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NOTICE OF MEETING The 22nd District Agricultural Association Board of Directors meeting Tuesday, August 10, 2021 1:30pm

Boardroom via ZOOM 2260 Jimmy Durante Boulevard Del Mar,

As permitted by Executive Order N-25-20 (issued by Governor Newsom on March 12, 2020), the Del Mar Fairgrounds (DMF) will conduct the August 9, 2021 Board Meeting via ZOOM teleconference. If you wish to attend and participate in the meeting via teleconference, accommodations will be made. Please check the DMF website later this week for updated information and instructions on how to participate in the meeting via ZOOM/teleconference.

22ND DAA BOARD OF DIRECTORS

Richard Valdez, President Don Mosier, Director Lisa Barkett, Vice President Sam Nejabat, Director G. Joyce Rowland, Vice President Frederick Schenk, Director Michael Gelfand, Director Pierre Sleiman, Director Kathlyn Mead, Director

Secretary-Treasurer 22nd DAA Counsel Carlene Moore Josh Caplan Chief Executive Officer/General Manager Office of the California Attorney General

22nd District Agricultural Association Mission Statement To manage and promote a world-class, multi-use, public assembly facility with an emphasis on agriculture, education, entertainment and recreation in a fiscally sound and environmentally conscientious manner for the benefit of all.

Persons wishing to attend the meeting and who may require special accommodations pursuant to the provisions of the Americans with Disabilities Act are requested to contact the office of the General Manager, (858) 755-1161, at least five working days prior to the meeting to insure proper arrangements can be made.

Items listed on this Agenda may be considered in any order, at the discretion of the chairperson. This Agenda, and all notices required by the California Bagley-Keene Open Meeting Act, are available on the internet at: www.delmarfairgrounds.com

BOARD OF DIRECTORS MEETING August 10, 2021 1:30 p.m. AGENDA

1. CALL TO ORDER – PRESIDENT RICHARD VALDEZ

2. ROLL CALL PAGE 3. CONSENT CALENDAR (ACTION ITEMS) • Minutes, Regular Meeting July 13, 2021 Approval 4-6 • 22nd District Agricultural Association (DAA) Contracts Approval 7

4. MANAGEMENT REPORT (INFORMATIONAL/ACTION) The Board may take approval action on the Manager’s Report: • Double Track & Special Events Platform Project presentation by SANDAG VERBAL • Don Diego Scholarship Foundation Report 8 • Employee Recognition 9 • CEO’s Update • HOME*GROWN*FUN Final Report • Fall Festival Update • The Center Update

5. COMMITTEE REPORTS The Board may take approval action on Committee Reports and New Committee Assignments:

A. DMTC Liaison Committee – Richard Valdez, Chair • Committee Report (Informational/Action) 10-

B. Strategic Planning Committee – Pierre Sleiman, Chair 42 • Committee Report (Informational)

C. Finance Committee – Richard Valdez, Chair 43 • Premier P&L Statement – June 2021 (Informational) • Financial Report (Informational) 44-58 D. Contracts Oversight Committee – Richard Valdez, Chair 59-61 • Committee Report (Informational/Action)

22nd DAA Board of Directors Meeting Agenda July13, 2021 E. Legal Committee – Richard Valdez, Chair • Committee Report (Informational/Action)

6. PUBLIC COMMENT Speakers are requested to sign in prior to the start of the meeting and are limited to two minutes. Speaker’s time may be modified based on the number of public speakers. No speaker may cede their time to another speaker. Public comments on agenda items will be accepted during the meeting as items are addressed. Public comment on issues NOT on the current Agenda is allowed. However, no debate by the Board shall be permitted on such public comments and no action will be taken on such public comment items at this time, as law requires formal public notice prior to any action on a docket item.

7. CLOSED EXECUTIVE SESSIONS (NOT OPEN TO THE PUBLIC) Pursuant to the authority of Government Code section 11126(a), (b), and (e), the Board of Directors will meet in closed executive sessions. The purpose of these executive sessions is: A. To confer with and receive advice from legal counsel regarding potential litigation involving the 22nd DAA. Based on existing facts and circumstances, there is significant exposure to litigation against the 22nd DAA. B. To confer with counsel, discuss, and consider the following pending litigation to which the 22nd DAA is a party. Cabezuela, et al., v. 22nd District Agricultural Association, San Diego County Superior Court, Case No. 37-2020-0022179. To C.con To confer with counsel, discuss, and consider the following pending litigation to which the 22nd DAA is a party. Jerry Hollendorfer, et al., v. Del Mar Club, et al., San Diego County Superior Court, Case No. 37-2019-00036284. D. To confer with counsel, discuss, and consider the following pending litigation to which the 22nd DAA is a party. Bell v. 22nd District Agricultural Association, San Diego County Superior Court, Case No. 2019-00055846. E. Personnel: The Board will meet in closed session to consider those items permitted under Government Code section 11126(a) related to the General Manager/CEO.

8. RECONVENE TO OPEN SESSION Report on actions, if any, taken by the Board in closed executive session.

9. DIRECTORS REQUEST & CLOSING COMMENTS

10. CORRESPONDENCE

11. ADJOURNMENT 62-64

22nd DAA Board of Directors Meeting Agenda July13, 2021

22nd DISTRICT AGRICULTURAL ASSOCIATION Board of Directors Meeting Del Mar Fairgrounds 2260 Jimmy Durante Boulevard Del Mar, CA 92014 July 13, 2021

MINUTES

The 22nd District Agricultural Association (DAA), Board of Directors met via ZOOM in the Boardroom at the Del Mar Fairgrounds on July 13, 2021 at 1:30 p.m.

OFFICERS PRESENT: Richard Valdez, President Lisa Barkett, Vice President (via ZOOM) Joyce Rowland, Vice President (via ZOOM) Carlene Moore, Chief Executive Officer

DIRECTORS PRESENT VIA ZOOM Michael Gelfand, Kathlyn Mead, Sam Nejabat, Frederick Schenk and Pierre Sleiman

DIRECTORS/OFFICERS ABSENT Donald Mosier

OTHERS PRESENT Josh Caplan, Deputy Attorney General (via ZOOM) Katie Mueller, Business Services Officer – 22nd DAA Melinda Carmichael, Business Development Officer – 22nd DAA Donna O’Leary, Executive Assistant - 22nd DAA

CALL TO ORDER President Valdez called the meeting to order at 1:30 p.m. with a quorum present.

ROLL CALL All Directors present except for Director Mosier who had an excused absence.

CONSENT CALENDAR

A. Minutes, Regular Meeting, June 8, 2021 B. 22nd District Agricultural Association (DAA) Contracts Approval

Director Gelfand moved to approve items on the consent calendar. Director Sleiman seconded the motion. President Valdez, Vice President Barkett, Vice President Rowland, Directors Gelfand, Nejabat, Schenk and Sleiman, were all in favor and the motion carried. Director Mosier had an excused absence.

MANAGEMENT REPORT

CEO’s Report Business Development Officer Carmichael presented a short wrap-up video provided by Scripps thanking all of the volunteers that contributed to the success of the vaccination at Del Mar.

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22nd DAA Board Meeting Minutes July 13, 2021 Page 2

CEO’s Report continued CEO Moore reported that staff is working on the RFP for Horsepark; SANDAG will be providing a report at the August Board Meeting regarding the Double track and special events platform project and staff is working on fall festival plans to be held October 15 through 17. The festival will be built around the opening of The Center.

HOME*GROWN*FUN Business Services Officer Mueller presented a highlight reel and reported the preliminary results for HOME*GROWN*FUN. Total attendance was 271,732.

Don Diego Scholarship Foundation (DDSF) Report Executive Director Chana Mannen introduced the top four 2021 scholarship winners.

PUBLIC COMMENT ON MANAGERS REPORT Martha Sullivan Jane Cartmill

COMMITTEE REPORTS

DMTC LIAISON COMMITTEE – Richard Valdez, Chair CEO Joe Harper and President & Chief Operating Officer Josh Rubinstein gave an overview on what to expect at the 2021 Summer Race Meet. Mr. Harper said DMTC continues to work closely with the county health department and their medical advisers at Scripps. Mr. Rubinstein announced that they will begin the season at a seated capacity, which is about 16,000 people. All tickets much be purchased on-line. Also discussed was the Breeders’ Cup, which will run at Del Mar on November 5th and 6th, 2021. Craig Dado, Chief Marketing Officer, reviewed their marking plan for the racing season.

PUBLIC COMMENT ON Martha Sullivan Elizabeth Jacobelly K.C. Vafiadis Jim Coleman Oscar de la Torre Maria Luisa Jane Cartmill

COMMUNITY & GOVERNMENT RELATIONS COMMITTEE – Don Mosier, Co-Chair Director Nejabat reported that at the meeting last month staff provided a debrief on 22nd DAA May board meeting that included HOME*GROWN*FUN, Horsepark, and strategic planning. Staff presented the draft of the Strategic Plan purpose, mission, vision and values statements. Director Nejabat said individual meetings will be scheduled with the cities, county and state officials, for further discussion.

