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 811-21117
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UBS Credit Recovery Fund, L.L.C.
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(Exact name of registrant as specified in charter)
1285 Avenue of the Americas, 11th Floor
New York, NY 10019
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(Address of principal executive offices) (Zip code)
Steven S. Drachman
c/o UBS Financial Services Inc.
1285 Avenue of the Americas, 11th Floor
New York, NY 10019
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-882-5819
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2010
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
UBS CREDIT RECOVERY FUND, L.L.C.
FINANCIAL STATEMENTS
(UNAUDITED)
SEMI-ANNUAL REPORT
PERIOD FROM JANUARY 1, 2010 TO JUNE 30, 2010
UBS CREDIT RECOVERY FUND, L.L.C.
FINANCIAL STATEMENTS
(UNAUDITED)
SEMI-ANNUAL REPORT
PERIOD FROM JANUARY 1, 2010 TO JUNE 30, 2010
CONTENTS
Statement of Assets, Liabilities and Members' Capital ..................... 1
Statement of Operations ................................................... 2
Statements of Changes in Members' Capital ................................. 3
Statement of Cash Flows ................................................... 4
Financial Highlights ...................................................... 5
Notes to Financial Statements ............................................. 6
Schedule of Portfolio Investments ......................................... 15
UBS CREDIT RECOVERY FUND, L.L.C.
STATEMENT OF ASSETS, LIABILITIES AND MEMBERS' CAPITAL
(UNAUDITED)
JUNE 30, 2010
ASSETS
Investments in Investment Funds, at fair value
(cost $353,014,818) $385,230,191
Cash and cash equivalents 23,389,531
Advanced subscriptions in Investment Funds 18,000,000
Receivable from Investment Funds 12,442,815
Receivable from other securities 900,205
Unrealized appreciation on foreign currency contracts 39,618
Interest receivable 1,455
Other assets 45,204
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TOTAL ASSETS 440,049,019
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LIABILITIES
Subscriptions received in advance 1,378,650
Investment Management Fee payable 529,003
Professional fees payable 140,555
Administration fee payable 120,535
Management Fee payable 109,449
Other liabilities 85,407
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TOTAL LIABILITIES 2,363,599
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MEMBERS' CAPITAL $437,685,420
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MEMBERS' CAPITAL
Represented by:
Net capital contributions $405,436,602
Accumulated net unrealized appreciation/(depreciation) on
investments in Investment Funds and foreign currency contracts
and translations 32,248,818
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MEMBERS' CAPITAL $437,685,420
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The accompanying notes are an integral part of these financial statements.
1
UBS CREDIT RECOVERY FUND, L.L.C.
STATEMENT OF OPERATIONS
(UNAUDITED)
PERIOD FROM JANUARY 1, 2010 TO JUNE 30, 2010
INVESTMENT INCOME
Interest $ 11,850
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TOTAL INVESTMENT INCOME 11,850
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EXPENSES
Investment Management Fee 3,120,794
Management Fee 645,682
Administration fee 236,591
Professional fees 210,978
Directors' fees 25,136
Printing, insurance and other expenses 162,119
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TOTAL EXPENSES 4,401,300
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NET INVESTMENT LOSS (4,389,450)
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NET REALIZED AND UNREALIZED GAIN/LOSS FROM INVESTMENTS
Net realized gain/(loss) from:
Investments in Investment Funds and other securities (4,075,517)
Foreign currency contracts and transactions 2,937,420
Net change in unrealized appreciation/depreciation on
investments in Investment Funds and foreign currency contracts
and translations 7,068,229
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NET REALIZED AND UNREALIZED GAIN/LOSS FROM INVESTMENTS 5,930,132
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NET INCREASE IN MEMBERS' CAPITAL
DERIVED FROM OPERATIONS $ 1,540,682
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The accompanying notes are an integral part of these financial statements.
2
UBS CREDIT RECOVERY FUND, L.L.C.
STATEMENTS OF CHANGES IN MEMBERS' CAPITAL
YEAR ENDED DECEMBER 31, 2009 AND PERIOD FROM JANUARY 1, 2010 TO JUNE 30,
2010 (UNAUDITED)
ADVISER MEMBERS TOTAL
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MEMBERS' CAPITAL AT JANUARY 1, 2009 $20,414 $ 418,856,230 $ 418,876,644
INCREASE (DECREASE) FROM OPERATIONS
Pro rata allocation:
Net investment income/(loss) (129) (9,512,604) (9,512,733)
Net realized gain/(loss) from investments in Investment
Funds and foreign currency contracts and transactions (636) (12,009,724) (12,010,360)
Net change in unrealized appreciation/depreciation on
investments in Investment Funds and foreign currency
contracts and translations 4,592 97,474,806 97,479,398
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NET INCREASE (DECREASE) IN MEMBERS' CAPITAL
DERIVED FROM OPERATIONS 3,827 75,952,478 75,956,305
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MEMBERS' CAPITAL TRANSACTIONS
Members' subscriptions -- 40,430,076 40,430,076
Members' withdrawals -- (123,421,569) (123,421,569)
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NET INCREASE (DECREASE) IN MEMBERS' CAPITAL
DERIVED FROM CAPITAL TRANSACTIONS -- (82,991,493) (82,991,493)
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MEMBERS' CAPITAL AT DECEMBER 31, 2009 $24,241 $ 411,817,215 $ 411,841,456
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INCREASE (DECREASE) FROM OPERATIONS
Pro rata allocation:
Net investment income/(loss) (72) (4,389,378) (4,389,450)
Net realized gain/(loss) from investments in Investment
Funds, other securities and foreign currency
contracts and transactions (61) (1,138,036) (1,138,097)
Net change in unrealized appreciation/depreciation on
investments in Investment Funds and foreign currency
contracts and translations 408 7,067,821 7,068,229
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NET INCREASE (DECREASE) IN MEMBERS' CAPITAL
DERIVED FROM OPERATIONS 275 1,540,407 1,540,682
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MEMBERS' CAPITAL TRANSACTIONS
Members' subscriptions -- 24,303,282 24,303,282
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NET INCREASE (DECREASE) IN MEMBERS' CAPITAL
DERIVED FROM CAPITAL TRANSACTIONS -- 24,303,282 24,303,282
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MEMBERS' CAPITAL AT JUNE 30, 2010 $24,516 $ 437,660,904 $ 437,685,420
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The accompanying notes are an integral part of these financial statements.
