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2017 ANNUAL REPORT

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Message from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2017 Accomplishments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Championship Racing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Del Mar Delivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Revenue Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

World-Class Racing Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102017 Facts & Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10New for 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Breeders’ Cup Challenge Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Relentless Focus on Integrity and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Brand Enhancement & Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16A Celebration of the Sport and Lifestyle of Horse Racing . . . . . . . . . . . . . . . . . 16Television Exposure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Cheval: A Collection by Breeders’ Cup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Providing A Customer and Participant Experience that Matches . . . . . . . . . . . . 20 the Quality of our Championship Racing Product

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

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32A . Breeders’ Cup Directors & Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32B . Breeders’ Cup Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33C . 2018 Breeders’ Cup North American Challenge Series Schedule . . . . . . . . . . 35D . 2018 Breeders’ Cup International Challenge Series Schedule . . . . . . . . . . . . . 36E . 2018 Breeders’ Cup Challenge Series Television Schedule . . . . . . . . . . . . . . . 37

TABLE OF CONTENTS

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MESSAGE FROM THE CEOOn behalf of our Members and Directors, I am very proud to share the highlights and accomplishments of 2017 – a record-setting year for the Breeders’ Cup . The 34th edition of the Breeders’ Cup World Championships was held for the first time at the beautiful and picturesque Del Mar racetrack, Where the Turf Meets the Surf, and by all accounts was a resounding success . Most, if not all, of our key performance indicators (KPIs) showed strong growth year-over-year, as outlined further in this report, and Del Mar and other surrounding San Diego communities welcomed our participants and fans with open arms and picture perfect weather .

A festive and fun crowd was on hand to witness the history-making performances of some of the highest rated fields ever assembled in Breeders’ Cup history . Led by 2016 Breeders’ Cup Classic winner and the world’s all-time leading money earner Arrogate, nine returning Champions and 150 other racing

superstars from around the globe competed in front of 70,420 fans over a two-day period . The two-day race schedule included 13 Grade I Championship races and an additional nine undercard races . Total purses and awards for the two days, including undercard races, exceeded $29 million . Average starters for the 13 Championship races increased to 12 .2 in 2017 from 11 .5 in 2016 .

Despite capping tickets sales at 37,500 people each day, Del Mar generated an all-time, two-day on-track wagering record of $25 .2 million and the second highest ticket sales revenue number in history at $15 .4 million . All sources handle for the event was $170 .8 million, the second highest in Breeders’ Cup history (behind only Churchill Downs in 2010 when there were 14 Breeders’ Cup races versus 13 in 2017) .

These results, combined with active management of expenses, led the Breeders’ Cup to recording its highest-ever net income of $11 .8 million and record-setting net operating income of $4 .1 million . Breeders’ Cup’s decision to introduce new venues (to date, Keeneland and Del Mar) continues to produce positive results in customer experience, community support and ultimately financial return . Del Mar has clearly earned a spot in the Breeders’ Cup host-site rotation .

Our long-term television partnership with NBC Sports (now the self-described television home of horse racing) continues to expand the Breeders’ Cup brand throughout the Summer and Fall while simultaneously constructing a storyline leading up to the Breeders’ Cup World Championships in November . In 2017, NBC provided its most extensive Breeders’ Cup coverage in history with 25 .5 hours of programming across the Challenge Series and Championships .

Plans for the 35th running of the Breeders’ Cup World Championships to be held at Churchill Downs are well under way . The 2018 Breeders’ Cup will be a record-tying ninth time that the event will be held at Churchill Downs and we are excited by the possibility of seeing the second Triple Crown winner in history compete for the Grand Slam in the Breeders’ Cup Classic . The Breeders’ Cup card will expand to 14 races again this year with the addition of the Juvenile Turf Sprint and I can assure you that the Breeders’ Cup will live up to its reputation as one of the highest caliber international racing events in the world . We also look forward to highlighting our two-year-old races on Future Stars Friday as the Dirt Mile and Longines Distaff move to Saturday to provide a blockbuster finish to the event .

As always, we would like to thank our nominators for their continued support . The Breeders’ Cup would not be possible without their efforts as nomination fees totaled $15 .7 million in 2017 .

Through the support of our nominators and the participating constituencies of the Thoroughbred industry, we are well positioned to meet the demands of a competitive future .

Sincerely,Craig R . FravelPresident and CEO

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2017 ACCOMPLISHMENTS

Championship Racing

The 2017 Breeders’ Cup World Championships featured history-making performances of

some of the highest rated fields ever assembled in Breeders’ Cup history. Nine returning

Champions – starring Gun Runner who forced a showdown with America’s highest-rated

runner, Arrogate – and racing superstars from around the globe competed in front of

70,420 fans over a two-day period.

An all-star international cast of 187 of the world’s best Thoroughbreds, including a record

46 from overseas, were pre-entered for the 2017 Breeders’ Cup World Championships.

Pre-entries were highlighted by Arrogate, Whitney and Suburban winner Gun Runner,

Longines Distaff standout Stellar Wind, defending Longines Turf winner Highland Reel

(IRE), Juddmonte International winner Ulysses (IRE) and Filly & Mare Turf star Lady Eli.

168 horses were officially entered into the 2017 Breeders’ Cup World Championships

and by the conclusion of day two there were 159 Starters with 141 Grade/Group I wins

among them and an aggregate of 327 graded wins prior to the Breeders’ Cup. A total of

71 individual Group or Grade I winners were represented in the 13 Grade I Championship

races and 38 international runners competed in the 2017 Breeders’ Cup, a new record for

international participation and seven more than in 2016 at Santa Anita.

At pre-entry, ten of the 13 races had full fields or were oversubscribed. Six races fielded a

maximum number of starters and the Breeders’ Cup races averaged 12.2 starters.

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Gun Runner wins the $6 million Breeders’ Cup Classic

2017 Breeders’ Cup at Del Mar

Forever Unbridled wins the $2 million Longines Breeders’ Cup Distaff 5

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Del Mar Delivers

Hosting its first-ever Breeders’ Cup, Del Mar racetrack and the surrounding communities

exceeded expectations across the board. Breeders’ Cup fans coming in from around the

world were greeted with luxury accommodations, fine dining, sandy beaches and two

days of world championship racing and entertainment.

Breeders’ Cup worked with Del Mar on capital improvements and temporary structures

including Chalet Village, temporary box seats and The Beach. Chalet Village served as

the Breakfast Marquee during the week and the Trophy Lounge and high-end group

sales areas on Championship weekend while The Beach offered a fun, festive San Diego

experience in the infield.

An 8,000 square foot tent constructed on the grounds of Powerhouse Park overlooking

the Del Mar beach hosted Breeders’ Cup events all week and provided participants and

fans an experience unlike any other. Life-sized replica Breeders’ Cup Torrie horses painted

by local artists were placed around Del Mar, La Jolla and Solana Beach as part of the

Breeders’ Cup Festival while Breeders’ Cup-themed banners lined the streets.

All these efforts brought Breeders’ Cup fans to San Diego earlier and provided them with

a myriad of entertainment options all week long. The result was a record-high economic

impact of $96 million according to a study conducted by third-party research firm SMRI.

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Revenue Records

2017 proved to be a record-setting year for Breeders’ Cup with $11.8 million in net income

and $4.1 million in net operating income – both of which are the highest in company

history. Despite capping attendance at 37,500 to ensure a positive and comfortable guest

experience, Breeders’ Cup at Del Mar was a virtual sellout with $15.4 million in ticket sales,

the second highest in Breeders’ Cup history and a 60% increase over 2016 at Santa Anita.

The on-track handle of $25.2 million was an all-time record and generated a 22% increase

over the 2016 event at Santa Anita.