STRATEGIC PLANNING COMMITTEE – Pierre Sleiman, Chair CEO Carlene Moore gave a power-point presentation update. The goal is to come back in August and have the board take action and ultimately review and approve the purpose, mission, vision and value statements as well as the strategic goals and objectives, then in October the goal is to present a timetable outlining the planning process steps and the action plan for Board approval.

PUBLIC COMMENT ON STRATEGIC PLANNING Martha Sullivan Elizabeth Jacobelly Jane Cartmill

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22nd DAA Board Meeting Minutes July 13, 2021 Page 3

FINANCE COMMITTEE – Richard Valdez, Chair

Premier P&L Statement – May 2021 General Manager of Premier Food Services, Mark Wiggins, reviewed the May food and beverage report on page 14 of the board packet. Mr. Wiggins said more positive news will be forthcoming in the June report.

Financial Report President Valdez announced that the PPP loan, for $4.71 million, has been fully forgiven by the SBA and commended CEO Moore for her efforts getting the application completed. CEO Moore reported that the balance sheet is still being compiled and should have a completed report in August.

LEGAL COMMITTEE – Richard Valdez, Chair Nothing to report.

PUBLIC COMMENT – NON-AGENDA ITEMS Martha Sullivan Elizabeth Jacobelly Adam West

RECESS TO CLOSED EXECUTIVE SESSION There was no Executive Session.

DIRECTORS REQUESTS & CLOSING COMMENTS The Board discussed having future meetings in person in the Boardroom with the public attending via ZOOM. There was a consensus among the Board to have in-person meetings starting in September as long as the conditions are safe for all in attendance. Also discussed is the possibility of having a hybrid meeting where if some of the Directors could not attend in person they could join the meeting via ZOOM while the others attend in person.

Director Schenk said he is very proud of the staff for their cooperation with Scripps Health to bring to the community the Vaccination Superstation that helped make lives healthier.

ADJOURNMENT There being no further business to discuss, Director Sleiman moved to adjourn the meeting. Director Gelfand seconded and the meeting was adjourned at 3:38 p.m.

______Carlene Moore Chief Executive Officer

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CONTRACT APPROVAL(S) August 2021

In accordance with the requirements of the Department to Food & Agriculture, Fairs & Expositions Branch, Staff requests approval of the agreement(s) listed below:

Standard Agreements

Contract # Contractor Purpose Term Amount

$212,751.56 (AM 3 Lease of a Vacant Lot for 9/01/21 – 8/31/23 Estimated Revenue) Operation of an Indoor/Outdoor REV-15-008 Set Spike, LLC dba Wave (Year seven and eight Total Anticipated Volleyball Facility AM 3 Volleyball of a potential ten-year Revenue Including (Amendment to Exercise agreement) Option Years 2 Year Option Renewal) $1,038,774.00

Page 7 DON DIEGO SCHOLARSHIP FOUNDATION July 2021 Scholar Spotlight Horsing Around is Serious Fun for Eventer Olivia Loiacono-Putrino

Olivia Loiacono-Putrino was a promising young equestrian when she won Don Diego’s 4-H scholarship in 2006. She has fulfilled that promise, and so much more. As owner of San Marcos-based OKL Eventing, Olivia trains Olivia and Teddy Bear. three-day eventing participants, competes at a high level herself, and works toward qualifying for the Olympics in this challenging endurance and precision sport that combines dressage, cross-country jumping, and show jumping. A seasoned, successful rider who has traveled around the country and the world, Olivia discovered her passion as a three- year-old in Bonsall when she jumped on her first horse, Teddy Bear. She achieved a coveted Pony Club A-rating at 17 and now gives back by growing the local eventing community. Among the up-and-coming stars she has coached is 2019 Don Diego

scholarship recipient Sissy Sugarman. Photo courtesy of MGO Photography. “Adventure’s in my blood,” Olivia chuckles, relating how she and her husband, Joe, a talented base jumper, spent their honeymoon. “I did a tandem jump off 3,000-foot Mt. Brento in Italy. I was terrified.” It’s hard to imagine Olivia terrified of any challenge. She faces life with zest; eager to coach others to excellence, and attain her ultimate goal of making the Olympics and then, of course, winning! Olivia credits the $5,000 scholarship for propelling her to Cal Poly San Luis Obispo, where she studied Agriculture Business, then seized an opportunity to continue her education as an equestrian. “It all started for me in Bonsall; on a horse; in 4-H; raising and showing swine at the Fair. I learned showmanship and other skills that have translated into the life skills I have used to get me where I am.” And, where we hope she is headed: See you at the Games, Olivia!

When you support Don Diego Scholarship Foundation, you pay it forward to future DONATE leaders such as Olivia Loiacono-Putrino TODAY! who give back to their community and dondiegoscholarship.org/donate make the world a better place.

501 (c) (3) nonprofit organization: EIN 33-0859020 Page 8 Employee Recognition for “Years of Service”

April Roque, 20-years of service. April was first hired as a Personnel Specialist on August 6, 2001 in our Human Resources Department. April was promoted to Sr. Personnel Specialist on January 1, 2007 and again on October 1, 2014 to the position of Associate Governmental Program Analyst. In addition, April has stepped up and worked in the interim role of Human Resources Manager on multiple occasions, most recently running the daily operation of the Human Resources Department when our H.R. Manager retired. April is extremely knowledgeable and looked to as a subject matter expert for both the operation and compliance of CalHR practices and procedures. April is a true asset to the 22nd DAA, she is dedicated, detail oriented and a pleasure to work with!

Page 9 DEL MAR THOROUGHBRED CLUB

MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATING RESULTS

FOR THE TWELVE-MONTH PERIODS ENDING DECEMBER 31, 2019 and 2018

The management of Del Mar Thoroughbred Club (“DMTC”) provides the following discussion and analysis of our operating results through the period ending December 31, 2019. We include comparisons to our prior-year results to provide context and to highlight the factors that contribute not only to our operating results and corresponding rent payment, but also to the food and beverage (“F&B”) net revenues generated during our race meets. The following discussion reflects the results of our 36-day traditional summer race meet as well as our 13-day fall race meet.

Del Mar is viewed as a world-class venue for . And DMTC enjoys a reputation for having operations that are among the very best in the industry, both in terms of our ability to attract the highest quality Thoroughbred racing and our success in generating a highly diversified revenue stream through innovative programs. DMTC has been at the forefront of enacting industry-leading protocols designed to protect and enhance equine and rider safety and, thanks to such efforts, Del Mar consistently ranks among the safest racing venues in the country. A testament to the consistent quality and strength of our operations lies in the tremendous success of the Breeders’ Cup World Championship’s record-setting inaugural visit to Del Mar in 2017 and our selection to host the Breeders’ Cup again in 2021.

Our primary focus leading into our 2019 summer race meet was to continue our exemplary safety record. We achieved that goal as there was not a single serious racing injury during the summer season and accordingly Del Mar was ranked the safest major in the for the second consecutive year. As discussed in greater depth in this report, the unfortunate spike in equine fatalities at the Santa Anita meet from December to June of 2019, and the resulting media attention and public scrutiny on horse racing in California, negatively impacted the attendance, wagering levels and operating results of our race meets.

This year our operations generated a combined race meet net income to the 22nd District Agricultural Association (“District”) and Del Mar Race Track Authority (“RTA”) of $7.86 million, compared to $10.94 million for 2018. Since the District and DMTC entered into the current Del Mar Race Track Operating Agreement in 1990 the total contribution the District and RTA have received from racing exceeds $305.5 million.

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Page 10 OVERVIEW

Throughout our history DMTC has operated with the goal of generating a significant combined return from racing and allocating appropriate resources and capital to ensure the ongoing success of Thoroughbred racing at Del Mar as well as California. DMTC is viewed as an industry leader in developing innovative programs, adopting new technologies and creating dynamic marketing campaigns designed to attract top Thoroughbred racing to Del Mar and new fans to racing. Also, DMTC has been the leader in developing practices and procedures to protect and enhance equine and rider safety and consistently ranks among the safest racing venues in the country.

The horse racing industry in California faced stiff headwinds during the first half of 2019 as a result of a spate of equine fatalities during the Santa Anita race meet in the area from December to June. The circumstances caused Santa Anita to suspend racing for 24 days, including more than three weeks in March, so that its racing surfaces could be analyzed to determine what, if any, role the unusually heavy winter rain and track conditions played in causing the injuries. Animal rights advocates called for a suspension of horse racing in California. Further, United States Senator Dianne Feinstein demanded that Santa Anita halt racing indefinitely until the cause of the fatalities could be investigated. California legislators summoned Santa Anita and other industry leaders to Sacramento to explain what the industry was doing to protect the safety and welfare of horses.