3
UBS CREDIT RECOVERY FUND, L.L.C.
STATEMENT OF CASH FLOWS
(UNAUDITED)
PERIOD FROM JANUARY 1, 2010 TO JUNE 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in members' capital derived from operations $ 1,540,682
Adjustments to reconcile net increase in member's capital
derived from operations to net cash used in operating activities:
Purchases of investments in Investment Funds and other securities (37,000,000)
Proceeds from disposition of investments in Investment
Funds and other securities 42,287,687
Net realized gain/(loss) from investments in Investment Funds, other
securities and foreign currency contracts and transactions 1,138,097
Net change in unrealized appreciation/depreciation on
investments in Investment Funds and foreign currency contracts (7,074,402)
Changes in assets and liabilities:
(Increase) decrease in assets:
Advanced subscriptions in Investment Funds (18,000,000)
Interest receivable 4,441
Receivable from Investment Funds (562,000)
Receivable from other securities (900,205)
Other assets (29,822)
Increase (decrease) in liabilities:
Administration fee payable 23,081
Investment Management Fee payable (113,791)
Management Fee payable (23,543)
Professional fees payable (16,438)
Other liabilities 65,908
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NET CASH USED IN OPERATING ACTIVITIES (18,660,305)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Members' subscriptions, including change in subscriptions
received in advance 25,681,932
Payments on Members' withdrawals, including change in withdrawals payable (123,421,569)
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NET CASH USED IN FINANCING ACTIVITIES (97,739,637)
Net decrease in cash and cash equivalents (116,399,942)
Cash and cash equivalents--beginning of period 139,789,473
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CASH AND CASH EQUIVALENTS--END OF PERIOD $ 23,389,531
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The accompanying notes are an integral part of these financial statements.
4
UBS CREDIT RECOVERY FUND, L.L.C.
FINANCIAL HIGHLIGHTS
JUNE 30, 2010
The following represents the ratios to average members' capital and other
supplemental information for all Members, excluding the Adviser, for the periods
indicated.
An individual Member's ratios and returns may vary from the below based on the
timing of capital transactions.
PERIOD FROM
JANUARY 1,
2010 TO JUNE YEARS ENDED DECEMBER 31,
30, 2010 ------------------------------------------------------------------------
(UNAUDITED) 2009 2008 2007 2006 2005
------------ ------------ ------------ ------------ ------------ ------------
Ratio of net investment loss to
average members' capital(a, b) (2.07%)(c) (2.01%) (1.92%) (1.93%) (1.78%) (1.93%)
Ratio of total expenses to average
members' capital(a, b) 2.07%(c) 2.03% 2.07% 2.12% 1.99% 2.09%
Portfolio turnover rate 9.63% 23.27% 33.56% 4.42% 7.60% 24.36%
Total return(d) 0.40% 17.16% (28.77%) 18.54% 15.58% 4.36%
Average debt ratio(a) -- -- 0.01% 0.24% -- 1.09%
Members' capital at end of period
(including the Adviser) $437,685,420 $411,841,456 $418,876,644 $562,791,338 $275,562,734 $196,934,747
(a) The average members' capital used in the above ratios is calculated using
pre-tender members' capital, excluding the Adviser.
(b) Ratios of net investment income (loss) and total expenses to average
members' capital do not include the impact of expenses and incentive
allocations or incentive fees related to the underlying Investment Funds.
(c) Annualized.
(d) Total return assumes a purchase of an interest in the Fund at the beginning
of the period and a sale of the Fund interest on the last day of the period
noted, and does not reflect the deduction of placement fees, if any,
incurred when subscribing to the Fund. Total returns for a period of less
than a full year are not annualized.
The accompanying notes are an integral part of these financial statements.
5
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2010
1. ORGANIZATION
UBS Credit Recovery Fund, L.L.C. (the "Fund"), was organized as a limited
liability company under the laws of Delaware on April 30, 2002 and
commenced operations on August 1, 2002. The Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as a
closed-end, non-diversified, management investment company. The Fund's
investment objective is to maximize total return over the long-term. The
Fund is a multi-manager fund that seeks to achieve its objective by
deploying its assets primarily among a select group of portfolio managers
who invest in debt and, to a lesser extent, equity securities
("Obligations"), to take advantage of market opportunities and pricing
inefficiencies between the perceived value of an Obligation and its fair
value. Generally, such portfolio managers conduct their investment programs
through unregistered investment funds (collectively, the "Investment
Funds"), in which the Fund invests as a limited partner, member or
shareholder along with other investors.
The Fund's Board of Directors (the "Directors") has overall responsibility
to manage and control the business affairs of the Fund, including the
exclusive authority to oversee and to establish policies regarding the
management, conduct and operation of the Fund's business. The Directors
have engaged UBS Fund Advisor, L.L.C. ("UBSFA", the "Adviser" and, when
providing services under the Administration Agreement, the
"Administrator"), a Delaware limited liability company, to provide
investment advice regarding the selection of Investment Funds and to be
responsible for the day-to-day management of the Fund.
The Adviser is a wholly-owned subsidiary of UBS Americas, Inc., which is a
wholly-owned subsidiary of UBS AG, and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended.
Initial and additional applications for interests by eligible investors may
be accepted at such times as the Directors may determine and are generally
accepted monthly. The Directors reserve the right to reject any application
for interests in the Fund.
