As filed with the Securities and Exchange Commission on December 8, 2011
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-22358
Rochdale Structured Claims Fixed Income Fund, LLC
(Exact name of registrant as specified in charter)
570 Lexington Avenue
New York, New York 10022-6837
(Address of principal executive offices) (Zip code)
Kurt Hawkesworth
570 Lexington Avenue
New York, New York 10022-6837
(Name and address of agent for service)
212-702-3500
Registrant's telephone number, including area code
Date of fiscal year end: September 30
Date of reporting period: September 30, 2011
Item 1. Reports to Stockholders.
Rochdale Structured Claims Fixed Income Fund (RSCFIF)
Annual Report
September 30, 2011
Dear Fellow Shareholders,
The Rochdale Structured Claims Fixed Income Fund ("RSCFIF" or the "Fund") offers an opportunity for portfolio diversification through an investment in a pool of structured legal settlements with an investment objective that seeks safety of principal and above average current income. The Fund is collateralized by a note secured by cash flows from a diversified pool of annuities, purchased to cover structured legal settlements that have been acquired through a formal legal process from the claimants. Investment returns are generated by the interest income of cash flow payments received from each underlying annuity.
Despite quite a bit of market volatility, the Fund returned its expected 7% yield for the year ended September 30, 2011. In addition, the Fund received monthly distributions of capital payments consistent with the planned cash flows during the period.
With risks to the U.S. economic outlook high and ongoing worries over European growth and sovereign debt, we expect the fixed income market will continue to be volatile going forward. Though the fundamentals across a number of fixed income sectors remain relatively attractive, the challenge for investors against this uncertain backdrop is how to earn more from their fixed income portfolios without taking on too much risk. In our minds, U.S. Treasuries, although nominally safe, are paying too low of a yield due to the policy actions taken by the Federal Reserve. The alternative however requires taking more credit risk at a time when economic growth may be faltering.
In light of this, we believe the expected stability and known values of RSCFIF’s cash flows makes the Fund an ideal fixed income holding for such uncertain times. Compared to equivalent fixed income or annuities, the 7% fixed yield from RSCFIF provides above average levels of current income with low volatility and strong credit quality. In addition, although we do not see inflation as being a significant risk over the next 12 months, should it occur, a solid cash flowing investment like RSCFIF is likely to generate a relatively good yield after inflation.
Overall, the advantage of RSCFIF lies in preservation of principal, reliability of cash flows, and the high yield it brings to a portfolio. The Fund is backed by well-diversified, investment grade insurance companies, which are, in our view, highly secured. Furthermore, we believe during volatile equity market periods such as we are currently experiencing, the addition of stable non-equity, non-traditional investments has the added benefit of providing significant diversification benefits to a portfolio.
570 Lexington Avenue, New York, NY 10022-6837 | Tel. 800-245-9888/212-702-3500 | Fax 212-702-3535 | www.rochdale.com
San Francisco | Orlando | Dallas | Richmond
Sincerely,
Garrett R. D’Alessandro, CFA, CAIA, AIF®
Chief Executive Officer & President
Rochdale Investment Management LLC
Important Disclosures
Performance quoted represents past performance and is unaudited. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. The most recent month-end performance can be obtained by calling 800-245-9800.
An investor should consider carefully the Fund’s investment objectives, risks, charges, and expenses. The Private Offering Memorandum contains this and other important information about the investment company, and it may be obtained by calling 800-245-9800. Please read it carefully before investing. RIM Securities LLC, the affiliated broker dealer for Rochdale Investment Management LLC and the Distributor of the Fund, 570 Lexington Avenue, New York, NY 10022.
The views expressed herein represent the opinions of Rochdale Investment Management and are subject to change without notice at anytime. This information should not in any way be construed to be investment, financial, tax, or legal advice or other professional advice or service, and should not be relied on in making any investment or other decisions.
As with all investment strategies, there are risks associated with its implementation. Applicable risks include, but are not limited to, market risk, inflation risk, credit risk, and government policy risk. There is no guarantee that investment objectives will be met and the entire investment may be lost.
Rochdale Structured Claims Fixed Income Fund is considered a long term investment with limited liquidity and should not be invested in by investors whose objectives conflict with these characteristics. The limited liquidity of the Fund, due to the absence of a public market and a current investor’s limited transfer options to other investors, results in the lack of available market prices during the life of the Fund. Valuation will be provided as detailed in the Private Offering Memorandum and may be inaccurate and may also affect the value and expenses of the Fund. The Fund invests in a single issuer note, making it a non-diversified fund and more susceptible than a diversified fund to any single economic, financial, insurance industry, political or regulatory occurrence that may affect annuities, insurance companies or the Special Purpose Entity (“SPE”) structure. Performance and likelihood of future payments depend on factors such as the business standing of the SPE and its affiliates, the insurance companies, ratings of the insurer, federal and state regulation as well as human error during the transfer process.