As a result of the turmoil and uncertainty facing California horse racing, many owners and trainers relocated their horses to race in other states, like Kentucky, during the first half of the year. The exodus significantly reduced the Thoroughbred population in during the second quarter of the year, resulting in 600 fewer horses (or 15% less) than in 2018. This shortage of horses caused Santa Anita to cancel race days and run only three days a week over the last half of its six-month season, rather than its scheduled four days per week. Likewise, a lack of horses caused Los Alamitos to cancel three racing days from its short, three-week race meet immediately preceding Del Mar’s. All told, the decline in California’s Thoroughbred population led to cancellation of a combined total of 27 racing days at Santa Anita and Los Alamitos since March of this year. Over the past several years, DMTC has been at the forefront of enacting industry leading protocols designed to protect and enhance equine and rider safety and, thanks to such efforts, Del Mar consistently ranks among the safest racing venues in the country. Prior to the 2019 summer race meet, DMTC implemented even further safety measures, including adopting new medication rules to enhance safety, such as increasing veterinary supervision and testing of horses, and increasing stable security. These new measures moved Del Mar even further to the forefront of American racing’s efforts to create the safest sport possible. DMTC’s efforts proved successful as there was not a single racing fatality during the entire summer race meet. For the second consecutive year, Del Mar ranked as the safest major racetrack in the United States as judged by

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Page 11 the industry’s The Jockey Club Equine Database, which tracks race-day injuries. What is more, through our enhanced protocols and outreach efforts, DMTC was able to recruit owners and trainers to bring their horses back to Southern California, thereby stabilizing California racing and enabling DMTC to operate its full five-day-a-week, 36-day race meet without being forced to cancel a single scheduled race or race day. The success of DMTC’s meet is considered by industry insiders as an important step to help in restoring confidence in California horse racing. DMTC set several goals for itself in view of the circumstances leading up to its summer meet: (1) Continue our exemplary safety record. After introducing a comprehensive series of safety reforms in both 2017 and 2018, Del Mar enacted even further enhanced safety programs this summer. Those measures included additional pre-race veterinary observation protocols, adopting industry leading medication policies to further horse safety and setting up an independent panel of veterinarians and racing officials to review all horses scheduled to race. There was not a single serious injury during racing this summer, a feat believed to be unprecedented. (2) Provide stability and restore confidence to racing in California. After the turmoil and uncertainty the horsemen faced during the first half of 2019, it was important that Del Mar take a proactive lead in helping the horsemen restore confidence in racing in California. Del Mar has long been a leader in many important issues and challenges the industry faced. Since 2016, Del Mar has been the leader in equine and rider safety and, as noted, we continue to enhance our industry-leading safety record. Del Mar has been an innovator in horse recruitment with the development of the Ship and Win program and our recruitment efforts were again successful. Del Mar management has a history of communicating and working with industry stakeholders on important issues. This year Del Mar established a stakeholder safety advisory committee consisting of trainers, veterinarians, jockeys, racing surface maintenance personnel and management which met regularly to discuss safety practices, operations and track surfaces, which is the latest example of our leadership efforts. As discussed in this report, California racing regained its footing during the 2019 Del Mar summer race meet by restoring confidence in the integrity of efforts to ensure safety. (3) Offer a consistent, five-day-a-week and 36-day summer race meet that would reward fans and horsemen alike. Del Mar offered racing for all of our scheduled 36 days. Doing so brought needed stability to Southern California racing following Santa Anita and Los Alamitos having to cancel 27 racing days combined. We continued our aggressive horse recruitment efforts, including a concerted outreach to bring owners and trainers back to Southern California and enhancing our already successful Ship and Win program, which attracted 123 out-of-state horses that started 177 races. Both of these

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Page 12 figures represent a 15% increase over 2018. Del Mar strategically reduced live races on slower weekdays and certain other days early in the race meet to allow the efforts of the Ship and Win program to build the horse inventory and to give horsemen time to become familiar with the new training and medication rules that we enacted. These efforts allowed Del Mar to run all 36 days of scheduled racing, bringing needed stability to Southern California racing. Further, maintaining a five-day-a-week and 36-day meet benefited the racing industry labor pool. Being able to run our full 36-day schedule enabled many of those covered under industry collective bargaining agreements to qualify for health and other benefits that had been in danger of being lost due to the 27 race days canceled at Santa Anita and Los Alamitos. (4) Establish comprehensive communications and messaging to the public, media and legislators promoting Del Mar’s equine safety and welfare efforts. Prior to the summer meet DMTC had extensive conversations with media members to discuss Del Mar’s industry-leading equine safety and welfare efforts. These meetings, including sessions with the San Diego Union-Tribune’s Editorial Board, reaffirmed Del Mar’s standing as the country’s safest major race track in 2018 and detailed our enhanced reforms and protocols for 2019. In addition, DMTC management engaged directly in meetings with federal and state legislators to review all facets of racing and training operations. These in-person discussions in Sacramento and at Del Mar included audiences with California’s Senate President Toni Atkins, and senior staff members from the offices of Governor Gavin Newsom and Senator Dianne Feinstein. Lastly, in conjunction with the Thoroughbred Owners of California (“TOC”), DMTC developed an extensive public-awareness campaign focusing on our safety protocols and horse welfare initiatives. Public messaging included the website www.calracingcares.com, which highlights the tremendous care received by our equine athletes.

DMTC succeeded in meeting each of these goals. The unprecedented safe racing during our meet, realized by working together with our stakeholders, and racing our scheduled 36 days helped to restore confidence in racing in Southern California and underscores the efforts DMTC and the horsemen are making to ensure safety. As discussed above, DMTC has been a leader in developing safety protocols and procedure for our race meet and for California racing. In November of 2019, Del Mar Thoroughbred Club partnered with our fellow leaders in Thoroughbred racing to form the Thoroughbred Safety Coalition (“TSC”). Together with Breeders' Cup, , Keeneland, New York Racing Association (”NYRA”) and The Stronach Group, the Coalition represent more than 84% of American Graded Stakes and is committed to industry-leading safety protocols, transparency and accountability to the sport. The safety of our athletes, both equine and human continues to be Del Mar’s top priority, but we understand more must be done The TSC provides for a comprehensive and centralized set of standards that include medical, operational and organizational reforms not only in California but across our organizations nationally.

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Page 13 DMTC believes the integrity of the sport of racing and the industry in California depends on Del Mar and other stakeholders dedicating ourselves to meeting our responsibility to provide the safest racing and training environment possible for our horses and riders. While Del Mar was rated the safest racetrack in North America for the second consecutive year, we are committed to our efforts to ensure our race horses and jockeys remain safe. We are also committed to educating the public about safety efforts and about the extraordinary levels of care provided to our equine athletes.

SUMMER AND FALL RACE MEET HIGHLIGHTS

As we have previously noted, the number of horses that run in a race, or field size, directly correlates to the amount wagered on the race, or wagering handle. The more horses that run in a race, the larger the wagering pool. While other racetracks across California and the entire nation have struggled to maintain field sizes, DMTC is considered an industry leader in developing innovative programs to combat the decline in the horse population in Southern California and bolster field sizes. Del Mar’s average field size in 2019 was adversely impacted by the uncertainties resulting from the events at Santa Anita. That uncertainty led to the decline in horse inventory during the second quarter of 2019 as horses left California to race elsewhere and contributed to the cancelation of 27 race days at Santa Anita and Los Alamitos. Field size for the 2019 summer race meet consequently declined to 8.0 horses per race compared to 8.7 horses per race in 2018 and 8.6 horses in 2017. Our recent fall race meet field size was 7.4 horses per race compared to 7.7 horses per race in the 2018 fall race meet. Del Mar’s efforts to stabilize the industry and our horse recruitment efforts helped both race meet’s field sizes to once again be the highest in California and our summer race meet field size matched the field size of the popular Saratoga race meet in upstate New York.

Our Ship and Win program, which provides an incentive for owners of out-of-state horses to ship their horses into California and race at Del Mar, is a critical component of our recruitment efforts. We began the “Ship and Win” program in 2011 and since then it has brought 1,431 horses to race at Del Mar. DMTC and the Thoroughbred Owners of California (“TOC”) again provided funding for the program and its 2019 shipping payment was increased by $500 to $2,500. Also increased was the purse bonus for the first race after shipping to 40%, up from a 30% first-race purse bonus in 2018. Del Mar’s aggressive recruitment efforts, attractive purses and the thrill of racing in front of the largest crowds in California drew 156 out-of-state horses who qualified for the Ship and Win program. Those horses accounted for 249 total starts during the two 2019 race meets.

The 2019 36-day and seven-week summer race meet opened Wednesday, July 17th and closed on Labor Day, Monday, September 2nd. These dates were consistent with the 2018 seven- week summer race meeting, which opened Wednesday, July 18th, and closed on Labor Day, Monday, September 3rd.

