N-CSR 1 w81820nvcsr.txt FORM N-CSR 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 O'Connor Fund of Funds: Long/Short Credit Strategies LLC (formerly, UBS Credit Recovery Fund, L.L.C.) (Exact name of registrant as specified in charter) 299 Park Avenue, 29th Floor New York, NY 10171 (Address of principal executive offices) (Zip code) James M. Hnilo, Esq. UBS Alternative and Quantitative Investments LLC One North Wacker Drive, 32nd Floor Chicago, Illinois 60606 (Name and address of agent for service) Registrant's telephone number, including area code: (312) 525-5000 Date of fiscal year end: December 31 Date of reporting period: December 31, 2010 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. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. UBS CREDIT RECOVERY FUND, L.L.C. FINANCIAL STATEMENTS WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM YEAR ENDED DECEMBER 31, 2010
UBS CREDIT RECOVERY FUND, L.L.C. FINANCIAL STATEMENTS WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM YEAR ENDED DECEMBER 31, 2010 CONTENTS Report of Independent Registered Public Accounting Firm .............................................. 1 Statement of Assets, Liabilities and Members' Capital ................................................ 2 Statement of Operations .............................................................................. 3 Statements of Changes in Members' Capital ............................................................ 4 Statement of Cash Flows .............................................................................. 5 Financial Highlights ................................................................................. 6 Notes to Financial Statements ........................................................................ 7 Schedule of Portfolio Investments .................................................................... 18
(ERNST & YOUNG LOGO) Ernst & Young LLP 5 Times Square New York, New York 10036-6530 Tel: (212) 773-3000 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Members and Board of Directors of UBS Credit Recovery Fund, L.L.C. We have audited the accompanying statement of assets, liabilities and members' capital of UBS Credit Recovery Fund, L.L.C. (the "Fund"), including the schedule of portfolio investments, as of December 31, 2010, and the related statements of operations and cash flows for the year then ended, the statements of changes in members' capital for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of investments in investment funds as of December 31, 2010, by correspondence with management of the underlying investment funds. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of UBS Credit Recovery Fund, L.L.C. at December 31, 2010, the results of its operations and its cash flows for the year then ended, the changes in its members' capital for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. (ERNST & YOUNG LLP) February 24, 2011 A member firm of Ernst & Young Global Limited 1
UBS CREDIT RECOVERY FUND, L.L.C. STATEMENT OF ASSETS, LIABILITIES AND MEMBERS' CAPITAL ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- ASSETS Investments in Investment Funds, at fair value (cost $273,891,050) $ 324,211,016 Investments in other securities, at fair value (cost $34,452) 35,955 Cash and cash equivalents 41,136,162 Receivable from Investment Funds 104,820,151 Advanced subscriptions in Investment Funds 12,000,000 Interest receivable 2,080 Other assets 68,744 ----------------------------------------------------------------------------------------------------------- TOTAL ASSETS 482,274,108 ----------------------------------------------------------------------------------------------------------- LIABILITIES Unrealized depreciation on foreign currency contracts 146,192 Withdrawals payable 111,919,134 Subscriptions received in advance 1,229,885 Investment Management Fee payable 558,073 Professional fees payable 174,508 Administration fee payable 118,646 Management Fee payable 115,463 Custody fee payable 1,050 Other liabilities 173,364 ----------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 114,436,315 ----------------------------------------------------------------------------------------------------------- MEMBERS' CAPITAL $ 367,837,793 ----------------------------------------------------------------------------------------------------------- MEMBERS' CAPITAL Represented by: Net capital contributions $ 317,662,516 Accumulated net unrealized appreciation/(depreciation) on investments in Investment Funds and foreign currency contracts and translations 50,175,277 ----------------------------------------------------------------------------------------------------------- MEMBERS' CAPITAL $ 367,837,793 ----------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. 2
