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2018 ANNUAL REPORT

1 2 TABLE OF CONTENTS

Message from the CEO ...... 2

2018 Accomplishments...... 4 Championship Racing...... 4 Downs: Our Old Kentucky Home...... 6 Strong Revenue...... 7 Nominations...... 8

World-Class Racing Competition ...... 10 2018 Facts & Figures...... 10 New in 2018...... 12 Challenge Win and You’re In Series...... 12 Relentless Focus on Integrity and Safety...... 14

Brand Enhancement & Experience...... 16 Celebration of the Sport and Lifestyle of ...... 16 Television Exposure ...... 18 Elevated Breeders’ Cup Merchandise...... 19 Providing a Customer and Participant Experience That Matches ...... 20 the Quality of Our Championship Racing Product

Financial Performance ...... 22 A . Selected Financial Data ...... 22 B . Management’s Discussion and Analysis of Operating Results...... 23

Appendix...... 32 A . Breeders’ Cup Directors & Members...... 32 B . Breeders’ Cup Staff...... 33 C . 2019 Breeders’ Cup Challenge Series Schedule ...... 35 D . 2019 Breeders’ Cup Challenge Series Television Schedule ...... 37

1 MESSAGE FROM THE CEO

Dear Breeders’ Cup Nominators,

As I approach the ninth edition of the Breeders’ Cup World Championships during my tenure as President and CEO, I find that each event has a special moment or memory that stands out for me . Inevitably, those moments usually take place on the racetrack, and 2018 was no exception . As I frequently point out, what distinguishes our event from all others is the quality of the competition and the American-based and internationally campaigned horses, which once again highlighted the brilliance of our equine stars at on the first weekend of November .

Any description of the 2018 event starts out with ’s victory in the Breeders’ Cup Classic capping a remarkable year that included a string of Grade I victories in the , Gold Cup at Santa Anita, Pacific Classic and . The Classic was preceded by a similarly spectacular performance in the Longines Breeders’ Cup Turf by two-time Arc winner . Her mere presence on the track during training hours mesmerized all in attendance and her late afternoon victory over the talented Coolmore was well earned in the colors of long-term Breeders’ Cup supporter Farms .

With the addition of the new Breeders’ Cup Juvenile Turf Sprint (awarded a Grade II after its debut as a Championship event running on Future Stars Friday), total purses and awards in 2018 were nearly $31 million and average field size increased to 12 5. versus 12 2. in 2017 . A record 175 starters featured 41 internationally campaigned horses and a total of 66 individual Grade I or Group 1 winners .

Complementing the action on the racetrack, our hosts at Churchill Downs doubled down on their commitment to deliver first class customer service while accommodating a total of 112,672 Breeders’ Cup fans over the two days . Gross ticket sales of $15 4. million were the third highest in Breeders’ Cup history while total handle was $162 7. million . Overall customer satisfaction was quite high as our ticket purchaser Net Promoter Score hit 68 as compared to the Survey Monkey Global Benchmark of 23 . Many thanks to Kevin Flanery and his team at Churchill Downs for delivering as promised .

As you will see in the accompanying financial report, the Breeders’ Cup finished the year ending January 31, 2019 in its best financial condition ever . On an operating basis, 2018 produced income of $2 8. million before investment gains and a total of $5 5. million in net income including gains on investments .

We could not for a better partner in promoting both the Breeders’ Cup and racing than our friends at NBC Sports, the television home of . Their production of both the Breeders’ Cup Challenge Series and the World Championships reached more than 12 7. million viewers in 2018 while showcasing the greatest racing venues and equine athletes in the United States and overseas .

As always, we are most grateful to our nominators, who collectively paid fees of $16 7. million in 2018 . Foal nominations again topped 50% of eligible foals with domestic stallions standing for more than $5,000 nominated at a rate of over 95% .

While it is reassuring to be able to deliver good news about the past year, we remain mindful that each new year brings both challenges and opportunities . We must all be aware of our responsibilities in the area of equine and human safety and we have been painfully reminded of the importance of meeting that responsibility in early 2019 . As we look forward to our event at Santa Anita this year, we remain to the highest safety and integrity standards and to leading the industry in working on needed reforms . Our staff is determined to get up each morning asking what we can do in service to the horses we are privileged to breed and race and to those who care for them . Please join us in answering that call .

Sincerely, Craig R . Fravel President and CEO 2 3 2018 ACCOMPLISHMENTS

Championship Racing

The 2018 Breeders’ Cup World Championships featured history-making performances by some of the highest-rated fields ever assembled in the 35 editions of the Breeders’ Cup. Five returning Champions and racing superstars from around the globe competed over two days in Louisville, Kentucky at the legendary Churchill Downs to decide top honors.

Led by multiple Grade I winner Accelerate, two-time Prix de l’Arc de Triomphe winner Enable (GB), Coral- (G1) and Irish Stakes (G1) winner , winner Monomoy Girl and Juvenile standout Game Winner, an all-star international cast of 221 of the world’s best , including a record 51 from overseas, were pre-entered for the 2018 Breeders’ Cup World Championships.

A total of 191 horses were officially entered into the 2018 Breeders’ Cup World Championships and by the conclusion of day two there were 175 Starters with 135 Grade I/Group 1 wins among them; completing an aggregate of 328 graded wins prior to the Breeders’ Cup. A total of 66 individual Grade I/Group 1 winners were represented in the 14 Championship races and 41 international runners competed in the Breeders’ Cup, setting a new record for both domestic and international participation. Thirteen of the world’s highest rated thoroughbreds started in the Championships.

At pre-entry, twelve of the 14 races had full fields or were oversubscribed. Eight races fielded a maximum number of starters, and the Breeders’ Cup races averaged 12.5 starters, an increase from 12.2 in 2017.

4 Accelerate wins the $6 Million Breeders’ Cup Classic

Enable wins the $4 Million Longines Breeders’ Cup Turf

Monomoy Girl wins the $2 Million Longines Breeders’ Cup Distaff 5 Churchill Downs: Our Old Kentucky Home

The Breeders’ Cup World Championships returned to historic Churchill Downs in 2018, marking the ninth time that the event has been run under the Twin Spires, which tied Santa Anita for the most times a venue has hosted the event. With Southern hospitality on full display, the Louisville community welcomed our participants and fans with new hotels and restaurants and a host of activities as part of the Breeders’ Cup Festival week.

Churchill Downs invested $150 million in the facility since the last time the Breeders’ Cup was held there in 2011. These investments provided a plethora of new and luxury seating options which were popular with Breeders’ Cup fans from across the globe. Continuing with the successful Guest Chef Program, Breeders’ Cup secured eight renowned chefs to host various dining areas at Churchill Downs on Friday and Saturday, highlighted by world-famous Masaharu Morimoto carving a 220-pound tuna for guests in The Mansion.

The Trackside Breakfast Marquee presented by WinStar Farm and Fasig-Tipton, a 9,000 square foot temporary structure constructed in the infield near the 1/8 pole, offered Breeders’ Cup participants catered breakfast and 360-degree views of the track to watch their horses train all week long. The high-end temporary venue was then converted to a ticketed area for fans to experience the two days of Championship racing from an amazing vantage point in the infield.

The Breeders’ Cup Festival provided a week-long celebration of the sport and Breeders’ Cup, offering events and activities for fans and the local community alike. Highlighted by the Rood & Riddle Post Position Draw, the Equestricon fan convention and Top Golf at Cardinal Stadium, the Festival generated additional exposure for the Breeders’ Cup and provided many reasons for fans to come to Louisville early in the week. The week of festivities contributed to an overall economic impact of $74 million on the Louisville metro area, according to a study conducted by third-party research firm SMRI.

6 Strong Revenue

2018 was a banner year for Breeders’ Cup with $5.5 million in net income and $2.8 million in net operating income – a result that leaves the company in its best financial condition ever. Taking advantage of the massive Churchill Downs facility, Breeders’ Cup attracted 112,672 fans over the two days and generated $15.4 million in ticket sales, the third highest in Breeders’ Cup history.

Total handle of $162.7 million included $52.2 million wagered on the new Future Stars Friday format, nearly setting a new record for total Friday handle. Simulcast revenue was the highest in event history at $13.9 million.

Average field size of 12.5 for Breeders’ Cup races led to $10.0 million in entry fees, which is the highest entry fee revenue ever. A total of $16.7 million in foal, racehorse and stallion nomination fees were generated in 2018, the most since the Great Recession of 2008.

