Occidental Thoroughbreds 2007 Investment Fund, LLC

Number of Units                                               40    
Cost per Unit:                                          $50,000
Total Pool Maximum:                         $2,000,000
Minimum Pool:                                   $   750,000
Minimum Number of Units:                                1

Managed by:             

Occidental Thoroughbreds Management Company LLC

Objective:                   

To purchase select mares in the $100,000 - $300,000 range and to sell their offspring, generally as yearlings, over a three year period. The fund may also invest in weanlings, race mares, and open mares.

Expenses:                   

The Manager is authorized to pay all reasonable expenses incurred in buying, keeping, and selling the horses in this package.  These expenses include boarding, insurance, veterinary, transportation, and commissions, and may be provided by the Manager, or affiliates, at its customary rates.  To the extent that pool money is not available to pay expenses, each member shall be billed quarterly for additional expenses. 

Distributions:             

The Manager has the sole discretion to distribute excess returns and gains.  Distributions will not occur any more frequently than yearly.

Management fee:       

The Manager shall receive 20% of all profit made after the investors are paid back for initial investment and upkeep charges.  The Manager may also act as buying and/or selling agent and receive its customary commission (5%) for such services.  The Manager will also get a management fee each year equal to 2.0% of the initial investment pool

Dissolution:                

The Fund shall dissolve once the last horse is sold but in no case will the term of the investment exceed 4 years.

For additional information please contact Andre Regard at (859) 533-0781 or aregard@aol.com.

Occidental Thoroughbreds 2007 Investment Fund, LLC : Market Assessment

The thoroughbred market is under expansion pressure and positive appreciation momentum due to various factors such as increased purses at tracks, new owner participation, and growth as a spectator sport. Fueling this momentum are several recent examples of new investors in the industry having great success, such as the owners of FUNNY CIDE and AFLEET ALEX. Even the popularity of the book and film, Seabiscuit, is believed to be spurring this appreciation. This has equated to an increased demand for race horses and breeding stock. Sales at Keeneland in Lexington, Kentucky, which is the world’s premier thoroughbred sales company, have seen a 44% increase in yearling prices and 95% increase in mare prices over the last 5 years, indicating a strong growth opportunity. In total, yearlings sold for $561 Million last year and mares sold for $370 Million. This is combined growth of $350 Million in sales over this period. In addition, over the last five years the U.S. spectator base of the sport has increased over 19%, to a total of 78.5 million adults. Much of the new participation in the racing side of the business has come through public partnerships that are in nascent stages relative to other ownership categories but are having the effect of broadening the market with new owners. Many of these partnerships and racing stables in general, acquire the bulk of their racing stock at the yearling sales. Because these partnerships do not breed horses their additional participation in the industry is creating a greater demand for yearlings to race.

Over the last three years the greatest growth has been in the top 20% of the market, which is referred to as the select sales. The top 20% has generated 80-85% of the revenue over this period in each year. In 2007 the average price of a Keeneland Yearling was $101,300. However, a top 20% yearling averaged $211,350. Likewise, the average price of a Keeneland Mare was $126,800 but a top 20% mare was $294,250. When fixed costs such as board and veterinarian cost (which run about $10,000 per year, per horse), are taken into account, it is clear that there is greater opportunity to leverage fixed costs at the higher end of the market.

Opportunity

In order to exploit current market conditions and participate in breeding and selling potential select quality horses, the Occidental Thoroughbreds 2007 Investment Fund, LLC (the “Company”) has been formed. The Company will establish a pooled investment of $2,000,000 that will allow for the purchase of approximately 12 mares at an average value of $200,000. Through careful diversification and selection, it is anticipated that the Company will generate returns that average in excess of 25% per year over the life of the fund, which is limited to 3 years. The Fund may also selectively invest in weanlings, racemares, and open mares.

Strategy and Management

Many purchasers of thoroughbreds act on emotion, luck, and instinct in order to try to hit “homeruns.” However, careful market analysis shows that a strict discipline focused on selecting pedigree, stud fee ratio analysis and confirmation produces select yearlings that yield solid investment returns. In essence, our strategy focuses on a series of base hits in the 20% to 30% annualized return range with some occasional opportunity for a homerun.

The manager of the Company is Occidental Thoroughbreds Management Company. Andre and Trish Regard will handle the day to day business of the Company for the Manager. Andre has been involved with the thoroughbred business since 1995. Trish is a life-long horsewoman who will assist in selecting the horses and handle the day-to-day husbandry of the horses. In addition, Trish is also on the cutting edge on new techniques for raising thoroughbreds and preparing them for racing. Andre and Trish, through their bloodstock advisory business, Occidental Thoroughbreds, have been involved in over $12,000,000 of transactions over the last 5 years. They have bred horses that have sold for as much as $420,000 and pinhooked a $27,000 purchase into a $660,000 sale. In addition, they have bred six stakes horses over the last 4 years. A similar fund managed by Occidental Thoroughbreds, which dissolved in December 2007, resulted in a two year return of 32% for the investors. Advisors to the Company include leading veterinarians, a nutritionist, farriers, and other industry experts. The business will be based in Bourbon County, Kentucky, the center of the international thoroughbred business.

Specific Program

The Company is selling up to 40 Investment Units for $50,000 each. The fund will close by June 2008. Beginning in November of 2007, the Company will purchase various mares and weanlings. The majority of offspring will be sold in the yearling sales with some horses sold as weanlings. The Company does not intend to sell mares until liquidation. Cash distributions are anticipated as early as the second year of the fund. The Manager will get an annual fee equal to 2% of the total pool raised and 20% of the profit after the investors are paid out entirely. In addition, the Manager may charge the Company other reasonable fees in accordance with industry practice and standards. Total liquidation and distribution of all appreciated proceeds of the Company is planned for March 2011.

Proforma

Limited Downside. Because the Company has multiple horses and the ability to sell and purchase horses throughout the life of the fund based on their performance, the likelihood of a complete loss of capital is significantly mitigated.