Total handle of $170.5 million was the second highest in Breeders’ Cup history, second

only to Churchill Downs’ $173.8 million in 2010 which featured 14 Breeders’ Cup races

versus 13 in 2017.

Viewership of the NBC and NBCSN telecasts on Friday and Saturday reached more

than five million unique viewers, with the primetime broadcast of the Classic drawing an

average of 2 million viewers. Digital viewership of the Breeders’ Cup NBC telecasts and the

Player’s Show continues to climb and exceeded 464,000 online views in 2017.

The Breeders’ Cup Challenge Series: Win and You’re In presented by Lane’s End Farm and

America’s Best Racing featured some of the best races from all over the world and drew

more than 8 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.

0

5

10

15

20

20172016201520142013

TICKET SALES REVENUE

Mill

ions

$7.9

$8.5

$17.

2

$9.6

$15.

4

Del MarSanta Anita Santa Anita Keeneland Santa Anita Del MarSanta Anita Santa Anita Keeneland Santa Anita

0

50

100

150

200

20172016201520142013

HANDLE TOTAL

Mill

ions

$163

.5

$159

.4

$156

.7

$169

.2

$170

.5

The very foundation of the Breeders’ Cup program begins with the nominations 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. A total of $15.7 million in foal, racehorse and

stallion nomination fees were generated in 2017.

International Stallion Nomination Program

Breeders’ Cup has expanded its nomination programs around the world with 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 2017 international stallion program generated $2.34 million in fees with 281 stallions

participating from all over the world.

NOMINATIONS

North American Stallion Nomination Program

There were 534 nominated stallions in North America that generated nomination fees of

approximately $8.3 million in 2017.

North American stallion nominations must be 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.

65% of Breeders’ Cup nominated stallions stand for $2,500 or more representing over

95% of our domestic stallion revenue. In addition, more than 88% 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.

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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 2017, Breeders’ Cup received 10,200 nominated foals (55% of eligible foal crop reported).

Foal nomination revenue totaled $4,172,200.

EARLY RACEHORSE NOMINATION DEADLINE: JULY 15 Runner not nominated? Deep discounts of nomination fees if done on or before July 15th! All horses must be nominated to compete in the Breeders’ Cup World Championships. Call today (859) 514-9422!

BREEDERS’ CUP WORLD CHAMPIONSHIPS, NOV 2-3 at CHURCHILL DOWNS members.breederscup.com

2017 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 2017, Breeders’ Cup received $782,000 in fees related to Horses of Racing Age nominations.

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An all-star international cast of 187 of the world’s best Thoroughbreds, including a record

46 from overseas, were pre-entered for the 2017 Breeders’ Cup World Championships

which led to 159 Championship starters over the two-day event, including 71 Group or

Grade I winners.

The two-day race schedule included 13 Grade I Championship races and an additional

nine undercard races. Total purses and awards for the two days, including undercard

races, exceeded $29 million. Purses were paid down to the eighth finish position in all

BCWC races.

WORLD-CLASS RACING COMPETITION

2017 Facts & Figures

• 213 Pre-entries with 187 individual horses, 46 Internationally

campaigned

• 168 Entries, 40 Internationally campaigned

• 159 Starters, 38 Internationally trained – 141 Grade/Group I wins among

them, 327 graded wins prior to the Breeders’ Cup

• Average starters for the 13 Championship races – 12.2 in 2017 vs 11.5 in

2016 (Santa Anita)

• At pre-entry, 10 of the 13 races had full fields or were oversubscribed

• Nine Returning Champions

• Three out of the top five highest rated horses in the world, Arrogate

(134) and Gun Runner (127) and Ulysses (127) were pre-entered, with

Gun Runner finishing first in the Breeders’ Cup Classic. Seven out of

the top ten highest rated horses in the world and 17 of the top 34

participated.

• Aidan O’Brien and Chad Brown tied for the most starters with 13 each

• A total of $2,350,000 was paid in travel awards for horses shipping

into California

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New for 2018

In 2018, Breeders’ Cup announced the addition of the $1 Million Breeders’ Cup Juvenile

Turf Sprint to the Championship lineup. This newly created two-year-old race joined the

existing four Juvenile Championship races. For the first time at the 2018 Breeders’ Cup

World Championships, all five Juvenile races will be run on Friday, November 2 and the

Longines Breeders’ Cup Distaff and the Breeders’ Cup Dirt Mile move 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, which will take effect at the 2018 event.

This brings the total of purses and awards distributed over the two-day Championships to

over $30 million.

Breeders’ Cup continues to pay down to the 8th finish position in all Championship races

and provides 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.

Breeders’ Cup Challenge Series

In 2017, the Breeders’ Cup Challenge “Win & You’re In” Series

concluded its eleventh year with 54 Challenge winners pre-

entered and 45 individual starters in the Breeders’ Cup World

Championships. In total the series featured 81 Challenge Series races,

of which 62 were Grade/Group I rated. Geographically there were

36 International races, 18 on the East Coast, 15 in the Midwest and 12

on the West Coast. Winners received automatic race selection and

free entry fees while foal Nominators of Challenge winners received

a $10,000 nominator award for each win, totaling $470,000 paid

out in 2017. Galileo tops the Challenge sire list with a total of six Challenge winners.

In 2018, the Breeders’ Cup Challenge Series: “Win & You’re In” presented by America’s

Best Racing will consist of 85 stakes races across six continents occurring in 12 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)

a travel stipend of $10,000 for non-Kentucky based domestic runners and $40,000 for

international runners, (iv) a hotel credit and (v) a $10,000 Nominator Award.

Now in its 12th year, the Challenge Series features stakes racing qualifiers from top

venues in North America, including Arlington Park, Belmont Park, Churchill Downs,

Del Mar, Gulfstream Park, Keeneland, Monmouth Park, Saratoga, Santa Anita Park and

Woodbine. Venues around the world include Randwick in Australia; Kenilworth in South

Africa; Palermo, San Insidro, Club Hipico, Gavea and Monterrico in South America; Ascot,

Goodwood, Newmarket and York in Great Britain; Deauville and Paris in France; The

Curragh and Leopardstown in Ireland; and Tokyo Racecourse, Hanshin Racecourse and

Nakayama Racecourse in Japan. Please see Appendix C for a list of all 2018 Breeders’ Cup

Challenge Series races.

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The Breeders’ Cup continues to lead by example in the conduct of Thoroughbred racing

at the highest levels of safety and integrity. The Breeders’ Cup is a leading advocate of the

Coalition for Horse Racing Integrity, and has devoted resources to support the passage

of H.R. 3084 – The Horse Racing Integrity Act. In June 2018, CEO Craig Fravel testified

before a sub-committee of the House Energy and Commerce Committee in support

of a unified approach to medication regulation. There are currently over 100 House

Co-Sponsors of this measure, and we anticipate additional support.

In 2017, the Breeders’ Cup built upon its own out-of-competition testing policy in an effort

to have immediate access to testing results of horses that won Breeders’ Cup Challenge

races or were actively targeting the Breeders’ Cup World Championships. 85% 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 being returned.

Breeders’ Cup also enacted, for the first time, the Breeders’ Cup Condition of Entry. As a

condition of entry for any Breeders’ Cup World Championship race, no horse within six

months of the event may test positive for any anabolic steroid or any other prohibited

substance described under the Association of Racing Commissioners International (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 Championships will be ineligible to participate. No runners in 2017

were found to have violated this rule.

