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 811-21629
SPECIAL VALUE EXPANSION FUND, LLC
(Exact Name of Registrant as Specified in Charter)
2951 28TH STREET, SUITE 1000
SANTA MONICA, CALIFORNIA 90405
(Address of Principal Executive Offices) (Zip Code)
DAVID A. HOLLANDER, SECRETARY
SPECIAL VALUE EXPANSION FUND, LLC
2951 28TH STREET, SUITE 1000
SANTA MONICA, CALIFORNIA 90405
(Name and Address of Agent for Service)
Registrant's telephone number, including area code: (310) 566-1000
Copies to:
RICHARD T. PRINS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR TIMES SQUARE
NEW YORK, NEW YORK 10036
Date of fiscal year end: SEPTEMBER 30, 2005
Date of reporting period: MARCH 31, 2005
ITEM 1. REPORTS TO STOCKHOLDERS.
SEMI-ANNUAL SHAREHOLDER REPORT
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
March 31, 2005
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Semi-Annual Shareholder Report
(unaudited)
March 31, 2005
Contents
Unaudited Financial Statements
Statement of Assets and Liabilities.......................................... 2
Statement of Investments in Securities of Unaffiliated Issuers................3
Statement of Investments in Affiliates........................................5
Statement of Operations.......................................................6
Statements of Changes in Net Assets...........................................7
Statement of Cash Flows.......................................................8
Notes to Financial Statements.................................................9
Supplemental Information
Portfolio Asset Allocation...................................................24
Special Value Expansion Fund, LLC (the "Company") files its complete schedule of
portfolio holdings with the Securities and Exchange Commission ("SEC") for the
first and third quarters of each fiscal year on Form N-Q. The Company's Forms
N-Q are available on the SEC's website at http://www.sec.gov. The Company's
Forms N-Q 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 1-800-SEC-0330.
A free copy of the fund's proxy voting guidelines may be obtained on the SEC's
website at www.sec.gov, or by calling the Company's adviser, Tennenbaum Capital
Partners, LLC, at (310) 566-1000. Collect calls for this purpose are accepted.
1
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Statement of Assets and Liabilities (unaudited)
March 31, 2005
Cost Fair Value
----------------- -----------------
Assets
Investments in securities of unaffiliated issuers
Debt securities $ 95,983,826 $ 96,095,639
----------------- -----------------
Total investments in securities of unaffiliated issuers
95,983,826 96,095,639
Investments in securities of affiliated issuers
Debt securities 7,776,157 8,227,231
Equity securities 8,466,129 14,335,993
----------------- -----------------
Total investments in securities of affiliated issuers 16,242,286 22,563,224
----------------- -----------------
Total Investments 112,226,112 118,658,863
Cash and cash equivalents 79,840,110
Subscriptions receivable for common shares 10,000,000
Accrued interest income on securities of unaffiliated issuers 620,812
Accrued interest income on securities of affiliated issuers 19,303
Prepaid expenses and other assets 131,058
Deferred debt issuance costs 2,265,272
-----------------
Total assets 211,535,418
-----------------
Liabilities
Credit facility payable 53,000,000
Payable for investment securities purchased 18,675,477
Management and advisory fees payable 300,000
Accrued expenses and other liabilities 562,686
-----------------
Total liabilities 72,538,163
-----------------
Preferred Stock
Auction rate money market preferred stock; liquidation preference $50,000/share;
unlimited shares authorized, 700 shares issued and outstanding 35,000,000
Accumulated dividends on auction rate money market preferred stock 48,756
Series S; liquidation preference $1,000/share; 1 share authorized, issued
and outstanding 1,000
Reserve for potential distributions to Series S preferred stock 1,445,217
Series Z; liquidation preference $500/share; 500 shares authorized, 312
shares issued and outstanding 156,000
Accumulated dividends on Series Z preferred stock 7,349
-----------------
Total preferred stock 36,658,322
-----------------
Net assets applicable to common shareholders $ 102,338,933
=================
Composition of net assets applicable to common shareholders:
Common stock, $0.001 par value, unlimited shares authorized, 178,275.433 shares
issued and outstanding, 19,117.309 subscribed and pending issuance $ 197
Paid-in capital in excess of par 98,607,308
Distributions in excess of net investment income (1,363,662)
Accumulated net realized gain on investments 163,661
Accumulated net unrealized gain on investments 6,432,751
Accumulated dividends and reserve for potential dividends to preferred (1,501,322)
-----------------
Net assets applicable to common shareholders $ 102,338,933
=================
Common stock, NAV per share $ 518.45
See accompanying notes.
2
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Statement of Investments in Securities of Unaffiliated Issuers (unaudited)
March 31, 2005
Showing Percentage of Total Cash and Investments of the Company
Percent of
Principal Fair Cash and
Security Amount Value Investments
- ---------------------------------------------------------------------- -------------- -------------- ------------
Debt Securities (48.39%)
Bank Debt (40.37%) (1)
Machinery (Nonagriculture, Nonconstruction, Nonelectronic) (13.61%)
Ahern Rentals, Inc. Senior Secured Notes, 12% Cash + 2.5% PIK, due
10/29/09
(Acquired 10/29/04, Amortized Cost $26,864,143) $26,989,322 $27,023,059 13.61%
Personal Transportation (11.03%)
Northwest Airlines, Inc. 1st Preferred Mortgage, 12.19%, due 10/12/16
(Acquired 10/12/04, Amortized Cost $13,019,847) $13,142,504 13,224,645 6.66%
Northwest Airlines, Inc. 1st Preferred Mortgage, 12.19%, due 11/19/17
(Acquired 11/19/04, Amortized Cost $8,515,888) $ 8,618,374 8,672,239 4.37%
-----------
Total Personal Transportation 21,896,884
Telecommunications (6.09%)
Integra Telecom, Inc. 1st Lien Senior Secured Term Loan,
LIBOR + 7% Cash + 2% PIK, due 9/14/09
(Acquired 9/20/04, Amortized Cost $12,298,686) $12,468,632 12,094,573 6.09%
Utilities (9.64%)
La Paloma Generating Co.