570 Lexington Avenue, New York, NY 10022-6837 | Tel. 800-245-9888/212-702-3500 | Fax 212-702-3535 | www.rochdale.com
San Francisco | Orlando | Dallas | Richmond
Rochdale Structured Claims Fixed Income Fund, LLC
Annual Report
September 30, 2011
Rochdale Structured Claims Fixed Income Fund, LLC
Annual Report
September 30, 2011
TABLE OF CONTENTS | |
Page | |
Report of Independent Registered Public Accounting Firm | |
Financial Statements | |
Statement of Net Assets | 2 |
Statement of Operations | 3 |
Statement of Changes in Members' Capital | 4 |
Statement of Cash Flows | 5 |
Notes to Financial Statements | 6-14 |
Financial Highlights | 15 |
Investment Breakdown | 16 |
Manager and Officer Information | |
Approval of Investment Advisory Agreement | |
Additional Information |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and
Board of Managers of
Rochdale Investment Management LLC
We have audited the accompanying statement of net assets of the Rochdale Structured Claims Fixed Income Fund, LLC, a series of Rochdale Investment Management LLC (the “Fund”), as of September 30, 2011, including the related statement of operations for the year then ended, the statements of changes in members’ capital for the year then ended and the period February 24, 2010 (commencement of operations) through September 30, 2010, the statement of cash flows for the year then ended, and the financial highlights for the year then ended and the period February 24, 2010 through September 30, 2010. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2011, by correspondence with the custodian. As described in Note 2, the Fund has a restricted security, representing 100% of the Fund’s net assets that does not have market quotations readily available and are valued at their fair value as determined in good faith using procedures established by the Board of Managers. Amounts ultimately realized from the disposal of such restricted security may vary significantly from the fair values presented. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Rochdale Structured Claims Fixed Income Fund, LLC, as of September 30, 2011, and the results of its operations for the year then ended, the changes in members’ capital for the year then ended and the period February 24, 2010 through September 30, 2010, its cash flows for the year then ended, and the financial highlights for the year then ended, and the period February 24, 2010 through September 30, 2010, in conformity with accounting principles generally accepted in the United States of America.
Philadelphia, Pennsylvania
November 28, 2011
Rochdale Structured Claims Fixed Income Fund, LLC
STATEMENT OF NET ASSETS
September 30, 2011
ASSETS: | |||
Investments in Securities: 101.5% | |||
Asset Backed Security: 100.5% | |||
Crescit Eundo Finance I, LLC Note, 8.10%, Series 2009-A, | $ | 36,424,662 | |
February 15, 2040;(1)(2) at value (cost $36,424,662) | |||
Short-Term Investments: 1.0% | |||
First American Government Obligations Fund, 0.00%(3) (cost $371,550) | 371,550 | ||
Total Investments in Securities (cost $36,796,212)(4) | 36,796,212 | ||
Interest receivable | 131,129 | ||
Prepaid expenses | 21,496 | ||
Total assets | 36,948,837 | ||
LIABILITIES: | |||
Distribution payable | 324,011 | ||
Payable to Advisor(5) | 297,914 | ||
Accrued expenses and other liabilities | 61,073 | ||
Total liabilities | 682,998 | ||
NET ASSETS | $ | 36,265,839 | |
ANALYSIS OF NET ASSETS | |||
TOTAL MEMBERS' PAID IN CAPITAL | $ | 36,265,839 | |
Capital Units outstanding | |||
(Unlimited number of Units authorized, no par value) | 39,006 | ||
Net asset value, offering and redemption | |||
price per Unit (net assets/Units outstanding) | $ | 929.76 | |
(1) Illiquid security. | |||
(2) Fair valued by Valuation Committee as delegated by the Fund's Board of Managers. | |||
(3) 7-Day yield. | |||
(4) Tax cost of investments is the same. | |||
(5) Includes offering costs payable which the Advisor paid on behalf of the Fund. |
The accompanying notes are an integral part of these financial statements.
2
Rochdale Structured Claims Fixed Income Fund, LLC
STATEMENT OF OPERATIONS
Year Ended September 30, 2011
INVESTMENT INCOME: | |||
Interest Income | $ | 3,043,772 | |
EXPENSES: | |||
Advisory fees | 93,792 | ||
Service fees | 93,792 | ||
Fund accounting and fund administration fees | 101,958 | ||
Registration expense | 6,312 | ||
Audit fees | 36,030 | ||
Custody fees | 3,200 | ||
Legal fees | 32,950 | ||
Directors fees | 19,500 | ||
Insurance expense | 6,432 | ||
Printing and mailing | 3,900 | ||
Miscellaneous | 1,650 | ||
Total Expenses | 399,516 | ||
Add expenses recouped (see Note 4) | 125,720 | ||
Net Expenses | 525,236 | ||
NET INVESTMENT INCOME | $ | 2,518,536 |
The accompanying notes are an integral part of these financial statements.