20 TICKET SALES REVENUE

15

10 Millions 5 $8.5 $17.2 $15.5 $9.6 $15.4

0 2014 2015 2016 2017 2018 Santa Anita Keeneland Santa Anita Del Mar Churchill Downs

200 HANDLE TOTAL

150

100 $159.3 $155.5 $169.4 $170.8 $162.7 Millions 50

*$11.9 *$11.9 *$12.6 *$12.6 *$13.9 0 2014 2015 2016 2017 2018 Santa Anita Keeneland Santa Anita Del Mar Churchill Downs *Simulcast Revenue 7 NOMINATIONS

The very foundation of the Breeders’ Cup program begins with the nomination of foals and stallions. From its earliest beginnings in 1982 to the current year, the nomination programs provide a valuable source of funding for the Breeders’ Cup, showcased by the Breeders’ Cup World Championships. The nomination programs have evolved just as the racing programs have and Breeders’ Cup is committed to providing excellent racing and benefits for our breeders and nominators.

North American Stallion Nomination Program

There were 515 nominated stallions in North America that generated nomination fees of approximately $8.5 million in 2018.

North American stallion nominations are made annually by a payment equal to the stallion’s advertised stud fee. Stallions that are expected to have more than 50 live foals are assessed an additional fee equal to 50% of the stud fees while stallions that are expected to have 100 or more live foals are assessed an additional 100% of their stallion nomination fee.

A total of 71% of Breeders’ Cup-nominated stallions stand for $2,500 or more, representing over 96% of our domestic stallion revenue. In addition, more than 90% of foal nominations are by stallions nominated for a fee of $5,000 or more. In North America we continue to have 95% of stallions standing for a fee of $5,000 or more nominating with the Breeders’ Cup.

International Stallion Nomination Program

Breeders’ Cup nomination is available worldwide through the International Stallion Nomination program.

Owners of all stallions standing outside North America now have the opportunity to nominate directly to the Breeders’ Cup and receive automatic eligibility for all their progeny to the Breeders’ Cup World Championships and the worldwide Breeders’ Cup Challenge Series.

Since 2011, benefits of this program have increased the number of international foals eligible to the Breeders’ Cup from 1,200 nominated annually to over 20,000 each year.

The 2018 international stallion program generated $2.9 million in fees with 270 stallions participating from all over the world.

8 2018 Horses of Racing Age Nominations

Any racehorse may be nominated at any time and receive eligibility for their entire racing career. Nominations made prior to July 15 receive a discount on the standard racehorse nomination fee.

In 2018 Breeders’ Cup received $1.2 million in fees related to Horses of Racing Age nominations.

North American Foal Nomination Program

Foals from a nominated stallion are eligible for nomination to the Breeders’ Cup by payment of a one-time nomination fee of $400 by October 15 of the year of birth or by payment of a late fee of $1,500 by December 15 of the year of birth. This $400 nomination fee reflects a lowered nomination fee from $500 that was set since the program’s inception. Only foals that are by fully- nominated North American stallions are eligible to be nominated during their year of birth at the weanling nomination fee level.

In 2018 Breeders’ Cup recorded 10,202 nominated foals (58% of eligible foal crop reported). Foal nomination revenue totaled $4.2 million, which included 71 late nominations at $1,500 each.

9

9 WORLD-CLASS RACING COMPETITION

An all-star international cast of 221 of the world’s best Thoroughbreds, including a record 51 from overseas, were pre-entered for the 2018 Breeders’ Cup World Championships which led to 175 Championship starters over the two-day event, including 66 Grade I/Group 1 winners.

The two-day race schedule included 14 Championships races (13 Grade I) and an additional eight undercard races. Total purses and awards for the two days, including undercard races, were nearly $31 million. Purses were paid down to the eighth finish position in all Championship races.

Among other incentives, Breeders’ Cup provided an equine travel allowance of $40,000 for all international runners and $10,000 for all domestic runners stabled outside of Kentucky. In addition, a $1,500 hotel credit is given to each ownership at one of the official participant hotels and executive car service is provided for the owners of each Breeders’ Cup runner.

2018 Facts & Figures • Average starters for the 14 Championship races was 12.5 in 2018 (vs 12.2 in 2017 at Del Mar) – the highest number of average starters since the two-day format began • At pre-entry, twelve of the 14 races had full fields or were oversubscribed • Five returning Champions • Thirteen of the world’s highest-rated horses competed over the two days • A total of $2.9 million was paid in travel awards for horses shipping into Kentucky • Entry fees reached $10.0 million for the first time • Racehorse nomination fees topped $1.2 million

10 11 New in 2018

In 2018, Breeders’ Cup announced the addition of the $1 Million Breeders’ Cup Juvenile Turf Sprint to the Championship lineup. This two-year-old race joined the existing four Juvenile Championship races for the newly created Future Stars Friday. For the first time at the 2018 Breeders’ Cup World Championships, all five Juvenile races were run on Friday, November 2 and the Longines Breeders’ Cup Distaff and the Breeders’ Cup Dirt Mile moved to the Saturday schedule of races. Breeders’ Cup also increased the purse of the TwinSpires Breeders’ Cup Sprint from $1.5 million to $2 million.

These increases brought the total of purses and awards distributed over the two-day Championships to nearly $31 million.

Breeders’ Cup Challenge Series

In 2018 the Breeders’ Cup Challenge “Win and You’re In” Series presented by America’s Best Racing concluded its twelfth year with 52 Challenge winners pre-entered and 45 individual starters in the Breeders’ Cup World Championships. In total the series featured 85 Challenge Series races, of which 66 were Grade I/Group 1 rated. Geographically there were 33 international races, 19 on the East Coast, 16 in the Midwest, 13 on the and four in Canada. Winners received automatic race selection and free pre-entry and entry fees while foal nominators of Challenge winners received a $10,000 nominator award for each win, totaling $450,000 paid out in 2018. Kitten’s Joy and topped the Challenge sire list with a total of three Challenge winners each.

Five Challenge winners also went on to win their respective divisions, Accelerate (Classic), Sistercharlie (Filly & Mare Turf), Roy H, (repeat winner of Sprint), Game Winner (Juvenile) and Jaywalk (Juvenile ).

In 2019, the Breeders’ Cup Challenge Series: “Win and You’re In” presented by America’s Best Racing will consist of 86 stakes races across six continents occurring in 11 countries. Winners of a “Win and You’re In” Challenge Series race receive (i) an automatic entry into a specific Breeders’ Cup World Championship race, (ii) paid pre-entry and entry fees, (iii) all runners will receive a travel stipend of $10,000 for non-California based domestic runners and $40,000 for international runners, (iv) a hotel credit and (v) a $10,000 Nominator Award.

Please see Appendix C for a list of all 2019 Breeders’ Cup Challenge Series races.

12 13 INTEGRITY AND SAFETY

The Breeders’ Cup continues to lead by example in the conduct of Thoroughbred racing at the highest levels of safety and integrity.

In 2018 the Breeders’ Cup built upon its own established out-of-competition testing policy which provided for testing of horses winning Breeders’ Cup Challenge races and others actively targeting the Breeders’ Cup World Championships. 94% of trainers that entered runners over the two days had pre-race testing performed under the Breeders’ Cup OOC testing protocols with completely clear tests. There were 289 horses sampled from both North American and International stables with random horses tested multiple times to insure there was no perception of being ‘in the clear’.

Breeders’ Cup ‘in-house’ rules included the Prohibited Substance Rule, the Convicted Trainer Rule and the Condition of Entry which prohibited the use of anabolic steroids in the six months prior to the Championships. A multi-jurisdictional team of regulatory veterinarians and equine investigators assembled at Churchill Downs to perform daily inspection of runners and provide 24-hour security for the equine athletes. The protocols performed at Churchill Downs are in place for Santa Anita with additional enhancements.

14 The 2019 Breeders’ Cup will feature the most up-to-date medication practices, testing protocols, equine security program, veterinary exams, injury management protocols and racing surface testing:

1. Out-of-competition testing, including blood and hair testing, will be performed on all Breeders’ Cup Challenge winners and potential runners throughout the summer and fall and random follow-up testing on smaller samples will be performed within 24 hours of initial testing. 2. Breeders’ Cup Condition of Entry - As a condition of entry for any Breeders’ Cup World Championships race, no horse within six months of the event shall test positive for any anabolic steroid or any other prohibited substance described under the ARCI prohibited substance list. Any horse testing positive for anabolic steroids or other ARCI prohibited substances in a Breeders’ Cup out-of-competition test sample during the six months prior to the event will be ineligible to participate in the Breeders’ Cup World Championships. 3. Pre-race testing for TCO2 will be performed on all runners. 4. All runners must be on the grounds and checked in by equine security 72 hours before post at which point equine security surveillance will begin and will continue for 24 hours a day until the horse runs. A three-part equine security team consisting of security officers, trained Breeders’ Cup investigators and CHRB investigators will monitor all runners and keep security logs on all treatments, visitors and staff associated with the runner. 5. Comprehensive veterinary exams will be performed all week long on runners, observing horses under tack on the track and in-stall and jogging exams performed multiple times by a 14-member team of impartial Breeders’ Cup veterinarians combined with the CHRB veterinary team. These combined teams will also create and implement an injury management protocol for race days which will also bring in equine surgeons from UC Davis and Colorado State University to join an on-site emergency response team of over 20 equine veterinarians, surgeons and technicians. 6. Post-race testing will be performed on the first four finishers plus any additional runner selected by the Stewards. The post-race samples will undergo the most rigorous instrumental analysis by the Kenneth L. Maddy Equine Analytical Chemistry Laboratory at UC Davis which is a fully accredited lab by the RMTC standards. The results will be reconciled against a mass-spectral library of more than 1,500 substances, inclusive of controlled therapeutic medications, banned substances, and a recently expanded anabolic steroid panel. This screening process is more rigorous than that applied to any human sporting discipline. 7. Both the dirt and turf courses at Santa Anita will be inspected daily once training resumes with data collected and analyzed and provided to Dr. Mick Peterson for evaluation to ensure that both racing surfaces are consistent and safe. Dr. Peterson will be on-site Breeders’ Cup week to provide daily track condition reports to horsemen and the public as well as a European turf specialist providing daily readings from a ‘Going Stick’. These reports will be available online as well as distributed to the Breeders’ Cup Board, participants and media via email. 8. A police, fire and emergency response team has been assembled and will conduct monthly, then weekly, then daily meetings for coordination of event crisis responses, traffic and general law enforcement. Representatives from these local teams coordinate all activities through Santa Anita and Breeders’ Cup counterparts with all members of the team in constant communication regarding protocols and crisis management implementation.

