongoing

ways

to

deliver

value

to

its

shareholders,

including

through

balance

sheet

optimization

and

potential

return

of

capital

strategies.

Key

considerations

with

respect

to

such

assessment

included,

but

was

not

limited

to,

the

potential

use

of

incremental

debt

to

fund

segments

of

Sotheby’s

operations,

ongoing

funding

requirements

for

certain

of

Sotheby’s

strategic

initiatives,

both

announced

and

contemplated,

the

value

of

Sotheby’s

real

estate

properties,

and

the

potential

tax

implications

of

any

of

the

actions

considered.

The

actions

taken

by

Sotheby’s

based

on

its

review

of

its

capital

allocation

and

financial

policies

may

impact

its

current

and

future

liquidity,

financial

condition,

market

capitalization

and

business.

In

addition,

the

amount

and

timing

of

Sotheby’s

return

of

capital

to

shareholders

depends

on

various

factors,

including

the

outcome

of

Sotheby’s

review

of

strategies

with

respect

to

its

real

estate

properties,

the

amount

of

excess

cash

generated

by

the

business

in

the

future,

and

the

amount

of

capital

that

may

be

required

to

support

Sotheby’s

future

liquidity

needs,

among

other

factors.

A

small

number

of

shareholders

may

ultimately

impact

Sotheby's

business

As

of

December

31,

2013,

management

believes

that

two

of

Sotheby’s

largest

shareholders

control

approximately

16%

of

Sotheby’s

Common

Stock.

These

two

significant

shareholders,

either

individually

or

acting

together,

may

be

able

to

exercise

significant

influence

over

matters

requiring

shareholder

approval,

including

the

election

of

directors

and

approval

of

significant

corporate

transactions.

A

breach

of

the

security

measures

protecting

Sotheby's

global

network

of

information

systems

and

those

of

certain

third-party

service

providers

utilized

by

Sotheby's

may

occur.

Sotheby's

is

dependent

on

a

global

network

of

information

systems

to

conduct

its

business

and

is

committed

to

maintaining

a

strong

infrastructure

to

secure

these

systems.

As

part

of

its

information

systems

infrastructure,

Sotheby's

relies,

to

a

certain

extent,

upon

third-party

service

providers

to

perform

services

related

to

BIDnowTM,

retail

wine

e-commerce

and

website

server

hosting.

While

these

third-party

service

providers

offer

unique

and

specialized

information

security

measures,

certain

elements

of

Sotheby's

global

information

system

security

are

outside

management's

direct

control

due

to

the

use

of

these

service

providers.

These

third-party

service

providers

are

contractually

obligated

to

host

and

maintain

the

service

in

a

professional

manner,

in

accordance

with

the

rules

and

standards

generally

accepted

within

the

industry.

This

includes

conventional

security

measures

such

as

firewall,

password

and

encryption

protection,

breach

notification

requirements,

and

PCI

practices

for

credit

card

processing

services.

A

breach

of

the

security

measures

protecting

Sotheby's

information

systems

could

adversely

impact

its

operations,

reputation,

and

brand.

Sotheby's

business

continuity

plans

may

not

be

effective

in

addressing

the

impact

of

unexpected

events

that

could

impact

its

business.

Sotheby's

inability

to

successfully

implement

its

business

continuity

plans

in

the

wake

of

an

unexpected

event,

such

as

an

act

of

God

or

a

terrorist

attack

occurring

near

one

of

its

major

selling

and/or

sourcing

offices

and/or

any

other

unexpected

event,

could

disrupt

its

ability

to

operate

and

adversely

impact

its

operations.

49

APPENDIX

RISK

FACTORS

(CONTINUED):

Sotheby's

relies

on

a

small

number

of

clients

who

make

a

significant

contribution

to

its

revenues,

profitability

and

operating

cash

flows.

Sotheby's

relies

on

a

small

number

of

clients

who

make

a

significant

contribution

to

its

revenues,

profitability,

and

operating

cash

flows.

Accordingly,

Sotheby's

revenues,

profitability,

and

operating

cash

flows

are

highly

dependent

upon

its

ability

to

develop

and

maintain

relationships

with

this

small

group

of

clients,

as

well

as

the

financial

strength

of

these

clients.