3
Rochdale Structured Claims Fixed Income Fund, LLC
STATEMENT OF CHANGES IN MEMBERS' CAPITAL
Year Ended September 30, 2011 | Period from February 24, 2010* through September 30, 2010 | |||||
FROM OPERATIONS | ||||||
Net investment income | ||||||
Net Increase in Members' Capital Resulting From Operations | $ | 2,518,536 | $ | 1,599,035 | ||
2,518,536 | 1,599,035 | |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||
From net investment income | ||||||
From return of capital | (2,518,536 | ) | (1,599,035 | ) | ||
Total distributions to members | (1,955,139 | ) | (515,761 | ) | ||
(4,473,675 | ) | (2,114,796 | ) | |||
INCREASE FROM TRANSACTIONS IN MEMBERS' CAPITAL | ||||||
Proceeds from sales of members' capital units | ||||||
Payments for purchases of members' interests | 500,000 | 38,904,187 | ||||
Offering costs | (498,561 | ) | - | |||
Net proceeds of Members' capital units | - | (268,887 | ) | |||
Total increase (decrease) in Members' Capital | 1,439 | 38,635,300 | ||||
(1,953,700 | ) | 38,119,539 | ||||
MEMBERS' CAPITAL | ||||||
Beginning of period | ||||||
End of period | 38,219,539 | 100,000 | ||||
$ | 36,265,839 | $ | 38,219,539 | |||
* Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
4
Rochdale Structured Claims Fixed Income Fund, LLC
STATEMENT OF CASH FLOWS
Year Ended September 30, 2011
CASH FLOW FROM OPERATING ACTIVITIES | |||
Net increase in members' capital resulting from operations | $ | 2,518,536 | |
Adjustments to reconcile net increase in members' capital | |||
resulting from operations to net cash from operating activities | |||
Principal repayment of note receivable | 1,918,699 | ||
Change in operating assets and liabilities | |||
Interest receivable | 6,989 | ||
Prepaid expenses | (9,506 | ) | |
Payable to Advisor(1) | (26,354 | ) | |
Accrued expenses and other liabilities | (71,954 | ) | |
Net cash from operating activities | 4,336,410 | ||
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from sales of members' capital units | 500,000 | ||
Capital withdrawals | (498,561 | ) | |
Distributions | (4,375,243 | ) | |
Net cash used in financing activities | (4,373,804 | ) | |
Net change in cash and cash equivalents | (37,394 | ) | |
CASH AND CASH EQUIVALENTS | |||
Beginning of year | 408,944 | ||
End of year | $ | 371,550 |
(1) | Includes offering costs payable which the Advisor paid on behalf of the Fund. |
The accompanying notes are an integral part of these financial statements.
5
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
1. | Organization |
Rochdale Structured Claims Fixed Income Fund, LLC (the "Fund") is a Delaware limited liability company registered under the Investment Company Act of 1940, as amended, as a closed-end, non-diversified, management investment company. The Fund’s investment objective is to seek a steady level of current income with low volatility through investment in promissory notes secured by interests in receivables from insurance companies related to structured settlements. |
Rochdale Investment Management LLC (the “Advisor” or “Rochdale”) is an investment advisor registered under the Investment Advisers Act of 1940, as amended, to serve as the Advisor for the Fund. |
Each Member must certify that they are a qualified investor or “accredited investor” under Federal securities law and subscribe for a minimum initial investment in the Fund of $25,000. Brokers selling units may establish higher minimum investment requirements than the Fund and may independently charge transaction fees and additional amounts in return for their services in addition to receiving a portion of the sales charge. The Fund is an illiquid investment and no Member will have the right to require the Fund to redeem its units. The existence of the Fund is not expected to be perpetual, but will instead be self-liquidating over time or sold, with an expected life of between seven and fifteen years from inception. |
2. | Significant Accounting Policies |
The following accounting policies are in accordance with accounting principles generally accepted in the United States and are consistently followed by the Fund. |
Security Valuation |
The Fund invested substantially all of its investable assets in the 8.10% Fixed Rate Note, Series 2009-A, which is represented by one certificate (“Note”) issued by a special purpose entity, Crescit Eundo Finance I, LLC. |
The value of the collateral underlying the Note depends on a number of factors unique to the structured settlement industry. These include, but are not limited to, the nature and quality of the underlying settlements; the ratings and creditworthiness of the annuity providers who are obligated under the terms of the underlying settlements, the terms which are, in turn, subject to court orders (or acknowledgment letters in the case of owned annuities) to remit payments to entities, including Settlement Funding, LLC, that are wholly-owned by Peach Holdings, LLC; the physical security of the documents that evidence the underlying settlements; and the extent to which the Fund may be assured that the Fund’s security interest in the collateral is properly perfected in accordance with the protections afforded secured creditors under Article 9 of the Uniform Commercial Code. |
6
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
2. | Significant Accounting Policies (continued) Security Valuation (continued) |
The Fund’s Board has approved fair value procedures pursuant to which the Fund will value its investment in the Note. The fair value procedures recognize that the Note is illiquid and that no market currently exists for it, save for the potential that the Advisor may be able to effect a negotiated sale of the Note held by the Fund. The valuation shall be updated no less frequently than quarterly. These updates shall be based on various factors, as deemed appropriate by the Pricing Committee, including without limitation, the following: |
(i) | Comparisons with other fixed income opportunities available in the credit markets and spreads, on a risk adjusted basis such as, without limitation: |