15 BRAND ENHANCEMENT & EXPERIENCE

A Celebration of the Sport and Lifestyle of Horse Racing

The Breeders’ Cup has grown from a one-day, seven-race event to a multi-day, 14-race celebration of the sport and lifestyle of horse racing that features championship racing worth $31 million in purses and awards, world-class hospitality and events. The Breeders’ Cup Challenge Series layers our brand on top of 86 of the best races in 11 countries around the world.

The Breeders’ Cup is recognized globally as one of the world’s most prestigious, world-class championship racing events. Our brand positioning and messaging continually reinforces our core value proposition of showcasing the best races conducted under the highest standards of safety and integrity, the best jockeys, the best trainers, the best owners, the best breeders, the best events and the best fan experience.

We continue to retain a luxury, lifestyle public relations firm, Communications, to help us tell the Breeders’ Cup brand story through targeted, top-tier national media outlets. Our fan development and engagement strategy relies heavily on digital and social media to reinforce our brand messaging and increase interest in our event and sport.

In 2018 we launched a new, innovative digital docuseries called ALL IN: The Road to the Classic. The seven-episode series provided original, compelling content that brought fans behind the scenes with the main characters tied to the horses vying for a spot in the $6 Million Breeders’ Cup Classic. The series was distributed primarily through a dedicated Facebook Watch page, along with YouTube and BreedersCup.com, and the seven ALL IN episodes generated more than 1.4 million views with fans consuming more than 24,000 hours of the series in total. A targeted social advertising campaign was created to generate awareness for the series and drive fans to the Facebook Watch page to view the episodes and follow the show page. The three-week media flight generated 25.4 million impressions and 4.6 million video views of the docuseries campaign.

As a result of our marketing efforts surrounding ALL IN, Facebook recently selected Season 1 of the Breeders’ Cup ALL IN project to be featured as a “success story” on its website. This is a tremendous honor for our team and a great summary of how we promoted the content series across all of our channels and used it to generate interest and engagement with viewers. The success story can be at www.BreedersCup.com/FB.

Another new content initiative in 2018 was the development and production of Breeders’ Cup VR, the first live virtual reality broadcast of the Breeders’ Cup World Championships. Produced by Greenfish Labs, Breeders’ Cup VR took viewers at home into a virtual Churchill Downs for a never-before-seen experience. Utilizing three VR/360-degree cameras set up around the venue, the innovative production gave fans an up-close look at the horses for each Breeders’ Cup race starting from the time they assembled in the gap on the backstretch, continuing into the Paddock and then ending in the Winner’s Circle.

16 On-air host Paul Espinosa guided fans through their virtual experience and on-screen graphics showed horse information, replays and the Players’ Show. A cutting-edge “Computer Vision Zone” was added to the Paddock view and utilized machine learning and computer vision technology to automatically detect a horse’s saddle towel and display that horse’s information on the screen.

The two-day broadcast had 100,000 total views via Virtual Reality headsets as well as in 360-degree view on Facebook, Twitter, BreedersCup.com, the Breeders’ Cup Mobile App and YouTube. Overall the VR show generated 1.2 million impressions with more than 375,000 minutes consumed across all channels.

Breeders’ Cup continues to amplify its voice on social media and generate meaningful engagement with fans. During the week of the 2018 Breeders’ Cup World Championships our social media platforms reached over 13 million people and community engagement increased 17% as compared to the prior year. A focus on exclusive, behind-the-scenes video content contributed to a 33% increase in video views on Breeders’ Cup platforms throughout Championship week (not including views on the ALL IN Watch page). During the same week, platform growth increased 37% and event hashtag use increased 43%, from 92,400 to 132,000.

The social media strategy for 2018 focused heavily on distribution and cross-posting, providing exclusive content to key partners including World Horse Racing, NBC Sports, America’s Best Racing, Churchill Downs and the to ensure maximum brand exposure.

17 Television Exposure

NBC Sports continues to be the long-term home of the Breeders’ Cup World Championships (contractually committed through 2025) and has shown tremendous commitment to the sport of horse racing in the past few years. For the 2018 World Championships, NBC produced 11.5 hours of programming across NBC, NBCSN and Facebook with the final 2.5 hours on network television. Viewership of the NBC and NBCSN telecasts of the Championships on Friday and Saturday reached 4.4 million unique viewers, with NBC’s late-afternoon broadcast of the Classic drawing an average of 1.6 million viewers.

New in 2018, NBC produced a special Breeders’ Cup Live! one-hour show for Facebook, featuring the first Championship race on Saturday, and it generated 56,000 views. Breeders’ Cup week coverage started on Thursday at 7:00 p.m. ET on NBCSN with Betting the Breeders’ Cup, a 30-minute telecast focused on wagering on the upcoming Championship races. The show re-aired two additional times in advance of the live coverage of the Breeders’ Cup.

With NBC Sports at the helm in the United States, international distribution of the World Championships has been consolidated by HBA Media through continued commitment from broadcasting giants including Eurosport, who delivered the Championships to an available audience of 130 million.

A range of other networks including Eurosport Asia, Yas TV, Dubai Racing Channel (UAE), Sport Confidential, Match TV, SNTV, Equidia (France), TSN (Canada), Armed Forces Network, Wuhan TV, Shanghai TV (China), Racing.com (Australia), The Green Channel (Japan) and CNN News International also broadcast the Breeders’ Cup World Championships globally, with a total available audience of over 420 million households.

In 2018 Breeders’ Cup and NBC Sports Group announced a three-year extension of the Breeders’ Cup Challenge Series: Win and You’re In presented by America’s Best Racing. As part of the agreement, NBC Sports will continue its exclusive presentation of the series across all media platforms through the 2021 season. The 2018 series featured some of the best races from all over the world (see full schedule in Appendix C) and drew more than 8.3 million unique viewers nationally across ten broadcasts on NBC and NBCSN. Through our extended partnership with NBC, the Breeders’ Cup continues to expand its brand and fan interest in the finest Thoroughbred racing has to offer.

18 Elevated Breeders’ Cup Merchandise

In 2018 Breeders’ Cup continued its focus on aligning with elevated apparel and general merchandise brands to create an expanded range of top quality retail offerings. Luxury brands featuring the Cheval logo saw increased sales of 16% across Breeders’ Cup channels. Reputable brands such as Barbour, Waterford and Hunter led the way and assisted in creating an enhanced shopping experience both online and on-site at the World Championships.

New for 2018, Breeders’ Cup created a horsemen’s shopping experience within the Trackside Breakfast Marquee structure. The space was created to enhance participant experience and serve as a convenient point of pick up for all participant gifting as well as to create a curated shopping environment. Brand ambassadors from both Barbour and Joules were on-site to engage with participants and lend a personal shopper feel to the space.

2018 marked the second year of the reimagined brand alignment across the luxury and general fan gear side of the Breeders’ Cup retail program. Breeders’ Cup saw overall growth within the retail sector of 10% compared to the national average of 4.3%.

19 Providing a Customer and Participant Experience That Matches the Quality of Our Championship Racing Product

In 2018 the Breeders’ Cup continued its efforts to improve the participant and fan event experience. With Churchill Downs having invested over $150 million in major capital improvements since it last hosted a Breeders’ Cup, a variety of new and refurbished seating and dining areas awaited our fans. These improvements to concessions, seating options and premium dining areas offered Breeders’ Cup participants, sponsors and fans top-notch hospitality.

Breeders’ Cup transformed the Plaza, located at the main entrance of Churchill Downs, into a central activation hub offering guests a wide range of experiences including new food and beverage options, sponsor activations, photo opportunities and its annual Longines Prize for Elegance fashion contest. A section of the Winner’s Circle Suites was turned into The View, offering a unique, fun experience for those looking for rail access. Eight celebrity chefs were brought in to curate special menus in several dining areas throughout Churchill Downs to provide an elevated experience for our guests.