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Page 14 The summer meet offered an impressive parade of stakes races as Del Mar’s competitive stakes program featured many world-class equine stars competing in 40 summer stakes races worth a combined $7.3 million. The summer meet provided memorable performances on the track, such as an impressive performance by Bast in the Del Mar Debutante; a thrilling photo finish win by Vasilika in the John C. Mabee Stakes; and a second straight victory in the $1 million TVG Pacific Classic by the Hronis Racing/trainer John Sadler connections with Higher Power’s triumph. There was also a string of remarkable individual efforts from the Hronis Racing ownership group, which had record summer purse earnings of $1,441,077 and an unmatched seven stakes victories. Trainer John Sadler had nine stakes wins and leading jockey Flavien Prat won 10 stakes and had 42 total victories. The significant media attention and public and political scrutiny on horse racing in California leading up to our summer meet negatively impacted attendance levels, which declined 13.8%, primarily with our casual, non-core patrons. The impact was greatest in race day walk-up attendance and admission revenues as well as related F&B sales revenues. Attendance levels and revenues from our regular and core racing fans declined just slightly because these patrons have an awareness and understanding of Del Mar’s safety record and our ongoing, industry-leading safety efforts. Group Sales revenues posted gains in our high-end and premium areas and Group Sales revenues were the second highest in our history, off slightly from 2018’s record levels as a result of modest declines in revenues for our non-premium Group areas. Strong growth in premium and high-end Group attendance, the continuation of our event-driven marketing strategy and our summer concert series contributed to higher F&B per capita sales revenues. The decline in horse inventory also impacted wagering revenues on live racing since lower inventory meant field size decreased, which led to fewer live races. Del Mar’s strong brand and reputation as a home for world-class Thoroughbred racing and entertainment continued to provide areas of growth. Sponsorship revenues, led by the addition of Claiborne Farm stallion Runhappy’s title sponsorship of our opening day Oceanside Stakes and closing day , achieved record results, increasing more than $500,000 over last year’s record sponsorship revenues.

The 2019 four-week fall race meet again was North America’s most wagered on race meet in the month of November. In just six years since we began the fall session, many industry stakeholders view Del Mar’s fall meet as the nation’s premier race meet during this time frame. Factors such as the Ship and Win program incentive, our attractive purse structure and the Southern California fall weather attracted 33 out-of-state shippers, including four horses that last started in Europe. The fall race meet’s quality racing product – with its emphasis on turf racing – was highlighted with seven stakes races contested on closing weekend, including two Grade I turf stakes races. The Grade I Derby, run on November 30th, was won by Mo Fornza, who was trained by local Peter Miller. On Closing Day of the fall race meet, the Grade I Matriarch was won by Got Stormy, conditioned by the highly successful, east coast-based trainer Mark Casse. The stakes-filled race cards and large fields resulted in over $30.7 million of wagering during closing weekend, the highest ever two-day wagering total for the fall race meet. The scheduled 15- day fall race meet was shortening to 13 race days as inclement weather and our continued effort to provide the safest possible racing environment for our horses and jockeys resulted in the

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Page 15 cancellation of two race days on Thursday, November 21 and Thanksgiving, Thursday, November 28. The fall race meet was favored by our largest and most sophisticated bettors as Del Mar’s large wagering pools allow them to place substantial bets without significantly impacting the pari- mutuel odds on their wagers. Average daily wagering for the 13-day, 2019 fall race meet rose 9.2% to a record $11.32 million. Total wagering for the meet was $147.3 million, 11.3% lower than the 16-day 2018 fall race meet. Daily average attendance for the 2019 fall race meet matched last year’s figures at 4,627 per day.

Through the combined efforts of DMTC, the 22nd District Agricultural Association (“District”) and the Race Track Authority (“RTA”), racing at Del Mar has benefitted from substantial and ongoing improvements to the Del Mar Fairgrounds facility. These improvements have included converting the main track to dirt and installing a new, wider turf course – both of which have been major investments in the development of Thoroughbred racing and have contributed to Del Mar’s status as one of the best venues in the horse racing industry. Del Mar’s selection to host its second Breeders’ Cup in 2021 and the record-breaking success of our first Breeders’ Cup in 2017 underscore the importance that these investments and combined efforts play in the ongoing success of racing at Del Mar.

The issues surrounding the Santa Anita meet from December to June, and the resulting media attention and public scrutiny on horse racing in California, negatively impacted our summer race meet attendance, wagering levels and operating results and the fall race meet operating results also were impacted by the two race days cancelled due to rain. The 2019 summer and fall race meets generated a combined return from racing of $7.87 million. This amount is $3.08 million lower than the combined return from the 2018 summer and fall race meets. Racing net revenues totaled $1.62 million in 2019, consisting of $1.225 million of Direct Payments ($825,000 for the summer meet and $400,000 for the fall meet) as well as a payment to the RTA of $390,000. Race meet related F&B net revenues, as defined in the Operating Agreement, totaled $6.25 million, and consists of race meet F&B net revenues of $5.62 million from the summer and $640,000 from the fall race meets. The 2019 F&B net revenues are $670,000 less than 2018 F&B net revenues.

REVENUES

Revenues for the year ending December 31, 2019 totaled $34.72 million and were $4.39 million, or 11.2%, under budget and $3.59 million, or 9.4%, below revenues for the prior year period. These declines were because wagering revenues on live racing fell as the lower horse inventory resulted in fewer live races and lower field sizes. The significant media attention and public and political scrutiny on horse racing in California led to a decline in on-track attendance and attendance-related revenues. Fall race meet revenues also declined as the scheduled 15-day fall race meet was shortened to 13 race days as inclement weather resulted in the cancelation of two race days. Additionally, the 2018 fall race meet ran 16 days, or three more race days than the 2019 fall race meet. Del Mar’s strong brand and DMTC’s sales efforts generated a $510,000, or 17.1%, gain in sponsorship revenues in 2019.

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Page 16 Wagering Revenues: Wagering revenues comprise DMTC’s most significant source of revenue and accounted for 54.7% of summer race meet revenues, 81.4% of fall race meet revenues and 59.3% of total revenues. The fall race meet has a larger concentration of wagering to total revenues because all existing sponsorship agreements, management services and other operating revenues are allocated to the summer race meet. Additionally, because the summer race meet draws more out-of-town and casual patrons than the fall race meet, the summer race meet generates higher attendance-related revenues.

We receive wagering commissions and purses from wagering by patrons in California, regardless of whether the wagers are made on-track at Del Mar, off-track at Southern California satellite (“ITW”) locations, or from Southern California residents wagering through ADW providers that are licensed by the CHRB. Del Mar also receives commissions and purses when patrons who are outside of California wager on Del Mar races at brick-and-mortar locations (e.g., race tracks, , ITW locations and sports bars) and through ADW providers that contract with Del Mar to take wagers on our races. California patrons are able to wager on three types of races: (1) those run at Del Mar (“live races”); (2) those run in Northern California; and (3) races imported from racetracks outside California (“imported races”). Total wagering declined 11.0% to $579.3 million in 2019. Wagering on live Del Mar races declined 15.4% to $446.6 million, while wagering on imported races increased 8.7% to $117.5 million and wagering on Northern California races declined 1.1% to $15.2 million from prior-year levels. The decline in wagering on live races was due to 6.6% fewer live races and lower average field sizes during the summer race meet and the three fewer race days during the fall race meet. Import wagering rose as experienced ITW and ADW patrons increased wagering on Saratoga, Gulfstream, Arlington, Monmouth Park and other imported race signals.

The unfortunate events at Santa Anita and adverse media and political attention during the first half of the year impacted both the average field size and the number of live races run during the summer race meet. As noted above, the inventory of race horses in Southern California declined 15% during the second quarter as approximately 600 horses shipped out of California during the Santa Anita meet to race in other states. The decline in horse inventory, along with the new medication and safety rules requiring horsemen to adjust training patterns, exerted downward pressure on racing entries, particularly during the first five weeks of the summer race meet. These factors resulted in a decline in the number of live races run and average field size during the summer race meet. In order to run the full 36-day race meet this year, some live races were eliminated on Wednesdays, Thursdays and Sundays during the first five weeks of the race meet and certain other days. Field size and the number of live races run increased the final two weeks of the summer meet. The increase was largely due to our Ship and Win program and additional horse recruitment efforts, as well as horsemen adjusting their training practices as they became accustomed to our new safety protocols. The number of live races, which was 8% lower than the prior year at the mid-point of the season, ended the summer race meet 6.6% lower than 2018 because an increase in horses entered to race allowed us to avoid eliminating races. Similarly, field

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Page 17 size, which averaged 7.7 horses per race at the mid-point of the race meet, increased late in the meet and averaged 8.75 horses the final week of the race meet. Average field size ended the meet at 8.0 horses per race, down from 8.7 horses for the 2018 summer race meet. These factors contributed to the 14.7% decline in wagering on live races during the summer meet. Our summer race meet field sizes are larger than the fall meet because most horses that race during the fall race meet stable and train during the fall at Santa Anita and Los Alamitos and must van to Del Mar to race during that time. Approximately 350 horses were stabled at Del Mar during the fall race meet compared to 1,900 that were stabled at Del Mar during the summer meet. Average field size was 7.4 horses during the 2019 fall race meet compared 7.7 horses during the 2018 fall session. Several horses that were scheduled to race the last two weeks of the fall race meet elected not to ship and race at Del Mar due to the increment weather during that time.