(a) | Swap rates: the variable rate available in a swap contract for the fixed rate payable under the Portfolio Note; |
(b) | Interest Rates: the Fed Funds rate (i.e. that amount the Federal Reserve charges banks for overnight borrowing) and other prevailing interest rates in the U.S.; |
(c) | Credit Ratings: the weighted average rating of the Annuity Providers issuing the annuity contracts which constitute the Receivables; and |
(d) | Subjective Factors: relative liquidity, creditworthiness and underlying collateral. |
(ii) | Information obtained by the Advisor from the issuer of the Portfolio Notes relating to the financial position of such issuer and relevant affiliates; |
(iii) | Cash flows payable by Annuity Providers under the Transaction Related Agreements; |
(iv) | Credit Ratings assigned to the various Annuity Providers; |
(v) | The occurrence of any significant market or company specific event that may affect the issuer, its affiliates, their capital structure (as contemplated under the terms of the transaction related documents) or the structured settlement industry; and |
(vi) | Reported changes, if any, in the quality of the underlying collateral as a result of changes in such ratings, the creditworthiness of the issuer, its affiliates or the Annuity Providers or specific factors that may affect the value of collateral. |
7
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
2. | Significant Accounting Policies (continued) |
Security Valuation (continued) |
The Fund follows fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion in changes in valuation techniques and related inputs during the period. These standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Management has determined that these standards have no material impact on the Fund’s financial statements. The fair value hierarchy is organized into three levels based upon the assumptions (referred to as “inputs”) used in pricing the asset or liability. These standards state that “observable inputs” reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from independent sources and “unobservable inputs” reflect an entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. These inputs are summarized in the three broad levels listed below: |
Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.
Level 2 - Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
Level 3 - Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. |
8
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
2. | Significant Accounting Policies (continued) |
Security Valuation (continued) |
The following is a summary of the inputs used to value the Fund’s investments at September 30, 2011:
September 30, 2011 |
Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | |||||||||
Note | $ | - | $ | - | $ | 36,424,662 | $ | 36,424,662 | |||||
Short-Term Investment | 371,550 | - | - | 371,550 | |||||||||
$ | 371,550 | $ | - | $ | 36,424,662 | $ | 36,796,212 |
The following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value using significant unobservable inputs (Level 3) during the fiscal year ended September 30, 2011:
Investment | |||
in Security | |||
Balance, September 30, 2010 | $ | 38,343,361 | |
Realized gain/(loss) | – | ||
Change in unrealized appreciation/depreciation | – | ||
Purchases | – | ||
Principal payments | (1,918,699 | ) | |
Balance, September 30, 2011 | $ | 36,424,662 |
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “Improving Disclosures about Fair Value Measurements” (“ASU”). The ASU requires enhanced disclosures about a) transfers into and out of Levels 1 and 2, and b) purchases, sales, issuances, and settlements on a gross basis relating to Level 3 measurements. There were no significant transfers into and out of Levels 1 and 2 during the current period presented as compared to the previous annual report. The adoption of the ASU disclosures did not have a significant impact on the Fund’s financial statements for the year ended September 30, 2011.
9
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
2. | Significant Accounting Policies (continued) |
Security Valuation (continued) |
In May 2011, the FASB issued Accounting Standards Update No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements” in Generally Accepted Accounting Principles (“GAAP”) and the International Financial Reporting Standards (“IFRS”). This requirement amends FASB ASC Topic 820, Fair Value Measurements and Disclosures, to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. This requirement is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. Management is currently evaluating the impact of these amendments and does not believe they will have a material impact on the Fund’s financial statements.
Restricted securities include securities that have not been registered under the Securities Act of 1933, as amended, and securities that are subject to restrictions on resale. The Fund may invest in restricted securities that are consistent with the Fund’s investment objective and investment strategies. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer’s expense either upon demand by the Fund or in connection with another registered offering of the securities. Investments in restricted securities are valued at fair value as determined in good faith in accordance with procedures adopted by the Board of Managers. It is possible that the estimated value may differ significantly from the amount that might ultimately be realized in the near term, and the difference could be material. At September 30, 2011, the Fund was invested in the following restricted security:
Security | Acquisition Date | Principal Amount | Cost | Price per Share | Value | % Net Assets | |||||||||||
Crescit Eundo | |||||||||||||||||
Finance I, LLC Note | February 24, 2010 | $ | 36,424,662 | $ | 36,424,662 | $ | 100 | $ | 36,424,662 | 100.5 | % |
Organization Expenses
Expenses incurred by the Fund in connection with the organization were expensed as incurred. The Advisor reimbursed the Fund for these expenses, subject to potential recovery (see Note 4).