UBS CREDIT RECOVERY FUND, L.L.C. STATEMENT OF OPERATIONS ----------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Interest $ 21,654 ----------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 21,654 ----------------------------------------------------------------------------------------------------------- EXPENSES Investment Management Fee 6,388,075 Management Fee 1,321,671 Administration fee 491,843 Professional fees 396,007 Directors' fees 54,273 Custody fee 9,832 Printing, insurance and other expenses 350,746 ----------------------------------------------------------------------------------------------------------- TOTAL EXPENSES 9,012,447 ----------------------------------------------------------------------------------------------------------- Administration and custody fees waived (11,550) NET EXPENSES 9,000,897 ----------------------------------------------------------------------------------------------------------- NET INVESTMENT LOSS (8,979,243) ----------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS Net realized gain/(loss) from: Investments in Investment Funds and other securities 20,182,542 Foreign currency contracts and transactions 1,745,550 Net change in unrealized appreciation/depreciation on investments in Investment Funds, investments in other securities and foreign currency contracts and translations 24,994,688 ----------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS 46,922,780 ----------------------------------------------------------------------------------------------------------- NET INCREASE IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS $ 37,943,537 ----------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. 3
UBS CREDIT RECOVERY FUND, L.L.C. STATEMENTS OF CHANGES IN MEMBERS' CAPITAL ----------------------------------------------------------------------------------------------------------- YEARS ENDED DECEMBER 31, 2009 AND 2010 ----------------------------------------------------------------------------------------------------------- ADVISER MEMBERS TOTAL ----------------------------------------------------------------------------------------------------------- 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, investments in other securities and foreign currency contracts and translations 4,592 97,474,806 97,479,398 ----------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS 3,827 75,952,478 75,956,305 ----------------------------------------------------------------------------------------------------------- MEMBERS' CAPITAL TRANSACTIONS Members' subscriptions -- 40,430,076 40,430,076 Members' withdrawals -- (123,421,569) (123,421,569) ----------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN MEMBERS' CAPITAL DERIVED FROM CAPITAL TRANSACTIONS -- (82,991,493) (82,991,493) ----------------------------------------------------------------------------------------------------------- MEMBERS' CAPITAL AT DECEMBER 31, 2009 $ 24,241 $ 411,817,215 $ 411,841,456 ----------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) FROM OPERATIONS Pro rata allocation: Net investment income/(loss) (146) (8,979,097) (8,979,243) Net realized gain/(loss) from investments in Investment Funds, other securities and foreign currency contracts and transactions 1,219 21,926,873 21,928,092 Net change in unrealized appreciation/depreciation on investments in Investment Funds, investments in other securities and foreign currency contracts and translations 1,413 24,993,275 24,994,688 ----------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN MEMBERS' CAPITAL DERIVED FROM OPERATIONS 2,486 37,941,051 37,943,537 ----------------------------------------------------------------------------------------------------------- MEMBERS' CAPITAL TRANSACTIONS Members' subscriptions -- 29,971,934 29,971,934 Members' withdrawals -- (111,919,134) (111,919,134) ----------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN MEMBERS' CAPITAL DERIVED FROM CAPITAL TRANSACTIONS -- (81,947,200) (81,947,200) ----------------------------------------------------------------------------------------------------------- MEMBERS' CAPITAL AT DECEMBER 31, 2010 $ 26,727 $ 367,811,066 $ 367,837,793 ----------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. 4
UBS CREDIT RECOVERY FUND, L.L.C. STATEMENT OF CASH FLOWS ----------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net increase in members' capital derived from operations $ 37,943,537 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 (68,322,439) Proceeds from disposition of investments in Investment Funds and other securities 174,020,081 Net realized gain/(loss) from investments in Investment Funds and other securities (20,182,542) Net change in unrealized appreciation/depreciation on investments in Investment Funds, investments in other securities and foreign currency contracts and translations (24,994,688) Changes in assets and liabilities: (Increase) decrease in assets: Advanced subscriptions in Investment Funds (12,000,000) Interest receivable 3,816 Receivable from Investment Funds (92,939,336) Other assets (53,362) Increase (decrease) in liabilities: Administration fee payable 21,192 Custody fee payable (450) Investment Management Fee payable (84,721) Management Fee payable (17,529) Professional fees payable 17,515 Other liabilities 155,365 ----------------------------------------------------------------------------------------------------------- NET CASH USED IN OPERATING ACTIVITIES (6,433,561) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Members' subscriptions, including change in subscriptions received in advance 31,201,819 Payments on Members' withdrawals, including change in withdrawals payable (123,421,569) ----------------------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (92,219,750) Net decrease in cash and cash equivalents (98,653,311) Cash and cash equivalents--beginning of year 139,789,473 ----------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS--END OF YEAR $ 41,136,162 ----------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. 5