Cert. Residual (Acquired 2/2/05, Cost $0) (2) $ 228,406 236,400 0.12%
Priority W/Cap (Acquired 2/2/05, Cost $791,152) $ 791,152 799,064 0.40%
Tranche A Hedge Roll Up (Acquired 2/2/05, Cost $4,561,639) (2) $ 3,638,530 4,602,740 2.32%
Tranche A Residual
(Acquired 2/2/05, Cost $2,923,240) (2) $ 3,166,357 2,976,376 1.50%
(Acquired 3/18/05, Cost $963,553) (2) $ 1,064,369 1,000,507 0.50%
Tranche B Hedge Residual (Acquired 2/2/05, Cost $2,968,153) (2) $ 2,973,430 3,077,500 1.55%
Tranche B Hedge Roll Up (Acquired 2/2/05, Cost $186,225) (2) $ 148,540 187,903 0.09%
Tranche B Residual
(Acquired 2/2/05, Cost $3,895,107) (2) $ 3,891,066 4,027,253 2.03%
(Acquired 3/18/05, Cost $232,710) (2) $ 232,590 240,731 0.12%
Tranche B Roll Up
(Acquired 2/2/05, Cost $186,225) (2) $ 148,540 187,903 0.09%
(Acquired 3/18/05, Cost $790,040) (2) $ 631,489 798,834 0.40%
Tranche C Roll Up (Acquired 2/2/05, Cost $1,017,132) (2) $ 811,302 1,026,297 0.52%
-----------
Total Utilities 19,161,508
Corporate Fixed Income Securities (8.02%)
Automobiles (2.98%)
Miscellaneous Securities (2), (3) $ 9,134,000 5,914,265 2.98%
Diversified/Conglomerate Service (1.58%)
Mastec, Inc. Senior Sub. Notes, 7.75%, due 2/1/08 $ 3,230,000 3,133,100 1.58%
Leisure, Amusement, Motion Pictures and Entertainment (3.46%)
Bally Total Fitness Holdings, Inc. Senior Sub. Notes, 9.875%, due
10/15/07 $ 8,085,000 6,872,250 3.46%
-----------
Total Debt Securities of Unaffiliated Issuers (cost $95,983,826) $96,095,639
-----------
3
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Statement of Investments in Securities of Unaffiliated Issuers
(unaudited) (continued)
March 31, 2005
Showing Percentage of Total Cash and Investments of the Company
Percent of
Principal Fair Cash and
Security Amount Value Investments
- ----------------------------------------------------------------- ---------------- ---------------- -------------
Cash and Cash Equivalents (40.24%)
American Express Commercial Paper, 2.73%, due 4/7/05 $ 3,000,000 $ 2,998,180 1.51%
American Express Commercial Paper, 2.73%, due 4/19/05 $ 3,000,000 2,995,450 1.51%
GECC Commercial Paper, 2.65%, due 4/4/05 $ 6,000,000 5,996,908 3.02%
United States Government Treasury Bill, 2.63%, due 4/21/05 $ 15,000,000 14,976,987 7.55%
United States Government Treasury Bill, 2.54%, due 4/7/05 $ 17,000,000 16,984,434 8.56%
United States Government Treasury Bill, 2.63%, due 4/28/05 $ 32,000,000 31,934,682 16.09%
Wells Fargo Bank Overnight Repo, 2.55%, due 4/1/05 $ 3,742,121 3,742,121 1.89%
Cash Held on Account at Various Institutions $ 211,348 211,348 0.11%
------------
Total Cash and Cash Equivalents (4) 79,840,110
------------
Total Cash and Investments in Securities of Unaffiliated Issuers $175,935,749 88.63%
============
Notes to Statement of Investments in Securities of Unaffiliated Issuers:
(1) Certain investments in bank debt may be considered to be subject to
contractual restrictions, and such investments are bought and sold among
institutional investors in transactions not subject to registration under
the Securities Act of 1933. Such transactions are generally limited to
commercial lenders or accredited investors and often require approval of
the agent or borrower.
(2) Non-income producing security.
(3) Miscellaneous Securities is a single unrestricted position.
(4) Amount does not include $10.0 million of subscriptions receivable that was
received on or about May 2, 2005.
Aggregate purchases and aggregate sales of securities of unaffiliated issuers,
other than Government securities, totaled $80,920,946 and $3,175,983
respectively. Aggregate purchases includes securities received as payment in
kind. Aggregate sales includes principal paydowns on debt securities.
The total value of restricted securities of unaffiliated issuers as of March 31,
2005, was $80,176,024, or 40.37% of total cash and investments of the Company.
See accompanying notes.
4
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Statement of Investments in Affiliates (1) (unaudited)
March 31, 2005
Showing Percentage of Total Cash and Investments of the Company
Principal Percent of
Amount Fair Cash and
Security or Shares Value Investments
- ------------------------------------------------------------------------ --------------- --------------- ------------
Debt Securities (4.14%)
Bank Debt (4.14%) (2)
Diversified/Conglomerate Manufacturing (4.14%)
Intentia International AB Secured Notes, LIBOR + 9%, due 9/14/09
(Acquired 9/13/04, Amortized Cost $7,776,157) - (Sweden) $7,958,628 $8,227,231 4.14%
Total Debt Securities of Affiliates (cost $7,776,157)
Equity and Equity Related Securities (7.23%)
Diversified/Conglomerate Manufacturing (7.23%)
Put/Call Agreement for 345,049 Intentia International AB Series A
Common, expires 7/9/05 (Acquired 2/12/05) - (Sweden) (3), (4), (5), (6) 1 - 0.00%
Intentia International AB Series A Common
(Acquired 9/13/04, Cost $1,757,708) - (Sweden) (3), (4), (5), (6) 691,087 1,592,276 0.80%
Intentia International AB Series B Common
(Acquired 9/13/04, Cost $6,708,421) - (Sweden) (3), (4), (5), (6) 5,531,086 12,743,717 6.43%
---------------
Total Equity and Equity Related Securities of Affiliates (cost
$8,466,129) 14,335,993
---------------
Total Investments in Securities of Affiliated Issuers (cost
$16,242,286) $22,563,224 11.37%
===============
Notes to Statement of Investments in Affiliates:
(1) The issuers of the securities listed on this schedule are considered
affiliates under the Investment Company Act of 1940 due to the ownership
by the Company of more than 5% of the issuer's voting securities.