In order to provide seamless ingress and egress at Churchill Downs, Breeders’ Cup developed a comprehensive traffic control plan for the main roads surrounding the track, including street closures, highway message boards, traffic light control and law enforcement support. As part of the plan, Breeders’ Cup offered a complimentary Park-and-Ride program that shuttled over 15,000 patrons to and from the racetrack from two main off-site locations, as well as enhanced airport shuttle service for participants and VIP round trip shuttle services from official host hotels.

Local artists performed the National Anthem on Friday and Saturday accompanied by the Culver Academy Mounted Color Guard. Participants from Kentucky Wounded Heroes, the Louisville Sea Cadets and Western Kentucky University unfurled the American flag on the track during Saturday’s anthem performance. Guests on-track were treated to post-race performances by popular local bands offering extended entertainment after the races each day.

20 20 The infield was used to construct a high-end temporary chalet which hosted the Trackside Breakfast Marquee presented by WinStar Farm and Fasig-Tipton as well as the Breeders’ Cup Lounge on race days. The 9,000 square foot chalet provided participants a luxurious way to watch their horses work in the morning during Breeders’ Cup week and included an exclusive Participant Gifting Lounge. It was turned into a hospitality lounge on race days offering bottle service, upscale dining and a nightclub-like atmosphere featuring DJ VICE as the post-race entertainment. Catered breakfast and lunch was provided by local hot spot Wiltshire Pantry.

On Thursday before the World Championships, participants gathered at the newly renovated Speed Art Museum in downtown Louisville for the 8th Annual Taste of the World event featuring eighteen international chefs and a special performance by world-renowned artists William Joseph and Caroline Campbell.

In partnership with Equestricon, Breeders’ Cup hosted the Rood & Riddle Breeders’ Cup Post- Position Draw as part of the three-day fan convention at the brand-new, state-of-the-art Kentucky International Convention Center. The partnership allowed Breeders’ Cup to create its first-ever digital draw board featuring the Breeders’ Cup starting gate for all 14 Championship races, which was shown on the convention’s large LED screen behind the main stage. The event was attended by over 1,100 guests.

The Breeders’ Cup, Churchill Downs Racetrack, the Louisville Convention and Visitors Bureau, and organizers of the Host Committee produced the 2018 Breeders’ Cup Festival, a weeklong series of events and activations that led up to Breeders’ Cup weekend. Festival events raised funds for local, equine and national charities.

21 FINANCIAL PERFORMANCE

SELECTED FINANCIAL DATA AND MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATING RESULTS Responsible Stewardship of Nominator Provided Financial Support

Actual FYE Actual FYE Actual FYE Actual FYE Actual FYE 1/31/19 1/31/18 1/31/17 1/31/16 1/31/15 Revenues: Simulcast fees $ 13,942,655 $ 12,612,501 $ 12,599,070 $ 11,939,746 $ 11,869,179 Host track contribution 6,677,590 7,853,701 4,609,961 6,179,004 4,250,000 Entry fees 9,970,000 8,985,000 8,265,000 5,720,000 6,100,000 Nomination fees 16,715,813 15,669,308 15,610,640 15,265,536 14,620,520 Sponsorship & licensing 6,760,242 6,561,810 5,894,589 6,381,135 4,130,633 Total Revenues 54,066,300 51,682,320 46,979,260 45,485,421 40,970,332

Expenses: Championship purses 29,939,000 28,166,481 27,703,799 25,980,500 26,293,250 & awards Challenge awards 3,252,968 3,165,290 3,325,715 2,171,112 2,142,000 & administrative costs Direct event operating 362,487 573,871 734,315 354,879 835,407 expenses Marketing & enhanced 3,218,190 3,340,001 3,731,940 3,435,394 3,466,340 experience expenses Television 3,754,297 3,612,601 3,192,080 3,794,762 3,944,780 Sponsorship expenses 1,712,956 1,629,537 1,374,208 1,783,936 1,115,746 Nomination marketing 378,214 366,747 313,525 381,088 333,959 & administration Industry support 198,002 192,900 238,733 242,900 245,000 New business initiatives 174,309 2,081 1,459 45,619 196,784 Strategic Growth Initiatives 1,076,144 275,000 - - - Racing Integrity Coalition/ 373,496 151,911 204,093 449,120 - World Horse Racing Consortium Salaries & benefits 4,585,349 4,391,176 3,940,351 4,136,117 3,843,227 Business travel 472,688 559,397 486,290 445,620 466,747 General & administrative fees 1,781,717 1,558,842 1,538,680 1,484,737 1,557,028 Total Expenses 51,279,817 47,985,835 46,785,188 44,705,784 44,440,268 Net Operating Income (Loss) 2,786,484 3,696,485 194,072 779,637 (3,469,936) Investment Income 2,673,681 8,106,319 3,141,436 63,088 4,359,603 Net Income (Loss) $ 5,460,164 $ 11,802,804 $ 3,335,508 $ 842,725 $ 889,667

Additional Financial Data: Debt/Investments Summary Line of credit outstanding - - 675,406 816,454 5,455,439 permanent portion only Investment values 57,156,168 51,850,588 42,912,489 39,773,772 43,710,950 Investments position (net) 57,156,168 51,850,588 42,237,083 38,957,318 38,255,511 Other assets & liabilities 2,601,524 2,446,941 257,643 201,901 60,982 (not utilized in the permanent portion of the line of credit calculation above) Total unrestricted $ 59,757,692 $ 54,297,529 $ 42,494,726 $ 39,159,219 $ 38,316,493 net assets

22 FINANCIAL PERFORMANCE

The management of Breeders’ Cup Limited (“BCL”) has prepared the following discussion of financial results for the year ending January 31, 2019. A copy of the 2018 results (year ending January 31, 2019) along with the results for prior fiscal years 2014 to 2017 are shown on page 22 for comparison purposes. For presentation purposes, each fiscal year will be referred to by the calendar year in which the Breeders’ Cup World Championships (“Championships”) were conducted. As discussed more fully below, you will note certain material differences in some line items comparing results for years where the event has been held at Churchill Downs versus Del Mar. This discrepancy is due to negotiated differences in the respective deal structures. Given the growth of the event, the size of the crowd that Churchill Downs can accommodate and the necessity to continue to improve the hospitality provided each year, the impact in terms of financial reporting has been a shift of some expenses from the BCL only budget (as was the case at Del Mar) to the event budget, reflected in Host Track Contribution, (as was the case at Churchill Downs). The end result is a more accurate placement of expenses that are more directly related to event execution. 2018 was another strong year for BCL. On an operating basis, 2018 produced the third-highest net income from operations of $2.8 million before investment gains and the third-highest total net income of $5.4 million including gains on investments. On a pro forma basis after taking into account the effect of (i) a purse increase of $1.5 million due to the addition of the $1 million Juvenile Turf Sprint and a $500,000 purse increase for the Sprint in 2018 and (ii) expenses related to the new digital content initiative, ALL IN: The Road to the Classic, 2018 net income from operations would have surpassed 2017 net income from operations (the highest in the history of the Breeders’ Cup) by $1.4 million (growth of 33%). Ticket sales in 2018 were $15.4 million, the third-highest in event history and a 57% increase over the last time the event was held at Churchill Downs in 2011 ($9.6 million). Total handle was $162.7 million and BCL received the highest-ever revenue from simulcast wagering of $13.9 million. Most importantly, we continue to receive great support from our breeders and nominators generating $15.5 million in stallion and foal nominations (excluding horses of racing age fees) which is the highest since the 2008 market crash. As a result, BCL paid out nearly $31 million in purses and awards (including undercard purses) at the 2018 Championships. Aside from the solid financial performance in 2018, Churchill Downs lived up to its commitment to BCL and delivered a fantastic two-days of racing complimented by first-class facilities and hospitality. The 2018 Breeders’ Cup racing product was incredible with 175 starters (a new Breeders’ Cup record) which included 66 individual Grade I or Group 1 winners. Average starters per race were 12.5 in 2018 versus 12.2 in 2017; this represents the highest average number of starters since the two-day Championship format began in 2007. Even after excluding the new Juvenile Turf Sprint, the number of starters was 163 in 13 races which eclipsed the previous record of 161 starters in 13 races. Twelve races were oversubscribed at pre-entry and international participation continued to grow with 41 internationally campaigned horses including Enable, the two-time Qatar Prix de l’Arc de Triomphe winner. The foundation for the success in 2018 is built upon the strategic objectives established in 2013-14, which are as follows: 1. Creation of a true sense of competition among potential host sites and host communities through the introduction of new venues (Keeneland and Del Mar) resulting in improved service delivery, capital investment in facilities, community support and involvement and financial return.