UBS CREDIT RECOVERY FUND, L.L.C. FINANCIAL HIGHLIGHTS ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 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. YEARS ENDED DECEMBER 31, ------------------------ 2010 2009 2008 2007 2006 ---- ---- ---- ---- ---- Ratio of net investment loss to average members' capital (a), (b) (2.03%) (2.01%) (1.92%) (1.93%) (1.78%) Ratio of gross expenses to average members' capital (a), (b) 2.04% 2.03% 2.07% 2.12% 1.99% Ratio of administration and custody fees waived to average members' capital (a), (b), (c) 0.00%(d) 0.00% 0.00% 0.00% 0.00% Ratio of net expenses to average members' capital (a), (b) 2.04% 2.03% 2.07% 2.12% 1.99% Portfolio turnover rate 16.23% 23.27% 33.56% 4.42% 7.60% Total return (e) 8.67% 17.16% (28.77%) 18.54% 15.58% Average debt ratio (a) 0.00% 0.00% 0.01% 0.24% 0.00% Members' capital at end of year (including the Adviser) $367,837,793 $411,841,456 $418,876,644 $562,791,338 $275,562,734 (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 loss and gross/net 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) The administration and custody fees waiver was effective November 1, 2010. Therefore, the ratio of administration and custody fees waived was not applicable for the years ended December 31, 2006 through December 31, 2009. (d) Less than 0.005%. (e) 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. The accompanying notes are an integral part of these financial statements. 6
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 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") have 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. As of September 30, 2010, pursuant to an Assignment and Assumption Agreement, the Directors have engaged UBS Alternative and Quantitative Investments LLC ("UBS A&Q", 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. UBS A&Q is a wholly owned subsidiary of UBS AG and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. In addition to the assignment of responsibilities, the capital balance as of September 30, 2010 was transferred from UBSFA (defined below) to UBS A&Q. Prior to the Assignment and Assumption Agreement, the Directors had engaged UBS Fund Advisor, L.L.C. ("UBSFA"), a Delaware limited liability company, in the roles of Adviser and Administrator. UBSFA 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 7
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 1. ORGANIZATION (CONTINUED) 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. 2. NEW ACCOUNTING PRONOUNCEMENTS In January 2010, the Financial Accounting Standards Board ("FASB") issued Codification Accounting Standards Update No. 2010-06, IMPROVING DISCLOSURES ABOUT FAIR VALUE MEASUREMENTS ("ASU 2010-06"). ASU 2010-06 amends Topic 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES to add new requirements for disclosures about transfers into and out of Levels 1 and 2, and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. This update also clarifies existing fair value disclosures about the level of disaggregation for the classes of assets and liabilities and the disclosures about the inputs and valuation techniques used to measure fair value. ASU 2010-06 is effective for the interim and annual periods beginning after December 15, 2009 and for periods beginning after December 15, 2010 for the new Level 3 disclosures. The adoption of ASU 2010-06 new disclosures and clarification of existing disclosures did not have a material impact on the Fund's financial statements. 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 year 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 year 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 within the Schedule of Portfolio Investments. 8
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 3. SIGNIFICANT ACCOUNTING POLICIES A. PORTFOLIO VALUATION 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 disclosures 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 December 31, 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 Fund had no unfunded capital commitments as of December 31, 2010. The Investment Fund in the convertible arbitrage category may simultaneously purchase or sell convertible securities and either buy or short sale the same issuer's common stock while maintaining a market neutral position. The Investment Fund within this strategy is generally subject to a 45 day redemption notice period and can be redeemed with no restrictions as of the measurement date. 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 53 percent of the fair value of the investments in this strategy are side pockets, liquidating trusts or private equity positions where the liquidation of assets is expected over the next 12 - 48 months. The remaining approximately 47 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. Two Investment Funds, with a fair value of $44,120,337, transferred from Level 3 to Level 2 at the measurement date. 9
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. PORTFOLIO VALUATION (CONTINUED) 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 90 - 180 day redemption notice periods. Investment Funds representing approximately 9 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 91 percent of the Investment Funds have either initial redemption dates commencing in the future (13 percent) or are available to be redeemed with no restrictions (78 percent), subject to the Investment Funds' liquidity terms, as of the measurement date. Two Investment Funds, with a fair value of $14,239,227, transferred from Level 3 to Level 2 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 26 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 74 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. Four Investment Funds, with a fair value of $48,601,430, 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, and subscription and redemption activity. The Adviser and/or the 10