(2) Certain investments in bank debt may be considered to be subject to
contractual restrictions, and such investments are bought and sold among
institutional investors in transactions not subject to registration under
the Securities Act of 1933. Such transactions are generally limited to
commercial lenders or accredited investors and often require approval of
the agent or borrower.
(3) Investment is not a controlling position.
(4) Securities regulations temporarily restrict the sale of this security due
to membership on the Board of Directors of the issuer by an affiliate of
the Company.
(5) Denominated in Swedish Kroner, and converted to US Dollars.
(6) Non-income producing security.
Aggregate purchases and aggregate sales of securities of affiliated issuers,
other than Government securities, totaled $1,573,272 and zero, respectively.
Aggregate purchases includes securities received as payment in kind. Aggregate
sales includes principal paydowns on debt securities.
The total value of restricted securities of affiliated issuers as of March 31,
2005, was $22,563,224, or 11.37% of total cash and investments of the Company.
See accompanying notes.
5
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Statement of Operations (unaudited)
For the Six Months Ended March 31, 2005
Investment income:
Interest income $ 4,747,370
Income from original issue discount 39,977
-----------
Total interest and related investment income 4,787,347
-----------
Operating expenses:
Management and advisory fees 1,800,000
Legal fees, professional fees and due diligence expenses 357,958
Commitment fees 145,356
Insurance expense 129,563
Amortization of deferred debt issuance costs 109,728
Interest expense 67,490
Directors fees 58,000
Custody fees 26,500
Other operating expenses 367,284
-----------
Total expenses 3,061,879
-----------
Net investment income 1,725,468
Net realized and unrealized gain on investments:
Net realized gain on investments:
Proceeds from sales, maturities and paydowns 3,340,429
Cost of investments sold, paid down, or matured 3,175,983
-----------
Net realized gain on investments 164,446
Change in net unrealized gain:
Net unrealized gain, beginning of period 1,422,669
Net unrealized gain, end of period 6,432,751
-----------
Net change in unrealized gain on investments 5,010,082
-----------
Net realized and unrealized gain on investments 5,174,528
-----------
Distributions to preferred shareholders (279,069)
Net change in reserve for potential dividends to preferred shareholders (1,278,125)
-----------
Net increase in net assets applicable to common shareholders
resulting from operations $ 5,342,802
===========
See accompanying notes.
6
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Statements of Changes in Net Assets
Period from
October 1, 2004 to Period from
March 31, 2005 September 1, 2004 to
(unaudited) September 30, 2004
------------- -------------
Total common shareholder committed capital $ 300,000,000 $ 300,000,000
============= =============
Net assets applicable to common shareholders, beginning of period $ 90,820,626 $ -
Common shareholder contributions 10,000,000 90,000,000
Equity placement and offering costs charged to paid-in capital (1,324,495) (68,000)
------------- -------------
Common shareholder contributions, net 8,675,505 89,932,000
Net investment income 1,725,468 (317,721)
Net realized gain on investments 164,446 6,875
Net change in unrealized gain on investments 5,010,082 1,422,669
Distributions to preferred shareholders from net investment income (279,069) --
Net change in reserve for potential dividends to preferred shareholders (1,278,125) (223,197)
------------- -------------
Net increase in net assets applicable to common shareholders
resulting from operations 5,342,802 888,626
Distributions to common shareholders from net investment income (2,492,340) --
Distributions to common shareholders from net realized gains (7,660) --
Net assets applicable to common shareholders, end of period
(including distributions in excess of net investment income of
$1,363,662 at March 31, 2005) $ 102,338,933 $ 90,820,626
============= =============
See accompanying notes.
7
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Statement of Cash Flows (unaudited)
For the Six Months Ended March 31, 2005
Operating activities:
Net increase in net assets applicable to common shareholders
resulting from operations $ 5,342,802
Adjustments to reconcile net increase in net assets resulting from
operations to net cash used in operating activities:
Net realized gain on investments (164,446)
Net change in unrealized gain on investments (5,010,082)
Dividends paid to auction rate money market preferred shareholders 279,069
Income from original issue discount (39,977)
Income from paid in-kind capitalization (417,441)
Amortization of deferred debt issuance costs 109,728
Increase in reserve for potential dividends to preferred shareholders 1,278,125
Changes in assets and liabilities:
Purchases of investment securities (82,494,217)
Proceeds from sales, maturities and paydowns of investment securities 3,340,429
Increase in deferred debt issuance costs (2,375,000)
Decrease in subscription receivable from common shares 20,000,000
Decrease in prepaid expenses and other assets 107,062
Increase in accrued interest income (398,180)
Decrease in receivable for investment securities sold 218,533
Increase in payable for securities purchased 18,675,477
Decrease in directors fees payable (19,157)
Increase in accrued expenses and other liabilities 371,027
------------
Net cash used in operating activities (41,196,248)
------------
Financing activities:
Proceeds from issuance of common shares 10,000,000
Dividends to common shareholders (2,500,000)
Payments for equity placement and offering costs (1,324,495)
Proceeds from draws on credit facility 86,000,000
Paydowns on credit facility (33,000,000)
Proceeds from issuance of auction rate money market preferred shares 35,000,000
Dividends paid to auction rate money market preferred shareholders (279,069)
------------
Net cash provided by financing activities 93,896,436
------------
Net increase in cash and cash equivalents 52,700,188
Cash and cash equivalents at beginning of period 27,139,922
------------
Cash and cash equivalents at end of period $ 79,840,110
============
See accompanying notes.