The Fund from time to time may offer to repurchase interests pursuant to
written tenders to members (the "Members"). These repurchases will be made
at such times and on such terms as may be determined by the Directors, in
their complete and exclusive discretion. The Adviser expects that it will
recommend to the Directors that the Fund offer to repurchase interests from
Members once each year, at year-end. Members can only transfer or assign
their membership interests or a portion thereof (i) by operation of law
pursuant to the death, bankruptcy, insolvency or dissolution of a Member,
or (ii) with the written approval of the Directors, which may be withheld
in their sole and absolute discretion. Such transfers may be made even if
the balance of the capital account to such transferee is equal to or less
than the transferor's initial capital contribution.
6
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
2. NEW ACCOUNTING PRONOUNCEMENTS
In January 2010, the Financial Accounting Standards Board ("FASB") issued
new guidance to improve disclosures about fair value measurement. This new
guidance clarifies existing disclosure requirements regarding (i) the level
of disaggregation for which fair value measurement disclosures should be
provided, and (ii) the inputs and valuation techniques used to measure fair
value for measurements that fall within either Level 2 or Level 3 of the
fair value hierarchy. It also requires disclosure of significant transfers
into and out of Level 1 and Level 2 measurements in the fair value
hierarchy and the reasons for those transfers, as well as the reasons for
all transfers into and out of Level 3. This guidance is effective for
interim and annual reporting periods beginning after December 15, 2009. The
Fund has adopted this accounting guidance for the period ended June 30,
2010, which has not had a material impact on the Fund's members' capital or
results of operations. The guidance also requires entities to separately
present purchases, sales, issuances, and settlements in their
reconciliation of Level 3 fair value measurements (i.e. to present such
items as gross basis rather than on a net basis), which are effective for
fiscal years beginning after December 15, 2010 and for interim periods
within those fiscal years. Adoption of this accounting guidance is
currently being assessed but is not expected to have a material impact on
the Fund's members' capital or results of operations.
3. SIGNIFICANT ACCOUNTING POLICIES
A. PORTFOLIO VALUATION
The Fund values its investments at fair value, in accordance with U.S.
generally accepted accounting principles ("GAAP"), which is 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.
Various inputs are used in determining the fair value of the Fund's
investments which are summarized in the three broad levels listed below.
LEVEL 1-- quoted prices in active markets for identical securities
LEVEL 2-- fair value of investments in Investment Funds with the ability to
redeem at net asset value as of the measurement date, or within one quarter
of the measurement date
LEVEL 3-- fair value of investments in Investment Funds that do not have
the ability to redeem at net asset value within one quarter of the
measurement date
The Fund recognizes transfers into and out of the levels indicated above at
the end of the reporting period. All transfers into and out of Level 3 can
be found in the Level 3 reconciliation table. There were no transfers
between Level 1 and Level 2.
7
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. PORTFOLIO VALUATION (CONTINUED)
GAAP provides guidance in determining whether there has been a significant
decrease in the volume and level of activity for an asset or liability when
compared with normal market activity for such asset or liability (or
similar assets or liabilities). GAAP also provides guidance on identifying
circumstances that indicate a transaction with regards to such an asset or
liability is not orderly. In its consideration, the Fund must consider
inputs and valuation techniques used for each class of assets and
liabilities. Judgment is used to determine the appropriate classes of
assets and liabilities for which disclosures about fair value measurements
are provided. Fair value measurement disclosure for each class of assets
and liabilities requires greater disaggregation than the Fund's line items
in the Statement of Assets, Liabilities and Members' Capital. The Fund
determines the appropriate classes for those disclosures on the basis of
the nature and risks of the assets and liabilities and their classification
in the fair value hierarchy (i.e., Levels 1, 2, and 3).
For assets and liabilities measured at fair value on a recurring basis
during the period, the Fund provides quantitative disclosures about the
fair value measurements separately for each class of assets and
liabilities, as well as a reconciliation of beginning and ending balances
of Level 3 assets and liabilities broken down by class.
The following is a summary of the investment strategy and any restrictions
on the liquidity provisions of the investments in Investment Funds held in
the Fund as of June 30, 2010. Investment Funds with no current redemption
restrictions may be subject to future gates, lock-up provisions or other
restrictions, in accordance with their offering documents.
The Investment Funds in the direct loans/structured finance strategy invest
primarily in asset-based lending, real estate-structured finance
transactions, distressed securities, subprime residential mortgage market
and special situation investments. Investment Funds within this strategy
are generally subject to 90 - 180 day redemption notice periods. Investment
Funds representing approximately 45 percent of the fair value of the
investments in this strategy are side pockets or liquidating trusts where
the liquidation of assets is expected over the next 12 - 48 months. The
remaining approximately 55 percent of the Investment Funds have either
initial redemption dates commencing in the future (29 percent) or are
available to be redeemed with no restrictions (26 percent), subject to the
Investment Funds' liquidity terms, as of the measurement date. As of the
measurement date, Investment Funds within this strategy had unfunded
capital commitments of $3,775,195.
The Investment Funds in the distressed/credit strategy invest primarily in
securities of companies and government entities that are either in
distress, already in default or under bankruptcy protection. Investment
Funds within this strategy are generally subject to 60 - 180 day redemption
notice
8
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. PORTFOLIO VALUATION (CONTINUED)
periods. Investment Funds representing approximately 21 percent of fair
value of the investments in this strategy are side pockets or liquidating
trusts where the liquidation of assets is expected over the next 36 months.
The remaining approximately 79 percent of the Investment Funds are
available to be redeemed with no restrictions, subject to the Investment
Funds' liquidity terms, as of the measurement date. The Investment Funds
within this strategy had no unfunded capital commitments as of the
measurement date. One Investment Fund, with a fair value of $17,458,187,
transferred from Level 2 to Level 3 at the measurement date.