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. PORTFOLIO VALUATION (CONTINUED) Directors 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. The Receivable from Investment Funds balance at December 31, 2010 includes an increase of $10,406,180 compared to December 31, 2009 due to a change in estimates as a result of additional information received regarding the potential recovery value of the receivables due from two underlying Investment Funds. The portion of the Receivable from Investment Funds balance related to these two underlying Investment Funds was $15,680,742 as of December 31, 2010. The impact on total return for the Fund for the year ending December 31, 2010 as a result of the change in estimate was an increase of 2.36%. 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 December 31, 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 11
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. FUND EXPENSES (CONTINUED) 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. D. INCOME TAXES The Fund has reclassified $8,979,243 and $21,928,092 from accumulated net investment loss and accumulated net realized loss from investments in Investment Funds, respectively, to net capital contributions during the year ended December 31, 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 December 31, 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. For the year ended December 31, 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 PFPC Trust Company 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. 12
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 and Investment Management Fee will be paid to the Adviser 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 UBS A&Q 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 Investment Management Fee and the Management Fee which is similarly allocated to all Members other than the Adviser or Administrator 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, 13
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 4. RELATED PARTY TRANSACTIONS (CONTINUED) respectively. These additional annual retainer amounts are paid for by the Fund on a pro-rata basis with ten other UBS funds where UBS A&Q 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 CUSTODY FEES PFPC Trust Company (the "Custodian"), which will be renamed BNY Mellon Investment Servicing Trust Company effective July 1, 2011, provides custodial services for the Fund. The Custodian entered into a service agreement whereby PFPC Trust provides securities clearance functions, as needed. 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. ("BNY Mellon"). BNY Mellon serves as accounting and investor servicing agent to the Fund and in that capacity provides certain administrative, accounting, record keeping, tax and Member related services. BNY Mellon receives a monthly fee primarily based upon (i) the average members' capital of the Fund subject to a minimum monthly fee, and (ii) the aggregate members' capital of the Fund and certain other investment funds sponsored or advised by UBS AG, UBS Americas, Inc. or their affiliates. Additionally, the Fund reimburses certain out of pocket expenses incurred by BNY Mellon. Effective March 26, 2010, the Custodian and BNY Mellon have agreed to a fee reduction for reimbursement of the Fund's line of credit commitment fees ("Fee Reduction") for a period of 364 days from November 1, 2010, the effective date of the Fund's line of credit agreement with State Street Bank and Trust Company ("Initial Term"). Based on the methodology within the agreement, the Custodian and BNY Mellon have agreed to waive $69,300 for the Fund over the Initial Term. For the period from November, 1, 2010 to December 31, 2010, the Custodian and BNY Mellon waived $1,200 and $10,350, respectively, which is shown in aggregate as administration and custody fees waived on the Statement of Operations. 6. LOAN PAYABLE Effective November 1, 2010, the Fund, along with other UBS sponsored funds, entered into a one year, $250,000,000 committed, secured revolving line of credit with State Street Bank and Trust Company. The Fund is limited to $69,300,000 (the "Borrower Sublimit Amount") of the secured 14
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 6. LOAN PAYABLE (CONTINUED) revolving line of credit with a maximum borrowing limit of 15% of the Fund's Members' Capital. The interest rate on the borrowing is the higher of (a) 1.50% above the Overnight LIBOR Rate and (b) 1.50% above the Federal Funds Rate, in each case as in effect from time to time. There is a commitment fee payable by the Fund, calculated at 25 basis points per annum of the Borrower Sublimit Amount not utilized. For the year ended December 31, 2010, the Fund did not borrow under this secured revolving line of credit. 7. INVESTMENTS As of December 31, 2010, the Fund had investments in Investment Funds, none of which were related parties. Aggregate purchases and proceeds from sales of investment for the year ended December 31, 2010 amounted to $68,322,439 and $174,020,081, 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 Fund has not yet received all such Schedule K-1's for the year ended December 31, 2010; therefore, 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. One or more underlying fund investments have entered into a side pocket arrangement. Detailed information about the Investment Funds' portfolios is not available. 8. 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. 15