Subject

to

management

approval

under

Sotheby's

policy,

Sotheby's

may

pay

the

consignor

the

net

sale

proceeds

from

an

auction

or

private

sale

before

payment

is

collected

from

the

buyer

and/or

may

allow

the

buyer

to

take

possession

of

purchased

property

before

payment

is

received.

In

these

situations,

Sotheby's

is

exposed

to

losses

in

the

event

the

buyer

does

not

make

payment.

Under

the

standard

terms

and

conditions

of

its

auction

and

private

sales,

Sotheby's

is

not

obligated

to

pay

the

consignor

for

property

that

has

not

been

paid

for

by

the

buyer.

However,

in

certain

instances

and

subject

to

management

approval

under

Sotheby's

policy,

the

consignor

may

be

paid

the

net

sale

proceeds

before

payment

is

collected

from

the

buyer

while

Sotheby's

retains

possession

of

the

property.

In

such

situations,

if

the

buyer

does

not

make

payment,

Sotheby's

will

take

title

to

the

property,

but

could

be

exposed

to

losses

if

the

value

of

the

property

declines.

In

certain

other

situations

and

subject

to

management

approval

under

Sotheby's

policy,

the

buyer

is

allowed

to

take

possession

of

purchased

property

before

making

payment.

In

these

situations,

Sotheby's

is

liable

to

the

seller

for

the

net

sale

proceeds

whether

or

not

the

buyer

makes

payment

and

would

incur

losses

in

the

event

of

buyer

default.

Sotheby's

ability

to

collect

auction

receivables

may

be

adversely

impacted

by

buyers

from

emerging

markets,

as

well

as

by

the

banking

and

foreign

currency

laws

and

regulations,

and

judicial

systems

of

the

countries

in

which

it

operates

and

in

which

its

clients

reside.

Sotheby's

operates

in

40

countries

and

has

a

worldwide

client

base

that

has

grown

in

recent

years

due

in

part

to

a

dramatic

increase

in

the

activity

of

buyers

from

emerging

markets,

and

in

particular,

China.

The

collection

of

auction

receivables

related

to

buyers

from

emerging

markets

may

be

adversely

impacted

by

the

buyer's

lack

of

familiarity

with

the

auction

process

and

the

buyer's

financial

condition.

Sotheby's

ability

to

collect

auction

receivables

may

also

be

adversely

impacted

by

the

banking

and

foreign

currency

laws

and

regulations

regarding

the

movement

of

funds

out

of

certain

countries,

as

well

as

by

Sotheby's

ability

to

enforce

its

rights

as

a

creditor

in

jurisdictions

where

the

applicable

laws

and

regulations

may

be

less

defined,

particularly

in

emerging

markets.

Demand

for

art-related

financing

is

unpredictable,

which

may

cause

variability

in

Sotheby's

results

of

operations.

Sotheby's

business

is,

in

part,

dependent

on

the

demand

for

art-related

financing,

which

can

be

significantly

influenced

by

overall

economic

conditions

and

by

the

often

unpredictable

financial

requirements

of

owners

of

major

art

collections.

Accordingly,

the

financial

results

of

Sotheby's

Finance

segment

are

subject

to

variability

from

period

to

period.

The

ability

of

Sotheby's

to

realize

proceeds

from

the

sale

of

collateral

for

Finance

segment

loans

may

be

delayed

or

limited.

In

situations

when

there

are

competing

claims

on

the

collateral

for

Finance

segment

loans

and/or

when

a

borrower

becomes

subject

to

bankruptcy

or

insolvency

laws,

Sotheby's

ability

to

realize

proceeds

from

the

sale

of

its

collateral

may

be

limited

or

delayed.

50

APPENDIX

RISK

FACTORS

(CONTINUED):

The

value

of

the

property

held

in

inventory

and

the

property

pledged

as

collateral

for

Finance

segment

loans

is

subjective

and

often

fluctuates,

exposing

Sotheby's

to

losses

and

significant

variability

in

its

results

of

operations.

The

market

for

fine

art,

decorative

art,

and

high-end

jewelry

is

not

a

highly

liquid

trading

market.