8
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Notes to Financial Statements (unaudited)
March 31, 2005
1. Organization and Nature of Operations
Special Value Expansion Fund, LLC (the "Company"), a Delaware limited liability
company, is registered as a nondiversified, closed-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"). The Company
has elected to be treated as a regulated investment company ("RIC") for U.S.
federal income tax purposes. The Company will not be taxed on its income to the
extent that it distributes such income each year and satisfies other applicable
income tax requirements.
The Certificate of Formation of the Company was filed with the Delaware
Secretary of State on August 12, 2004. Investment operations commenced on
September 1, 2004. The Company received initial funding on September 1, 2004 and
was formed to acquire a portfolio of investments consisting primarily of bank
loans, distressed debt, stressed high yield debt, mezzanine investments and
public equities. The stated objective of the Company is to generate current
income as well as long-term capital appreciation using a leveraged capital
structure. GMAM Investment Funds Trust II ("GMAM") owns 99.5% of the Company's
common shares.
Tennenbaum Capital Partners, LLC ("TCP") serves as the Investment Manager of the
Company. TCP is controlled and managed by Tennenbaum & Co., LLC ("Tennenbaum &
Co.") and certain affiliates. The Company, TCP, Tennenbaum & Co., and their
members and affiliates may be considered related parties.
Company management consists of the Investment Manager and the Board of
Directors. The Investment Manager directs and executes the day-to-day operations
of the Company, subject to oversight from the Board of Directors, which sets the
broad policies for the Company. The Board of Directors consists of four persons,
three of whom are independent. If the Company has preferred shares outstanding,
as it currently does, the holders of the preferred shares voting separately as a
class will be entitled to elect two of the Company's Directors. The remaining
Directors of the Company will be subject to election by holders of common shares
and preferred shares voting together as a single class.
Company Structure
Total maximum capitalization of the Company is targeted at $600 million,
consisting of $300 million of capital committed by investors to purchase the
Company's common shares, $100 million of Auction Rate Money Market Preferred
Shares ("APS"), $200 million under a Senior Secured Revolving Credit Facility
(the "Senior Facility"), $156,000 of Series Z Preferred Stock and $1,000 of
Series S Preferred Stock (see Note 7). The contributed investor capital, APS and
the amount drawn under the Senior Facility
9
1. Organization and Nature of Operations (continued)
are to be used to purchase Company investments and to pay certain fees and
expenses of the Company. Substantially all of these investments will be included
in the collateral for the Senior Facility and are available to pay certain fees
and expenses of the Company incurred in connection with its organization and
capitalization. At March 31, 2005, there was $53 million outstanding under the
Senior Facility.
Credit enhancement with respect to the APS and Senior Facility will be provided
by a AAA/Aaa rated monoline insurer (the "Insurer") through surety policies
issued pursuant to an insurance and indemnity agreement between the Company and
the Insurer. Under the surety policies, the Insurer will guarantee payment of
the liquidation preference and unpaid dividends on the APS and amounts drawn
under the Senior Facility. The cost of the surety polices is 0.11% for
unutilized portions of the Money Market preferred shares and the Senior Facility
and 0.24% for the outstanding portions of those sources of capital.
The Company will liquidate and distribute its assets and will be dissolved at
September 1, 2014, subject to up to two one-year extensions if requested by the
Investment Manager and approved by a majority of the Company's equity interests.
However, the Operating Agreement will prohibit the liquidation of the Company
prior to September 1, 2014 if the APS are not redeemed in full prior to such
liquidation.
Investor Capital
Investors have committed to purchase $300 million of the Company's common shares
over a two year period on dates specified by the Company. On September 1, 2004,
each investor contributed 20% of its capital commitment to purchase common
shares, and an additional 10% of the common share commitment was received by the
Company by November 1, 2004. The Company called an additional 3.33% of the
common share commitment on March 18, 2005. On April 18, 2005, this call was
amended and increased to 10% of the common share commitment, and the full amount
was $30 million received on or about May 2, 2005. The Company expects to call
and receive the remaining 60% of the common share commitments by September 1,
2006. At March, 31, 2005, the ratio of contributed to committed capital is
0.33:1.
Auction Rate Money Market Preferred Capital
At March 31, 2005, the Company had 700 shares of APS issued and outstanding with
a liquidation preference of $50,000 per share (plus an amount equal to
accumulated but unpaid dividends upon liquidation). The APS are redeemable at
the option of the Company, subject to certain limitations. Additionally, under
certain conditions, the Company may be required to either redeem certain of the
APS or repay indebtedness, at
10
1. Organization and Nature of Operations (continued)
the Company's option. Such conditions would include a failure by the Company to
maintain adequate collateral as required by its credit facility agreement or by
the Statement of Preferences of the APS, or a failure by the Company to maintain
sufficient asset coverage as required by the 1940 Act. As of March 31, 2005, the
Company was in full compliance with such requirements.
The auction agent receives a fee from the Company for its services in connection
with auctions of APS and compensates broker-dealers at an annual rate of 0.25%
of the purchase price of the shares of the APS that are issued and outstanding.
The Company has entered into an agreement with a major broker-dealer to
underwrite initial issuances of the APS for a two year period based on an agreed
upon drawdown schedule and subject to certain criteria.
The issuances of the APS will total $100 million of the Company's total
capitalization. On November 17, 2004, the Company received $35.0 million upon
issuance of 700 shares of APS.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). In the opinion of the Investment Manager, the
unaudited financial results of the Company included herein contain all
adjustments necessary to present fairly the financial position of the Company as
of March 31, 2005, and the results of its operations, changes in net assets and
cash flows for the period ended March 31, 2005. The results of operations for
the period ended March 31, 2005, are not necessarily indicative of the operating
results to be expected for a full year. The following is a summary of the
significant accounting policies of the Company.