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (CONTINUED) 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. 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 net realized gain and net change in unrealized loss on forward foreign currency exchange contracts for the year ended December 31, 2010 is $1,745,550 and $616,944, 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 forward foreign currency exchange contracts that is presented in the Schedule of Portfolio Investments is consistent with the derivative activity during the year ended December 31, 2010. 9. 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. 16
UBS CREDIT RECOVERY FUND, L.L.C. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ----------------------------------------------------------------------------------------------------------- DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------- 10. SUBSEQUENT EVENTS As of December 31, 2010, the Fund had $111,919,134 of withdrawals payable. On January 26, 2011, the Fund paid $106,815,734. The remaining amount payable of $5,103,400 is scheduled to be paid in accordance with the terms of the Fund's December 31, 2010 tender offer. Effective February 7, 2011, the Fund has changed its name to O'Connor Fund of Funds: Long/Short Credit Strategies LLC. 17
UBS CREDIT RECOVERY FUND, L.L.C. SCHEDULE OF PORTFOLIO INVESTMENTS ------------------------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 2010 ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND DOLLAR AMOUNT UNREALIZED OF FAIR VALUE % OF GAIN/(LOSS) INITIAL FIRST FOR FIRST MEMBERS' FROM ACQUISITION AVAILABLE AVAILABLE INVESTMENT FUND COST FAIR VALUE CAPITAL INVESTMENTS DATE LIQUIDITY (a) REDEMPTION (b) REDEMPTION (b) ------------------- ------------ ------------ -------- ----------- ----------- --------------- -------------- -------------- CONVERTIBLE ARBITRAGE Waterstone Market Neutral Fund, L.P. (c) $ 18,000,000 $ 18,658,122 5.07 $ 658,122 7/1/2010 Quarterly ------------ ------------ -------- ----------- ----------- CONVERTIBLE ARBITRAGE SUBTOTAL $ 18,000,000 $ 18,658,122 5.07% $ 658,122 DIRECT LOANS/ STRUCTURED FINANCE European Special Opportunities Fund II, Ltd., Class B (d) 12,509,535 13,152,525 3.57 1,041,043 2/1/2008 N/A Indus Structured Finance Fund, L.P., Class A (e) 10,006,738 5,694,403 1.55 (1,257,908) 5/1/2007 N/A Marathon Distressed Subprime Fund, L.P. (c) 20,000,000 27,061,211 7.36 7,246,558 9/1/2007 Every 18 months Marathon Structured Finance Fund, L.P. (f) 2,466,141 1,830,852 0.50 68,924 11/1/2004 N/A Marathon Structured Finance Fund, L.P. (d) 3,517,174 3,927,950 1.07 785,149 11/1/2004 N/A One William Street Capital Partners, L.P. (c) 14,176,025 17,059,126 4.64 3,273,876 12/1/2009 Quarterly Styx Partners, L.P. (d) 22,429,699 24,515,920 6.66 (4,742,242) 8/1/2002 N/A ------------ ------------ -------- ----------- ----------- DIRECT LOANS/STRUCTURED FINANCE SUBTOTAL $ 85,105,312 $ 93,241,987 25.35% $ 6,415,400 DISTRESSED/CREDIT Cyan Warwick European Distressed & Special Situations Credit Fund LP 7,900,000 7,892,122 2.15 (7,878) 8/1/2010 Quarterly 9/30/2012 7,892,122 Marathon Special Opportunity Fund, L.P. (c) 9,696,160 13,593,730 3.69 1,656,704 10/1/2002 Every 24 months Marathon Special Opportunity Fund, L.P. (f) 4,288,200 4,639,581 1.26 187,555 10/1/2002 N/A Marathon Special Opportunity Fund, L.P. (c),(d),(g) 433,158 645,497 0.18 261,137 10/1/2002 N/A Monarch Debt Recovery Fund, L.P. (c) 6,750,000 19,212,814 5.22 3,737,419 10/1/2002 Annually Normandy Hill Fund, L.P. (c) 15,000,000 14,661,148 3.99 (338,852) 4/1/2010 Quarterly ------------ ------------ -------- ----------- ----------- DISTRESSED/CREDIT SUBTOTAL $ 44,067,518 $ 60,644,892 16.49% $ 5,496,085 DIVERSIFIED CREDIT Ahab Partners, L.P. (d) 9,645,364 10,240,403 2.78 2,840,502 8/1/2002 N/A Brevan Howard Credit Catalysts Fund, L.P. (c) 22,000,000 23,949,983 6.51 1,949,983 6/1/2010 Monthly Brigade Leveraged Capital Structures Fund, L.P. (c) 21,826,694 27,139,314 7.38 2,797,839 2/1/2008 Quarterly Camulos Partners, L.P. (d) 6,625,878 1,466,773 0.40 (1,482,479) 2/1/2006 N/A Canyon Value Realization Fund, L.P. (c),(f),(g) 2,208,316 2,970,924 0.81 353,655 8/1/2002 N/A Claren Road Credit Partners, L.P., L Interest (f) 547,951 3,288,723 0.89 506,291 10/1/2006 N/A Claren Road Credit Partners, L.P., L Interest payable (f) 3,522,251 4,108,959 1.12 1,803,598 10/1/2006 N/A Cyrus Opportunities Fund II, L.P. (f) 456,428 753,163 0.20 226,841 8/1/2002 N/A Cyrus Opportunities Fund II, L.P. (d) 808,224 846,182 0.23 522,745 8/1/2002 N/A Gracie Credit Opportunities Fund, L.L.C. (c) 25,000,000 26,220,232 7.13 1,161,511 11/1/2009 Quarterly Harbinger Capital Partners Fund I, L.P., Class L (f) 197,109 835,255 0.23 412,096 8/1/2006 N/A Harbinger Capital Partners Special Situations Fund, L.P. (d) 2,949,459 6,100,809 1.66 (671,156) 8/1/2006 N/A Harbinger Capital Partners Special Situations Fund, L.P. (f) 1,328,967 1,049,260 0.29 (149,571) 8/1/2006 N/A Harbinger Class PE Holdings (US) Trust (f) 5,265,688 3,870,548 1.05 (1,108,980) 8/1/2002 N/A Knighthead Domestic Fund, L.P. (c) 11,270,919 19,066,572 5.18 3,776,751 6/1/2008 Every 24 months Redwood Domestic Fund, L.P. 10,000,000 16,400,270 4.46 2,972,998 10/1/2008 Every 24 months Whitebox Hedged High Yield Fund, L.P. (d) 571,168 892,024 0.24 178,285 2/1/2004 N/A Whitebox Hedged High Yield, Ltd. (d) 2,493,804 2,466,621 0.67 609,163 9/1/2005 N/A ------------ ------------ -------- ----------- ----------- DIVERSIFIED CREDIT SUBTOTAL $126,718,220 $151,666,015 41.23% $16,700,072 The preceding notes are an integral part of these financial statements. 18