As

a

result,

the

valuation

of

these

items

is

inherently

subjective

and

their

realizable

value

often

fluctuates

over

time.

Accordingly,

Sotheby's

is

at

risk

both

as

to

the

realizable

value

of

the

property

held

in

inventory

and

as

to

the

realizable

value

of

the

property

pledged

as

collateral

for

client

loans.

In

estimating

the

realizable

value

of

the

property

held

in

inventory

and

the

property

pledged

as

collateral

for

Finance

segment

loans,

management

relies

on

the

opinions

of

Sotheby's

specialists,

who

consider

the

following

complex

array

of

factors

when

valuing

these

items:

(i)

whether

the

property

is

expected

to

be

offered

at

auction

or

sold

privately,

in

the

ordinary

course

of

Sotheby's

business;

(ii)

the

supply

and

demand

for

the

property,

taking

into

account

economic

conditions

and,

when

relevant,

changing

trends

in

the

art

market

as

to

which

collecting

categories

and

artists

are

most

sought

after;

and

(iii)

recent

sale

prices

achieved

for

comparable

items

within

a

particular

collecting

category

and/or

by

a

particular

artist.

If

there

is

evidence

that

the

estimated

realizable

value

of

a

specific

item

held

in

inventory

is

less

than

its

carrying

value,

a

loss

is

recorded

to

reflect

management's

revised

estimate

of

realizable

value.

In

addition,

if

the

estimated

realizable

value

of

the

property

pledged

as

collateral

for

a

client

loan

is

less

than

the

corresponding

loan

balance,

management

assesses

whether

it

is

necessary

to

record

a

loss

to

reduce

the

carrying

value

of

the

loan,

after

taking

into

account

the

ability

of

the

borrower

to

repay

any

shortfall

between

the

value

of

the

collateral

and

the

amount

of

the

loan.

These

factors

may

cause

significant

variability

in

Sotheby's

financial

results

from

period

to

period.

Sotheby's

could

be

exposed

to

losses

and/or

reputational

harm

as

a

result

of

various

claims

and

lawsuits

incidental

to

the

ordinary

course

of

its

business.

Sotheby's

becomes

involved

in

various

legal

proceedings,

lawsuits,

and

other

claims

incidental

to

the

ordinary

course

of

its

business.

Management

is

required

to

assess

the

likelihood

of

any

adverse

judgments

or

outcomes

in

these

matters,

as

well

as

potential

ranges

of

probable

or

reasonably

possible

losses.

A

determination

of

the

amount

of

losses,

if

any,

to

be

recorded

or

disclosed

as

a

result

of

these

contingencies

is

based

on

a

careful

analysis

of

each

individual

exposure

with,

in

some

cases,

the

assistance

of

outside

legal

counsel.

The

amount

of

losses

recorded

or

disclosed

for

such

contingencies

may

change

in

the

future

due

to

new

developments

in

each

matter

or

a

change

in

settlement

strategy.

Sotheby's

could

be

exposed

to

reputational

harm

as

a

result

of

wrongful

actions

by

certain

third

parties.

Sotheby's

is

involved

in

various

business

arrangements

and

ventures

with

unaffiliated

third

parties.

Wrongful

actions

by

such

parties

could

harm

Sotheby's

brand

and

reputation.

Sotheby's

could

be

exposed

to

losses

in

the

event

of

title

or

authenticity

claims.

The

assessment

of

property

offered

for

auction

or

private

sale

can

involve

potential

claims

regarding

title

and

authenticity.

Items

sold

by

Sotheby's

may

be

subject

to

statutory

warranties

as

to

title

and

to

a

limited

guarantee

as

to

authenticity

under

the

Conditions

of

Sale

and

Terms

of

Guarantee

that

are

published

in

Sotheby's

auction

sale

catalogues

and

the

terms

stated

in,

and

the

laws

applicable

to,

agreements

governing

private

sale

transactions.

The

authentication

of

the

items

offered

by

Sotheby's

is

based

on

scholarship

and

research,

but

necessarily

requires

a

degree

of

judgment

from

Sotheby's

specialists.

In

the

event

of

a

title

or

authenticity

claim

against

Sotheby's,

Sotheby's

may

have

recourse

against

the

seller

of

the

property

and

may

have

the

benefit

of

insurance,

but

a

claim

could

nevertheless

expose

Sotheby's

to

losses

and

to

reputational

risk.