Investment Valuation
Management values investments held by the Company based upon the principles and
methods of valuation set forth in policies adopted by the Company's Board of
Directors and in conformity with the Senior Facility and Statement of
Preferences for the APS.
Investments listed on a recognized exchange, whether U.S. or foreign, are valued
for financial reporting purposes as of the last business day of the reporting
period using the closing price on the date of valuation.
11
2. Summary of Significant Accounting Policies (continued)
Liquid investments not listed on a recognized exchange are valued by an approved
nationally recognized security pricing service, by using the average of the bid
prices on the date of valuation, as supplied by three approved broker-dealers,
or the lower of two quotes from approved broker dealers. At March 31, 2005, all
investments were valued based on prices from a nationally recognized exchange or
nationally recognized third-party pricing service.
Investments not listed on a recognized exchange or priced by an approved source
("Unquoted Investments") are valued as follows for purposes of inclusion as
permitted collateral in the borrowing base of the Senior Facility:
a) for semi-liquid investment positions with a value of $15 million or
greater but less than $30 million, the most recent quote provided by an
approved investment banking firm;
b) for semi-liquid investment positions with a value greater than $30
million, the most recent valuation provided by an approved third-party
appraisal;
c) for illiquid investment positions with a value of $15 million or greater,
the most recent valuation provided by an approved third-party appraisal;
and
d) However, notwithstanding items (a) through (c), above, the Investment
Manager may determine the market value of Unquoted Investments without
obtaining a third party quote or appraisal, up to an aggregate of 5% of
the total capitalization of the Company.
Investments for which market quotations are not readily available or are
determined to be unreliable are valued at fair value under guidelines adopted by
the Board of Directors. Fair value is generally defined as the amount that an
investment could be sold for in an orderly disposition over a reasonable time.
Generally, to increase objectivity in valuing the Company's assets, the
Investment Manager will utilize external measures of value, such as public
markets or third-party transactions, whenever possible. The Investment Manager's
valuation is not based on long-term work-out value, immediate liquidation value,
nor incremental value for potential changes that may take place in the future.
The values assigned to investments that are valued by the Investment Manager are
based on available information and do not necessarily represent amounts that
might ultimately be realized, as these amounts depend on future circumstances
and cannot reasonably be determined until the individual investments are
actually liquidated. The Investment Manager generally uses three methods to fair
value securities:
12
2. Summary of Significant Accounting Policies (continued)
(i) Cost Method. The cost method is based on the original cost of the securities
to the Company. This method is generally used in the early stages of a portfolio
company's development until significant positive or negative events occur
subsequent to the date of the original investment by the Company in such company
that dictate a change to another valuation method.
(ii) Private Market Method. The private market method uses actual, executed,
historical transactions in a portfolio company's securities by responsible third
parties as a basis for valuation. In connection with utilizing the private
market method, the Investment Manager may also use, where applicable,
unconditional firm offers by responsible third parties as a basis for valuation.
(iii) Analytic Method. The analytical method is generally used by the Investment
Manager to value an investment position when there is no established public or
private market in the portfolio company's securities or when the factual
information available to the Investment Manager dictates that an investment
should no longer be valued under either the cost or private market method. This
valuation method is based on the judgment of the Investment Manager, using data
available for the applicable portfolio securities.
Investment Transactions
The Company records investment transactions on the trade date, except for
private transactions that have conditions to closing, which are recorded on the
closing date. The cost of investments purchased is based upon the purchase price
plus those professional fees which are specifically identifiable to the
investment transaction. Realized gains and losses on investments are recorded
based on the specific identification method, which typically allocates the
highest cost inventory to the basis of the securities sold.
Cash and Cash Equivalents
Cash consists of amounts held in accounts with brokerage firms and the custodian
bank. Cash equivalents consist of highly liquid investments with an original
maturity of three months or less. For purposes of reporting cash flows, cash
consists of the cash held with brokerage firms and the custodian bank, and cash
equivalents maturing within 90 days.
13
2. Summary of Significant Accounting Policies (continued)
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Company's
policy that its custodian takes possession of the underlying collateral
securities, for which the fair value exceeds the principal amount of the
repurchase transaction, including accrued interest, at all times. If the seller
defaults, and the fair value of the collateral declines, realization of the
collateral by the Company may be delayed or limited.
Investments in Foreign Securities
The Company invests in securities traded in foreign countries and denominated in
foreign currencies. At March 31, 2005 investments denominated in foreign
currencies totaled approximately 7.23% of the Company's total cash and
investments. All such open positions are converted at the closing rate in effect
on March 31, 2005 and reported in U.S. dollars. Purchases and sales of
investment securities and income and expense items denominated in foreign
currencies are translated into U.S dollars on the respective dates of such
transactions. As such, foreign security positions and transactions are
susceptible to foreign currency as well as overall market risk. Accordingly,
potential unrealized gains and losses from foreign security transactions may be
affected by fluctuations in foreign exchange rates. Such fluctuations are
included in the net realized and unrealized gain or loss from investments. Net
unrealized foreign currency gains of $294,341 were included in unrealized gains
on investments at March 31, 2005.
Securities of foreign companies and foreign governments may involve special
risks and considerations not typically associated with investing in U.S.
companies and securities of the U.S. government. These risks include, among
other things, revaluation of currencies, less reliable information about
issuers, different securities transactions clearance and settlement practices,
and potential future adverse political and economic developments. Moreover,
securities of some foreign companies and foreign governments and their markets
may be less liquid and their prices more volatile than those of securities of
comparable U.S. companies and the U.S. government.
Debt Issuance Costs
Costs of $2.4 million were incurred in connection with placing the Company's
Senior Facility. These costs are being deferred and are amortized on a
straight-line basis over eight years, the estimated life of the Senior Facility.
The impact of utilizing the straight-line amortization method versus the
effective-interest method is not expected to be material to the Company's
operations.
14
2. Summary of Significant Accounting Policies (continued)
Equity Placement and Offering Costs
Placement costs for the Company's APS capital were $1.0 million. Offering costs
totaled $0.4 million. These costs were charged to paid-in capital.