UBS CREDIT RECOVERY FUND, L.L.C. SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED) ------------------------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 2010 ------------------------------------------------------------------------------------------------------------------------------------ REALIZED AND % OF UNREALIZED UNREALIZED MEMBERS' GAIN/(LOSS) FROM EURO FX CONTRACTS COST GAIN/(LOSS) CAPITAL INVESTMENTS ------------------------------------------ ------------ ------------ ------------- ---------------- Euro Foreign Currency Forward Contract (h) $ -- $ (146,192) (0.04)% $ 1,128,607 REALIZED AND % OF UNREALIZED MEMBERS' GAIN/(LOSS) FROM INVESTMENT FUND COST FAIR VALUE CAPITAL INVESTMENTS ------------------------------------------ ------------ ------------ ------------- ---------------- Other Securities(i) 34,452 35,955 0.01 58,876 Redeemed Investment Funds -- -- -- 16,465,618 ------------ ------------ ------------- ---------------- TOTAL $273,925,502 $324,100,779 88.11% $ 46,922,780 ============ ============ ============= ================ (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) Investment Funds categorized as Level 2 investments. (d) 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. (e) The Investment Fund is a private equity position that is expected to be fully distributed to its investors over the next 48 months. (f) A portion or all of the Fund's interests in the Investment Fund are held in side pockets which have restricted liquidity. (g) The Investment Fund is expected to be fully liquidated within twelve months. (h) The current fair value of the Euro foreign currency forward sale contract open with Morgan Stanley & Co. Incorporated is $(13,080,054) and the value on settlement date of March 31, 2011 is $(12,933,862). (i) Securities received from in-kind distributions from Investment Funds which have been held for less than one year. Complete information about the Investment Funds' underlying investments is not readily available. 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, and subscription and redemption activity. 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 December 31, 2010 measurement date, or within one year 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 year of the December 31, 2010 measurement date. There were no transfers between Level 1 and Level 2 at December 31, 2010. The preceding notes are an integral part of these financial statements. 19
UBS CREDIT RECOVERY FUND, L.L.C. SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED) ------------------------------------------------------------------------------------------------------------------------------------ DECEMBER 31, 2010 ------------------------------------------------------------------------------------------------------------------------------------ ASSETS TABLE ------------------------------------------------------------------------------------------------------------------------------------ TOTAL FAIR VALUE AT DECEMBER 31, LEVEL 1 LEVEL 2 LEVEL 3 DESCRIPTION 2010 ----------------------------------------------------------------------------------------------------------------------------------- Convertible Arbitrage $ 18,658,122 $ -- $ 18,658,122 $ -- Direct Loans/Structured Finance 93,241,987 -- 44,120,337 49,121,650 Distressed/Credit 60,644,892 -- 48,113,189 12,531,703 Diversified Credit 151,666,015 -- 99,347,025 52,318,990 Other Securities 35,955 35,955 -- -- ------------------------------------------------------------------- TOTAL ASSETS $ 324,246,971 $ 35,955 $ 210,238,673 $ 113,972,343 ------------------------------------------------------------------- LIABILITIES TABLE ----------------------------------------------------------------------------------------------------------------------------------- TOTAL FAIR VALUE AT DECEMBER 31, LEVEL 1 LEVEL 2 LEVEL 3 DESCRIPTION 2010 ----------------------------------------------------------------------------------------------------------------------------------- Euro FX Contracts $ (146,192) $ -- $ (146,192) $ -- ------------------------------------------------------------------- TOTAL LIABILITIES $ (146,192) $ -- $ (146,192) $ -- ------------------------------------------------------------------- The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value: CHANGE IN NET TRANSFERS UNREALIZED IN AND/OR BALANCE AS OF REALIZED GAIN / APPRECIATION / NET PURCHASES / (OUT) BALANCE AS OF DESCRIPTION DECEMBER 31, 2009 ** (LOSS) DEPRECIATION (SALES) OF LEVEL 3 * DECEMBER 31, 2010 ----------------------------------------------------------------------------------------------------------------------------------- Direct Loans / Structured Finance $115,768,617 $(2,131,536) $8,546,934 $(28,942,028) $(44,120,337) $49,121,650 Distressed Credit 35,239,110 (3,261,995) 3,749,462 (8,955,647) (14,239,227) 12,531,703 Diversified Credit 135,842,741 (4,215,714) 17,292,027 (47,998,634) (48,601,430) 52,318,990 ----------------------------------------------------------------------------------------------------------------------------------- Total $286,850,468 $(9,609,245) $29,588,423 $(85,896,309) $(106,960,994) $113,972,343 ----------------------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation/depreciation on Level 3 assets still held as of December 31, 2010 is $7,499,333. * Net transfers in and/or (out) of Level 3 include transfers out of Investment Funds that were previously categorized as Level 3 investments. ** In the prior year, Investment Funds were categorized as Level 2 investments if the Fund had the ability to redeem at net asset value as of the December 31, 2009 measurement date or within 90 days of such date. The transfers out of Level 3 investments in the amount of $106,617,292 are due to the liquidity of the underlying Investment Funds in relation to the change in the measurement date from December 31, 2009 to December 31, 2010. The remaining net transfer out of Level 3 investments in the amount of $343,702 is due to a transfer between side pocket and liquid holdings during the year ended December 31, 2010. The preceding notes are an integral part of these financial statements. 20