51

APPENDIX

RISK

FACTORS

(CONTINUED):

Auction

guarantees

create

the

risk

of

loss

resulting

from

the

potential

inaccurate

valuation

of

art.

As

discussed

above,

the

market

for

fine

art,

decorative

art,

and

high-end

jewelry

is

not

a

highly

liquid

trading

market

and,

as

a

result,

the

valuation

of

these

items

is

inherently

subjective.

Accordingly,

Sotheby's

is

at

risk

with

respect

to

management's

ability

to

estimate

the

likely

selling

prices

of

property

offered

with

auction

guarantees.

If

management's

judgments

about

the

likely

selling

prices

of

property

offered

with

auction

guarantees

prove

to

be

inaccurate,

there

could

be

a

significant

adverse

impact

on

Sotheby's

results

of

operations,

financial

condition,

and

liquidity.

Sotheby's

could

be

exposed

to

losses

in

the

event

of

nonperformance

by

its

counterparties

in

auction

guarantee

risk

and

reward

sharing

arrangements.

In

certain

situations,

Sotheby's

reduces

its

financial

exposure

under

auction

guarantees

through

risk

and

reward

sharing

arrangements.

Sotheby's

counterparties

to

these

risk

and

reward

sharing

arrangements

are

typically

major

international

art

dealers

or

major

art

collectors.

Sotheby's

could

be

exposed

to

losses

in

the

event

any

of

these

counterparties

do

not

perform

according

to

the

terms

of

these

contractual

arrangements.

Future

costs

and

obligations

related

to

Sotheby's

U.K.

Pension

Plan

are

dependent

on

unpredictable

factors,

which

may

cause

significant

variability

in

employee

benefit

costs.

Future

costs

and

obligations

related

to

Sotheby's

defined

benefit

pension

plan

in

the

U.K.

are

heavily

influenced

by

changes

in

interest

rates,

investment

performance

in

the

debt

and

equity

markets,

changes

in

statutory

requirements

in

the

U.K.,

and

actuarial

assumptions,

each

of

which

is

unpredictable

and

may

cause

significant

variability

in

Sotheby's

employee

benefit

costs.

Tax

matters

may

cause

significant

variability

in

Sotheby's

financial

results.

Sotheby's

operates

in

many

tax

jurisdictions

throughout

the

world

and

the

provision

for

income

taxes

involves

a

significant

amount

of

management

judgment

regarding

interpretation

of

relevant

facts

and

laws

in

the

jurisdictions

in

which

Sotheby's

operates.

Sotheby's

effective

income

tax

rate

can

vary

significantly

between

periods

due

to

a

number

of

complex

factors

including,

but

not

limited

to:

(i)

future

changes

in

applicable

laws;

(ii)

projected

levels

of

taxable

income;

(iii)

pre-tax

income

being

lower

than

anticipated

in

countries

with

lower

statutory

rates

or

higher

than

anticipated

in

countries

with

higher

statutory

rates;

(iv)

increases

or

decreases

to

valuation

allowances

recorded

against

deferred

tax

assets;

(v)

tax

audits

conducted

by

various

tax

authorities;

(vi)

adjustments

to

income

taxes

upon

the

finalization

of

income

tax

returns;

(vii)

the

ability

to

claim

foreign

tax

credits;

(viii)

the

repatriation

of

foreign

earnings

for

which

Sotheby's

has

not

previously

provided

income

taxes;

and

(ix)

tax

planning

strategies.

Sotheby's

clients

reside

in

various

tax

jurisdictions

throughout

the

world.

To

the

extent

that

there

are

changes

to

tax

laws

or

tax

reporting

obligations

in

any

of

these

jurisdictions,

such

changes

could

adversely

impact

the

ability

and/or

willingness

of

clients

to

purchase

or

sell

works

of

art

through

Sotheby's.

Additionally,

Sotheby's

is

subject

to

laws

and

regulations

in

many

countries

involving

sales,

use,

value-added

and

other

indirect

taxes

which

are

assessed

by

various

governmental

authorities

and

imposed

on

certain

revenue-producing

transactions

between

Sotheby's

and

its

clients.