INTEGRITY AND SAFETY

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Breeders’ Cup reserves the right to refuse the pre-entry or subsequent entry of any horse,

in Breeders’ Cup sole discretion, for any reason, including, but not limited to, situations

where any connection (e.g., owner, trainer, jockey) of such horse has engaged or may have

engaged in conduct, or become the subject of a regulatory or law enforcement inquiry or

action alleging conduct that is unlawful, unethical or which may otherwise compromise

the integrity of the Breeders’ Cup World Championships. In addition, Breeders’ Cup may,

in Breeders’ Cup’s sole discretion, refuse the pre-entry or subsequent entry of any horse

that has tested positive for any anabolic steroid or other ARCI prohibited substance in out

of competition testing conducted in connection with the Breeders’ Cup Challenge Series

in the year of the Championships or similar testing conducted by Breeders’ Cup Limited.

The 2018 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 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 BC investigators and KHRC 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 team of impartial Breeders’ Cup veterinarians combined with the KHRC veterinary

team. These combined teams will also create and implement an injury management

protocol for race days.

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 at a fully accredited lab selected by the Kentucky Horse Racing

Commission. 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.

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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 $30 million in purses and awards, world-class hospitality and exclusive events.

The Breeders’ Cup Challenge Series layers our brand on top of 85 of the best races in

12 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, the best jockeys, the

best trainers, the best owners, the best breeders, the best events and the best experience.

The Breeders’ Cup continues to retain a luxury, lifestyle public relations firm, Nike

Communications, to tell the brand story through targeted, top-tier national media outlets.

The Breeders’ Cup fan development and engagement strategy relies heavily on digital and

social media to reinforce the brand messaging and increase interest in the event and sport.

In 2017, the Breeders’ Cup launched a new, mobile-first website that provides new and

existing fans a visually appealing and engaging destination to learn about and experience

the Breeders’ Cup. A native iOS and Android mobile app was also created to offer live

streaming of all Breeders’ Cup races, race and contender information, event and venue

details and other interactive experiences.

Breeders’ Cup became the first racing event in the U.S. to live stream from a jockey cam

during a live race when Mike Smith wore the Jockey Cam powered by Aston Martin for

most of his Breeders’ Cup mounts at Del Mar, including his victory ride aboard Caledonia

Road in the Juvenile Fillies. The Jockey Cam was streamed live on the NBC Sports

broadcast, BreedersCup.com and the Breeders’ Cup mobile app. In another first for the

Breeders’ Cup, a 360° camera was installed in the Del Mar paddock and streamed live to

BreedersCup.com and the mobile app to allow users at home and around the world to

experience what it was like to be at Del Mar for the Breeders’ Cup.

Breeders’ Cup continues to invest in growing our social channels, developing a consistent

Breeders’ Cup voice on social media and increasing online engagement with our fans.

During Breeders’ Cup week alone social media generated 29 million impressions, 2.5

million video minutes watched and 754,000 engagements. For the second year in a row,

Breeders’ Cup partnered with Snapchat to offer a Live Story on Championship Saturday

that generated 1.3 million unique views of 1,000 pieces of user generated Breeders’ Cup

content.

BRAND ENHANCEMENT& EXPERIENCE

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Television Exposure

NBC Sports is the long-term home of the Breeders’ Cup (through 2025) and has

shown tremendous commitment to the sport of horse racing in the past few years.

The Breeders’ Cup Classic continues to be the only race ever broadcast on prime time

network television and 2017’s Classic broadcast drew an average of 2 million viewers while

NBCSN’s Friday and Saturday shows posted a combined average of 550,000 viewers

during the nine and half hours of coverage. Another 464,000 viewers streamed the

Breeders’ Cup online or via the Breeders’ Cup and NBC Sports mobile apps.

In addition to the 12 hours of Championship Week coverage, the expanded Breeders’ Cup

Challenge Series (see full schedule in Appendix D) featured 11 races across 13.5 hours of

live coverage across NBC and NBCSN bringing Breeders’ Cup total broadcast hours to

25.5 for the year. Breeders’ Cup is a trusted partner of NBC Sports and assists with the

production, social media and other television needs at all of these Win And You’re In sites.

When adding the Triple Crown and other major event coverage, NBC Sports provided a

total of 85.5 hours of racing coverage in 2017 including, for the first time, live coverage

from Royal Ascot. In 2018 that international coverage was expanded and featured four

Breeders’ Cup Challenge races, the first Win and You’re In races ever held during the

Royal Meeting.

Breeders’ Cup and NBC Sports are currently discussing terms to renew the Breeders’ Cup

Challenge Series beyond the current contract’s expiration at the end of 2018.

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Cheval: A Collection by Breeders’ Cup

Leveraging the power of the Breeders’ Cup brand, a new, luxury merchandise line was

developed and launched in 2017 featuring only the iconic horse head design from the

Breeders’ Cup primary logo. Cheval, as it was named, was created with our merchandise

partner, Upper Right Marketing, and represents the highest level of the Breeders’ Cup

brand and experience. The Cheval brand embodies luxury, aspiration, excellence and

prestige.

Officially launched in October of 2017, initial sales were strong and the new merchandise

line presents a long-term growth opportunity for Breeders’ Cup.

Providing a Customer and Participant Experience That Matches

the Quality of Our Championship Racing Product

In 2017, the Breeders’ Cup continued its relentless focus on improving the participant

and fan event experience. To start, attendance was capped at 37,500 people to ensure

those on-site had an enjoyable two days and that decision, despite forgoing additional

ticketing revenue, proved to positively affect other KPIs, including short wagering and

concession lines which assisted in producing record on-track handle and strong food

and beverage sales.

Breeders’ Cup utilized the grandstand parking lot area to create the Chalet Village, an

exclusive seating area boasting two double-decker chalets with a private entryway

providing guests additional luxury accommodations and strategically dispersing patrons

around the venue to realize operational efficiencies. Temporary box seats were added to

the Clubhouse and Grandstand areas; 3,000 chairs were upgraded in existing box seating,

dining and suite areas; 200 tables were upgraded in the Turf Club, and; two local celebrity

chefs Jeffrey Strauss of Pamplemousse Grill and Top Chef finalist Brian Malarkey curated

special menus in certain dining areas to provide a better experience for our guests. In

total, 2,500 temporary seats were added throughout the Del Mar racetrack to provide a

better customer experience.

Playing into the local market vibe, 750 tons of sand were brought into the Del Mar infield

to create a fun, new area called “The Beach” that offered rail-side viewing, adirondack

chairs with umbrellas and a private bar. The remainder of the infield played home to Taste

of Breeders’ Cup: San Diego, a unique culinary experience celebrating the signature fare

that has solidified San Diego as one of the country’s top culinary destinations. The one-of-

a-kind festival featured 21 different chefs and food vendors, a large video board, premium

bars and a beer garden.

In order to deliver seamless ingress and egress at Del Mar racetrack, Breeders’ Cup

developed a comprehensive traffic control plan for the main roads surrounding the

track, including flaggers, directional cones, traffic light control and law enforcement

support. As part of the plan, Breeders’ Cup offered a courtesy Park-and-Ride program

2020

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that shuttled 7,500 fans to and from the racetrack from three off-site locations as well as

complimentary shuttle service for participants and VIPs from official host hotels.

During the two-day Championships, guests on-track were treated to special performances

by Rock and Roll Hall of Fame member Richie Sambora and four-time Grammy-nominated

singer and songwriter Jewel who sang an acapella version of Bing Crosby’s “Where the

Turf Meets the Surf.” Tapping into the strong local military presence in San Diego, the

Navy Band (Friday) and the 1st Marine Division Band (Saturday) performed the National

Anthem. A special flyover of three F/A-18 Hornet jets was conducted by the Marine

Fighter Attack Squadron 232 “Red Devils” on Saturday.