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2. Development of a long-term television and media partnership with NBC, now the self- described television home of horse racing, and expansion of the brand across the Breeders’ Cup Challenge Series which builds a storytelling and sponsorship sales platform for the Championships throughout the country and the world in the summer and fall. 3. Construction of consistent brand messaging, public relations and marketing programs in support of the Challenge and the Championships through expanded television coverage, earned media, and a creative and coherent social and digital media strategy. 4. Continual enhancement and upgrade of the participant experience through world class entertainment events, improved food and beverage options and concierge level customer service, making the Breeders’ Cup a “can’t miss” event on the international racing calendar. 5. Setting the highest standard of integrity, security and safety in connection with the Championships and continuing to lead US racing by example in developing and implementing best management practices in pre- and post-race drug testing, out-of- competition testing, on-site security and video surveillance, racing surface inspections, pre-race veterinary exams and integration and cooperation with regulatory authorities. 6. Active management of expenses while seeking growth in core revenue areas such as ticket sales, wagering and sponsorship and continued delivery of experiential quality and the quality of the racing product. With the foregoing objectives in mind, we remain highly focused on conducting championship races of the highest caliber featuring an international cast of the best trainers, owners, breeders and most importantly, horses.

REVENUES Total revenues for 2018, excluding gains on investments, were $54.1 million as compared to $51.7 million in 2017. Critical elements that contributed to the continued overall growth of revenue of $2.4 million are: (i) growth in simulcast wagering revenue due to successful host fee negotiations and positive margins available under Kentucky law; (ii) sustained growth in licensing revenues; (iii) an increase in entry fees due to large field size, the new Juvenile Turf Sprint, and $500,000 purse increase to the Sprint; and (iv) growth in nomination fees particularly through increases in international stallion nominations.

Simulcast Revenues Simulcast revenues in 2018 were a new Breeders’ Cup record of $13.9 million. Total all-source handle for the Championships was $162.7 million, down from $170.8 million in 2017.

While two-day total all-source handle was down $8.1 million from 2017, the new Future Stars Friday program was a success. Friday’s total commingled-pool handle of $52.2 million approached Del Mar’s all-time Friday high of $52.3 million (which was $3.3 million more than the average Friday handle for the past five years and surpassed Keeneland’s 2015 Friday by $7.3 million).

Saturday’s -pool handle decline of $8.6 million compared to 2017 at Del Mar is attributable to two main causes: (i) relatively poor on-track betting and (ii) sharply reduced off-track betting on the three undercard races. Of the $8.6 million decline in total handle, $3.3 million was attributable to on-track wagering (discussed below in the Host Track Contribution section). The remaining $5.3 million was lost in off-track betting markets. Of this $5.3 million,

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$4.7 million (89%) is the result of reduced betting on the three undercard races ($8 million in 2018 compared to $12.7 million in 2017). By contrast, the $84.7 million of off-track handle on the nine Saturday Breeders’ Cup races is on par with the record $85.2 million of off-track handle in 2017 on the nine Saturday Breeders’ Cup races. The undercard variance was directly related to poor field size. The 2018 Saturday undercard averaged seven starters per race which was four fewer starters per race than the eleven horse average in 2017 at Del Mar. Notwithstanding the foregoing, even though off-track handle had a negative variance of $5.3 million, due to successful host fee negotiations with ADWs and positive margins available under Kentucky law, common pool off-track wagering revenue over the two-days was $13.5 million, which is the highest in the history of BCL.

In addition to common-pool off-track wagering, BCL generated $429,000 in revenue from separate pool wagering and licensing agreements for aggregate simulcast wagering revenue of $13.9 million, an increase of $1.3 million from 2017.

Host Track Contribution Host Track Contribution is tied to the net results from shared operating revenues and expenses between the host track and Breeders’ Cup included in a contractual budget called the “Event Budget.” The main sources of revenue within the Event Budget are on-track wagering, ticketing, and attendance related revenues such as parking and concessions (excluding food and beverages that are already included in the ticket price). Expenses included in the Event Budget include labor costs (host track staffing and seasonal event staffing), rental fees (tote equipment, credit card terminals, production costs, and furniture), operating supplies (ticketing brochures, racing programs, and track apparel), racing and venue related expenses (veterinary panel, quarantine build-out, racing panel, and equine security), signage, participant hospitality, temporary facilities, event marketing and Breeders’ Cup Betting Challenge (“BCBC”) expenses.

The Host Track Contribution in 2018 was $6.7 million as compared to $7.9 million in 2017. Total Event Budget gross revenue was $20.8 million in 2018 and $22.0 million in 2017. The primary drivers of this line item are ticket sales revenues which totaled $15.4 million in 2018, as compared to $15.5 million in 2017. Even though Churchill Downs can accommodate larger crowds, ticket sales were lower than projected due to: (i) a highly ranked University of Kentucky football team playing at home against the University of Georgia (number four at the time) at 3:30 PM on Championship Saturday; and (ii) lower than anticipated support from the local community as evidenced by low walk-up attendance.

Most notably, on-track wagering in 2018 was $19.9 million as compared to a record $25.2 million in 2017 resulting in a negative variance of $5.3 million in total on-track handle and $1.1 million of net on-track wagering revenue. While the negative variance of off-track handle was a result of three Saturday undercard races, $2.4 million (72%) of the $3.3 million on-track handle deficit on Saturday was attributable to the nine Saturday Breeders’ Cup races. Total per capita wagering on Saturday at Churchill Downs was $179.21 compared to $421.86 at Del Mar in 2017 and $186.29 at Santa Anita in 2016. BCBC on-track contest participation was 202 players compared to 296 at Del Mar (total participation was 391 in 2018 compared to 439 in 2017) reflecting lower interest among tournament players in Churchill Downs as a destination event. On the positive side, BCBC players wagered an average of $12,500 in the BCBC alone in 2018.

Event Budget expenses in 2018 were $12.9 million as compared to $12.4 million in 2017.

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Additional expenses were necessary in order to accommodate a larger crowd of 112,672 and provide enhanced hospitality, particularly in the food and beverage area, that exceeded fan expectations. Among the increases in expenses were: (i) $290,000 for an improved food and beverage experience, including the celebrity chef component and the Director’s Room activation; and (ii) $450,000 in additional transportation costs as a result of being required to pay local law enforcement fees of $300,000 (which historically have not been required), additional public transportation needs due to a new park-and-ride program which did not occur in 2011 or 2010 at Churchill Downs, breakfast marquee transportation logistics, and unanticipated transportation price increases reflecting local market supply challenges.

Additionally, BCL successfully negotiated moving BCL Budget expenses to the Event Budget in 2018 (with Churchill Downs sharing roughly 18% of such expenses), including $400,000 of Enhanced Experience expenses previously borne solely by BCL.

Entry Fees Entry fees totaled $10.0 million in 2018 versus $9.0 million 2017. Increased entry fees are the result of: (i) increased field sizes totaling 175 starters in 2018 from 159 starters in 2017 and (ii) increased entries fees in the Sprint from $45,000 to $60,000 as a result of the $500,000 purse increase.

NOMINATIONS Domestic Stallion Nominations Domestic stallion nomination fees in 2018 yielded $8.5 million as compared to $8.4 million in 2017. Advertised stud fees in 2018 remained fairly consistent with stud fees in 2017, led by eight stallions with advertised fees of $100,000 or more and 23 stallions whose fees combined with live foal assessments paid $100,000 or more in fees.

International Stallion Nominations International stallion nomination fees in 2018 yielded $2.9 million in fees, a positive variance of $544,000 from 2017, including four stallions standing in Europe that stand for more than US$100,000. A portion of the positive variance is attributable to new stallions nominating as a result of the Juvenile Turf Sprint. The economy in South America, in particular Argentina, continues to be difficult and remains an obstacle for generating significant stallion nomination fees from that region. Australian nominations have also declined due to distance and geography, but BCL still receives support from key nominators in those regions.

Foal Nomination Fees Foal nomination fees remained the same in 2018 from 2017 at $4.2 million. This corresponds to the Club’s continued projection of flat foal crops year-to-year.

Horses of Racing Age Nominations Horses of Racing Age nominations totaled $1.2 million in 2018 as compared to $782,000 in 2017. Despite this increase, management continues to believe that there will be slight declines in Horse of Racing Age nominations from year-to-year due to increases in eligible foals under the adoption of the Breeders’ Cup International Stallion Program. With many more international

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runners becoming automatically eligible, the majority of late nominations will be comprised of those foals sired by North American stallions and not nominated to the Breeders’ Cup as foals.

Sponsorship and Licensing Sponsorship and licensing (merchandise, television and radio, and other intellectual property rights) resulted in combined revenue of $6.8 million in 2018, a positive variance of $198,000 from 2017. While licensing revenue increased, sponsorship revenue was unchanged in 2018 as compared to 2017. While a $300,000 partner declined to renew in 2018 that loss was offset by negotiated increases in two major beverage sponsorships.