While wagering on live races declined in 2019, wagering on imported races increased 8.7% as experienced ITW and ADW patrons in California shifted wagering to Saratoga, Monmouth Park, Gulfstream, Arlington and other imported race signals when their field sizes exceeded Del Mar’s. Also, fall race meet import wagering rose on the two days when live racing was cancelled due to rain. Racetracks along the east coast are able to draw from a larger inventory of race horses as compared to California’s population of race horses. Additionally, many racetracks outside California offer large purses that are supplemented by slots and gaming revenues, which attract a large number of regional horses on their premium stakes race days. Saratoga, the most heavily wagered import signal, enjoyed an increase in field size in 2019 to 8.0 compared to 7.8 in 2018. Saratoga’s field size benefitted from moving to a five-day race week when Monday racing was eliminated in 2019. Saratoga’s field size in 2018 was also adversely impacted due to unusually wet weather during the first half of their 2018 summer race meet.

Wagering on Northern California races declined 1.1% in 2019. The Northern California racing calendar added a week of racing at in 2019, which replaced a week of racing at the Humboldt County Fair. The Humboldt County Fair is the least-wagered Northern California signal, whereas Golden Gate Fields is by far the heaviest-wagered Northern California signal.

Various changes in statutory and ADW wagering deductions used to fund statewide marketing programs and CHRB operations impacted 2019 commissions and purses. The legislation that funded the statewide marketing program administered by the California Marketing Committee (“CMC”) through a 0.25% deduction from ITW and on-track import and Northern California wagers expired on December 31, 2018. CMC previously allocated a portion of the statewide marketing funds to co-promote certain programs specific to Del Mar, including our Ship and Win and horse recruitment programs and on-track large player reward incentives. Del Mar and the TOC agreed to a new deduction from California ADW wagering for the summer race meet to continue funding these programs previously co-promoted by the CMC statewide program. The net benefit to wagering revenues for the summer race meet from the elimination of the CMC statutory deduction offset by the new ADW deduction was $30,000. As discussed in this report, horse

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Page 18 recruitment efforts and costs rose in 2019. Additionally, we increased our social media efforts to educate the public about Del Mar’s industry-leading safety record and our enhanced safety protocols and procedures. Del Mar and the TOC agreed to increase the deduction from California ADW wagering for the 2019 fall race meet to provide the funding for the increased horse recruitment costs and social media efforts. The net reduction in fall race meet wagering revenues from the elimination of the CMC statutory deduction and the higher ADW deduction was $160,000.

CHRB operations are funded by California racing associations and purses by a deduction from on-track, ITW and out-of-state wagering at all California racetracks and racing fairs. This deduction from wagering increased during the three-year period from 2015 to 2017 because the CHRB’s annual operating budget grew faster than statewide wagering levels. This higher deduction from wagering, in turn, reduced wagering revenues and purses during that same period. The CHRB deduction was unchanged in 2018 because strong wagering gains during Del Mar’s 2017 and 2018 race meets, along with record Breeders’ Cup wagering in 2017, helped generate more statewide revenues from this deduction than was required to fund the CHRB’s 2018 operating budget. The cancelation of 27 race days at Santa Anita and Los Alamitos during the second quarter of 2019 created a deficit of CHRB board support funding from wagering. The additional funding required to offset this deficit impacted summer race meet commissions by $160,000 and fall race meet commission by $70,000.

On-track wagering: On-track summer race meet wagering revenues totaled $3.96 million and were $670,000, or 14.5%, under budget due to the 13.8% decline in on-track attendance, the fewer live races and the decline in field size. As noted previously, attendance declines were greatest with casual and non-core patrons, while attendance levels from our regular and core racing fans declined just slightly because these patrons have an awareness and understanding of Del Mar’s safety results and our ongoing, industry-leading safety efforts. Because casual fans wager less, per capita wagering increased approximately 1.0% in 2019. The CHRB board support deficit impacted summer race meet on-track wagering revenues by $50,000 and resulted in the yield on on-track wagering declining nine basis points to 7.68% in 2019. On-track wagering commissions for the fall race meet totaled $610,000 and were $190,000, or 23.4%, under budget. The decline was primarily due to the rain-shorten fall race meet. The CHRB board support deficit impacted fall race meet on-track wagering revenues by $20,000 and contributed to the yield on on-track wagering declining 51 basis points to 7.64% in 2019.

ADW wagering: The ease and convenience of Internet wagering, together with extensive cable coverage by TVG, our largest ADW partner, has made ADW wagering the strongest area of handle growth since on-line wagering was introduced in 2002. ADW wagering during the recent summer race meet grew to account for 41% of all wagering by California patrons. ADW wagering by California residents was unchanged as wagering on live races declined 13.2% due to the fewer live races and declines in field size. ADW wagering on imported races rose 11.2% as ADW patrons shifted wagering to Saratoga and other imported race signals. Wagering on

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Page 19 Northern California races increased 9.7% because of an additional week of racing at Golden Gate Fields in 2019, which replaced a week of racing at the Humboldt County Fair, which, as noted above, resulted in a move from the least wagered Northern California signal to the heaviest wagered Northern California signal. ADW wagering commissions for the summer race meet totaled $2.49 million and were $180,000, or 6.8%, below 2018 commissions and $280,000, or 10.2%, below projections. ADW commissions on live races declined $260,000 while commissions on imported races rose $120,000 and commission on Northern California race increased $10,000. The new Co-Op marketing funding deduction impacted ADW commissions by $70,000. Pursuant to agreements reached by ADW companies and the TOC, ADW providers that accept wagers from California residents are now required to utilize geolocation services to identify when an ADW customer places a wager through their ADW account while they are physically present at a race track. The reduced rates paid to the ADW providers for such on-track ADW wagers generate a higher yield for purses and commissions compared to ADW wagers that are made away from the track. On-track geo-located handle now accounts for 5.4% of on-track wagers, up from 4.8% in 2018 and geo-located wagers generated an additional $50,000 each in commissions and purses compared to traditional ADW wagers this past summer. The shift in ADW wagering to imported races, which yield less than live ADW wagering, together with new Co-Op marketing deduction in 2019 resulted in a 31 basis point decline in the yield on California ADW wagering during the summer race meet. Total ADW wagering by California residents increased 8.7% for the fall race meet and average daily ADW wagering for the 13-day 2019 fall meet rose 29.0% compared to the 16-day 2018 fall race meet. The growth in fall race meet ADW wagering was due to a 20.0% increase in ADW wagering on imported races, while ADW wagering on live races declined due to the three fewer fall race days in 2019. Fall race meet ADW wagering commissions fell $80,000 due to the shift in ADW wagering to lower yielding imported races together with the increased Co-Op marketing deduction for the fall race meet. These factors contributed to a 42 basis point decline in the yield on California ADW wagering during the 2019 fall race meet. Because no CHRB support deduction is taken from California ADW wagering, the CHRB support deficit did not impact ADW commissions.

Satellite wagering: ITW wagering declined 6.9% for the summer race meet as certain patrons continued to move a portion of their off-track wagering to more convenient ADW wagering platforms. Wagering on live races during the summer race meet declined 17.7% due to the fewer live races and decline in field size. ITW wagering on imported races rose 4.9% during the summer as ITW patrons shifted wagering to Saratoga and other imported race meets. The yields on ITW wagering declined 11 basis points during the 2019 summer race meet. The additional CHRB board support funding impact was $70,000 and lower ITW yields by 21 basis points, while the elimination of the CMC funding benefited yield by eight basis points. Fall race meet ITW wagering commissions totaled $1.26 million and were $170,000, or 12.0%, under budget. The decline was due to certain patrons moving their wagering to ADW providers and due to the rain- shorten fall race meet. The CHRB board support deficit impacted fall race meet ITW wagering revenues by $30,000 and contributed to the yield on ITW wagering declining 11 basis points to

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Page 20 4.31% in 2019. ITW wagering benefitted from a new mini-satellite located in Norco in Riverside County opening in early 2019. The expansion of the ITW network through mini-satellites over the last five years has helped to slow a decline in ITW wagering as certain off-track patrons moved to more convenient ADW wagering platforms. The mini-satellite expansion also has provided the District with year-round fee revenue based on DMTC having granted approval of two locations within a 20-mile radius of the racetrack.

DMTC is a partner in SCOTWINC, the entity that administers the satellite network in Southern California. SCOTWINC receives simulcast revenues through a 2.5% fee on all wagers placed at satellite sites, as well as a 2.9% fee on all Southern California ADW wagers. These simulcast revenues fund mutuel staff costs and other SCOTWINC simulcast-related expenses. As a partner in SCOTWINC, DMTC and the horsemen annually participate in 50% of the excess, or shortfall, of SCOTWINC simulcast revenues and expenses. The SCOTWINC operating surplus $160,000, which is $60,000 below budget and $40,000 above the 2018 surplus. The budget shortfall in the SCOTWINC surplus was due to lower simulcast revenues related to the decline in wagering on live races in 2019 and the two fewer fall race days. This revenue decline was partially offset by lower labor costs resulting from the recent labor agreement with the pari-mutuel clerk’s union Local 280 along with a decline in telecommunications costs resulting from a new contract.