Organization Costs
Organization costs of $0.3 million were incurred in connection with the
formation of the Company and expensed to operations.
Purchase Discounts
The majority of the Fund's high yield and distressed debt securities are
purchased at a considerable discount to par as a result of the underlying credit
risks and financial results of the issuer and by general market factors that
influence the financial markets as a whole. GAAP requires that discounts on
corporate (investment grade) bonds, municipal bonds and treasury bonds be
amortized using the effective-interest or constant-yield method. The process of
accreting the purchase discount of a debt security to par over the holding
period results in accounting entries that increase the cost basis of the
investment and records a noncash income accrual to the statement of operations.
The Company considers it prudent to follow GAAP guidance that requires the
Investment Manager to consider the collectibility of interest when making
accruals. Statement of Position 93-1 discusses financial accounting and
reporting for high yield debt securities and notes that because of the credit
risks associated with high yield and distressed debt securities, income
recognition must be carefully considered and constantly evaluated for
collectibility.
Accordingly, when accounting for purchase discounts, management recognizes
discount accretion income when it is probable that such amounts will be
collected and when such amounts can be estimated. A reclassification entry is
recorded at year-end to reflect purchase discounts on all realized investments.
For income tax purposes, the economic gain resulting from the sale of debt
securities purchased at a discount is allocated between interest income and
realized gains.
Dividends to Common Shareholders
Dividends and distributions to common shareholders are recorded on the
ex-dividend date. The amount to be paid out as a dividend is determined by the
Board of Directors
15
2. Summary of Significant Accounting Policies (continued)
and is generally based upon the taxable earnings estimated by the Investment
Manager. Net realized capital gains are distributed at least annually. On
December 31, 2004 the Board of Directors declared a dividend to common
shareholders in the amount of $2.5 million which was paid on January 31, 2005.
Income Taxes
The Company intends to comply with the applicable provisions of the Internal
Revenue Code of 1986, as amended, pertaining to regulated investment companies
to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes. Accordingly, no provision for
income taxes is required in the financial statements.
Income and capital gain distributions are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States of America. Capital accounts within the financial
statements are adjusted for permanent and temporary book and tax differences.
These adjustments have no impact on net assets or the results of operations.
Temporary differences are attributable to differing book and tax treatments for
the timing of the recognition of gains and losses on certain investment
transactions and the timing of the deductibility of certain expenses, and will
reverse in subsequent periods.
Permanent book and tax basis differences may result in reclassifications among
undistributed (or distributions in excess of) net investment income (or
accumulated net investment loss), accumulated net realized gain (loss), and
paid-in capital. These differences are primarily due to non-deductible expenses.
Cost and unrealized appreciation (depreciation) for U.S. federal income tax
purposes of the investments of the Company at March 31, 2005 were as follows:
Unrealized appreciation $ 8,133,108
Unrealized depreciation (1,700,357)
-------------
Net unrealized appreciation (depreciation) 6,432,751
-------------
Cost $ 112,226,112
16
2. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of the financial statements 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 revenues and expenses
during the reporting period. Although management believes these estimates and
assumptions to be reasonable and accurate, actual results could differ from
those estimates.
3. Allocations and Distributions
At March 31, 2005, SVOF/MM, LLC (the "Special Member") held the Series S
preferred stock (see Note 7 below) and was entitled to distributions declared
thereon in the amounts and at the times described below. As set forth in the
Investment Management Agreement, distributions made to common and Series S
preferred shareholders with respect to any accounting period were determined as
follows:
a) First, 100% to the common shareholders based on their respective
proportionate capital contributions as of the end of such accounting
period until the amount distributed to each common shareholder, together
with amounts previously distributed to such shareholder, equals a 12%
annual weighted average return on undistributed capital attributable to
the common shares.
b) Then, 100% to the Special Member as the holder of the Series S preferred
stock until the amount distributed to the Special Member equals 25% of all
amounts previously distributed to the common shareholders pursuant to
clause (a) above; and
c) All remaining amounts: (i) 80% to the common shareholders based on their
proportionate capital contributions as of the end of such accounting
period and (ii) 20% to the Special Member as the holder of the Series S
preferred stock.
The timing of distributions is determined by the Board of Directors. If the
Company had liquidated all assets at March 31, 2005, distributions to the Series
S preferred shareholder would have been $1,445,217. A reserve for this amount is
reflected in the accompanying financial statements.
On May 9, 2005, the Series S preferred share was retired and the Investment
Management Agreement was amended such that all amounts formerly distributable to
the Series S preferred shareholder as discussed above became payable to TCP as a
performance fee. (See Note 7 below.) Such change has no impact on any
shareholder other than the Series S preferred shareholder.
17
3. Allocations and Distributions (continued)
APS dividend rates are determined by auction at periodic intervals and were
2.95% per annum as of March 31, 2005.
The Series Z share dividend rate is fixed at 8% per annum.
4. Management Fees and Other Expenses
Pursuant to the advisory agreement, the Investment Manager is entitled to
receive an annual management and advisory fee, payable monthly in arrears, equal
to 0.60% of the sum of the total common commitments, APS and debt potentially
issuable in respect of such common commitments, subject to reduction by the
amount of the debt when no facility is outstanding and the amount of APS when
less than $1 million in liquidation value of preferred stock is outstanding. For
purposes of computing the management fee, total committed capital is $600
million consisting of $300 million of capital committed by investors to purchase
the Company's common shares, $100 million of APS and $200 million of debt.
The Company pays all expenses incurred in connection with the business of the
Company, including fees and expenses of outside contracted services, such as
custodian, trustee, administrative, legal, audit and tax preparation fees, costs
of valuing investments, insurance costs, brokers' and finders' fees relating to
investments, and any other transaction costs associated with the purchase and
sale of investments of the Company.