10
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
2. | Significant Accounting Policies (continued) |
Fund Expenses |
The Fund bears expenses incurred in its business. The expenses of the Fund include, but are not limited to, the following: management fees, legal fees; accounting and auditing fees; custody fees; costs of computing the Fund’s net asset value; expenses of preparing, printing, and filing reports and other documents with government agencies; expenses of Members’ and Board meetings; Member record keeping and Member account services, fees, and disbursements; insurance premiums; fees for investor services and other types of expenses as may be approved from time to time by the Board. |
Federal Income Taxes |
The Fund intends to be treated as a partnership for Federal income tax purposes. Each Member is responsible for the tax liability or benefit relating to such Member’s distributive share of taxable income or loss. Therefore, no federal income tax provision is reflected in the accompanying financial statements. |
The Fund has adopted accounting standards regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Fund has concluded that there is no impact on the Fund’s net assets or results of operations. These standards require the Fund to analyze all open tax years, as defined by the statute of limitations, for all major jurisdictions. Open tax years are those open for exam by taxing authorities and include the 2010 and 2011 tax years. During the fiscal year ended September 30, 2011, distributions in the amount of $2,518,536 were from ordinary income for tax purposes. |
Offering Costs |
Offering Costs were charged to Members’ capital in proportion to the number of units sold during the offering period (see Note 4). |
Subsequent Events |
The Fund has adopted financial reporting rules regarding subsequent events which require an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. Management has evaluated the Fund’s related events and transactions that occurred subsequent to September 30, 2011. There were no events or transactions that occurred during this period that materially impacted the amounts or disclosures in the Fund’s financial statements. |
11
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
2. | Significant Accounting Policies (continued) |
Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. |
3. | Investment Management |
The Fund has an investment management agreement with Rochdale. The Advisor is responsible for providing investment advisory management, certain administrative services and conducts relations with the service providers to the Fund. |
The Fund will pay the Advisor an investment management fee at an annual rate equal to 0.25% of the Fund’s month-end net assets. The investment management fee will accrue and be payable monthly. |
4. | Expense Reimbursement |
The Advisor has contractually agreed to waive and/or reimburse the Fund’s expenses to the extent needed to limit the Fund’s annual operating expenses to 1.40% of net assets. To the extent that the Advisor reimburses or absorbs fees and expenses, it may seek payment of such amounts for three years after the year in which the expenses were reimbursed or absorbed. The Fund will make no such payment, however, if its total annual operating expenses exceed the expense limit in effect at the time the expenses were reimbursed or at the time these payments are proposed. |
The expense reimbursement agreement allows the Advisor to request recoupment of Covered Fund Costs, as defined in the agreement (including Offering Costs advanced by the Advisor) only if the distribution to Members with respect to the year for which the recoupment is sought would (after taking into account the amount of recoupment) equal or exceed the Minimum Annual Distribution, 7.00% compounded monthly per annum per Unit. The Fund and the Advisor agree that the Advisor may request recoupment of expenses absorbed and repayment of offering costs advanced by the Advisor in the prior three years in years in which the Minimum Annual Distribution is achieved so long as the Fund’s actual annual expenses plus the amount of any requested recoupment with respect to such year, does not exceed 1.40% of net assets. |
12
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
4. | Expense Reimbursement(continued) |
The initial amount available for recoupment was $306,490, consisting of $268,887 offering costs advanced by the Advisor and $37,603 expenses reimbursed by the Advisor, which were incurred during the seed audit period ended November 2009. During the fiscal year ended September 30, 2011, $125,720 was recouped by the Advisor. At September 30, 2011, the remaining cumulative amount available for recoupment amounted to $180,770. This amount may be recouped by September 30, 2013. |
5. | Shareholder Servicing Arrangement |
The Fund will pay a fee to the Advisor (or its affiliates) at an annual rate of 0.25% of the Fund’s month-end net assets, including assets attributable to the Advisor (or its affiliates). Services provided include, but are not limited to, handling Member inquiries regarding the Fund (e.g., responding to questions concerning investments in the Fund, and reports and tax information provided by the Fund); assisting in the enhancement of relations and communications between Members and the Fund; assisting in the establishment and maintenance of Member accounts with the Fund; and assisting in the maintenance of Fund records containing Member information. |