BCL’s major partnerships in 2018 included Longines, TwinSpires, Americas Best Racing, John Deere, and six Thoroughbred farms: Calumet, Claiborne, Coolmore, Lane’s End, Three Chimneys and WinStar.

Licensing revenue in 2018 was $1.3 million which was a positive variance of $189,000 from 2017. Licensing revenue continues to grow due to increased merchandise sales through our partner Upper Right Marketing, continued growth in royalties relating to online qualifiers to the Breeders’ Cup Betting Challenge via Horseplayers.com and royalties attributable to experiential ticket packages via Quint Events.

EXPENSES CHAMPIONSHIP PURSES AND AWARDS

Championship Purses 2018 Championship gross purse expenses were $28 million and net of travel reimbursements (8% of purse value) totaled $25.8 million which reflects a negative variance of $1.4 million from 2017. The variance reflects the creation of the $1 million Juvenile Turf Sprint and a $500,000 purse increase in the Sprint. Since 2016, Breeders’ Cup has increased purses by a combined total of $3.5 million or roughly 14%.

Championship Nominator Awards Horses that finish first through fourth in any Breeders’ Cup World Championship race earn a foal nominator award for the breeder nominating the horse. A stallion nominator award is paid to the person who nominated the sire. Stallion nominator awards are no longer paid to European Breeders’ Fund nominated stallions who were not separately nominated to the Breeders’ Cup. Championship nominator awards are based on a percentage of nomination revenue so there was no mid-year adjustment needed in this category with respect to increases in entry fees. Championship nominator award expenses totaled $1.2 million in 2018, which is a positive variance of $151,000 from 2017. The positive variance is attributable to higher international participation and a higher proportion of international participants finishing first through fourth.

Championship Travel Awards Championship travel awards are paid to international and domestic shippers who stable outside the host track state. A travel allowance of $10,000 for North American runners and $40,000 for international runners is paid when the respective horse starts in the Breeders’ Cup World

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Championships. 2018 travel awards were $2.9 million, an increase of $500,000, corresponding to an increase to 175 starters in 2018 from 159 in 2017.

Championship Owner Rewards Championship owner rewards are part of a new program providing each owner of a Championship runner a $1,500 hotel credit towards an official Breeders’ Cup designated hotel (Omni in 2018) and complimentary VIP car service to and from the airport. 2018 expenses totaled $150,000 which is a negative variance of $44,000 from 2017 despite many owners living in close proximity to Churchill Downs as compared to Del Mar. Management was pleased to see the increase in this expense because such increase illustrates more owners utilizing this program.

CHALLENGE AWARDS AND ADMINISTRATIVE COSTS

Breeders’ Cup Challenge Series Entry Fees In 2018, BCL had 85 Breeders’ Cup Challenge Series “Win & You’re In” races, including 33 international, 19 East Coast, 16 Midwest, 13 West Coast and four Canadian races. 66 Grade I/ Group 1 races were Challenge Series races. Any nominated horse that wins a Challenge Series race receives: (a) an automatic starting position in the corresponding Championship race; (b) Pre-entry and Entry Fees paid; and (c) a nominator award of $10,000 to the person nominating the foal or horse of racing age.

2018 Challenge Series entry fee expenses were $2.8 million. Expenses increased by $85,000 from 2017 as 45 individual horses winning a combined 49 Challenge Series races competed at Churchill Downs which was the same as 2017 when 45 individual horses won a combined 49 Challenge Series. A portion of the increase in expenses is related to the entry fee increase on the Sprint as a result of the purse increase. Management views the consistent participation in the Challenge Series as a reflection on the effectiveness of the program and of the desire of horsemen to participate in the Win and You’re In program.

Challenge Series Nominator Awards Challenge Series nominator awards have remained essentially flat since 2014 and were $437,000 in 2018.

Challenge Fulfillment Expenses Challenge fulfillment expenses include horse blankets, caps, flowers, gifts, trophies and other similar items. 2018 expenses totaled $66,000 as compared to $30,000 in 2017 reflecting increased focus on growing awareness and participation in the Challenge Series.

Direct Event Operating Expenses Direct event operating expenses are expenses not contained in the Event Budget but which pertain to horsemen hospitality and gifting, horsemen materials, industry VIP ticketing, and media relations. Examples include the hospitality lounge at the Omni in 2018. The 2018 expenses were $362,000, down from $573,000 in 2017 as result of: (i) reallocating certain operating expenses from the BCL Budget to the Event Budget and (ii) limiting the number of hotel hospitality lounges which were not necessary in 2018 because the majority of the horse owners stayed at the Omni. Overall, direct operating expenses within the BCL Budget and Event Budget

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remained consistent with expenses in 2017. We continue to increase our investment in the horsemen hospitality program as we seek to improve the participant experience.

MARKETING AND ENHANCED EXPERIENCE EXPENSES

Enhanced Experience Events Enhanced experience expenses in 2018 were $1.0 million with a positive variance of $203,000 from 2017. While enhanced experiences expenses were less in the BCL Budget from expenses in 2017, the actual expenses attributable to enhanced experiences increased by $565,000 from 2017 as $1.1 million of those expenses (as compared to $400,000 in 2017) were reallocated to the Event Budget and Sponsorship fulfillment within the BCL Budget. In 2018 the Breakfast Marquee was designed and repurposed as a public ticketed seating area during the two- day Championships called the “Breeders’ Cup Lounge.” As such, build-out expenses for the breakfast marquee were included within the Event Budget.

Simulcast Marketing and Betting Challenge In 2018 simulcast marketing expenses were $489,000, reflecting increased expenses of $74,000 from 2017. These expenses are for promoting wagering on the Championships and include our enhanced Player’s Show production (simulcast program specific to wagering analysis and data), BCBC and Horseplayers.com marketing, and national player marketing programs designed to stimulate wagering on the Breeders’ Cup.

Event and Brand Marketing Event and brand marketing expense were $1.7 million in 2018, an increase of $8,000 from 2017. These expenses include ticket sales marketing, public relations and other event related communications in and around the Louisville community (the last time the Championships were located at Churchill Downs was in 2011). Other expenditures included Challenge Series marketing and promotions as well as ongoing social media, website and mobile app maintenance and enhancements.

Television 2018 television expenses totaled $3.8 million, an increase of $142,000 from 2017 due to a contractual three percent production expense paid to NBC. BCL’s agreement with NBC promotes Thoroughbred racing via the Challenge Series on television beginning at the conclusion of the Triple Crown and continuing through the World Championships. NBC now has Thoroughbred racing programming every month of the year with the exception of December and February. This important industry endeavor continues to promote Thoroughbred racing to a broad audience.

Sponsorship Expenses Sponsorship fulfillment was $1.7 million in 2018, equating to 32% of sponsorship revenue, as compared to $1.6 million and 30% in 2017, respectively. Significant sponsorship fulfillment expenses in 2018 included the purchasing of tickets for Trophy Lounge which did not occur in 2017 due to the location of Trophy Lounge in the Breakfast Marquee in 2017.

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Nominations Marketing and Administration 2018 nominations marketing and administration expenses were $378,000, which is an increase of $11,000 from 2017. Increased expenses were the result of international consultant travel and nominations administrative supplies related to the Lexington office relocation.

Industry Support 2018 industry support totaled $198,000 comprising $150,000 in dues to the National Thoroughbred Racing Association (“NTRA”) and $48,000 to the Thoroughbred Aftercare Alliance (the “TAA”). In 2017 industry support was $193,000. The slight increase in industry support was attributable to an increased contribution to the TAA due to the addition of the Juvenile Turf Sprint and Sprint purse increase since the amount of the TAA contribution is tied to purses.

New Business Initiatives New business initiatives expenditures were $174,000 in 2018 and included a live virtual reality / 360-degree production, called Breeders’ Cup VR, featuring three VR cameras placed in the backstretch, paddock and Winner’s Circle at Churchill Downs. Breeders’ Cup VR provided fans the opportunity to virtually experience what it’s like to be at Churchill Downs for the Breeders’ Cup and deliver never-before-seen views of the jockeys, horses and venue. Additionally, expenses were attributable to a sizzle reel production with respect to ALL IN: The Road to the Classic.

Strategic Growth Initiatives Strategic growth initiatives in 2018 were $1.1 million. This is a new expense and is related to ALL IN: The Road to the Classic (“ALL IN”). In short, the objective was to create additional content in new formats and make it available for consumption on emerging platforms for consumers, particularly in the month leading up to the Championships once the Challenge Series has concluded. The goal was, and remains, to address and expand “awareness” of the Breeders’ Cup brand and overall “consumption” of Breeders’ Cup content. These episodes were produced by Bobby Flay’s Rock Shrimp Productions and were featured on Facebook Watch. ALL IN generated 1.4 million views and viewers consumed 24,500 hours of the series resulting in an average of 1 minute per view. As a result of our marketing efforts surrounding ALL IN, Facebook recently selected Season 1 of the Breeders’ Cup ALL IN project to be featured as a “success story” on its website. Management has placed emphasis on increasing the number of views and average watch time in 2019 through additional coverage with NBC and our other international broadcast partners.