5. Senior Secured Revolving Credit Facility
The Company has entered into a credit agreement with certain lenders, which
provides for a senior secured revolving credit facility ("Senior Facility"). The
Senior Facility is a revolving extendible credit facility pursuant to which
amounts may be drawn up to $200 million ("Total Maximum Commitment"), subject to
certain draw down criteria. Amounts drawn under the Senior Facility may be
repaid, in whole or in part, at the election of the Company, and redrawn subject
to the draw down criteria. The Senior Facility matures November 17, 2012,
subject to extension by the lenders at the request of the Company for one
12-month period. Amounts outstanding under the Senior Facility at March 31, 2005
totaled $53 million. Borrowings under the Senior Facility at March 31, 2005
consisted of a $28 million revolving loan due on April 29, 2005 and $25 million
borrowed on the swingline facility which was due to be repaid or converted to a
revolving loan by the Company no later than April 7, 2005. As of March 31, 2005,
the interest payable on amounts outstanding under the Senior Facility was
$9,658. For the six months ended March 31, 2005, the daily weighted average debt
outstanding was $4,593,407. The weighted average interest rate on debt
outstanding during the period was 2.88%.
18
5. Senior Secured Revolving Credit Facility (continued)
Advances under the Senior Facility bear interest, at the issuer's option, at
either (i) the Eurodollar Rate or Commercial Paper Rate for interest periods of
one, two, three, or six months plus 0.43% per annum; or (ii) the higher of; (x)
the "Prime Rate" plus 0.43% per annum, and (y) the "Federal Funds Effective
Rate," plus 0.50% per annum. Additionally, advances under the swingline facility
will bear interest at either the Eurodollar Rate or
Commercial Paper Rate plus 0.43% per annum. Interest payments vary from monthly
to quarterly based on the nature of the advance.
In addition to amounts due on outstanding debt, the Senior Facility accrues fees
of 0.20% per annum for the first 550 days following the inception of the credit
agreement, and 0.30% thereafter, on the difference between the Total Maximum
Commitment and the outstanding balance on the Senior Facility, provided that
certain minimum borrowing amounts are achieved based on the table below. In the
event the minimum borrowing amounts are not met or exceeded during the
respective fee periods, the fees will accrue at 0.43%
per annum on the Minimum Borrowing Amount as defined in the table below, in
addition to 0.20% per annum for the first 550 days following the inception of
the credit agreement, and 0.30% thereafter on the difference between the Total
Maximum Commitment and the Minimum Borrowing Amount.
Period Minimum Borrowing Amount
- ---------------------------------------- ----------------------------------
From Closing Date to End of Month 10
following the Closing Date 0% of Total Maximum Commitment
From Beginning of Month 11 to End of
Month 15 following the Closing Date 15% of Total Maximum Commitment
From Beginning of Month 16 to End of
Month 20 following the Closing Date 30% of Total Maximum Commitment
From Beginning of Month 21 to End of
Month 24 following the Closing Date 40% of Total Maximum Commitment
From Beginning of Month 25 to Maturity 75% of Total Maximum Commitment
6. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk
The Company conducts business with brokers and dealers that are primarily
headquartered in New York and Los Angeles and are members of the major security
exchanges. Banking activities are conducted with a firm headquartered in the New
York area.
19
6. Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk
(continued)
In the normal course of business, the Company's securities activities involve
execution, settlement and financing of various securities transactions resulting
in receivables from, and payables to, brokers and the Company's custodian. These
activities may expose the Company to risk in the event brokers and dealers are
unable to fulfill contractual obligations. Management does not anticipate any
losses from counterparties with whom it conducts business.
7. Preferred Capital
In addition to the APS capital described in Note 1, the Company had one Series S
preferred share and 312 Series Z preferred shares issued and outstanding as of
March 31, 2005.
Series S Preferred Share
The Company issued one share of its Series S preferred shares to the Special
Member, having a liquidation preference of $1,000 plus accumulated but unpaid
dividends. The Special Member is controlled by the Investment Manager and owned
substantially entirely by the Investment Manager and certain affiliates. On May
9, 2005, the Series S preferred share was retired. Prior to retirement, the
Series S preferred share was entitled to receive dividends pursuant to Note 3
above. The Series S preferred share ranked on par with the APS and Series Z
preferred shares and voted with them as a single class. The Series S preferred
share was redeemable at liquidation preference at any time if the investment
advisory agreement with TCP was terminated for any reason.
On May 9, 2005, the Investment Management Agreement was amended such that all
amounts distributable to the Series S preferred shareholder as discussed in Note
3 became distributable to TCP, and the Series S preferred share was retired.
Upon retirement, the Series S preferred share assumed the status of an
authorized but unissued share. Such change has no impact on any shareholder
other than the Series S preferred shareholder. The Company may, if it receives
approval from the staff of the SEC for such an arrangement, again issue a share
of its Series S preferred shares to the Special Member, and pay such dividends
on such Series S preferred share as were payable to the Special Member prior to
the retirement of the Series S preferred share. If the Company implements this
structure, the amount of distributions paid by the Company pursuant to Note 3
will not change.
Series Z Preferred Shares
The Company issued 312 shares of its Series Z preferred shares, having a
liquidation
20
7. Preferred Capital (continued)
preference of $500 per share plus accumulated but unpaid dividends and paying
dividends at an annual rate equal to 8% of liquidation preference. The Series Z
preferred shares rank on par with the APS and the Series S preferred share with
respect to the payment of dividends and distribution of amounts on liquidation,
and vote with the APS and Series S preferred share as a single class. The Series
Z preferred shares are redeemable at any time at the option of the Company and
may only be transferred with the consent of the Company.