6. | Distribution to Members |
The Fund intends to make distributions to Members on a monthly basis in aggregate amounts representing substantially all of its net investment income, if any, during the year. The Fund also intends to distribute monthly proceeds from any principal paydowns on the Note, which will be designated as a return of capital to Members. Although the Fund does not expect to realize long-term capital gains except under extraordinary circumstances (such as the sale of all or a substantial portion of the Note), if it does earn such gains, they will be paid out once each year (unless otherwise permitted by the 1940 Act). The Fund will make distributions only if authorized by the Board and declared by the Fund out of assets legally available for these distributions. |
7. | Investment Transactions |
For the fiscal year ended September 30, 2011, excluding short-term securities and U.S. Government securities, sales of investments were $1,918,699. There were no purchases or sales of U.S. Government securities during the fiscal year ended September 30, 2011. |
13
Rochdale Structured Claims Fixed Income Fund, LLC
Notes to Financial Statements
8. | Proxy Results (Unaudited) |
On June 3, 2011, a special meeting of Members was held to consider approving Garrett D’Alessandro as a member of the Board of Managers of the Fund. The following table illustrates the specifics of the vote: |
For | Against | Abstain | ||
38,004.19 | – | – |
On August 12, 2011, a special meeting of Members was held to consider approving Jay C. Nadel, Daniel A. Hanwacker and Susan Henshaw Jones as members of the Board of Managers of the Fund since three Independent Managers recently resigned from the Board of Managers of the Fund, two of which had met or were approaching the Fund’s retirement age of 75. The following table illustrates the specifics of the vote: |
For | Against | Abstain | ||
38,004.19 | – | – |
14
Rochdale Structured Claims Fixed Income Fund, LLC
Financial Highlights
Year Ended September 30, 2011 | Period from February 24, 2010* through September 30, 2010 | |||||
Net Asset Value, beginning of period | $ | 979.88 | $ | 993.10 | ||
Income from investment operations: | ||||||
Net investment income | 64.57 | 41.00 | ||||
Total from investment operations | 64.57 | 41.00 | ||||
Less Distributions: | ||||||
From net investment income | (64.57 | ) | (41.00 | ) | ||
From return on capital | (50.12 | ) | (13.22 | ) | ||
Total distributions | (114.69 | ) | (54.22 | ) | ||
Net asset value, end of period | $ | 929.76 | $ | 979.88 | ||
TOTAL RETURN - NET | 6.92 | % | 4.21 | % (1)(2) | ||
RATIOS/SUPPLEMENTAL DATA | ||||||
Members' Capital, end of period ($000's) | $ | 36,266 | $ | 38,220 | ||
Portfolio Turnover | 0.00 | % | 1.72 | % (1) | ||
Internal Rate of Return (3) | 6.92 | % | 5.89 | % | ||
Ratio of Net Investment Income to Average Net Assets: | ||||||
Before waivers/reimbursements or recoupment | 7.05 | % | 6.92 | % (4) | ||
After waivers/reimbursements or recoupment | 6.71 | % | 6.92 | % (4) | ||
Ratio of Expenses to Average Net Assets: | ||||||
Before waivers/reimbursements or recoupment | 1.06 | % | 1.20 | % (4) | ||
After waivers/reimbursements or recoupment | 1.40 | % | 1.20 | % (4) |
* | Commencement of operations. |
(1) | Not Annualized. |
(2) | Represents total return on a net asset value basis. Using the initial offering price of $1,000.00, including offering costs of $6.90, total return for the period was 3.49%. |
(3) | Net of all incentive allocations and fees since inception of the investment. |
(4) | Annualized. |
Total return is calculated for all Members taken as a whole and an individual Member's return may vary from these Fund returns based on the timing of capital transactions. |
The expense ratios are calculated for all Members taken as a whole. The computation of such ratios based on the amount of expenses assessed to an individual Member's capital may vary from these ratios based on the timing of capital transactions. |
The accompanying notes are an integral part of these financial statements.
See Report of Independent Registered Public Accounting Firm
15
Rochdale Structured Claims Fixed Income Fund, LLC
September 30, 2011
Investment Breakdown
(as a % of total investments)
The accompanying notes are an integral part of these financial statements.
See Report of Independent Registered Public Accounting Firm
16
ROCHDALE STRUCTURED CLAIMS FIXED INCOME FUND, LLC
MANAGER AND OFFICER INFORMATION
The Managers of the Fund, who were elected for an indefinite term by the initial members of the Fund, are responsible for the overall management of the Fund, including, general supervision and review of the investment activities of the Fund. The Managers, in turn, elect the officers of the Fund, who are responsible for administering the day to day operations of the Fund. The current Managers and officers, their affiliations and principal occupations for the past five years are set forth below. The Statement of Additional Information includes additional information about the Managers and is available, without charge, by calling 1-866-209-1967.