The

application

of

these

laws

and

regulations

to

Sotheby's

unique

business

and

global

client

base,

and

the

estimation

of

any

related

liabilities,

is

complex

and

requires

a

significant

amount

of

judgment.

These

indirect

tax

liabilities

are

generally

not

those

of

Sotheby’s

unless

it

fails

to

collect

the

correct

amount

of

sales,

use,

value-added,

or

other

indirect

taxes.

Failure

to

collect

the

correct

amount

of

indirect

tax

on

a

transaction

may

expose

Sotheby's

to

claims

from

tax

authorities.

52

APPENDIX

RISK FACTORS (CONTINUED):

Insurance coverage for artwork may become more difficult to obtain, exposing Sotheby's to losses for artwork in Sotheby's possession.

Sotheby's maintains insurance coverage through brokers and underwriters for the works of art it owns and for works of art consigned to it by its clients, which are

exhibited and stored at Sotheby's facilities around the world. An inability to adequately insure such works of art due to limited capacity of the global art insurance

market could, in the future, have a material adverse impact on Sotheby's business.

Due to the nature of its business, valuable works of art are exhibited and stored at Sotheby's facilities around the world. Such

works of art could be

subject to damage or theft, which could have a material adverse effect on Sotheby's business and reputation.

Valuable works of art are exhibited and stored at Sotheby's facilities around the world. Although Sotheby's maintains state of the art security measures at its

premises, valuable artworks may be subject to damage or theft. The damage or theft of valuable property despite Sotheby's security measures could have a

material adverse impact on Sotheby's business and reputation. Sotheby's maintains insurance coverage for the works of art that are exhibited and stored at its

facilities, which could significantly mitigate any potential losses resulting from the damage or theft of such works of art.

53

IMPORTANT ADDITIONAL INFORMATION

Sotheby’s,

its

directors,

director

nominees

and

certain

of

its

executive

officers

are

participants

in

the

solicitation

of

proxies

from

Sotheby’s

stockholders

in

connection

with

Sotheby’s

2014

Annual

Meeting

of

Stockholders.

Sotheby’s

has

filed

its

definitive

proxy

statement

and

form

of

GREEN

proxy

card

with

the

U.S.

Securities

and

Exchange

Commission

(the

“SEC”)

with

respect

to

the

2014

Annual

Meeting

of

the

Stockholders. 

SOTHEBY’S

STOCKHOLDERS

ARE

STRONGLY

ENCOURAGED

TO

READ

THE

DEFINITIVE

PROXY

STATEMENT

(INCLUDING

ANY

AMENDMENTS

AND

SUPPLEMENTS)

AND

ACCOMPANYING

GREEN

PROXY

CARD

AS

THEY

CONTAIN

IMPORTANT

INFORMATION.

Information

regarding

the

names

of

Sotheby’s

directors,

director

nominees

and

executive

officers

and

their

respective

interests

in

Sotheby’s

by

security

holdings

or

otherwise,

is

set

forth

in

Sotheby’s

definitive

proxy

statement

for

the

2014

Annual

Meeting

of

Stockholders

and

other

materials

to

be

filed

with

the

SEC.

Additional

information

can

also

be

found

in

Sotheby’s

Annual

Report

on

Form

10-K

for

the

year

ended

December

31,

2013,

filed

with

the

SEC

on

February

27,

2014.

These

documents,

including

any

proxy

statement

(and

amendments

or

supplements

thereto)

and

other

documents

filed

by

Sotheby’s

with

the

SEC,

are

available

for

no

charge

at

the

SEC’s

website

at

http://www.sec.gov

and

at

Sotheby’s

investor

relations

website

at

http://investor.shareholder.com/bid/index.cfm.

Copies

may

also

be

obtained

by

contacting

Sotheby’s

Investor

Relations

by

mail

at

1334

York

Avenue,

New

York,

NY

10021

or

by

telephone

at

800-700-6321

or

212-894-1023.

This

document

contains

quotes

and

excerpts

from

certain

previously

published

material.

Consent

of

the

author

and

publication

has

not

been

obtained

to

use

the

material

as

proxy

soliciting

material.