Chalet Village was home to the Trackside Breakfast Marquee presented by WinStar Farm

and Fasig-Tipton, a 16,000 sq. ft. temporary chalet that provided Participants a luxurious

way to watch their horses work in the morning during Breeders’ Cup week. Catered

breakfast was provided by high-end local restaurant Pamplemousse Grille. Guests were

offered complimentary shoe shines and other entertainment throughout the week,

including various musicians and magicians.

On Thursday before the World Championships, Participants gathered at the picturesque

Birch Aquarium with cliff side views overlooking the Pacific Ocean in La Jolla for the 7th

Annual, A Taste of the World event featuring fifteen international chefs and a special

performance by Jewel.

In partnership with the Del Mar Village Association, Breeders’ Cup constructed an 8,000

sq. ft. chalet on the grounds of Powerhouse Park overlooking the Del Mar beach. The

“Barn at the Beach”, as it was named, played host to seven events throughout the week,

including the Breeders’ Cup Post Position Draw presented by Rood & Riddle on Monday

evening. The venue provided spectacular views of the Pacific Ocean and many of the

events held there supported local causes.

The Breeders’ Cup, Del Mar Racetrack, San Diego Tourism Authority, San Diego Sports

Alliance and organizers of the Host Committee produced the 2017 Breeders’ Cup Festival,

a weeklong series of events and activations that led up to Breeders’ Cup weekend. Festival

events raised more than $200,000 for local, equine and national charities.

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FINANCIAL PERFORMANCE

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

Actual FYE Actual FYE Actual FYE Actual FYE Actual FYE

1/31/18 1/31/17 1/31/16 1/31/15 1/31/14

Revenues:

Simulcast fees $ 12,612,501 $ 12,599,070 $ 11,939,746 $ 11,869,179 $ 12,138,106

Host track contribution 7,853,701 4,609,961 6,179,004 4,250,000 3,928,780

Entry fees 8,985,000 8,265,000 5,720,000 6,100,000 5,500,000

Nomination fees 15,669,308 15,610,640 15,265,536 14,620,520 14,952,119

Sponsorship & licensing 6,561,810 5,894,589 6,381,135 4,130,633 2,873,284

Total Revenues 51,682,320 46,979,260 45,485,421 40,970,332 39,392,289

Expenses:

Championship purses 28,166,481 27,703,799 25,980,500 26,293,250 26,461,000 & awards

Challenge awards 3,165,290 3,325,715 2,171,112 2,142,000 2,137,536 & administrative costs

Direct event operating 573,871 734,315 354,879 835,407 1,116,402 expenses

Marketing & enhanced 3,340,001 3,731,940 3,435,394 3,466,340 3,158,381 experience expenses

Television 3,612,601 3,192,080 3,794,762 3,944,780 2,245,563

Sponsorship expenses 1,629,537 1,374,208 1,783,936 1,115,746 1,018,568

Nomination marketing 366,747 313,525 381,088 333,959 339,833 & administration

Salaries & benefits 4,391,176 3,940,351 4,136,117 3,843,227 3,791,085

Business travel 559,397 486,290 445,620 466,747 515,639

NTRA/TAA support 192,900 238,733 242,900 245,000 483,333

New business initiatives 2,081 1,459 45,619 196,784 92,510

General & administrative fees 1,558,842 1,538,680 1,484,737 1,557,028 1,845,929

Total Expenses 47,558,924 46,581,095 44,256,664 44,440,268 43,205,779

Net Operating Income 4,123,396 398,165 1,228,757 (3,469,936) (3,813,490)

Investment Income 8,106,319 3,141,436 63,088 4,359,603 3,859,375

Racing Integrity Coalition/ 151,911 204,093 449,120 - - World Horseracing Consortium

Innovation Committee 275,000

Net Income $ 11,802,804 $ 3,335,508 $ 842,725 $ 889,667 $ 45,885

Additional Financial Data:

Debt/Investments Summary

Line of credit outstanding - 675,406 816,454 5,455,439 9,194,171 permanent portion only

Investment values 51,850,588 42,912,489 39,773,772 43,710,950 46,331,892

Investments position (net) 51,850,588 42,237,083 38,957,318 38,255,511 37,137,721

Other assets & liabilities 2,446,941 257,643 201,901 60,982 289,105 (not utilized in the permanent portion of the line of credit calculation above)

Total unrestricted $ 54,297,529 $ 42,494,726 $ 39,159,219 $ 38,316,493 $ 37,426,826 net assets

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The management of Breeders’ Cup Limited (“BCL”) has prepared the following discussion of financial results for the year ending January 31, 2018. A copy of the 2017 results (year ending January 31, 2018) along with the results for prior fiscal years 2013 to 2016 are attached for comparison purposes (Schedule A). 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 Santa Anita versus Del Mar. This discrepancy is due to negotiated differences in the respective deal structures. Simply stated, the Santa Anita deal structure contemplated a minimum guaranteed contribution by the host site ($4.2 million) while the Del Mar deal provides for upfront retention by the host site and a back-end revenue share. The impact in terms of financial reporting has been a shift of some expenses from the BCL only budget (as was the case at Santa Anita) to the event budget, reflected in Host Track Contribution, (as was the case at Del Mar). The end result is a more accurate placement of expenses that are more directly related to event execution which corresponds to the allocation of risk.

2017 was a record year. BCL recorded both its highest ever net income of $11.8 million and highest ever net operating income of $4.1 million. Del Mar delivered as promised with ticket sales of $15.4 million and an all-time record of $25.2 million in on-track handle despite limiting on on-track attendance of 37,500 per day. Those figures compare to prior year ticket sales at Santa Anita of $9.6 million and on-track handle of $20.7 million. It is clear that Del Mar earned its place in our current roster of host track partners (Churchill Downs, Del Mar, Keeneland and Santa Anita) which have each established the ability to produce a strong financial performance and most importantly bring a positive owner and fan experience.

Aside from the record financial performance, Del Mar delivered in spectacular fashion, featuring Southern California sunshine, beaches and first-class hospitality that introduced many of our core guests from the United States and abroad to experience “Where the Turf Meets the Surf” for the first time. Most importantly, the racing was incredible and included 159 starters, 71 of which were Group or Grade I winners. A total of 38 international runners competed in the Breeders’ Cup this year which is a new record high and seven more than in 2016.

The foundation of the success achieved in 2017 is based off of the strategic objectives established in 2013-14 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.

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 while building 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.

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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. Maintenance of 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 trainers, owners, breeders and most importantly, horses.

REVENUESTotal revenues for 2017, excluding gains on investments, were $51.7 million as compared to $47 million in 2016. Critical elements in continued overall growth of revenue are: (i) growth in the volume of wagering and more specifically on-track handle growth due to (1) increased premium seating which correlates to increased average wagers per person and (2) new requirements in California which treat a wager made via advanced deposit wagering (“ADW”) by a California resident at the racetrack as an on-track wager resulting in higher revenue to the host track, (ii) growth in the yield on simulcast wagers as the result of a change in pricing beginning in 2015 to 50% of gross rather than 50% of net takeout, (iii) overall growth in ticketing revenues embedded in the Event Budget, and (iv) sustained growth in sponsorship revenues. Admissions revenue is a key component of Host Track Revenue which varies greatly depending upon the host site and is primarily a function of premium seating capacity as discussed below.

Simulcast Revenues

Simulcast revenues in 2017 were a Breeders’ Cup record of $12.6 million. Total all source wagering was $170.8 million (the second highest in the history of Breeders’ Cup; the highest occurred in 2010 which included one additional Breeders’ Cup race). Common pool wagering increased by $4.8 million from 2016 which resulted in a positive variance of $390,000. After factoring in separate pool wagering, the end result is a total positive variance of $142,000 before various licensing fees. The positive variance is particularly impressive given the number of long-shot winners, which typically results in lower churn and lower net revenue.