The Investment Funds in the diversified credit strategy invest primarily in
long and short credit, event-driven and capital structure arbitrage
strategies in the high-yield distressed and high grade corporate debt
instruments and their derivatives. Investment Funds within this strategy
are generally subject to 30 - 180 day redemption notice periods. Investment
Funds representing approximately 23 percent of fair value of the
investments in this strategy are side pockets or liquidating trusts where
the liquidation of assets is expected over the next 48 months. The
remaining approximately 77 percent of the Investment Funds have either
initial redemption dates commencing in the future (18 percent) or are
available to be redeemed with no restrictions (59 percent), subject to the
Investment Funds' liquidity terms, as of the measurement date. The
Investment Funds within this strategy had no unfunded capital commitments
as of the measurement date. Two Investment Funds, with a fair value of
$23,517,747, transferred from Level 3 to Level 2 at the measurement date.
A detailed depiction of each investment in the portfolio by investment
strategy, including any additional liquidity terms and other restrictions,
as well as a breakdown of the portfolio into the fair value measurement
levels, can be found in the tables within the Schedule of Portfolio
Investments.
Net asset value of the Fund is determined by or at the direction of the
Adviser as of the close of business at the end of any fiscal period in
accordance with the valuation principles set forth below or as may be
determined from time to time pursuant to policies established by the
Directors. The Fund's investments in Investment Funds are subject to the
terms and conditions of the respective operating agreements and offering
memorandums, as appropriate. The Fund's investments in Investment Funds are
carried at fair value. All valuations utilize financial information
supplied by each Investment Fund and are net of management and performance
incentive fees or allocations payable to the Investment Funds' managers or
pursuant to the Investment Funds' agreements. The Fund's valuation
procedures require the Adviser to consider all relevant information
available at the time the Fund values its portfolio. The Adviser has
assessed factors including, but not limited to the individual Investment
Funds' compliance with fair value measurements, price transparency and
valuation procedures in place, subscription and redemption activity, level
of illiquid securities held, and the existence or absence of certain
redemption restrictions. The Adviser and/or the Directors
9
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A. PORTFOLIO VALUATION (CONTINUED)
will consider such information and consider whether it is appropriate, in
light of all relevant circumstances, to value such a position at its net
asset value as reported or whether to adjust such value. The underlying
investments of each Investment Fund are accounted for at fair value as
described in each Investment Fund's financial statements. (See Schedule of
Portfolio Investments).
The fair value relating to certain underlying investments of these
Investment Funds, for which there is no ready market, has been estimated by
the respective Investment Funds' management and is based upon available
information in the absence of readily ascertainable fair values and does
not necessarily represent amounts that might ultimately be realized. Due to
the inherent uncertainty of valuation, those estimated fair values may
differ significantly from the values that would have been used had a ready
market for the investments existed. These differences could be material.
Complete information about the Investment Funds' underlying investments is
not readily available. Therefore it is unknown on an aggregate basis
whether the Investment Funds held any investments whereby the Fund's
proportionate share exceeded 5% of the Fund's net assets at June 30, 2010.
The fair value of the Fund's assets and liabilities which qualify as
financial instruments approximates the carrying amounts presented in the
Statement of Assets, Liabilities and Members' Capital.
B. INVESTMENT TRANSACTIONS AND INCOME RECOGNITION
The Fund accounts for realized gains and losses from Investment Fund
transactions based on the pro-rata ratio of the fair value and cost of the
underlying investment at the date of redemption. Interest income and
expenses are recorded on the accrual basis.
C. FUND EXPENSES
The Fund bears all expenses incurred in its business, including, but not
limited to, the following: all costs and expenses related to portfolio
transactions and positions for the Fund's account; legal fees; accounting
and auditing fees; custodial fees; costs of computing the Fund's net asset
value; costs of insurance; registration expenses; offering and organization
costs; due diligence, including travel and related expenses; expenses of
meetings of Directors; all costs with respect to communications to Members;
and other types of expenses approved by the Directors.
10
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. INCOME TAXES
The Fund has reclassified $4,389,450 and $1,138,097 from accumulated net
investment loss and accumulated net realized loss from investments,
respectively, to net capital contributions during the six month period
ended June 30, 2010. The reclassification was to reflect, as an adjustment
to net contributions, the amount of estimated taxable income or loss that
have been allocated to the Fund's Members as of June 30, 2010 and had no
effect on members' capital.
The Fund files income tax returns in the U.S. federal jurisdiction and
applicable states. Management has analyzed the Fund's tax positions taken
on its federal and state income tax returns for all open tax years, and has
concluded that no provision for federal or state income tax is required in
the Fund's financial statements. The Fund's federal and state income tax
returns for tax years for which the applicable statutes of limitations have
not expired are subject to examination by the Internal Revenue Service and
state departments of revenue. The Fund recognizes interest and penalties,
if any, related to unrecognized tax benefits as income tax expense in the
Statement of Operations. During the period ended June 30, 2010, the Fund
did not incur any interest or penalties.
Each Member is individually required to report on its own tax return its
distributive share of the Fund's taxable income or loss.
E. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of monies invested in a PNC Bank, NA
account which pays money market rates and are accounted for at cost plus
accrued interest which is included in interest receivable on the Statement
of Assets, Liabilities and Members' Capital. Such cash, at times, may
exceed federally insured limits. The Fund has not experienced any losses in
such accounts and does not believe it is exposed to any significant credit
risk on such accounts.
F. USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP 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 increases and decreases in members' capital from operations
during the reporting period. Actual results could differ from those
estimates.
11
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
4. RELATED PARTY TRANSACTIONS
The Adviser provides investment advisory services to the Fund pursuant to
an Investment Management Agreement. Pursuant to that agreement, the Fund
pays the Adviser a monthly fee (the "Investment Management Fee") at the
annual rate of 1.45% of the Fund's members' capital, excluding the capital
account attributable to the Adviser.