Interested Managers and Officers | |||||
Term of | Number of | Other | |||
Position(s) | Office and | Funds in Fund | Directorships | ||
Held with | Length of | Principal Occupation(s) | Complex Overseen | Held by | |
Name, Address and Age | Fund | Time Served | During the Past Five Years | by Manager | Manager |
Carl Acebes | Chairman and | Since Inception | Chairman and Co-Chief Investment Officer | 1 | * |
570 Lexington Avenue | Board Member | of Rochdale Investment Management LLC | |||
New York, NY 10022 | |||||
Age: 65 | |||||
Garrett R. D'Alessandro | President, | Since Inception | President, Chief Executive Officer and | 1 | * |
570 Lexington Avenue | Vice-Chairman | Since 2011 | Co-Chief Investment Officer of Rochdale | ||
New York, NY 10022 | and Board Member | Since 2011 | Investment Management LLC | ||
Age: 53 | |||||
William O'Donnell | Treasurer | Since 2011 | Chief Financial Officer of Rochdale | N/A | N/A |
570 Lexington Avenue | Investment Management LLC since | ||||
New York, NY 10022 | July 2011; Financial Consultant, October | ||||
Age: 47 | 2009 to June 2011; Financial Officer, | ||||
Compliance Officer & Corporate Secretary | |||||
Trustee - Clay Finlay Pension Plan of | |||||
Clay Finlay LLC, October 1990 to | |||||
to September 2009 | |||||
Barbara Hawkesworth | Chief | Since 2011 | Executive Vice President, Chief Compliance | N/A | N/A |
570 Lexington Avenue | Compliance | Officer and Deputy General Counsel for | |||
New York, NY 10022 | Officer | Rochdale Investment Management LLC | |||
Age: 38 | and Symphonic Financial Advisors LLC | ||||
Kurt Hawkesworth | Secretary | Since Inception | Senior Executive Vice President, | N/A | N/A |
570 Lexington Avenue | Chief Operating Officer and General Counsel | ||||
New York, NY 10022 | of Rochdale Investment Management LLC | ||||
Age: 40 |
Independent Managers | |||||
Term of | Number of | Other | |||
Position(s) | Office and | Funds in Fund | Directorships | ||
Held with | Length of | Principal Occupation(s) | Complex Overseen | Held by | |
Name, Address and Age | Fund | Time Served | During the Past Five Years | by Manager | Manager |
Daniel A. Hanwacker, Sr. | Board Member | Since 2011 | CEO and President, Hanwacker Associates, | 1 | * |
570 Lexington Avenue | Inc. (asset management consulting and | ||||
New York, NY 10022 | executive search services) | ||||
Age: 59 | |||||
Susan Henshaw Jones | Board Member | Since 2011 | President and Director, Museum of the City | 1 | * |
570 Lexington Avenue | of New York | ||||
New York, NY 10022 | |||||
Age: 64 | |||||
Jay C. Nadel | Board Member | Since 2011 | Financial Services Consultant | 1 | * |
570 Lexington Avenue | Lapolla Industries, | ||||
New York, NY 10022 | Inc. (2007 - present) | ||||
Age: 53 |
* | Rochdale Investment Trust, Rochdale Core Alternative Strategies Master Fund LLC, Rochdale Core Alternative Strategies Fund TEI LLC, |
Rochdale Core Alternative Strategies Fund LLC, Rochdale Alternative Total Return Fund LLC and Rochdale International Trade Fixed Income Fund. |
Rochdale Structured Claims Fixed Income Fund, LLC
Approval of Investment Advisory Agreement
At the quarterly meeting held on September 13, 2011, the Board of Managers (the “Board”) of the Rochdale Structured Claims Fixed Income Fund, LLC (the “Fund”), including all of the Managers (“Independent Managers”) who are not “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) of the Fund, met in person and voted to approve the renewal of the investment advisory agreement (“Agreement”) between the Fund and Rochdale Investment Management, LLC (the “Advisor” or “Rochdale”). In approving the Agreement, the Board, had before it information with respect to the Fund, including materials concerning the design and development of the Fund’s investment program.
In reaching their decisions, the Managers requested and obtained from Rochdale such information they deemed reasonably necessary to evaluate the Agreement. In considering the Agreement, the Managers evaluated a number of factors and considerations that they believed, in light of their own business judgment, to be relevant.
In connection with the approval of the Agreement, the Independent Managers consulted with their independent legal counsel, discussing, among other things, the legal standards and certain other considerations relevant to the Managers’ deliberations. The Board reviewed the advisory services provided by Rochdale. The Managers received and considered information regarding the nature, extent and quality of services provided to the Fund by Rochdale. In particular, the Board considered the Fund’s investment objective and strategies and the Advisor’s record of managing the Fund’s mandate, including the performance achieved by the Fund, as well as the experience, capability and financial resources of Rochdale. The Board also considered the fact that the Fund serves as a vehicle for implementing asset allocation strategies for the substantial portion of the Fund’s unitholders who are also advisory clients of the Advisor. Based on the information presented, the Board concluded that the expected nature and quality of the advisory and related services to be provided by the Advisor supported approval of the Agreement.
The Board also reviewed the advisory fees and the overall expenses of the Fund. Due to the unique nature of the Fund’s investment program, there was no comparative fund fee and expense data available for the Managers to consider. The Board considered information relating to advisory fee revenues and expenses borne by the Advisor as well as the Advisor’s agreement to reimburse the Fund if the specified expense cap was exceeded. The Board determined that the advisory fees were fair and reasonable and consistent with the best interests of unitholders and that the Advisor’s profit level is not excessive. The Board was also informed with respect to fees charged by the Advisor to its other private accounts and distinguished the fee structures of the private accounts from that of the Fund in light of the regulatory framework within which closed-end funds, such as the Fund, operate, and the expenses incurred by the Advisor in order to ensure compliance with such regulations. The Board also considered information regarding economies of scale, the Advisor’s financial interest in renewal of the advisory agreement and any fall out benefits that might be derived from the Advisor’s affiliation with the Fund.
After reviewing this information and such other matters as the Managers considered necessary to the exercise of their reasonable business judgment, and without identifying any single factor as being determinative, the Board, including the Independent Managers, unanimously approved the Agreement.