Positive factors that contributed to increased simulcast revenue included a larger average field size of 12.2 in 2017, up from 11.5 in 2016. Additionally, Congress enacted legislation shortly prior to the 2017 Breeders’ Cup which revised the mandatory tax withholding that previously considered only the base amount of a wager rather than the overall cost of a mutuel ticket. As such, fewer winning wagers trigger automatic withholding requirements which in turn generated greater liquidity for horseplayers to continue to make wagers throughout the day.

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We believe the industry continues to experience a shift in wagering from brick and mortar locations to ADW companies as evidenced by the $4.8 million increase in common pool simulcast wagering in 2017. Accordingly, we are continuing to project increases in simulcast handle.

Host Track Contribution

Host Track Contribution is tied to the net results from shared operational 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 within 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, and Breeders’ Cup Betting Challenge (“BCBC”) expenses.

Most notably, the Host Track Contribution in 2017 was $7.9 million as compared to $4.6 million in 2016. Total Event Budget gross revenue was $23 million in 2017 and $14.1 million in 2016. The primary drivers of this line item were ticket sales revenues (excluding processing, parking and other fees) which totaled $15.4 million in 2017, as compared to $9.6 million in 2016 and on-track handle. Note that $156,911 from Trackside Marquee ticket sales in 2016 was not included in the Event Budget and was treated as BCL only revenue.

Growth in ticket sales in 2017 resulted from several factors including an increased availability of premium seating, the strong demand to attend Del Mar as a first time venue, and local support from the San Diego area.

On-track wagering in 2017 was particularly robust with total on-track handle of $25.2 million as compared to $20.7 million in 2016 resulting in a positive variance of $4.5 million of total handle and $900,000 of net on-track wagering revenue. Other revenue increases contained within the Event Budget included $812,000 of net revenue from general concession sales in 2017 compared to $173,000 in 2016 resulting in a positive variance of $639,000. These figures are especially impressive when taking into account reported on-track attendance on Saturday of 37,692 in 2017 versus 72,811 in 2016. These figures support our theory that increased premium seating results in other ancillary increased revenue (wagering, food and beverage and merchandise sales.) $360,000 of local sponsorships occurred in 2017 as compared to minimal local sponsorships in 2016.

While, as noted above, the expense items included in the Event Budget vary between Santa Anita on one hand and Del Mar on the other, the primary drivers of this line item are expenses related to ticket sales. Total Event Budget expenses were $13.4 million in 2017 as compared to $8.4 million in 2016. Expense increases are mainly attributable to: (i) additional temporary structures; (ii) food and beverage costs attributable to increased premium ticket sales which included a food and beverage component; (iii) necessary offsite parking and transportation due to the limited Del Mar parking footprint; (iv) increased undercard purses and quarantine requirements, (v) horsemen gifting being allocated to the Event Budget versus the BCL Budget; and (vi) increased horsemen hospitality.

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More specifically, even though total revenue within the Event Budget had a positive variance of $7.9 million in 2017, total labor costs only increased by $37,000. Increased expenses associated with temporary structures in 2017 totaled $1.6 million (excluding the breakfast marquee/trophy lounge buildout costs which were allocated to the BCL Budget because those facilities were repurposed for the Trophy Lounge resulting in no ticket purchases for sponsors) as compared to $552,000 in 2016, resulting in a negative variance of $988,000.

Entry Fees

Entry fees totaled $9 million in 2017 versus $8.3 million 2016. Increased entry fees are the result of an increased field size of 159 starters in 2017 from 150 starters in 2016. At pre-entry, 10 out of 13 Championship races in 2017 had full fields or were oversubscribed compared to seven of 13 in 2016.

NOMINATIONS

Domestic Stallion Nominations

Domestic stallion nomination fees in 2017 yielded $8.4 million as compared to $8.3 million in 2016. Advertised stud fees remained fairly consistent with stud fees in 2016, led by nine stallions with advertised fees of $100,000 or more and 20 stallions whose fees combined with live foal assessments paid $100,000 or more in fees.

International Stallion Nominations

International stallion nomination fees in 2017 yielded $2.3 million in fees, a positive variance of $46,000 from 2016, including seven stallions standing in Europe that stand for more than US$100,000. 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.

Foal Nomination Fees

Foal nomination fees slightly increased in 2017 and yielded $4.2 million with a positive variance of $118,000 from the prior years. The small increase in foal nominations corresponds to the Jockey Club’s continued projection of flat foal crops year to year.

Horses of Racing Age Nominations

Horses of Racing Age nominations totaled $782,000 in 2017 as compared to $866,000 in 2016. 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 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 $6.56 million in 2017, a positive variance of $667,000 from 2016. Specifically, sponsorship had a positive variance of $136,000, 2.6% over 2016. In

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addition to sponsorship revenue, $360,000 of local sponsorship revenue was included in the Event Budget which is reflected in the Host Track Contribution. Los Angeles has historically been a difficult marketplace and increased sponsorship sales in 2017 are attributed to a more favorable marketplace in San Diego in addition to the event having significant visibility as a first-time event within the community. Licensing had a positive variance of $531,000, 88% over 2016. These increases were attributable to: (i) a new clothing line and partnership with Upper Right Marketing resulting in $75,000 of additional revenue; (ii) $100,000 of new royalties relating to the establishment of online qualifiers to the Breeders’ Cup Betting Challenge via Horseplayers.com; and (iii) $216,000 of additional revenue through restructuring existing licensing agreements relating to selling our content for international distribution.

Sponsorship in the American Thoroughbred industry continues to face challenges including animal welfare issues and various companies reluctant to sponsor industries connected to wagering. As a result of the 2008 financial crisis which greatly impacted sponsorships throughout sports, BCL’s sponsorship efforts have shifted from maintaining a small number of key sponsorship partners to now over 40 sponsorship partners. Sponsorship diversification mitigates significant financial risk of losing a major sponsor and increases comfort among potential sponsors impressed by BCL’s extensive roster of partners. BCL’s major partnerships include Longines, Kendall-Jackson Wines, TwinSpires, Aston Martin, America’s Best Racing, Maker’s Mark, John Deere, Tito’s Handmade Vodka, Lane’s End, Harrah’s and WinStar. Other major racing events such as Prix de l’Arc de Triomphe, Goodwood, Royal Ascot and Dubai World Cup have major presenting or title sponsorship deals (indirectly through sovereign wealth funds) which likely encompass a high percentage of their total sponsorship revenue. BCL continues to have discussions with similar potential sponsors, but management believes a diversified sponsorship roster positions BCL for a stable future.

EXPENSESWORLD CHAMPIONSHIP RACING EXPENSES

Championship Purses

2017 Championship purses totaled $24.4 million which reflects no variance from the 2016 purses. While no purse increases occurred in 2017, purses will increase by $1.5 million in 2018 as the result of the creation of the $1 million Juvenile Turf Sprint and a $500,000 purse increase in the Sprint. Since 2015, 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 $1.3 million in 2017, which is a negative variance of $118,000 from 2016.

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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 Championships. 2017 travel awards were $2.4 million, an increase of $310,000, corresponding to an increased field size of 159 starters in 2017 from 150 in 2016.

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 (L’Auberge, Torrey Pines and Fairmont Grand in 2017) and complimentary VIP car service to and from the airport. 2017 expenses totaled $106,000. Management believes these benefits were still under-utilized in 2017 due in part to (a) the second time availability of the program and (b) other hotel options preferred by owners. Management is continuing to enhance communication efforts to inform owners of this incentive and other services in 2018.