The Administrator provides certain administrative services to the Fund,
including, among other things, providing office space and other support
services. In consideration for such services, the Fund pays the
Administrator a monthly fee (the "Management Fee") at an annual rate of
0.30% of the Fund's members' capital, excluding the capital account
attributable to the Adviser. The Management Fee is paid to the
Administrator out of the Fund's assets and debited against the Members'
capital accounts, excluding the capital account attributable to the
Adviser. A portion of the Investment Management Fee and the Management Fee
is paid by UBSFA to its affiliates.
UBS Financial Services Inc. ("UBS FSI"), a wholly-owned subsidiary of UBS
Americas, Inc., acts as a placement agent for the Fund, without special
compensation from the Fund, and bears its own costs associated with its
activities as placement agent. Placement fees, if any, charged on
contributions are debited against the contribution amounts, to arrive at a
net subscription amount. The placement fee does not constitute assets of
the Fund.
The net increase or decrease in members' capital derived from operations
(net income or loss) is allocated to the capital accounts of all Members on
a pro-rata basis, other than the Management Fee which is similarly
allocated to all Members other than the Adviser as described above.
Each Director of the Fund receives an annual retainer of $7,500 plus a fee
for each meeting attended. The Chairman of the Board of Directors and the
Chairman of the Audit Committee of the Board of Directors each receive an
additional annual retainer in the amounts of $10,000 and $15,000,
respectively. These additional annual retainer amounts are paid for by the
Fund on a pro-rata basis with ten other UBS funds where UBSFA is the
investment adviser. All Directors are reimbursed by the Fund for all
reasonable out of pocket expenses.
Other investment partnerships sponsored by UBS Americas or its affiliates
may also maintain investment interests in the Investment Funds owned by the
Fund.
5. ADMINISTRATION AND CUSTODIAN FEES
PNC Global Investment Servicing (U.S.), Inc. ("PNC"), a member of The PNC
Financial Services Group, Inc., serves as administrative and accounting
agent to the Fund, and in that capacity provides certain administrative,
accounting, record keeping, tax and Member related services. PNC receives a
monthly fee primarily based upon (i) the average members' capital of the
Fund subject to a minimum
12
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
5. ADMINISTRATION AND CUSTODIAN FEES (CONTINUED)
monthly fee, and (ii) the aggregate members' capital of the Fund and
certain other investment funds sponsored or advised by UBS Americas, Inc.
or its affiliates. Additionally, the Fund reimburses certain out of pocket
expenses incurred by PNC.
PFPC Trust Company provides custodial services for the Fund.
6. INVESTMENTS
As of June 30, 2010, the Fund had investments in Investment Funds, none of
which were related parties.
Aggregate purchases and proceeds from sales of investments for the period
from January 1, 2010 to June 30, 2010 amounted to $37,000,000 and
$42,287,687, respectively.
The cost of investments for federal income tax purposes is adjusted for
items of taxable income allocated to the Fund from the Investment Funds.
The allocated taxable income is reported to the Fund by the Investment
Funds on Schedule K-1. The tax basis of investments for 2010 will not be
finalized by the Fund until after the fiscal year end.
The agreements related to investments in Investment Funds provide for
compensation to the general partners/managers in the form of management
fees of 1.00% to 2.00% (per annum) of net assets and performance incentive
fees or allocations of 20.00% of net profits earned.
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
In the normal course of business, the Investment Funds in which the Fund
invests trade various financial instruments and enter into various
investment activities with off-balance sheet risk. These include, but are
not limited to, short selling activities, writing option contracts,
contracts for differences, equity swaps, distressed investing, merger
arbitrage and convertible arbitrage. The Fund's risk of loss in these
Investment Funds is limited to the fair value of these investments.
The Fund has entered into a forward foreign currency exchange contract for
the purchase or sale of a specific foreign currency at a fixed price on a
future date as a hedge against either specific transactions or portfolio
positions. The Fund may also purchase and sell forward contracts to seek to
increase total return. All commitments are "marked-to-market" daily at the
applicable translation rates and any resulting unrealized gains or losses
are recorded in the Fund's financial statements. The Fund records realized
gains or losses at the time a forward contract is offset by entry into a
closing transaction or extinguished by delivery of the currency. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
13
UBS CREDIT RECOVERY FUND, L.L.C.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED)
The Fund entered into a forward foreign currency exchange contract to hedge
against a Euro denominated Investment Fund. The Fund enters into these
contracts from time to time to mitigate the foreign currency risks
associated with these types of investments.
The Fund is required to present enhanced information in order to provide
users of financial statements with an improved degree of transparency and
understanding of how and why an entity uses derivative instruments, how
derivative instruments are accounted for, and how derivative instruments
affect an entity's financial position, results of operations and its cash
flows. In order to provide such information to financial statement users,
the Fund provides qualitative disclosures about an entity's associated risk
exposures, quantitative disclosures about fair value amounts of derivative
instruments and the gains and losses from derivative instruments.
The realized and unrealized gain/(loss) on forward foreign currency
exchange contracts for the period from January 1, 2010 to June 30, 2010 is
$2,937,420 and $(431,134), respectively, and are included in the net
realized gain/(loss) from foreign currency contracts and transactions and
net change in unrealized appreciation/depreciation on investments in
Investment Funds and foreign currency contracts and translations on the
Statement of Operations. Unrealized appreciation on foreign currency
contracts is included on the Statement of Assets, Liabilities and Members'
Capital.
The volume of activity of foreign currency forward contracts that is
presented in the Schedule of Portfolio Investments is consistent with the
derivative activity during the period from January 1, 2010 to June 30,
2010.
8. INDEMNIFICATION
In the ordinary course of business, the Fund may enter into contracts or
agreements that contain indemnifications or warranties. Future events could
occur that lead to the execution of these provisions against the Fund.
Based on its history and experience, the Fund believes that the likelihood
of such an event is remote.