Out-of-state wagering: The export of Del Mar’s live race product produces significant non- California wagering revenues and purses as Del Mar races are distributed through numerous Internet wagering platforms and broadcast to over 1,100 wagering locations throughout North, Central and South America, Europe and . Out-of-state wagering during the recent summer race meet was impacted by both the 6.6 % decline in the number of live races offered and the lower field size. Out-of-state wagering declined 14.4% from the record out-of-state wagering during the 2018 summer race meet levels due to the lower field sizes as many out-of-state patrons shifted wagering to other race track signals offered to them. Wagering by out-of-state players who employ sophisticated computer programs to handicap races declined just 3.3% during the summer race meet largely due to the liquidity of our large pari-mutuel wagering pools. Those large wagering pools allow these players to place large bets without significantly impacting the pari- mutuel odds on their wagers. Out-of-state commissions totaled $6.21 million for the summer race meet and these revenues were $1.06 million, or 14.5%, lower than the 2018 summer race meet. The yield on out-of-state wagering increased one basis point to 2.85% during the summer meet as higher yields negotiated on wagering exported to the Texas, Washington and Massachusetts markets offset the impact of the funding of the CHRB board support deficit. Total out-of-state wagering for the 13-day fall race meet declined 15.6% compared to the 16-day 2018 fall race meet and average daily out-of-state wagering rose 3.8% for the shorten 2019 fall meet. Wagering by out-of-state players who employ computer-based handicapping models rose 35.5% due to the liquidity of our large wagering pools and because the Del Mar fall race meet is the premier race signal offered nationally during November. Out-of-state wagering revenues declined 19.1% during the fall due to the fewer 2019 fall race days and the yield on out-of-state wagering declined 17

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Page 21 basis points during the fall meet largely due to the impact of the funding of the CHRB board support deficit.

Non-wagering revenues: Non-wagering revenues totaled $14.23 million and accounted for nearly 41% of total revenues, the highest level of non-wagering to total revenues of all tracks in California and among the highest of any racetrack in the United States. Our non-wagering revenues consist of admissions-related revenues (daily admissions, seating and parking, season suites and boxes, turf club memberships and suites, group sales, programs, novelty concessions), sponsorships and other revenues. These revenues help diversify our reliance of wagering revenues. Admissions-related revenues declined $1.05 million, or 9.2%, in 2019 due to lower on-track attendance and the fewer fall race days. Sponsorship revenues grew to record levels, increasing $510,000, or 17.1%.

The circumstances leading into our summer race meet, including the significant media attention and public and political scrutiny on horse racing in California, impacted attendance levels, particularly with our casual, non-core patrons. Total attendance for the recent summer race meet declined 13.8% compared to the 2018 summer race meet. The impact was greatest in race day, walk-up attendance and admission revenues and related F&B revenues. Daily admissions and seat-sales revenues declined 11.1% for the summer race meet. Parking revenues declined $230,000, or 16.7%, and were $200,000, or 15.0%, under budget due to the decline in on-track attendance and as a result of patrons continuing to increase their use of Uber and other ride sharing services. Satellite program revenues declined $30,000 due to the fact that ITW patrons tend to access program data online rather than purchasing printed programs. Fall race meet admissions- related revenues totaled $1.04 million for the 13-day fall race meet and were 15.3% lower than the 16-day 2018 fall race meet. Daily average attendance for the 2019 fall race meet matched last year’s figures at 4,627 per day.

Attendance levels and revenues from our regular and core racing fans declined just slightly during 2019 because these patrons have an awareness and understanding of Del Mar’s safety results and our ongoing industry-leading safety efforts. Season box revenues declined 3.3% because of non-renewal of some fourth level and non-prime season boxes. Turf Club membership revenues and luxury suite sales declined 2.1%. Group Sales revenues for our high-end sky rooms and celebrity suites grew 4.9%. However total Group revenues declined 3.2% from the 2018 record levels due to declines in revenues for our non-premium Group areas. Group revenues this past summer were the second highest in our history. The strong growth in premium and high-end Group areas along with our event-driven marketing programs and summer concert series contributed to a 5.8% increase in summer race meet F&B per capita sales revenues. Fall race meet F&B per capita sales rose 1% because the fall race meet has fewer concerts and food-based events.

DMTC has a long and successful history of maintaining and growing corporate partnerships through our ability to implement successful sponsorships, marketing and co-branding

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Page 22 programs. Sponsorship revenues for 2019 totaled a record $3.5 million, $330,000, or 10.5%, over budget and $510,000, or 17.1%, higher than the record established during the 2018 summer race meet. DMTC’s new sponsorships in 2019 include a partnership with Patron Spirits and Bacardi USA, which featured marketing programs centered on Patron Tequila, Grey Goose Vodka and Bacardi Rum. The three-year agreement provides for $900,000 in revenues. DMTC also added the Claiborne Farm stallion Runhappy to our sponsorship roster. Runhappy was featured as the title sponsor of the opening day Oceanside Stakes and the closing day Del Mar Futurity. The Runhappy partnership provides for $800,000 in DMTC revenues and purses over the next two years. Additionally, in 2020, a $100,000 purse bonus funded by Runhappy’s owner will be provided to any Runhappy-sired horse winning a two-year old “maiden special” race at Del Mar. Fall race meet sponsorship revenues also exceeded budget and prior fall race meet sponsorship revenues as a result of the addition of the My Point Credit Union partnership as the presenting sponsor for the fall race meet’s opening day.

EXPENSES

Total expenses before the Direct Payment to the District for the year ending December 31, 2019 totaled $33.0 million and were $1.84 million, or 5.8%, under budget, as reduced staff costs, marketing expenses and the final recovery of the 2016 write-off of the purse overpayment offset increased trailer rental and the costs associated with the enhanced safety protocols.

Staff costs: Staff costs, which consist of salaries and wages, benefits, workers’ compensation insurance and payroll taxes, comprise the largest single expense category and accounted for 53.8% of 2019 pre-rent expenses. Staff costs were 55.8% of summer race meet total pre-rent expenses and 45.1% of fall race meet pre-rent expenses. The fall race meet has a lower percentage of staff to total costs because the existing year-round staff costs are allocated to the traditional summer race meet. Staff costs collectively were $1.11 million, or 5.9%, under budget. Salaries, wages and payroll taxes combined for 2019 were $630,000, or 4.3%, under budget. Year- round administrative salaries were $90,000, or 2.9%, under budget as the cost-of-living adjustment for 2019 was eliminated due to the results of the summer race meet. Seasonal staffing salaries for the summer race meet were $260,000, or 3.6%, under budget as staffing levels were adjusted lower because of the decline in on-track attendance and due to the close monitoring of staffing levels. Staffing levels and costs in certain areas did, however, exceed budget due to additional morning workout veterinarian monitoring and inspections and safety monitoring procedures along with additional maintenance and preparation of the dirt and turf tracks. Fall race meet seasonal staff salaries were $250,000, or 11.0%, under budget due to the three fewer fall race days together with the reduction is certain non-critical patron-service staffing levels. Benefit costs were $340,000, or 10.1%, under budget due to the lower staffing levels, a reduction in the 401k matching contribution for non-union staff, and a refund payment received in the fourth quarter related to the completion of the post-settlement audit of the statewide, multiple-employer pension plan that covered the California racing industry non-union employees. Health insurance costs for seasonal union

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Page 23 employees that work the Southern California racing circuit increased in 2019 because of an increase in the number of these employees that first qualified for ACA health insurance during Del Mar’s five-day race week. Many employees did not work enough days prior to our meet to qualify for health coverage because of the cancelation of 27 race days at the Santa Anita and Los Alamitos race tracks during the second quarter of 2019. Workers’ compensation insurance costs were $130,000, or 22.2%, under budget because of lower premiums attributable to our favorable claims experience in 2018. These lower premiums were realized because of DMTC’s active risk management and safety training programs. Our 2019 workers compensation policy was renewed early in 2019 after we had submitted our current budget.

Advertising and public relations expenses: Advertising and public relations expenses totaled $4.81 million and were $310,000, or 6.1%, under budget. Our marketing efforts again focused on a promotions-driven calendar with events such as concerts, craft beer and food festivals as well as other programs that generate higher margin F&B revenues. Approximately two-thirds of the summer race meet marketing expenditures are allocated for these programs and events that drive attendance and F&B revenues. In conjunction with Premier Foods, we continued to develop creative programs that provide F&B offers (e.g., selective reduced pricing) to incentivize and reward attendance by our core customers. Television advertising costs were under budget as the current television campaign was based on the 2018 creative and production work. Radio advertising levels were lower than originally projected as it was determined these targeted audiences are reached through more economical social and digital media channels. Food festival event promotional costs were also under budget as we negotiated that event promoters bear a greater portion of event promotional costs. Our social media and communications outreach efforts were increased so that we could effectively demonstrate our industry-leading safety record, enhanced safety protocols and equine retirement and aftercare resources.