Racing Integrity Coalition/World Horse Racing Consortium Racing and Integrity expenses directed towards proposed federal legislation were $61,000 in 2018 which reflects $90,000 in savings from 2017 due to a reduction in pledged financial support from BCL.

Total expenses relating to the Racing Integrity Coalition and World Horse Racing Consortium were $373,000. The World Horse Racing Consortium is a global marketing/sponsorship joint venture among BCL, Royal Ascot, Goodwood, and Royal Randwick with the potential to also include Dubai World Cup, Qatar Prix de l’Arc de Triomphe, and JRA. The intent of the

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World Horse Racing Consortium is to establish a year-long global platform to cross-promote the top horse races in the world. The individual racing entities pool intellectual property rights seeking to generate sponsorships for the World Horse Racing Consortium which revenue would be proportionately distributed to such racing entities. BCL potentially benefits through generating additional sponsorship revenue from foreign businesses that desire to expand their sponsorship footprint. While the World Horse Racing Consortium investment did not produce a financial return in 2018, projected viewership metrics were achieved and sponsorship revenue is projected in 2019 and beyond.

Salary and Benefits 2018 salary and benefits were $4.6 million, an increase of $194,000 from 2017. The increase resulted from: (i) severance payments relating to employment changes in late fiscal year 2018; (ii) mid-year hires in 2017 receiving full annual salaries in 2018; (iii) the creation of a junior sponsorship sales position to help drive sponsorship revenue; and (iv) a three percent overall cost-of-living increase.

Business Travel 2018 business travel was $472,000 reflecting savings of $87,000 due to the Championships being held in Louisville versus California. Management continues to focus on minimizing travel costs through detailed planning and monitoring of compliance with travel policies.

General and Administrative Expenses 2018 general and administrative expenses were $1.8 million, an increase of $213,000. The additional expenses relate to one-time moving expenses which included the purchase of additional office supplies, IT configurations, storage facilities and the purchase of office furniture associated with the new Lexington office. In December of 2018, the New York office was relocated to shared space with The which projects to save an additional $100,000 in annual rent in 2019 and beyond which should result in lower general and administrative expenses. 2018 board related expenses were $30,000 with a negative variance of $9,000. Increased board expenses related to costs incurred with respect to a member election and two Board meetings occurring outside of Kentucky in 2018 instead of one Board meeting in 2017.

31 APPENDIX

A. BREEDERS’ CUP DIRECTORS & MEMBERS*

Breeders’ Cup Limited Directors Fred W. Hertrich III (Chairman) Anthony Manganaro Barbara Banke Clem Murphy Antony R. Beck Gavin Murphy William S. Farish, Jr. Dan Pride Craig Fravel Mike Rogers Walker Hancock II Bret Jones Elliott Walden

Breeders’ Cup Limited Members Barbara Banke Pope McLean, Jr. Antony Beck Clem Murphy Gatewood Bell Gavin Murphy Boyd Browning Maria Niarchos-Gouaze Doug Cauthen David O’Farrell Case Clay Bill Oppenheim Alan Cooper Garrett O’Rourke Everett Dobson James A. Philpott, Jr. W.S. Farish Daisy Phipps Pulito William S. Farish, Jr. Mike Pons H. Greg Goodman Dan Pride S. Walker Hancock, Jr. Dr. J. David Richardson Carlos Heller Mike Rogers Fred W. Hertrich, III Jaime Roth Dr. Andreas Jacobs Tom Ryan Brereton C. Jones Bernie Sams Bret Jones Alex Solis II Jak Knelman Oliver Tait Solomon Kumin W. Elliott Walden W. Bruce Lunsford Barry Weisbord M.V. Magnier Aron Wellman Anthony Manganaro

Honorary Members and Past Presidents James E. (Ted) Bassett III D.G. Van Clief Jr. Greg Avioli

*as of FY ending 1/31/19

32 APPENDIX

B. BREEDERS’ CUP STAFF

Executive Office Finance/Billing Craig Fravel Michael Newman President & CEO VP, Treasurer/Controller [email protected] [email protected] Dora Delgado Tim Schram Executive Vice President, VP, Finance & Human Resources Racing & Nominations [email protected] [email protected] Georganna Lilly Drew Fleming Assistant Controller Executive Vice President & [email protected] Chief Operating Officer Kelly Winters-Estes [email protected] Manager, Accounts Payable/Receivable Sarah Clark [email protected] Executive Assistant & Member Services [email protected] Corporate Partnerships, Licensing & Merchandise Racing & Nominations Christopher McNamara Josh Christian SVP, Corporate Partnerships VP, Racing & Nominations [email protected] [email protected] Heather Higgins Erin McLaughlin VP, Corporate Partnerships Sr. Manager, Racing Services [email protected] [email protected] Peggy Gdovka Courtney Reid Sr. Director, Corporate Partnerships Sr. Manager, Racing Operations [email protected] [email protected] Brian O’Leary Barbara Webster Sr. Manager, Corporate Partnerships Sr. Nominations Manager [email protected] [email protected] Edward Ernst Manager, Corporate Partnerships Sales [email protected] Information Technology Todd Sparks Meghan Wernimont VP, Information Technology Coordinator, Corporate Partnerships [email protected] [email protected]

33 APPENDIX

TV, Entertainment & Marketing Public Relations Justin McDonald Jim Gluckson SVP, Marketing Media Relations [email protected] [email protected] Peter Rotondo VP, Media & Entertainment Ticketing & Horsemen Relations [email protected] Brandy Stoeckinger Stefanie Palmieri VP, Ticketing & Venue Operations VP, Events [email protected] [email protected] Stephanie Booth Amy Lasky Sr. Manager, Director, Event Operations Ticketing & Customer Service [email protected] [email protected] Megan Browning Marketing Manager [email protected] Gemma Parenti Art Director [email protected]

34 APPENDIX

C. 2019 BREEDERS’ CUP CHALLENGE SERIES SCHEDULE - NORTH AMERICA

Race Date* Race Name Track City Breeders’ Cup Division 5/27/19 Shoemaker Mile Arcadia, California Mile 6/8/19 Jaipur Invitational Elmont, New York Turf Sprint 6/8/19 Belmont Park Elmont, New York Longines Distaff 6/8/19 Metropolitan Handicap Belmont Park Elmont, New York Big Ass Fans Dirt Mile 6/15/19 Stephen Foster Stakes Churchill Downs Louisville, Kentucky Classic 6/15/19 Fleur de Lis Stakes Churchill Downs Louisville, Kentucky Longines Distaff 6/29/19 Handicap Gulfstream Park Hallandale Beach, Florida Filly & Mare Sprint 7/6/19 John A. Nerud Belmont Park Elmont, New York Sprint 7/20/19 TVG.com Haskell Invitational Monmouth Park Oceanport, New Jersey Classic 7/27/19 Bing Crosby Stakes Del Mar Thoroughbred Club Del Mar, California Sprint 7/28/19 Clement L. Hirsch Stakes Del Mar Thoroughbred Club Del Mar, California Longines Distaff 8/3/19 Whitney Saratoga Springs, New York Classic 8/10/19 Beverly D. Stakes Arlington Heights, Illinois Maker’s Mark Filly & Mare Turf 8/10/19 Arlington Million Arlington Park Arlington Heights, Illinois Longines Turf 8/10/19 Handicap Saratoga Race Course Saratoga Springs, New York Mile 8/17/19 TVG Pacific Classic Del Mar Thoroughbred Club Del Mar, California Classic 8/17/19 Del Mar Handicap presented by Del Mar Thoroughbred Club Del Mar, California Longines Turf The 8/24/19 Pat O’Brien Stakes Del Mar Thoroughbred Club Del Mar, California Big Ass Fans Dirt Mile 8/24/19 Personal Ensign Saratoga Race Course Saratoga Springs, New York Longines Distaff 8/24/19 Ketel One Ballerina Saratoga Race Course Saratoga Springs, New York Filly & Mare Sprint 8/24/19 Saratoga Race Course Saratoga Springs, New York Longines Turf 9/7/19 Jockey Club Derby Belmont Park Elmont, New York Longines Turf 9/7/19 Kentucky Downs Turf Sprint Kentucky Downs Franklin, Kentucky Turf Sprint 9/14/19 Iroquois Stakes Churchill Downs Louisville, Kentucky Juvenile 9/14/19 Pocahontas Stakes Churchill Downs Louisville, Kentucky Juvenile Fillies 9/14/19 Ricoh Woodbine Mile , Canada Mile 9/15/19 Natalma Stakes Woodbine Racetrack Toronto, Canada Juvenile Fillies Turf 9/15/19 Summer Stakes Woodbine Racetrack Toronto, Canada Juvenile Turf 9/21/19 Cotillion Stakes Parx Racing Bensalem, Pennsylvania Longines Distaff 9/27/19 Stakes Santa Anita Park Arcadia, California Juvenile 9/27/19 Chandelier Stakes Santa Anita Park Arcadia, California Juvenile Fillies 9/28/19 Belmont Park Elmont, New York Classic 9/28/19 The Vosburgh Belmont Park Elmont, New York Sprint 9/28/19 Santa Anita Park Arcadia, California Classic 9/28/19 Rodeo Drive Stakes Santa Anita Park Arcadia, California Maker’s Mark Filly & Mare Turf 9/29/19 Stakes Santa Anita Park Arcadia, California Longines Distaff 10/4/19 Darley Alcibiades Stakes Keeneland Lexington, Kentucky Juvenile Fillies 10/4/19 Stoll Keenon Ogden Phoenix Stakes Keeneland Lexington, Kentucky Sprint 10/5/19 The Champagne Belmont Park Elmont, New York Juvenile 10/5/19 Claiborne Breeders’ Futurity Keeneland Lexington, Kentucky Juvenile 10/5/19 First Lady Stakes Keeneland Lexington, Kentucky Maker’s Mark Filly & Mare Turf 10/5/19 Shadwell Turf Mile Stakes Keeneland Lexington, Kentucky Mile 10/5/19 Thoroughbred Club of America Stakes Keeneland Lexington, Kentucky Filly & Mare Sprint 10/5/19 Santa Anita Sprint Championship Santa Anita Park Arcadia, California Sprint 10/6/19 Speakeasy Stakes Santa Anita Park Arcadia, California Juvenile Turf Sprint 10/6/19 The Flower Bowl Belmont Park Elmont, New York Maker’s Mark Filly & Mare Turf 10/6/19 The Frizette Belmont Park Elmont, New York Juvenile Fillies 10/6/19 The Futurity Belmont Park Elmont, New York Juvenile Turf Sprint 10/6/19 Dixiana Bourbon Stakes Keeneland Lexington, Kentucky Juvenile Turf 10/6/19 Indian Summer Stakes Keeneland Lexington, Kentucky Juvenile Turf Sprint 10/6/19 Juddmonte Spinster Stakes Keeneland Lexington, Kentucky Longines Distaff 10/9/19 JPMorgan Chase Jessamine Stakes Keeneland Lexington, Kentucky Juvenile Fillies Turf 35 Dates are tentative and subject to change. APPENDIX