9. SUBSEQUENT EVENTS
On July 1, 2010, The PNC Financial Services Group, Inc. sold the
outstanding stock of PNC Global Investment Servicing Inc. to The Bank of
New York Mellon Corporation. At the closing of the sale, PNC Global
Investment Servicing (U.S.) Inc. changed its name to BNY Mellon Investment
Servicing (US) Inc. PFPC Trust Company will not change its name until a
later date to be announced.
14
UBS CREDIT RECOVERY FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS
(UNAUDITED)
JUNE 30, 2010
DOLLAR
AMOUNT OF
REALIZED AND FAIR VALUE
UNREALIZED FOR FIRST
%OF GAIN/(LOSS) INITIAL AVAILABLE
MEMBERS' FROM ACQUISITION FIRST AVAILABLE REDEMPTION
INVESTMENT FUND COST FAIR VALUE CAPITAL INVESTMENTS DATE LIQUIDITY (a) REDEMPTION (b) (b)
- --------------- ------------ ------------ -------- ------------- ----------- --------------- --------------- -----------
DIRECT LOANS/STRUCTURED
FINANCE
European Special
Opportunities Fund II,
Ltd., Class B (c) $ 14,186,679 $ 12,244,769 2.80 $(1,521,709) 2/1/2008 N/A
Indus Structured Finance
Fund, L.P., Class A 11,380,871 6,626,057 1.51 (1,108,214) 5/1/2007 Semi-Annually 6/30/2012 6,626,057
Marathon Distressed
Subprime Fund, L.P. 20,000,000 22,230,391 5.08 2,415,738 9/1/2007 Every 18 months
Marathon Structured
Finance Fund, L.P. (c) 4,215,775 3,799,390 0.87 21,837 11/1/2004 N/A
Marathon Structured
Finance Fund, L.P. (d) 2,466,141 1,773,753 0.41 11,825 11/1/2004 N/A
One William Street Capital
Partners, L.P. 17,500,000 19,364,975 4.42 1,579,725 12/1/2009 Quarterly 12/31/2010 19,364,975
Styx Partners, L.P. (c) 24,699,873 22,364,127 5.11 (8,964,874) 8/1/2002 N/A
------------ ------------ ----- -----------
DIRECT LOANS/STRUCTURED
FINANCE SUBTOTAL $ 94,449,339 $ 88,403,462 20.20% $(7,565,672)
DISTRESSED/CREDIT
Gramercy Argentina
Opportunity Fund,
Ltd. (e) 10,000,000 9,813,566 2.24 (587,559) 8/1/2007 Quarterly
Gramercy Onshore Fund SPV
III, L.L.C. (c) 7,323,760 5,191,788 1.19 (949,070) 8/1/2007 N/A
Gramercy Onshore Fund SPV,
L.L.C. (c) 7,513,196 4,299,929 0.98 (865,376) 8/1/2007 N/A
Marathon Special
Opportunity Fund, L.P. 13,246,605 17,604,378 4.02 396,599 10/1/2002 Every 24 months
Marathon Special
Opportunity Fund,
L.P. (c) 760,797 942,676 0.21 133,082 10/1/2002 N/A
Marathon Special
Opportunity Fund,
L.P. (d) 5,017,445 5,847,277 1.34 666,006 10/1/2002 N/A
Monarch Debt Recovery
Fund, L.P. 6,750,000 17,458,187 3.99 1,982,792 10/1/2002 Annually
Normandy Hill Fund,
L.P. (e) 15,000,000 14,781,982 3.38 (218,018) 4/1/2010 Quarterly
------------ ------------ ----- -----------
DISTRESSED/CREDIT
SUBTOTAL $ 65,611,803 $ 75,939,783 17.35% $ 558,456
DIVERSIFIED CREDIT
Ahab Partners, L.P. (c) 9,645,364 9,225,468 2.11 1,825,567 8/1/2002 N/A
Brevan Howard Credit
Catalysts Fund,
L.P. (e) 22,000,000 22,061,600 5.04 61,600 6/1/2010 Monthly
Brigade Leveraged Capital
Structures Fund,
L.P. (e) 31,477,650 37,923,804 8.66 1,582,328 2/1/2008 Quarterly
Camulos Partners, L.P. (c) 8,508,696 3,129,859 0.71 (236,193) 2/1/2006 N/A
Canyon Value Realization
Fund, L.P. (d) 2,680,890 3,431,754 0.78 194,748 8/1/2002 N/A
Claren Road Credit
Partners, L.P. (e) 24,785,723 35,843,787 8.19 1,277,225 10/1/2006 Quarterly
Claren Road Credit
Partners, L.P., L
Interest (d) 891,653 3,323,173 0.76 197,040 10/1/2006 N/A
Claren Road Credit
Partners, L.P., L
Interest payable (d) 5,731,585 4,152,002 0.95 246,183 10/1/2006 N/A
Cyrus Opportunities Fund
II, L.P. (c) 2,670,116 2,413,099 0.55 167,810 8/1/2002 N/A
Cyrus Opportunities Fund
II, L.P. (d) 456,428 830,915 0.19 304,593 8/1/2002 N/A
Gracie Credit
Opportunities Fund,
L.L.C. 25,000,000 25,541,516 5.83 482,795 11/1/2009 Quarterly 12/31/2010 25,541,516
Harbinger Capital Partners
Fund I, L.P.,
Class L (d) 647,193 2,465,621 0.56 298,469 8/1/2006 N/A
Harbinger Capital Partners
Special Situations
Fund, L.P. (e) 4,266,526 8,992,931 2.05 (482,561) 8/1/2002 Anniversary
Harbinger Capital Partners
Special Situations
Fund, L.P. (d) 1,328,967 1,032,573 0.24 (166,258) 8/1/2006 N/A
Harbinger Class PE
Holdings (US) Trust (d) 6,459,866 4,765,776 1.09 (1,071,625) 8/1/2006 N/A
Knighthead Domestic
Fund, L.P. 16,000,000 24,667,256 5.64 1,377,435 6/1/2008 Every 24 months
Pardus Special
Opportunities Fund,
L.P. (c) 6,979,616 2,829,115 0.65 (856,108) 2/1/2006 N/A
Redwood Domestic Fund,
L.P. (e) 10,000,000 14,524,816 3.32 1,097,544 10/1/2008 Every 24 months 9/30/2010 14,524,816
Trilogy Financial
Partners, L.P. (c) 3,771,041 4,360,249 1.00 778,254 1/1/2003 N/A
Whitebox Hedged High Yield
Fund, L.P. (c) 1,819,187 2,508,854 0.57 1,454 2/1/2004 N/A
Whitebox Hedged High
Yield, Ltd. (c) 7,833,175 6,862,778 1.57 127,628 9/1/2005 N/A
------------ ------------ ----- -----------
DIVERSIFIED CREDIT
SUBTOTAL $192,953,676 $220,886,946 50.46% $ 7,207,928
The preceding notes are an integral part of these financial statements.