Rochdale Structured Claims Fixed Income Fund, LLC
Additional Information
Proxy Voting Policies and Procedures
You may obtain a description of the Fund’s proxy voting policies and procedures and information regarding how the Fund voted proxies relating to portfolio securities without charge, upon request, by contacting the Fund directly at 1-800-245-9888; or on the EDGAR Database on the SEC’s website at www.sec.gov.
Portfolio Holdings Disclosure
The Fund will file its complete schedule of portfolio holdings with the SEC at the end of the first and third fiscal quarters on Form N-Q within sixty days of the end of the quarter to which it relates. The Fund’s Forms N-Q will be available on the SEC’s website at www.sec.gov, and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-202-942-8090.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
The registrant undertakes to provide to any person without charge, upon request, a copy of its code of ethics by mail when they call the registrant at 1-866-209-1967.
Item 3. Audit Committee Financial Expert.
The registrant’s board of managers has determined that there are at least two audit committee financial experts serving on its audit committee. Jay C. Nadel and Daniel A. Hanwacker are the “audit committee financial experts” and are considered to be “independent” as each term is defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit related services, tax services and other services during the past two fiscal years. “Audit services” refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
FYE 9/30/2011 | FYE 9/30/2010 | |
Audit Fees | $25,000 | $25,000 |
Audit-Related Fees | $0 | $0 |
Tax Fees | $10,000 | $10,000 |
All Other Fees | $0 | $0 |
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
The percentage of fees billed by Tait, Weller & Baker LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
FYE 9/30/2011 | FYE 9/30/2010 | |
Audit-Related Fees | 0.0% | 0.0% |
Tax Fees | 0.0% | 0.0% |
All Other Fees | 0.0% | 0.0% |
All of the principal accountant hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any other controlling entity, etc.—not sub-adviser) for the last two years. The audit committee of the board of managers has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.
Non-Audit Related Fees | FYE 9/30/2011 | FYE 9/30/2010 |
Registrant | $10,000 | $10,000 |
Registrant’s Investment Adviser | $0 | $0 |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable since the Fund invests exclusively in non-voting securities.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
The following table provides information as of September 30, 2011:
PORTFOLIO MANAGER DISCLOSURE
List of Portfolio Managers and Biographical Information
Name | Title | Length of Service | Business Experience During Past 5 Years | Role of Portfolio Manager |
Carl Acebes | Chairman and Board Member | Since Inception | Founder and Co-Chief Investment Officer of Rochdale Investment Management LLC. Founder of Rochdale Securities Corporation and the Rochdale Corporation. | Heads the team of investment professionals and is intricately involved in the firms day to day investment management and research work. |
Garrett R. D’Alessandro | President Vice Chairman and Board Member | Since Inception Since 2011 Since 2011 | President, CEO, Co-Chief Investment Officer and Director of Research of Rochdale Investment Management LLC. | Directs portfolio management strategies and investment research efforts and determines companies that satisfy the firm’s criteria for inclusion in client portfolios. |
Name | Number of Registered Investment Companies Managed and Total Assets for Such Accounts (Including The Trust) | Beneficial Ownership of Equity Securities In Trust | Number of Other Pooled Investment Vehicles Managed and Total Assets for Such Accounts | Number of Other Accounts Managed and Total Assets For Such Accounts |
Carl Acebes | 7, $623 million | $0 | 11, $746 million | 93, $44.5 million |
Garrett R. D’Alessandro | 7, $623 million | $0 | 11, $746 million | 192, $314 million |
Mr. Acebes receives an annual salary established by the Manager. Salary levels are based on the overall performance of the Manager and not on the investment performance of any particular Portfolio or account. Like the Manager’s other employees, Mr. Acebes is eligible for a bonus annually. Such bonuses are also based on the performance of the Manager as a whole and not on the investment performance of any particular Portfolio or account. Additionally, Mr. Acebes owns a substantial portion of the Manager and, accordingly, benefits from any profits earned by the Manager.
Mr. D’Alessandro receives an annual salary established by the Manager. Salary levels are based on the overall performance of the Manager and not on the investment performance of any particular Portfolio or account. Like the Manager’s other employees, Mr. D’Alessandro is eligible for a bonus annually. Such bonuses are also based on the performance of the Manager as a whole and not on the investment performance of any particular Portfolio or account. Additionally, Mr. D’Alessandro owns a substantial portion of the Manager and, accordingly, benefits from any profits earned by the Manager.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant’s nominating committee charter does not contain any procedures by which shareholders may recommend nominees to the registrant’s board of managers.
Item 11. Controls and Procedures.
(a) | The registrant’s President/Chief Executive Officer and Treasurer/Chief Financial Officer have reviewed the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the registrant and by the registrant’s service provider. |
(b) | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable. |
(2) A separate certification for each principal executive and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable during this period.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Rochdale Structured Claims Fixed Income Fund, LLC
By (Signature and Title) /s/ Garrett R. D'Alessandro
Garrett R. D’Alessandro, President
Date December 7, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title) /s/ Garrett R. D'Alessandro
Garrett R. D’Alessandro, President
Date December 7, 2011
By (Signature and Title) /s/ William O'Donnell
William O’Donnell, Treasurer
Date December 7, 2011