2019 BREEDERS’ CUP CHALLENGE SERIES SCHEDULE - INTERNATIONAL

Race Date* Race Name Track City Breeders’ Cup Division 1/5/19 Cartier Paddock Stakes Kenilworth Racecourse Cape Town, South Africa Maker’s Mark Filly & Mare Turf 1/5/19 L’Ormarins Queen’s Plate Kenilworth Racecourse Cape Town, South Africa Mile 2/17/19 Tokyo, Japan Mile 5/1/19 Gran Premio Criadores Hipodromo Argentino de Palermo Buenos Aires, Argentina Longines Distaff 5/26/19 Gran Premio Club Hipico Falabella Club Hipico de Santiago Santiago, Chile Mile 6/2/19 Tokyo Racecourse Tokyo, Japan Mile 6/9/19 Grande Premio Brasil Hipodromo da Gavea Rio de Janeiro, Brazil Longines Turf 6/18/19 Queen Anne Stakes Ascot, Mile 6/19/19 Prince of Wales’s Stakes Ascot Racecourse Ascot, England Longines Turf 6/20/19 Norfolk Stakes Ascot Racecourse Ascot, England Juvenile Turf Sprint 6/22/19 Stakes Ascot Racecourse Lima, Peru Maker’s Mark Filly & Mare Turf 6/23/19 Osaka, Japan Longines Turf 6/30/19 Gran Premio Pamplona Hipodromo de Monterrico Ascot, England Longines Turf 7/27/19 King George VI & Queen Elizabeth Stakes Ascot Racecourse Ascot, England Longines Turf sponsored by QIPCO 7/31/19 Qatar Stakes Chichester, England Mile 8/11/19 Prix du Haras de Fresnay-Le Buffard Deauville Racecourse Deauville, France Mile Jacques Le Marois 8/18/19 Darley Prix Morny Deauville Racecourse Deauville, France Juvenile Turf Sprint 8/21/19 Juddmonte York, England Classic 8/22/19 York Racecourse York, England Maker’s Mark Filly & Mare Turf 8/23/19 Coolmore York Racecourse York, England Turf Sprint 9/14/19 Coolmore Fastnet Rock Dublin, Ireland Maker’s Mark Filly & Mare Turf 9/14/19 KPMG Champions Juvenile Stakes Leopardstown Racecourse Dublin, Ireland Juvenile Turf 9/14/19 QIPCO Irish Leopardstown Racecourse Dublin, Ireland Longines Turf 9/15/19 Derrinstown Stud Curragh Racecourse Kildare, Ireland Turf Sprint 9/15/19 Curragh Racecourse Kildare, Ireland Juvenile Fillies Turf 9/27/19 Shadwell Newmarket Racecourse Newmarket, England Juvenile Fillies Turf 9/28/19 Juddmonte Newmarket Racecourse Newmarket, England Juvenile Turf 9/29/19 Tokyo, Japan Turf Sprint 10/6/19 Prix de l’Opera Longines ParisLongchamp Paris, France Maker’s Mark Filly & Mare Turf 10/6/19 Prix de l’Abbaye de Longchamp Longines ParisLongchamp Paris, France Turf Sprint 10/6/19 Qatar Prix de l’Arc de Triomphe ParisLongchamp Paris, France Longines Turf 10/6/19 Qatar Prix Jean-Luc Lagardere ParisLongchamp Paris, France Juvenile Turf 10/6/19 Qatar Prix Marcel Boussac ParisLongchamp Paris, France Juvenile Fillies Turf 12/15/19 Gran Premio International San Isidro Racecourse Buenos Aires, Argentina Longines Turf Carlos Pellegrini Stakes

36 Dates are tentative and subject to change. APPENDIX

D. 2019 BREEDERS’ CUP CHALLENGE SERIES TELEVISION SCHEDULE

Date Network Time Event Track Breeders’ Cup Division

Saturday, 2:30pm - 4:00pm Ogden Phipps H.** Belmont Park Big Ass Fans Dirt Mile June 8 4:00pm - 7:00pm Jaipur Invitational** Turf Sprint Runhappy Metropolitan Mile** Longines Distaff

Saturday, 8:30pm - 10:00pm Stephen Foster S. Churchill Downs Classic June 15 Fleur De Lis S. Longines Distaff

Royal Ascot** Tuesday, 8:30am - 1:00pm Queen Anne Stakes Ascot Racecourse Mile June 18 Wednesday, 8:30am - 1:00pm Prince of Wales’s Stakes Ascot Racecourse Longines Turf June 19 Thursday, 8:30am - 1:00pm Norfolk Stakes Ascot Racecourse Juvenile Turf Sprint June 20 Saturday, 9:00am - 1:00pm Diamond Jubilee Stakes Ascot Racecourse Turf Sprint June 22

Saturday, 4:00pm - 6:00pm Belmont Oaks* Belmont Park Maker’s Mark F/M Turf July 6 Belmont Derby* Longines Turf John A. Nerud Sprint

Saturday, 5:00pm - 6:00pm TVG.com Haskell Inv. Monmouth Park Classic July 20

Wednesday, 9:00am - 11:00am Qatar ** Goodwood Racecourse Mile July 31

Saturday, 5:00pm - 6:00pm Whitney H. Saratoga Race Course Classic August 3 Longines Test S.* F/M Sprint

Saturday, 5:00pm - 6:00pm Fourstardave H. Saratoga Race Course Mile August 10

Saturday, 9:00am - 11:00am Juddmonte International S.** York Racecourse Classic August 21 Saturday, 4:30pm - 6:00pm Jockey Club Derby Belmont Park Longines Turf September 7 Jockey Club Oaks* Maker’s Mark F/M Turf

Saturday, 5:00-6:00pm Cotillion S. Parx Longines Distaff September 21 Pennsylvania Derby* Classic

Saturday, 6:30pm - 9:00pm Awesome Again Santa Anita Classic September 28 Rodeo Drive Maker’s Mark F/M Turf Highlights from Belmont & Santa Anita

Saturday, 5:30pm - 6:30pm Claiborne Breeders’ Futurity Keeneland Race Course Juvenile October 5 Shadwell Turf Mile Mile

Sunday, 4:30pm - 6:00pm Dixiana Bourbon S. Keeneland Race Course Juvenile Turf October 6 Juddmonte Spinster S. Longines Distaff ARC Day Recap ParisLongchamp Various

*Denotes non-Challenge race ** Denotes not produced by Breeders’ Cup Limited Dates are tentative and subject to change. 37 215 West Main Street • Suite 250 • Lexington, KY 40507 40 East 52nd Street • 15th Floor • New York, NY 10022 www.breederscup.com

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