15
UBS CREDIT RECOVERY FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
DOLLAR
AMOUNT OF
REALIZED AND FAIR VALUE
UNREALIZED FOR FIRST
%OF GAIN/(LOSS) INITIAL AVAILABLE
MEMBERS' FROM ACQUISITION FIRST AVAILABLE REDEMPTION
INVESTMENT FUND COST FAIR VALUE CAPITAL INVESTMENTS DATE LIQUIDITY (a) REDEMPTION (b) (b)
- --------------- ------------ ------------ -------- ------------- ----------- --------------- --------------- -----------
EURO FX CONTRACTS
Euro Foreign Currency
Forward Contract(f) $ -- $ 39,618 0.01% $ 2,506,286
Other Securities -- -- -- 33,708
Redeemed Investment Funds -- -- -- 3,189,426
------------ ------------ ----- -----------
TOTAL $353,014,818 $385,269,809 88.02% $ 5,930,132
============ ============ ===== ===========
(a) Available frequency of redemptions after the initial lock-up period, if
any. Different tranches may have varying liquidity terms.
(b) Investment Funds with no dates or amounts can be redeemed in full.
(c) The Investment Fund is in liquidation. In addition to any redemption
proceeds that may have already been received, the Fund will continue to
receive proceeds periodically as the Investment Fund liquidates its
underlying investments.
(d) A portion or all of the Fund's interests in the Investment Fund are held in
side pockets which have restricted liquidity.
(e) Investment Funds categorized as Level 2 investments.
(f) The current fair value of the Euro foreign forward currency sale contract
is $15,188,822 and the value on settlement date of September 30, 2010 is
$15,228,440.
The following is a summary of the inputs used in valuing the Fund's investments
at fair value. The inputs or methodology used for valuing the Fund's investments
are not necessarily an indication of the risk associated with investing in those
investments. The Fund's valuation procedures require evaluation of all relevant
factors available at the time the Fund values its portfolio. These relevant
factors include the individual Investment Funds' compliance with fair value
measurements, price transparency and valuation procedures in place, subscription
and redemption activity, level of illiquid securities held, and the existence or
absence of redemption restrictions.
The Fund's investments are categorized in three levels as disclosed below. Level
1 discloses the amount of investments where the values of those investments are
based upon quoted prices in active markets for identical securities. Level 2
discloses the amount of investments where the Fund has the ability to redeem at
net asset value as of the June 30, 2010 measurement date, or within one quarter
of the measurement date. Level 3 discloses the amount of investments where the
Fund does not have the ability to redeem at net asset value within one quarter
of the June 30, 2010 measurement date.
ASSETS TABLE
TOTAL FAIR VALUE AT
DESCRIPTION JUNE 30, 2010 LEVEL 1 LEVEL 2 LEVEL 3
- ----------- ------------------- ------- ------------ ------------
Direct Loans/Structured Finance $ 88,403,462 $ -- $ -- $ 88,403,462
Distressed/Credit 75,939,783 -- 24,595,548 51,344,235
Diversified Credit 220,886,946 -- 119,346,938 101,540,008
Euro FX Contracts 39,618 -- 39,618 --
------------ ------- ------------ ------------
TOTAL ASSETS $385,269,809 $ -- $143,982,104 $241,287,705
------------ ------- ------------ ------------
The preceding notes are an integral part of these financial statements.
16
UBS CREDIT RECOVERY FUND, L.L.C.
SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED)
(UNAUDITED)
JUNE 30, 2010
The following is a reconciliation of assets in which significant unobservable
inputs (Level 3) were used in determining fair value:
CHANGE IN
UNREALIZED NET TRANSFERS IN
BALANCE AS OF REALIZED GAIN / APPRECIATION / NET PURCHASES / AND/OR (OUT) OF BALANCE AS OF
DESCRIPTION DECEMBER 31, 2009 (LOSS) DEPRECIATION (SALES) LEVEL 3 JUNE 30, 2010
- ----------- ----------------- --------------- -------------- --------------- ---------------- -------------
Direct Loans / Structured
Finance $115,768,617 $(1,930,054) $(5,635,618) $(19,799,483) $ -- $ 88,403,462
Distressed Credit 35,239,110 60,945 (679,705) (734,302) 17,458,187 51,344,235
Diversified Credit 135,842,741 (5,687,735) 9,974,289 (15,071,540) (23,517,747) 101,540,008
------------ ----------- ----------- ------------ ------------ ------------
Total $286,850,468 $(7,556,844) $ 3,658,966 $(35,605,325) $ (6,059,560) $241,287,705
------------ ----------- ----------- ------------ ------------ ------------
Net change in unrealized appreciation/depreciation on Level 3 assets and
liabilities still held as of June 30, 2010 is $5,026,775.