Breeders’ Cup Challenge Series Expenses

In 2017, BCL had 82 Breeders’ Cup Challenge Series “Win & You’re In” races, including 36 International races, 18 on the East Coast, 15 in the Midwest and 12 on the West Coast. 64 Grade/Group I 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.

Challenge Series Entry Fees

2017 Challenge Series entry fee expenses were $2.7 million. Expenses decreased by $90,000 from 2016 as 45 individual horses winning a combined 49 Challenge Series races competed at Del Mar versus 43 individual horses winning a combined 48 Challenge Series races in 2016. Management views the increase in Challenge Series participants as a reflection on the effectiveness of the program and of the desire of horsemen to participate in the Challenge Series.

Challenge Series Nominator Awards

Challenge Series nominator awards have remained essentially flat since 2014 and were $470,000 in 2017.

Challenge Fulfillment Expenses

Challenge fulfillment expenses are blankets, caps and similar items. 2017 expenses totaled $30,000, which is consistent with prior years.

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 lounges at L’Auberge, Fairmont Grand and Torrey Pines in 2017. The 2017 expenses were $573,000 reflecting a positive variance of $161,000 as result of reallocating certain operating expenses from the BCL Budget to the

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Event Budget. Overall, aggregated direct operating expenses within the BCL Budget and Event Budget increased in 2017 due to the growing hospitality program from two hotels in 2016 to four hotels in 2017 and increasing the level of amenities. We continue to increase our investment in the horsemen hospitality program in order to continue to improve our event and horsemen experience.

Enhanced Experience Events

Enhanced experience expenses in 2017 were $1.22 million with a positive variance of $349,000 from 2016. While enhanced experiences expenses were less in the BCL Budget from expenses in 2016, the actual expenses attributable to enhanced experiences remained similar to 2016 as a portion of those expenses were reallocated to the Event Budget and Sponsorship fulfillment within the BCL Budget. In 2017, the Breakfast Marquee was designed to serve double duty as the Trophy Lounge for sponsors, industry VIPs and other contracted parties. A portion of the build-out costs for Breakfast Marquee/Trophy Lounge were allocated to the sponsorship fulfillment expenses versus the enhanced experience expenses. Historically, BCL was required to purchase tickets from the Event Budget for ticket fulfillment for sponsorship obligations and industry VIPs. However, in 2017 no tickets were purchased for this location. This produced savings and left high value inventory in the Del Mar grandstand available for sale to the public. Additional savings in 2017 include decreased expenses associated with a Finish Line Celebration and instead a smaller event occurred as required to fulfill contracted sponsorship obligations.

Simulcast Marketing and Betting Challenge

In 2017, simulcast marketing expenses were $415,000, a positive variance of $91,000 from 2016. In 2016 we launched a “Bet Like No Other” campaign focused on increasing wagering at off-track venues; a scaled down version occurred in 2017 which resulted in savings. Notably, simulcast handle continued to increase despite a decreased marketing spend. Other marketing initiatives included BCBC and Horseplayers.com promotions.

Event and Brand Marketing

2017 event and brand marketing expense was $1.7 million, an increase of $46,000 from 2016. The increase was attributable to promoting Del Mar as a first-time venue and communicating transportation, fashion and other event related messages to the San Diego community. Other expenditures included Challenge Series promotions, year around social media, website and mobile application upgrades, and additional celebrity promotions, including a performance by Jewel.

Television

2017 television expenses totaled $3.6 million reflecting a negative variance of $420,000 from 2016 due to two additional productions in 2017 and a three percent production expense increase per the terms of the ten-year deal with NBC. The 2016 Summer Olympics broadcast by NBC required elimination of two of our traditional Challenge Series broadcasts in 2016. 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 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.

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Sponsorship Fulfillment

Management has historically budgeted sponsorship fulfillment at 27% of sponsorship revenue based upon historical analysis. 2017 sponsorship fulfillment was $1.6 million, equating to 24.8% of sponsorship revenue. Significant sponsorship fulfillment expenses in 2017 included hospitality and build-out costs related to the Breakfast Marquee/Trophy Lounge.

Nominations Marketing and Administration

2017 nominations marketing and administration expenses were $367,000, which is a negative variance of $53,000 from 2016. The increased expenses included retention of a consultant in Japan to focus on Japanese stallion nominations and the recruitment of potential runners and supporting nominator communications to enhance marketing efforts.

Industry Support

2017 industry support totaled $193,000 comprising $150,000 in dues to the National Thoroughbred Racing Association (“NTRA”) and $43,000 to the Thoroughbred Aftercare Alliance. In 2016 industry support was $239,000. The decline in industry support was attributable to a new negotiated dues rate with the NTRA.

New Business Initiatives

New business initiatives expenditures were only $2,000 since (i) most new business initiative work occurred in-house without outside expenses and (ii) a delayed launch occurred with respect to World Horse Racing. World Horse Racing is a global marketing/sponsorship joint venture among BCL, Ascot Racecourse, Goodwood, and Victoria Racing Club with the potential to also include Dubai World Cup, Horse Racing Ireland, France Galop, Hong Kong Jockey Club and Japan Racing Association. The intent of World Horse Racing is to establish a year-long global platform to cross-promote the top horse races in the world. Once this platform is established, the individual racing entities will pool intellectual property rights to generate sponsorships for World Horse Racing 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 World Horse Racing investment does not project a financial return in 2018, sponsorship revenue is projected in 2019 and beyond. Both of these expenses are anticipated to increase as BCL continues to monitor the sports-wagering environment.

Salary and Benefits

2017 salary and benefits were $4.4 million which is a negative variance of $451,000 from 2016. The increase resulted from: (i) the hiring of a Senior Director of Industry Relations to assist in racing administration, domestic Challenge Series outreach, and nominator relations; (ii) year-end bonuses due to the financial success of Del Mar; (iii) a three percent cost of living increase; and (iv) eliminating a NTRA contribution of 50% of the salary of the Senior Director of Production, which is now born 100% by BCL. Management continues to be mindful of staffing costs and has assumed internally all of the former Chief Operating Officer’s responsibilities without hiring additional staffing.

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Business Travel

2017 business travel was $559,000. While 2016 travel was $73,000 more than 2016, this increase is attributable to (i) Del Mar being a first-time venue requiring significant work in the San Diego area and (ii) increased emphasis on supporting the Challenge Series through in-person attendance at each event. Management continues to focus on minimizing travel costs through detailed planning and monitoring of compliance with travel policies.

Board Meetings and Election Related Costs

2017 board related expenses were $21,000 with a positive variance of $19,000. Decreased board expenses related to only one Board meeting occurring outside Kentucky in 2017.

General and Administrative Expenses

2017 general and administrative expenses were $1.5 million which is a negative variance of $40,000. The additional expenses included legal fees relating to trademark work and an independent investigation of rule violations in the BCBC in addition to annual rent adjustments.

Racing Integrity Coalition Expenses

2017 expenses for the racing integrity coalition are $150,000 which reflects a savings of $19,000 from 2016.