Seasonal services: Seasonal services and contract costs were $360,000, or 9.7%, under budget as the recovery of the prior write-off of a purse overpayment, as discussed in detail below, exceeded projections by $560,000 and because of various increases in several seasonal costs as noted below. Outside veterinary costs exceeded budget by $80,000 due to additional contracted services related to the expanded pre-race and veterinary monitoring of morning training. Temporary trailer rental costs exceeded budget by $140,000 as the discovery of mold required the replacement of bunkhouse trailers used by backside workers. Also, trailer rental costs continued to increase in 2019 due to supply issues resulting from strong demand for temporary trailers by the construction industry. Track maintenance costs exceeded projections because of the expanded pre- race meet dirt racetrack maintenance along with the costs of the additional track maintenance associated with the enhanced morning training protocols instituted to enhance safety. Ship and Win program and horse recruitment costs exceeded projections by $140,000 due to both an increase in the number of horses that participated in the program along with the enhanced shipping and first-race purse incentives in 2019. The analysis of the 2019 Ship and Win program shows an

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Page 24 incremental cost per start of $3,075, while each additional start generated an estimated $6,020 of commissions and purses.

Purse overpayment recovery: As noted in our previous filings, several factors led to the overpayment of purses during the period of 2014 through 2016 as the industry adjusted to the closure of the Hollywood Park race track at the end of 2013 and as conditions changed accordingly at Del Mar. These factors included increased deductions from ADW and ITW wagering to fund SCOTWINC and stabling operations, lower large-player wagering, a reduction in average daily on-track wagering as Del Mar added the additional four weeks of fall racing, with lower field sizes and a decline in ADW wagering leading to lower 2016 racing revenues. Purse levels were lowered modestly in 2015 and 2016 and by the end of 2016 purses were at a level that stabilized the purse overpayment situation. However, we determined that further reduction of purses could jeopardize an advantage Del Mar has over other tracks in attracting horses and, consequently, we decided the best course of action – for the long-term sustainability of horse racing at Del Mar – was to write- off the $2.29 million purse overpayment that existed at the end of 2016.

The closure of the at the end of 2013 and the resulting loss of Hollywood Park’s stalls for use as offsite stabling and training of , caused the TOC and the remaining Southern California racetracks to enter into an agreement establishing an industry fund to provide for critically needed, additional off-site stabling and training facilities as well as funding for shortfalls in stabling, training and vanning reimbursements owed to industry creditors. This agreement provided for Del Mar to be awarded the fall race meet dates and required that Del Mar – the only Southern California racetrack that does not provide year-round stabling facilities – to annually contribute $700,000 to $1,000,000 to the industry fund. In 2019, the TOC, Del Mar and Santa Anita agreed that the industry fund accomplished the goals of providing the necessary training and stabling facilities and had repaid the stabling, training and vanning reimbursement shortfalls. Accordingly, the TOC, Del Mar and Santa Anita entered into an agreement to distribute the industry fund’s remaining assets. This agreement provides that Del Mar’s 2018 industry fund contribution of $700,000 and our 2019 industry fund contribution of $1,000,000 were redistributed to Del Mar’s purse account to supplement current and future Del Mar purses. The results of our 2017 and 2018 race meets provided for a $200,000 recovery of the prior-year purse write-off following the 2017 summer race meet and a $530,000 recovery of the purse write-off in 2018. The additional purse funds resulting from the above-referenced agreement provided for the recovery of the remaining prior write-off of the purse overpayment in the amount of $1.38 million in 2019. This purse recovery exceeded the projected 2019 recovery by $560,000.

Various other expense categories: Repairs and maintenance expense totaled $1.02 million in 2019 and were $110,000, or 12.7%, over budget. Track materials cost exceeded projection due to an increase in the amount of sand and other materials used in the dirt track in order to insure a consistent racing surface throughout the entire summer race meet. Additionally, the cost of sand again increased in 2019 due to the strong building and construction markets. Insurance expense was $40,000 under budget as the 2019 premium renewal rates were lower than expected. Our

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Page 25 budget assumed higher 2019 premiums because of the insurance industry losses resulting for the recent California wildfires and other natural disasters in 2018. Professional services were $160,000, or 39.6%, over budget due to an increase in legal costs primarily related to litigation resulting from a lawsuit filed by a trainer and the California Thoroughbred Trainers Association seeking to prevent DMTC from refusing to permit the trainer to participate in the summer meet due to concerns about ensuring equine safety and the need to protect the integrity of Del Mar’s and the industry’s efforts in that regard. Additionally, banking service fees were higher than expected as the recent decline in short-term interest rates produced lower earnings credits on compensating balances which offset bank service charges and fees. This decline in short-term rates also resulted in interest expense coming in $10,000 under budget. Satellite program costs were $30,000 under budget as ITW satellite patrons purchased fewer printed programs because they are able access and download programs on-line at no cost and because of the three fewer fall race days.

DMTC has financial statements based on the year ending December 31 while our tax returns were previously filed on the basis of a May 31 tax year. DMTC elected to change our tax year end from May 31 to December 31 as of 2019 in order to align our tax and financial year ends and will file a short period tax return for the seven-month period from June 1 through December 31, 2019. This change in the tax year end and filing of a short period tax return enabled DMTC to utilize previously unrecognized net operating losses and resulted in the revaluation of the income tax taxable liability in 2019. This resulted in a one-time current tax benefit and was the principal driver of the $599,000 income tax benefit for the current year. This revaluation of the income tax payable liability did not impact the 2019 rent payment.

The foregoing represents our Management’s Discussion and Analysis of DMTC’s operations, revenues and expenses based on the audited financial statements for the year ending December 31, 2019.

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Item 5-B, Strategic Planning Committee Report

Background: In April, the board and executive staff of the Del Mar Fairgrounds met in a day-long strategic planning session focused on the recovery and future success of the Del Mar Fairgrounds. The Strategic Planning Committee of the board is steering the process and was charged with focusing on initial key areas of the strategic plan and its supporting elements.

In May, the Committee presented a recap of the day’s discussion and outlined the action steps and basic timeline of board engagement to continue to move the process forward over the coming months. In June, the Committee presented draft Purpose, Mission, Vision, and Values statements for the board’s consideration and in July, presented draft Strategic Goals and Objectives. Working across other committees to help gather feedback, the process of receiving input from civic leaders is underway and the Committee plans to bring the final draft statements and goals forward at the September board meeting for the board’s review and approval.

The Committee and staff continue to further develop the strategic goals and objectives into an action plan, including an outline of steps and milestones for presentation at the October board meeting.

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Food & Beverage Report June 2021

June 2021 Food Service Revenues were $457,939. Budgeted Revenues for June 2021 were $358,020.

Net distribution to the District for June 2021 was $80,967 or 17.7%. Budgeted distribution for June 2021 was ($36,166) or (10.1%).

Year-to-date 2021 distribution to the District is ($129,242) or (23.4%). The budgeted distribution for YTD 2021 was ($254,146), or (58.5%).

2021 % 2021 % 2020 % Jun-21 ACTUAL BUDGET ACTUAL

TOTAL REVENUE 457,939 100.00% 358,020 100.00% 106,047 100.00%

TOTAL COGS 70,716 15.44% 67,203 18.77% (10) -0.01%

GROSS MARGIN 387,223 84.56% 290,817 81.23% 106,057 100.01%

TOTAL PAYROLL 231,531 50.56% 228,258 63.76% 96,475 90.97%

OPERATING EXPENSES 63,158 13.79% 103,892 29.02% 51,040 48.13%

NET PROFIT 92,534 20.21% (41,333) -11.54% (41,458) -39.09%

CLIENT DISTRIBUTION 80,968 17.68% (36,166) -10.10% (36,276) -34.21%

2021 % 2021 % 2020 % YTD ACTUAL BUDGET ACTUAL

TOTAL REVENUE 551,614 100.00% 434,429 100.00% 593,667 100.00%

TOTAL COGS 74,668 13.54% 69,937 16.10% 117,772 19.84%

GROSS MARGIN 476,946 86.46% 364,492 83.90% 475,895 80.16%

TOTAL PAYROLL 389,160 70.55% 381,330 87.78% 1,281,664 215.89%

OPERATING EXPENSES 235,492 42.69% 273,614 62.98% 360,528 60.73%

NET PROFIT (147,705) -26.78% (290,453) -66.86% (1,166,297) -196.46%

Y-T-D CLIENT DISTRIBUTION (129,242) -23.43% (254,146) -58.50% (1,020,510) -171.90%

J:\BOARD MEETINGS\Incoming Backup Materials\7 Committee Reports\C Finance_Budget\Copy of Food Beverage Report 2021 - June 2021Page 1 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58

Item 5-C, Finance Committee Report

Financial Report: Staff provided the Committee with an update on the accounting software conversion project. As has previously been reported, the 22nd DAA undertook a software conversion project for its accounting, payroll, and human resource management functions last year with data entry into the new software commencing in January of this year. The project is well underway with timekeeping, payroll, accounts payable and, most recently, accounts receivable activities occurring in it. There is still a lot of reconciliation work to be done within the new system in order to ensure the accuracy of financial reporting and information, in essence, verifying through manual reconciliation that the setup and implementation was properly completed.

Over the course of the past month, the Accounting Department has been working diligently to reconcile the manual tracking with the data entered into the new system since the beginning of the year, starting with the reconciliation of bank activity. Throughout this software conversion process, additional opportunities to automate processes and reporting have been identified and continue to be developed and implemented.