8. Shareholder's Capital
Issuances of common stock to and subscriptions of common stock by the Company's
investors for the periods ending March 31, 2005 and September 30, 2004 were as
follows:
Period from
Period from September 1, 2004
October 1, 2004 (commencement of
to operations) to
March 31, 2005 September 30, 2004
---------------------------------------------------------------------------------------------
Number of common shares issued 58,275 120,000
Number of common shares subscribed and pending issuance 19,117 58,275
Less: number of common shares subscribed in prior
period (58,275) --
-------------------------------------------------------- ------------ ------------
Net increase 19,117 178,275
-------------------------------------------------------- ------------ ------------
Gross proceeds from share issuance $ 30,000,000 $ 60,000,000
Subscription receivable for common shares 10,000,000 30,000,000
Less: proceeds from shares subscribed in prior period (30,000,000) --
Offering costs (392,495) --
APS placement costs (932,000) (68,000)
-------------------------------------------------------- ------------ ------------
Net proceeds $ 8,675,505 $ 89,932,000
-------------------------------------------------------- ------------ ------------
21
9. Financial Highlights
Period from Period from
October 1, 2004 September 1, 2004
to to
March 31, 2005 September 30, 2004
------------- -------------
Net assets applicable to common shareholders, beginning
of period $ 90,820,626 $ -
Contributions from common shareholders:
Gross contributions 10,000,000 90,000,000
Decrease in net assets from equity placement and
offering costs charged to paid-in capital (1,324,495) (68,000)
------------- -------------
Net common shareholder contributions 8,675,505 89,932,000
Investment operations:
Net investment income (loss) 1,725,468 (317,721)
Net realized and unrealized gain 5,174,528 1,429,544
Distributions to preferred shareholders from
net investment income (279,069) --
Net change in reserve for potential dividends to
preferred shareholders (1,278,125) (223,197)
------------- -------------
Net increase in net assets applicable to common
shareholders capital resulting from operations 5,342,802 888,626
Distributions to common shareholders:
Distributions from net investment income (2,492,340) --
Distributions from net realized gains (7,660) --
------------- -------------
Total distributions to common shareholders (2,500,000) --
------------- -------------
Net assets applicable to common shareholders, end of period $ 102,338,933 $ 90,820,626
============= =============
22
9. Financial Highlights (continued)
Period from Period from
October 1, 2004 September 1, 2004
to to
March 31, 2005 September 30, 2004
--------------- --------------
Per Common Share: (1)
Net asset value, beginning of period $ 509.44 $ 499.43
Investment operations:
Net investment income (loss) 9.58 (2.65)
Net realized and unrealized gain 29.73 14.52
Distributions to preferred shareholders from net
investment income (1.57) --
Net change in reserve for potential dividends to
preferred shareholders (7.28) (1.86)
--------------- --------------
Total from investment operations 30.46 10.01
Distributions to common shareholders:
Distributions from net investment income (13.98) --
Distributions from net realized gains (0.04) --
--------------- --------------
Total distributions to common shareholders (14.02) --
Decrease in net assets from equity placement and
offering costs charged to paid-in capital (7.43) --
--------------- --------------
Net asset value, end of period $ 518.45 $ 509.44
=============== ==============
Period return to common shareholders (2), (3) 6.49% 1.48%
Ratios and Supplemental Data
Ending net assets attributable to common shareholders $ 102,338,933 $ 90,820,626
Total expenses/average common equity (4) 6.55% 13.49%
Net investment income/average common equity (4) 3.69% (8.08%)
Portfolio turnover rate (3) 3.87% 1.22%
Weighted average debt outstanding $ 4,593,407 $ --
Weighted average number of shares 171,963 120,000
Average debt per share $ 26.71 $ --
(1) Per share changes in net asset value are computed based on the actual
number of shares outstanding during the time in which such activity
occurred.
(2) Returns (net of financing costs, fund expenses, management fees, dividends
paid to preferred shareholders, and the reserve for potential dividends to
preferred shareholders) calculated on a monthly time-linked, dollar
weighted basis as described in Chapter 2 of the AIMR Performance
Presentation Standards Handbook (1997).
(3) Not annualized.
(4) Annualized. These ratios included interest expense but do not reflect the
effect of dividend payments to preferred shareholders. The ratio of
expenses to average net assets is higher in earlier periods, and net
investment income to average net assets is reduced, due to the Company's
relatively smaller capital base while the Company is ramping up.
23
Special Value Expansion Fund, LLC
(A Delaware Limited Liability Company)
Portfolio Asset Allocation (% of Cash and Investments)
(unaudited)
March 31, 2005
[PIE CHARTS OMITTED]
Portfolio Holdings by Investment Type
- -------------------------------------
Bank Debt 44.51%
Cash and Cash Equivalents 40.24%
Corporate Fixed Income Securities 8.02%
Equity and Equity Related Securities 7.23%
Portfolio Holdings by Industry
- ------------------------------
Automobiles 2.98%
Cash and Cash Equivalents 40.24%
Diversified/Conglomerate Manufacturing 11.37%
Diversified/Conglomerate Service 1.58%
Leisure, Amusement, Motion Pictures and Entertainment 3.46%
Machinery 13.61%
Personal Transporation 11.03%
Telecommunications 6.09%
Utilities 9.64%
24
ITEM 2. CODE OF ETHICS.
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Included in Annual Shareholder Report in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for filing of Semiannual Reports to Shareholders.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's Chief Executive Officer and Chief Financial Officer
have evaluated the Registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the Registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the Registrant in this Form N-CSR was recorded,
processed, summarized, and reported in a timely manner.
(b) None.
ITEM 12. EXHIBITS.
(a) (1) Not applicable for filing of Semiannual Reports to Shareholders.
(a) (2) Certification pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as
Exhibit 99.CERT.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit
99.906CERT.
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.
Special Value Expansion Fund, LLC
By: /s/ Michael E. Tennenbaum
------------------------------------------
Name: Michael E. Tennenbaum
Title: Chief Executive Officer
Date: June 6, 2005
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: /s/ Michael E. Tennenbaum
------------------------------------------
Name: Michael E. Tennenbaum
Title: Chief Executive Officer
Date: June 6, 2005
By: /s/ Robert G. DiPaolo
------------------------------------------
Name: Robert G. DiPaolo
Title: Chief Financial Officer
Date: June 6, 2005