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APPENDIX

Roy JacksonBret JonesAnthony Manganaro Clem Murphy Dan PrideMike RogersW. Elliott Walden

Michael T. LevyTom LudtW. Bruce LunsfordAnthony ManganaroClem MurphyMaria Niarchos-GouazeDavid O’FarrellBill OppenheimGarrett O’RourkeJames A. Philpott, Jr.Dan PrideDr. J. David RichardsonMike RogersTom RyanBernie SamsAlex Solis IIOliver TaitW. Elliott WaldenBarry WeisbordBradley WeisbordAron WellmanDavid S. Willmot

A. BREEDERS’ CUP DIRECTORS & MEMBERS*

Breeders’ Cup Limited Members

Barbara BankeAntony BeckCraig BernickBoyd BrowningCarter CarnegieBill CasnerDoug CauthenHernan Ceriani CernadasCase ClayW.S. FarishWilliam S. Farish, Jr.Bobby FlayH. Greg GoodmanS. Walker Hancock, Jr.Carlos HellerFred W. Hertrich, IIIRoy JacksonDr. Andreas JacobsBrereton C. JonesBret JonesJohn T.L. Jones, IIISolomon Kumin

Breeders’ Cup Limited Directors

Fred W. Hertrich III (Chairman) Barbara BankeAntony R. BeckCraig BernickWilliam S. Farish, Jr. Bobby Flay Craig Fravel

Honorary Members and Past Presidents

James E. (Ted) Bassett IIID.G. Van Clief Jr.Greg Avioli

*as of FY ending 1/31/18

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APPENDIX

Executive Office

Craig FravelPresident & Chief Executive Officercraig@breederscup.com

Dora DelgadoSVP, Racing & Nominationsdora@breederscup.com

Drew FlemingSVP, Operations & Developmentdrew@breederscup.com

Bryan PettigrewSVP, Chief Marketing Officerbryan@breederscup.com

Jodie Vella-GregoryExecutive Assistant & Member Servicesjodie@breederscup.com

Racing & Nominations

Jill ByrneSenior Director, Industry Relationsjill@breederscup.com

Josh ChristianSenior Director, Racing & Nominationsjosh@breederscup.com

Erin McLaughlinManager, Racing Operations erin@breederscup.com

Barbara WebsterSenior Nominations Managerbarbie@breederscup.com

Finance/Billing

Michael NewmanVP/Treasurer/Controllermichael@breederscup.com

Tim SchramVP, Finance & Human Resourcestim@breederscup.com

Georganna LillyAssistant Controllergeorganna@breederscup.com

Kelly Winters-EstesManager, Accounts Payable/Receivablekelly@breederscup.com

Information Technology

Todd SparksVP, Information Technologytodd@breederscup.com

Corporate Partnerships, Licensing & Merchandise

Heather HigginsVP, Corporate Partnershipshhiggins@breederscup.com

Peggy GdovkaSenior Director, Corporate Partnershipspgdovka@breederscup.com

Brian O’LearySenior Manager, Corporate Partnershipsbrian@breederscup.com

Edward ErnstManager, Corporate Partnerships Salesedward@breederscup.com

Meghan WernimontCoordinator, Corporate Partnershipsmeghan@breederscup.com

B. BREEDERS’ CUP STAFF

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APPENDIX

TV, Entertainment & Marketing

Peter RotondoVP, Media & Entertainmentpeter@breederscup.com

Justin McDonaldVP, Marketing & Digital Mediajustin@breederscup.com

Stefanie PalmieriVP, Eventsstefanie@breederscup.com

Jason DondersDigital Marketing Managerjason@breederscup.com

Public Relations

Jim GlucksonMedia Relations jim@breederscup.com

Ticketing & Operations

Brandy StoeckingerVP, Ticketing & Venue Operationsbrandy@breederscup.com

Stephanie BoothSenior Manager, Ticketing and Customer Servicestephanie@breederscup.com

Amy LaskyDirector, Event Operationsamy@breederscup.com

Art Department

Gemma ParentiArt Directorgemma@breederscup.com

Fred Vickers Senior Director of Productionfvickers@breederscup.com

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APPENDIX

C. 2018 BREEDERS’ CUP NORTH AMERICAN CHALLENGE SERIES SCHEDULE

Race Date* Race Name Track City Breeders’ Cup Division5/28/18 Shoemaker Mile Santa Anita Park Arcadia, California Mile6/9/18 Runhappy Metropolitan Belmont Park Elmont, New York Dirt Mile6/9/18 Ogden Phipps Belmont Park Elmont, New York Longines Distaff6/9/18 Jaipur Inv. Belmont Park Elmont, New York Turf Sprint6/16/18 Stephen Foster Churchill Downs Louisville, Kentucky Classic6/16/18 Fleur de Lis Churchill Downs Louisville, Kentucky Longines Distaff6/30/18 Princess Rooney Gulfstream Park Hallandale Beach, Florida Filly & Mare Sprint6/30/18 Highlander Woodbine Toronto, Canada Turf Sprint7/7/18 Belmont Sprint Championship Belmont Park Elmont, New York TwinSpires Sprint7/28/18 Bing Crosby Del Mar Thoroughbred Club Del Mar, California TwinSpires Sprint7/29/18 Clement L. Hirsch Del Mar Thoroughbred Club Del Mar, California Longines Distaff7/29/18 Betfair.com Haskell Inv. Monmouth Park Oceanport, New Jersey Classic8/4/18 Whitney Saratoga Race Course Saratoga Springs, New York Classic8/11/18 Beverly D. Arlington Park Arlington Heights, Illinois Filly & Mare Turf8/11/18 Arlington Million Arlington Park Arlington Heights, Illinois Longines Turf8/18/18 TVG Pacific Classic Del Mar Thoroughbred Club Del Mar, California Classic8/18/18 Del Mar Handicap Del Mar Thoroughbred Club Del Mar, California Longines Turf8/25/18 Pat O’Brien Del Mar Thoroughbred Club Del Mar, California Dirt Mile8/25/18 Personal Ensign Saratoga Race Course Saratoga Springs, New York Longines Distaff8/25/18 Ketel One Ballerina Saratoga Race Course Saratoga Springs, New York Filly & Mare Sprint8/25/18 Forego Saratoga Race Course Saratoga Springs, New York Dirt Mile8/25/18 Sword Dancer Inv. Saratoga Race Course Saratoga Springs, New York Longines Turf9/1/18 Spinaway Saratoga Race Course Saratoga Springs, New York Juvenile Fillies9/15/18 Iroquois Churchill Downs Louisville, Kentucky Sentient Jet Juvenile9/15/18 Pocahontas Churchill Downs Louisville, Kentucky Juvenile Fillies9/15/18 Ricoh Woodbine Mile Woodbine Racetrack Toronto, Canada Mile9/16/18 Natalma Woodbine Racetrack Toronto, Canada Juvenile Fillies Turf9/16/18 Summer Woodbine Racetrack Toronto, Canada Juvenile Turf9/29/18 Vosburgh Inv. Belmont Park Elmont, New York TwinSpires Sprint9/29/18 Joe Hirsch Turf Classic Inv. Belmont Park Elmont, New York Longines Turf9/29/18 Jockey Club Gold Cup Inv. Belmont Park Elmont, New York Classic9/29/18 Awesome Again Santa Anita Park Arcadia, California Classic9/29/18 Zenyatta Santa Anita Park Arcadia, California Longines Distaff9/29/18 Rodeo Drive Santa Anita Park Arcadia, California Filly & Mare Turf9/29/18 FrontRunner Santa Anita Park Arcadia, California Sentient Jet Juvenile9/29/18 Chandelier Santa Anita Park Arcadia, California Juvenile Fillies10/5/18 Darley Alcibiades Keeneland Lexington, Kentucky Juvenile Fillies10/5/18 Stoll Keenon Ogden Phoenix Keeneland Lexington, Kentucky TwinSpires Sprint10/6/18 Frizette Belmont Park Elmont, New York Juvenile Fillies10/6/18 The Futurity Belmont Park Elmont, New York Juvenile Turf Sprint10/6/18 TBD Santa Anita Park Arcadia, California Juvenile Turf Sprint10/6/18 First Lady Keeneland Lexington, Kentucky Filly & Mare Turf10/6/18 Thoroughbred Club of America Keeneland Lexington, Kentucky Filly & Mare Sprint10/6/18 Claiborne Breeders’ Futurity Keeneland Lexington, Kentucky Sentient Jet Juvenile10/6/18 Shadwell Turf Mile Keeneland Lexington, Kentucky Mile10/6/18 Santa Anita Sprint Championship Santa Anita Park Arcadia, California TwinSpires Sprint10/7/18 Flower Bowl Invitational Belmont Park Elmont, New York Filly & Mare Turf10/7/18 Champagne Belmont Park Elmont, New York Sentient Jet Juvenile10/7/18 Juddmonte Spinster Keeneland Lexington, Kentucky Longines Distaff10/7/18 Dixiana Bourbon Keeneland Lexington, Kentucky Juvenile Turf10/7/18 Indian Summer Stakes Keeneland Lexington, Kentucky Juvenile Turf Sprint10/10/18 JPMorgan Chase Jessamine Keeneland Lexington, Kentucky Juvenile Fillies Turf