The Committee discussed the financial impacts on the 22nd DAA’s budget of the end of the state’s pay reduction program for Fiscal Year 20/21. As of June 30, 2021, the state’s Personal Leave Program (PL20) ended, lifting a year-long reduction in pay for state civil service employees of 9.23%, discontinuing the additional 2 days per month leave accrual, and resuming Other Post-Employment Benefits deductions. Effective July 1, salaries increased 4.55-5.06%, depending on bargaining unit, and employer contribution to retirement was reduced from 29.370% to 29.220%. Impacts to the 22nd DAA budge should be minimal as salaries were forecasted at 100% for the year, so the increase in the second half of the year should be offset by the reduction of salaries over the first half of the year.

The 22nd DAA’s process for the 2022 budget development begins with staff next month and will culminate with the board’s review and approval in December, with the Committee providing feedback and review along the way.

The Committee discussed concerns regarding the continued impacts of the pandemic on business this fall and winter as public health orders were recently updated (currently, masks are recommended for all persons indoor, vaccinated or not). Staff continues to monitor the situation and remain engaged with county public health officials. Fortunately, with the recent passage of the Budget Act of 2021, $50 million in General Fund support was included for the entire Network of California Fairgrounds. Last week, CDFA announced their approach to distribute the funds based on need and following the Targeted Support Application process they used this past Spring to distribute the remaining AB75 funds for FY20/21. Applications are due August 16th.

Staff reported to the Committee that the annually required Electronic Municipal Market Access (EMMA) filings for the bonds was submitted on July 27, 2021, including the attached voluntary disclosure, unaudited financials for 2019 and 2020 for the DAA and 2020 audited financials for DMTC (and included in this board packet).

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DEL MAR RACE TRACK AUTHORITY REVENUE BONDS SERIES 2015

Additional Information, dated July 27, 2021

The 22ND District Agricultural Association (the “DAA”) is including in the Annual Report for the above-captioned bonds (the “Bonds”) the following additional information regarding the impact of the COVID-19 pandemic on the DAA, the Del Mar Fairgrounds, and the Del Mar Race Track. Nothing contained herein is, or should be construed as, a representation by the DAA that the Annual Report comprises all of the information that may be material to a decision to invest in, hold, or dispose of any of the Bonds. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in the Pledge Agreement, dated as of August 1, 2015 (the “Pledge Agreement”), by and among the Del Mar Race Track Authority, the DAA, the State Race Track Leasing Commission and U.S. Bank National Association, as Trustee (the “Trustee”). The Bonds are secured by a pledge of Pledged Revenues (consisting of Race Track Net Revenues and Concession Net Revenues) and certain other funds to the extent set forth in the Indenture, dated as of August 1, 2015, between the Del Mar Race Track Authority and the Trustee.

The COVID-19 pandemic resulted in significant disruption to the national, state and local economies, including cancellation of conventions, sporting events, musical events, fairs and other large gatherings, and significant declines in personal and business travel. In particular, as a result of the COVID-19 pandemic, horse racing operations at the DAA’s Del Mar Fairgrounds were significantly curtailed. Spectators were barred from attending the 2020 Summer Race Meet due to pandemic-related restrictions, which in turn resulted in precipitous declines in concession revenues. In addition, in 2020 the DAA was unable to hold the annual Fair at the Del Mar Fairgrounds. The Fair is generally the most significant source of DAA general revenues.

Notwithstanding the material adverse financial impacts of the COVID-19 pandemic on the DAA, the DAA believes that during 2020 it maintained, and as of the date hereof continues to maintain, compliance with the financial covenants set forth in the Pledge Agreement. Specifically, the DAA deposited on a timely basis sufficient “Pledged Revenues” to make scheduled debt service payments with respect to the Bonds in 2020 and through and including October 1, 2021. The most significant source of Pledged Revenues with respect to 2021 debt service payments was a $3.3 million payment made to the DAA by the Del Mar Thoroughbred Club (the “DMTC”) in February 2021. Although the finances of the DMTC were materially adversely impacted by the COVID-19 pandemic, DTMC was able to procure a loan pursuant to the Paycheck Protection Program (“PPP”) established by the federal government pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which enabled DMTC to make the required payment of Race Track Net Revenues to the DAA pursuant to DMTC’s lease of the Del Mar Race Track.

In addition, in accordance with the Pledge Agreement, the DAA has continuously maintained funds on account which are legally available for the payment of the Bonds in an amount equal to at least Maximum Annual Debt Service (as defined in the Indenture pursuant to which the Bonds were issued).

In addition, the DAA received approximately $8.8 million of COVID relief funds from the State of California in 2020, and in 2021 has received an additional approximately $9.6 million through June 4, 2021.

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The Del Mar Fairgrounds was also used as a “Vaccination Super Station.” Approximately 117,000 vaccinations were administered at the Fairgrounds from February through June 2021.

The adopted budget for the State of California for Fiscal Year 2021-22 includes $50 million in funding to provide operational support to state-affiliated fairs (including the Del Mar Fairgrounds) due to the pandemic. These funds will be allocated by the California Department of Food and Agriculture (“CDFA”). While the DAA expects to receive a portion of this funding, it cannot predict the specific amount and timing.

The DAA was able to operate the Fair on a limited basis in June 2021. The Summer Race Meet began on July 16, 2021, and the DAA currently expects to host the Breeder’s Cup on November 5-6, 2021.

The audited financial statements for the DAA for the fiscal year ended December 31, 2019 were significantly delayed as a result of the pandemic, and are expected to be available by the end of August 2021 and will be filed when available. Unaudited financial statements for the fiscal year ended December 31, 2019 are being filed concurrently with this Additional Information filing. In addition, audited financial statements for the DAA for the fiscal year ended December 31, 2020 are not available as of the date hereof. In accordance with the continuing disclosure undertaking executed in connection with the issuance of the Bonds, the DAA is filing unaudited financial statements for the fiscal year ended December 31, 2020.

The DAA continues to monitor the situation. The impact of COVID-19 on the national, state and local economies and business and personal travel, and the ability of venue owners or operators to hold large scale public events such as fairs (including the Del Mar Fair), is evolving. There can be no assurances that continuing developments with respect to the COVID-19 will not limit or prevent the DAA from holding the Spring Race Meet, and/or the Breeder’s Cup or other revenue raising activities.

Certain statements contained in this disclosure are “forward-looking statements.” Particularly because of the evolving nature of the current public health crisis, no assurance can be given that any estimates of future impact discussed herein will be achieved, and actual results may differ materially from the potential impact described herein. In this respect, the words “estimate,” “forecast,” “project,” “anticipate,” “expect,” “intend,” “believe,” “budget” and similar expressions are intended to identify forward-looking statements. All projections, forecasts, assumptions and other forward-looking statements in this disclosure are expressly qualified in their entirety by this cautionary statement.

The publication of this disclosure does not constitute or imply any representation (i) that the foregoing is material to investors, (ii) regarding any other financial, operating or other information about the DAA or the Bonds or (iii) that no other circumstances or events have occurred or that no other information exists concerning the DAA or the Bonds other obligations which may have a bearing on the financial condition of the DAA, the security for the Bonds, or an investor’s decision to buy, sell or hold the Bonds.

By including this additional information in this Annual Report, the DAA does not undertake to provide any additional information in the future. The DAA disclaims any obligation to update this disclosure.

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TO: Fair CEOs and Board Chairs

SUBJECT: $50M General Fund Support – Targeted Support Program

On June 28, 2021, the Governor approved the Budget Act of 2021, which included $50 million in General Fund to the entire Network of California Fairs for operational support. The $50M was appropriated with the intent that these funds be allocated based on need. As such, the Fairs and Expositions Branch (F&E) will be implementing a Targeted Support Program to provide allocations tailored toward the operational needs of the network.

The Targeted Support Program will provide funding for operational support through an application process. Funding will depend on the financial need of the applicant relative to the financial needs of the application pool. Fairs interested in receiving this type of allocation will need to provide a completed application along with the supporting documents requested on the form; funds will be allocated based on financial need as supported by their financial statements and the key indicators they list (such as cash balance, unrestricted reserves, current liabilities, debt obligations, and payroll expenditures).

To be considered for the Targeted Support Program, applications and the required documents must be submitted to Joji Kume via email at [email protected] by August 16, 2021.

F&E will evaluate the applications submitted in order to determine the allocation amounts and the number of rounds in the Targeted Support Program. The number of rounds in the Targeted Support Program will be highly dependent on the financial need of the applications due August 16, 2021. If funds remain after the first distribution, there will be subsequent rounds, which will be based upon updated financial information at the time of reassessment. Distribution of these funds are expected to begin by the end of September 2021.

If you have any questions, please contact me at 916-900-5365 or via email at [email protected].

Fairs and Expositions Branch ● 1220 N Street ● Sacramento, California 95814 State of California Telephone: 916.900.3000 ● www.cdfa.ca.gov/FairsAndExpositions Gavin Newsom, GovernorPage 63 F2021-07 $50M General Fund Support – Targeted Support July 30, 2021 [Page 2]

Sincerely,

Mike Francesconi Branch Chief

Enclosure: Targeted Support Application

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