The net transfers in and/or (out) of Level 3 noted above are due to the
liquidity of the underlying Investment Funds in relation to the change in the
measurement date from December 31, 2009 to June 30, 2010.
The preceding notes are an integral part of these financial statements.
17
UBS CREDIT RECOVERY FUND, L.L.C. (UNAUDITED)
The Directors (including the Independent Directors) last evaluated the
Investment Management Agreement at a meeting on May 13, 2010. The Directors met
in an executive session during which they were advised by and had the
opportunity to discuss with independent legal counsel the approval of the
Investment Management Agreement. The Directors reviewed materials furnished by
UBS Fund Advisor, L.L.C. (the "Adviser"), including information regarding the
Adviser, its affiliates and its personnel, operations and financial condition.
Tables indicating comparative fee information, and comparative performance
information, as well as a summary financial analysis for the Fund, were also
included in the meeting materials and were reviewed and discussed. The Directors
discussed with representatives of the Adviser the Fund's operations and the
Adviser's ability to provide advisory and other services to the Fund.
The Directors reviewed, among other things, the nature of the advisory
services to be provided to the Fund by the Adviser, including its investment
process, and the experience of the investment advisory and other personnel
proposing to provide services to the Fund. The Directors discussed the ability
of the Adviser to manage the Fund's investments in accordance with the Fund's
stated investment objectives and policies, as well as the services to be
provided by the Adviser to the Fund, including administrative and compliance
services, oversight of Fund accounting, marketing services, assistance in
meeting legal and regulatory requirements and other services necessary for the
operation of the Fund. The Directors acknowledged the Adviser's employment of
highly skilled investment professionals, research analysts and administrative,
legal and compliance staff members to ensure that a high level of quality in
investment management and compliance services would be provided to the Fund. The
Directors also recognized the benefits that the Fund derives from the resources
available to the Adviser and the Adviser's affiliates, including UBS AG and UBS
Financial Services Inc. Accordingly, the Directors felt that the quality of
service offered by the Adviser to the Fund was appropriate and that the
Adviser's personnel had sufficient expertise to manage the Fund.
The Directors reviewed the performance of the Fund and compared that
performance to the performance of other investment companies presented by the
Adviser which had objectives and strategies similar to those of the Fund and
which are managed by other, thirdparty investment advisers ("Comparable Funds").
The Directors recognized that the Comparable Funds, as private funds, are not
subject to certain investment restrictions under the 1940 Act that are
applicable to the Fund and which can adversely affect the Fund's performance
relative to that of its respective Comparable Funds. The Directors noted that
the Fund's first quarter 2010 performance was below the median performance of
the Comparable Funds and the relevant indexes (Altman Defaulted Bond Index,
CSFB/Tremont Event Driven: Distressed Index, Hennessee Distressed Index,
HFRX/HFRI Distressed Securities Index, S&P 500 DRI and Salomon High Yield
Index), but that the Fund's performance for the five-year period ended March 31,
2010 was above the median performance of the Comparable Funds. The Directors
also compared the volatility of the Fund to that of its Comparable Funds. The
Directors observed that for the three- and five-year periods ended March 31,
2010, the Fund's volatility was above the median volatility of the Comparable
Funds but below the median volatility of the relevant indexes.
The Directors considered the fees being charged by the Adviser for its
services to the Fund as compared to those charged to the Comparable Funds, and
as compared to the fees charged by the Adviser and its affiliates for other UBS
alternative investment products. The information presented to the Directors
showed that although the combination of the Fund's management fee and service
fee was above the median management fee of the Comparable Funds, the Fund did
not charge an incentive fee. In comparing the advisory fees being charged to the
Fund to the fees being charged by the Adviser and its affiliates for other UBS
alternative investment products, the Directors noted that although the
combination of management fee and administrative services fee being charged to
the Fund was equal to the highest being charged to the Adviser's multi-manager
funds, the Fund did not charge an incentive fee.(1) In light of the foregoing,
the Directors felt that the combination of management fee and incentive fee
being charged to the Fund was appropriate and was within the overall range of
the fees paid by the Comparable Funds and other relevant UBS alternative
investment products.
The Directors also considered the profitability of the Adviser both before
payment to brokers and after payment to brokers and concluded that the profits
to be realized by the Adviser and its affiliates under the Fund's Investment
Management Agreement and from other relationships between the Fund and the
Adviser were within a range the Directors considered reasonable and appropriate.
The Directors also discussed the fact that the Fund was not large enough at that
time to support a request for breakpoints due to economies of scale. The
Directors determined that the fees under the Investment Advisory Agreement do
not constitute fees that are so disproportionally large as to bear no reasonable
relationship to the services rendered and that could not have been the product
of arm's length bargaining, and concluded that the fees were reasonable. The
Directors concluded that approval of the Fund's Investment Management Agreement
was in the best interests of the Fund and its investors.
- ----------
(1) The management fees charged to the other multi-manager funds range from 100
basis points to 175 basis points. The management fees are not waived for
investors. The incentive fees charged to the other multi-manager funds
range from zero to five percent of profits.
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
(b) There has been no change, as of the date of this filing, in any of the
portfolio managers identified in response to paragraph (a)(1) of this Item
in the registrant's most recently filed annual report on Form N-CSR.
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.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's 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) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
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) UBS Credit Recovery Fund, L.L.C.
--------------------------------------------------------------------
By (Signature and Title)* /s/ Michael Perry
-------------------------------------------------------
Michael Perry, Principal Executive Officer
Date August 23, 2010
----------------------------------------------------------------------------
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/ Michael Perry
-------------------------------------------------------
Michael Perry, Principal Executive Officer
Date August 23, 2010
----------------------------------------------------------------------------
By (Signature and Title)* /s/ Robert Aufenanger
-------------------------------------------------------
Robert Aufenanger, Principal Financial Officer
Date August 23, 2010
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.