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APPENDIX

D. 2018 BREEDERS’ CUP INTERNATIONAL CHALLENGE SERIES SCHEDULE

*Dates are tentative and subject to change.

Race Date* Race Name Track City Breeders’ Cup Division1/6/18 Cartier Paddock Stakes Kenilworth Racecourse Cape Town, South Africa Filly & Mare Turf

1/6/18 L’Ormarins Queen’s Plate Kenilworth Racecourse Cape Town, South Africa Mile

2/18/18 February S. Tokyo Racecourse Tokyo, Japan Mile

4/7/18 The Star Doncaster Mile Randwick Racecourse Sydney, Australia Mile

4/14/18 Coolmore Legacy Stakes Randwick Racecourse Sydney, Australia Filly & Mare Turf

5/1/18 Gran Premio Criadores Hipodromo Argentino de Palermo Buenos Aires, Argentina Longines Distaff

5/21/18 Gran Premio Club Hipico Falabella Club Hipico de Santiago Santiago, Chile Mile

5/25/18 Gran Premio 25 de Mayo Hipodromo de San Isidro Buenos Aires, Argentina Longines Turf

6/3/18 Yasuda Kinen Tokyo Racecourse Tokyo, Japan Mile

6/10/18 Grande Premio Brasil Hipodromo da Gavea Rio de Janeiro, Brazil Longines Turf

6/19/18 Queen Anne Stakes Ascot Racecourse Ascot, England Mile

6/20/18 Prince of Wales’s Stakes Ascot Racecourse Ascot, England Longines Turf

6/21/18 Norfolk Stakes Ascot Racecourse Ascot, England Juvenile Turf Sprint

6/23/18 Diamond Jubilee Stakes Ascot Racecourse Ascot, England Turf Sprint

6/24/18 Gran Premio Pamplona Hipdromo de Monterrico Lima, Peru Filly & Mare Turf

6/24/18 Takarazuka Kinen Hanshin Racecourse Osaka, Japan Longines Turf

7/28/18 King George VI & Queen Elizabeth Stakes Ascot Racecourse Ascot, England Longines Turf sponsored by QIPCO

8/1/18 Qatar Sussex Stakes Goodwood Racecourse Chichester, England Mile

8/12/18 Prix du Haras de Fresnay-Le Buffard Deauville Racecourse Deauville, France Mile Jacques Le Marois

8/22/18 Juddmonte International Stakes York Racecourse York, England Longines Turf

8/23/18 Darley Yorkshire Oaks York Racecourse York, England Filly & Mare Turf

8/24/18 Coolmore Nunthorpe Stakes York Racecourse York, England Turf Sprint

9/15/18 The Coolmore Matron Stakes Leopardstown Racecourse Dublin, Ireland Filly & Mare Turf

9/15/18 QIPCO Irish Champion Stakes Leopardstown Racecourse Dublin, Ireland Longines Turf

9/15/18 Willis Champions Juvenile Stakes Leopardstown Racecourse Dublin, Ireland Juvenile Turf

9/16/18 Moyglare Stud Stakes Curragh Racecourse Kildare, Ireland Juvenile Fillies Turf

9/16/18 Derrinstown Stud Flying Five Stakes Curragh Racecourse Kildare, Ireland Turf Sprint

9/28/18 Shadwell Rockfel Newmarket Racecourse Newmarket, England Juvenile Fillies Turf

9/29/18 Juddmonte Royal Lodge Newmarket Racecourse Newmarket, England Juvenile Turf

9/30/18 Sprinters Stakes Nakayama Racecourse Tokyo, Japan Turf Sprint

10/7/18 Longines Prix de L’Opera ParisLongchamp Paris, France Filly & Mare Turf

10/7/18 Qatar Prix Jean-Luc Lagardere ParisLongchamp Paris, France Juvenile Turf

10/7/18 Total Prix Marcel Boussac ParisLongchamp Paris, France Juvenile Fillies Turf

37

APPENDIX

E. 2018 BREEDERS’ CUP CHALLENGE SERIES TELEVISION SCHEDULE

*Denotes non-Challenge race

Date Network Time Event Track Breeders’ Cup Division

Saturday, 3:00pm Runhappy Metropolitan Mile Belmont Park Dirt Mile June 9 Ogden Phipps Longines Distaff Jaipur Inv. Turf Sprint Saturday, 8:30pm - 10:00pm Stephen Foster Churchill Downs Classic June 16 Fleur De Lis Longines Distaff

Royal AscotTues., June 19 9:30am - 1:00pm Queen Anne Stakes Ascot Racecourse Mile Wed., June 20 9:30am - 1:00pm Prince of Wales’s Stakes Longines Turf Thurs., June 21 9:30am - 1:00pm Norfolk Stakes Juvenile Turf Sprint

Sat., June 23 9:30am - 1:00pm Diamond Jubilee Stakes Turf Sprint Saturday, 4:30pm - 6:00pm Belmont Sprint Championship Belmont Park TwinSpires SprintJuly 7 Belmont Oaks Inv.* F/M Turf Suburban* Classic Sunday, 5:00pm - 6:00pm Betfair.com Haskell Inv. Monmouth Park ClassicJuly 29 Saturday, 5:00pm - 6:00pm Whitney Saratoga Race Course ClassicAugust 4 Longines Test F/M Sprint Saturday, 6:30-7:30pm Arlington Million Arlington Park Longines TurfAugust 11 Beverly D. F/M Turf

Saturday, 4:00pm - 6:00pm Travers* Saratoga Race Course ClassicAugust 25 Sword Dancer Inv. Longines Turf Saturday, 5:00-6:00pm Woodward* Saratoga Race Course ClassicSeptember 1 or 6:00-7:00pm Spinaway Juvenile Fillies Saturday, 7:00pm - 9:00pm Super Saturday from Santa Anita Santa Anita ClassicSeptember 29 featuring the Awesome Again Saturday, 4:30pm - 6:00pm Claiborne Breeders’ Futurity Keeneland Race Course Sentient Jet Juv.October 6 Shadwell Turf Mile Mile Sunday, 4:30pm - 6:00pm Dixiana Bourbon Keeneland Race Course Juvenile TurfOctober 7 Juddmonte Spinster Longines Distaff Friday, 3:00pm - 7:00pm Championship Friday Churchill DownsNovember 2 Saturday, 1:00pm - 3:30pm Championship Saturday Churchill DownsNovember 3 Saturday, 3:30pm - 6:00pm Breeders’ Cup Classic Churchill Downs November 3

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