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1. INTRODUCTION For the last several years, we at Dutchess Views Farm have been purchasing mares that would genetically and physically match our stallions. We feel that the thoroughbred business and in particular the breeding business is at a point where, if approached correctly, it could be profitable and enjoyable. We also believe that the business has not yet reached its highest. The technology of the Internet and the daily nationwide simulcasting of racing are bringing more and more people to the thoroughbred world as new active participants in the business. It is also increasing the total purse money available to owners of winning horses. The beneficial effect that alternative gaming at racetracks has on state Thoroughbred was affirmed beginning in 2004, according to statistics contained in The Jockey Club Online Fact Book. Both overall purse money and overall auction sales of thoroughbreds were both over the $1 Billion level for the first time in history. According to The Jockey Club statistics available purse money in the U.S. reached a record $1,092,085,465 in 2004. Statistics in the "Sales" section reflect the improving American economy, favorable tax-code revisions and the strength for foreign currencies against the U.S. dollar which helped drive increased participation by foreign buyers. Gross sales in 2004 increased 23.3% to a record $1,055,132,219, led by a 29.2% gain in gross sales of broodmares. These sales gains have continued in 2005 and 2006. This flow of people has injected an enormous amount of capital to the industry through the racetracks, sales rings, advertising, sponsoring etc. Some of that money is being returned to the breeders and owners of thoroughbred horses in every state. The State of New York in particular, through the New York Thoroughbred Breeding and Development Fund and the New York Racing Association, has designed several different programs to benefit the breeders and owners of race horses that have been bred in New York and are racing in the state. New York offers a bonus to the breeders of state bred horses that amounts to 20% of the purse money that those horses make while running in New York, plus another 20% extra for their owners and 7% for the owner of the stallion at time of breeding. The NYRA has also announced that is going to increase the purse money reserved for New York bred horses. The increase in purses is showing its effects in the public auctions of broodmares, yearlings, weanlings and two-year-olds all over the country. The average price of horses sold at public auction was up various sales throughout the world. The trend in 2006 and for 2007 seems to continue its upswing and the forecast seems bright. With the intention of getting a share of those profits in the State of New York, we purchase mares that we think fit very well in the local market. Some of them have been acquired at public auction and some privately, some in foal and some ready to be bred. Each of the mares have the same common denominators: a good female family; a match with our stallions' pedigrees; and purchase prices that we believe are below the market price. Introduction
2. GOALS Our plan is to co-own the mares with others who will have the opportunity of benefiting from any income that any of the horses involved may generate either from sale proceeds, breeders awards, bonuses, purses or any other source in accordance with his or her participation. Each owner will own a minimum of 25% of a horse. The main idea behind the plan, besides breeding horses that would qualify as New York bred and earn awards, is to hope that the value of the mares themselves increases as time goes by and that when the moment of selling arrives, they will be more valuable than they are now. Although the horse business is a very risky business and there is no guarantee that the value of the mares in this co-ownership will increase, we at Dutchess Views have accumulated enough experience in the trade, that we feel confident that our process of selection and management of the mares will eventually pay off. From the legal point of view, these plans are also being structured so that each co-owner could personally, during its duration, take advantage of all the tax deductions that the law provides for owners and breeders of race horses. Introduction
3. MANAGEMENT Dutchess Views will, in consultation with all the owners, carry out the everyday decisions involving the horses as well as those that involve the breeding and mating of each mare. All major decisions are made by majority vote. Dutchess Views will consult with each owner when it comes time to enter any horse in a public sale or when an offer has been received privately. Each of the owners will be free to bid on their own behalf or to match any private offer that has been made for any particular mare, weanling or yearling at any given time. Dutchess Views will provide all necessary accounting and each one of the owners will be entitled to receive a monthly statement reflecting cash flow and balance. They will also receive a yearly profit and loss statement that will reflect the status of the finances at the end of each. In addition to that, Dutchess Views will also keep all the necessary books and records and they shall be open for inspection by any owner at any time during the lifetime of the plan. Dutchess Views will not charge a management fee. It is our philosophy that we would rather own 25% of many mares than 100% of a few. We feel it is best to own the highest quality horses you can afford. Since our resources are limited compared to the very wealthy horse owners with whom we compete, we are trying to leverage our expertise and diversify our risks. We also benefit by keeping these horses boarding on our farm and by writing the mortality insurance. Introduction
4. GENERAL BUSINESS PLAN Each mare is a separate plan. This allows prospective owners to pick and choose one or more horses. Dutchess Views Farm will retain a minimum 25% interest on each mare. Each owner will own a minimum of 25% of each horse. At the time of offering the co-ownership interests in each horse the initial value at inception, plus the cost of keeping the horses thereafter will be included as part of the initial investment. Thereafter, expenses will be paid monthly in arrears. The owners will decide when and where to sell any foals each year and all income will be distributed quarterly. Alternatively, the owners may decide to race the foals. They would then be eligible for up to 47% in bonuses on top of purses actually won. Unless the owners elect to terminate the plan earlier, the duration of the plan will continue for 3 years. At this time all the horses owned will be entered for sale at a public auction. By this time the foals that the mares are carrying right now and are to be born next year will have reached the age of 3 and should have had enough time to have proved themselves as race horses at the track; by then all the owners will be entitled to their share of the purses they may earn as race horses and that the New York Breeders Association awards to the breeders of the horses foaled in New York. Every one of the foals that the mares would have had every year until then, will be eligible to earn this percentage of the purses, regardless of who ultimately owns them as race horses; once they are born, the owners are entitled to the awards as the breeder. Introduction
5. CO-OWNERSHIP HORSES Contact us and we will provide you with the horses currently available for co-ownership. They range in price from $10,000 to $50,000, so individual co-ownership interests range in price from $2,500 to $12,500 per horse.
Financials Example
*(slightly higher for horses less than 6 mos or over 12 yrs)
*(Please note that once a foal is weaned it is charged the full daily boarding rate)
Introduction
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