DIRECTORS AND OFFICERS (UNAUDITED) Information pertaining to the Directors and Officers of the Fund as of December 31, 2010 is set forth below. The statement of additional information (SAI) includes additional information about the Directors and is available without charge, upon request, by calling UBS Alternative and Quantitative Investments LLC ("UBS A&Q") at (888) 793-8637. NUMBER OF PORTFOLIOS IN OTHER TRUSTEESHIPS/ FUND DIRECTORSHIPS HELD BY TERM OF OFFICE COMPLEX DIRECTOR OUTSIDE NAME, AGE, ADDRESS AND AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY FUND COMPLEX POSITION(S) WITH FUNDS TIME SERVED(1) DURING PAST 5 YEARS DIRECTOR(2) DURING THE PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT DIRECTORS George W. Gowen (81) Term -- Indefinite Law partner of Dunnington, Bartholow 11 None UBS Alternative and Length--since & Miller. Quantitative Investments LLC Commencement of 677 Washington Boulevard Operations Stamford, Connecticut 06901 Director Stephen H. Penman (64) Term -- Indefinite Professor of Financial Accounting of 11 None UBS Alternative and Length--since the Graduate School of Business, Quantitative Investments LLC July 1, 2004 Columbia University. 677 Washington Boulevard Stamford, Connecticut 06901 Director Virginia G. Breen (46) Term -- Indefinite General Partner of Sienna Ventures; 11 Director of: Modus Link, UBS Alternative and Length--since General Partner of Blue Rock Capital. Inc.; Excelsior Absolute Quantitative Investments LLC June 27, 2008 Return Fund of Funds, 677 Washington Boulevard L.L.C.; Excelsior Buyout Stamford, Connecticut 06901 Investors, L.L.C.; Director Excelsior LaSalle Property Fund, Inc; UST Global Private Markets Fund, L.L.C. INTERESTED DIRECTOR Meyer Feldberg (68)(3) Term -- Indefinite Dean Emeritus and Professor of 58 Director of: Primedia, UBS Alternative and Length--since Management of the Graduate School of Inc.; Macy's, Inc.; Revlon, Quantitative Investments LLC Commencement of Business, Columbia University; Senior Inc.; NYC Ballet; SAPPI 677 Washington Boulevard Operations Advisor for Morgan Stanley. Ltd. Advisory Director of Stamford, Connecticut 06901 Welsh Carson Anderson & Director Stowe. OFFICER(S) WHO ARE NOT DIRECTORS William J. Ferri (44) Term -- Indefinite Global Head of UBS Alternative and N/A N/A UBS Alternative and Length--since Quantitative Investments LLC since Quantitative Investments LLC October 1, 2010 June 2010. Prior to serving in this 677 Washington Boulevard role, he was Deputy Global Head of Stamford, Connecticut 06901 UBS Alternative and Quantitative Principal Executive Officer Investments LLC. Robert F. Aufenanger (57) Term -- Indefinite Executive Director of UBS Alternative N/A N/A UBS Alternative and Length--since and Quantitative Investments LLC Quantitative Investments LLC May 1, 2007 since October 2010. Prior to October 677 Washington Boulevard 2010, Executive Director of UBS Stamford, Connecticut 06901 Alternative Investments US from April Principal Accounting Officer 2007 to October 2010. Prior to April 2007, Chief Financial Officer and Senior Vice President of Alternative Investments Group of U.S. Trust Corporation from 2003 to 2007.
NUMBER OF PORTFOLIOS IN OTHER TRUSTEESHIPS/ FUND DIRECTORSHIPS HELD BY TERM OF OFFICE COMPLEX DIRECTOR OUTSIDE NAME, AGE, ADDRESS AND AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY FUND COMPLEX POSITION(S) WITH FUNDS TIME SERVED(1) DURING PAST 5 YEARS DIRECTOR(2) DURING THE PAST 5 YEARS ----------------------------------------------------------------------------------------------------------------------------------- Frank S. Pluchino (51) Term--Indefinite Executive Director of UBS Alternative N/A N/A UBS Alternative and Length--since and Quantitative Investments LLC Quantitative Investments LLC July 19, 2005 since October 2010. Prior to October 677 Washington Boulevard 2010, Executive Director of Stamford, Connecticut 06901 Compliance of UBS Financial Services Chief Compliance Officer Inc. from 2003 to 2010 and Deputy Director of Compliance of UBS Financial Services of Puerto Rico Inc. from October 2006 to October 2010. (1) The Fund commenced operations on August 1, 2002. (2) Of the 58 funds/portfolios in the complex, 47 are advised by an affiliate of UBS Financial Services Inc. ("UBSFS") and 11 comprise the UBS A&Q Family of Funds. (3) Mr. Feldberg is an "interested person" of the Fund because he is an affiliated person of a broker-dealer with which the UBS A&Q Family of Funds may do business. Mr. Feldberg is not affiliated with UBSFS or its affiliates. The Fund 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 Fund's Forms N-Q are available on the SEC's website at http://www.sec.gov and may be reviewed or 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. Proxy Voting A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available with out charge upon request by calling the UBS Global Asset Management Sales Desk at 888-793-8637.
ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. The code of ethics may be obtained without charge by calling 212-821-6053. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics. (d) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. As of the end of the period covered by the report, the registrant's Board had determined that Professor Stephen Penman, a member of the audit committee of the Board, is the audit committee financial expert and that he is "independent," as defined by Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $68,100 in 2010 and $75,560 in 2009. Such audit fees include fees associated with annual audits for providing a report in connection with the registrant's report on form N-SAR. AUDIT-RELATED FEES (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $8,250 in 2010 and $13,000 in 2009. Audit related fees principally include fees associated with reviewing and providing comments on semi-annual reports. TAX FEES (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $99,000 in 2010 and $131,000 in 2009. Tax fees include fees for tax compliance services and assisting management in preparation of tax estimates. ALL OTHER FEES (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 in 2010 and $0 in 2009. (e)(1) The registrant's audit committee pre-approves the principal accountant's engagements for audit and non-audit services to the registrant, and certain non-audit services to service Affiliates that are required to be pre-approved, on a case-by-case basis. Pre-approval considerations include whether the proposed services are compatible with maintaining the principal accountant's independence. (e)(2) There were no services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, because such services were pre-approved. (f) Not applicable. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $2.273 million for 2010 and $3.029 million for 2009. (h) The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. 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. The Proxy Voting Policies are as follows: UBSAQ PROXY-VOTING POLICIES AND PROCEDURES A. INTRODUCTION UBSAQ votes proxies for each fund (each a "Fund," collectively, the "Funds") for which it acts as the Adviser and as such, has adopted these Proxy-Voting Policies and Procedures (these "Policies and Procedures"). The Funds are funds of funds that invest primarily in unregistered investment vehicles ("Investment Funds") which have investors other than the Fund. Generally, each of the Funds may invest a majority of its assets in non-voting securities of Investment Funds. The Investment Funds typically do not submit matters to investors for vote; however, should a matter be submitted for vote and provided the Fund holds voting interests in the Investment Fund, the Adviser will vote proxies in what it views to be in the best interest of the Fund and in accordance with these Policies and Procedures. The Board of Directors (the "Board") of the Funds has adopted these Policies and Procedures as the Funds'. The Adviser will notify the Board of any changes to the Adviser's Policies and Procedures. B. FIDUCIARY DUTY Proxy-voting is an integral part of the Adviser's investment management process. The Adviser is under a fiduciary duty to act in the best interest of the Fund(s) and to vote in a manner it believes to be consistent with efforts to maximize shareholder value. This authority carries with it a responsibility on the Adviser's part to analyze the issues connected with the votes and to evaluate the probable impact of its vote on the value of the investment. C. VOTING PROCEDURES Generally speaking, where the Adviser holds voting rights, it will vote consistent with management's recommendations on routine matters, absent a particular reason to the contrary. Non-routine matters will be voted on a case-by-case basis taking into consideration the best interests of the Fund(s) and the maximization of shareholder value. D. CONFLICTS OF INTEREST Any circumstance or relationship which would compromise a portfolio manager's objectivity in voting proxies in the best interest of the Fund(s) would constitute a conflict of interest. In such situations, the Adviser will address any material conflicts before voting proxies on behalf of the Fund(s). As a matter of policy, the Adviser will presume the existence of a conflict of interest for proxy-voting purposes in situations where: - A current investor of the Adviser is affiliated with an Investment Fund soliciting proxies or has communicated its view to the Adviser on an impending proxy vote; - The portfolio manager responsible for proxy-voting has identified a personal interest in the Investment Fund soliciting proxies or in the outcome of a shareholder vote; Revised: June 26, 2006 Rebranded:10/1/2010 - Members of the portfolio management team, including the portfolio manager responsible for proxy-voting, and/or members of senior management, have a personal interest through investment in the Investment Fund soliciting proxies; - Members of the Investment Fund or a third party with an interest in the outcome of a shareholder vote have attempted to influence either the Adviser or the portfolio manager responsible for voting a proxy. Employees of the Adviser should be aware of the potential for conflicts of interest that may result, on the part of the Adviser, from employees' personal relationships or special circumstances that may result as part of the Adviser's normal course of business. Employees who become aware of any such conflicts of interest are under obligation to bring them to the attention of the Chief Compliance Officer or Legal who will work with appropriate personnel of the Adviser to determine the materiality of the conflict. ADDRESSING MATERIAL CONFLICTS OF INTEREST. A conflict of interest will be considered material to the extent it is determined that such conflict has the potential to influence the Adviser's decision-making in the proxy-voting process and the determination will be based on an assessment of the particular facts and circumstances. If it is determined that a conflict of interest is not material, the Adviser may vote proxies notwithstanding the existence of the conflict. The Adviser shall maintain a written record of all conflicts of interest identified, the materiality determination, and the method used to resolve the material conflict of interest. If it is determined that a conflict of interest is material, the Adviser's Chief Compliance Officer or Legal will work with appropriate personnel of the Adviser to determine a resolution before voting proxies affected by such conflict of interest. Resolutions may include: - Disclosing the conflict and obtaining consent before voting (which consent in the case of the Fund(s) may be obtained from the Fund's board of directors); - Engaging another party on behalf of the Fund(s) to vote the proxy on its behalf; - Engaging a third party to recommend a vote with respect to the proxy based on application of the policies set forth herein; or - Such other method as is deemed appropriate under the circumstances given the nature of the conflict. F. ANNUAL FILING OF PROXY VOTING RECORD The Adviser will file an annual report of each proxy voted with respect to the Fund(s) during the preceding twelve-month period ended June 30 on Form N-PX, no later than August 31st of the then year. F. PROXY-VOTING DISCLOSURES Revised: June 26, 2006 Rebranded:10/1/2010 Where the Funds hold voting rights, the Funds shall include in their Form N-CSR (Certified Shareholder Report) : (i) a description of these Policies and Procedures; (ii) a statement that a description of these Policies and Procedures is available without charge, upon request by taking the specified action; and (iii) a statement that information regarding how the Adviser voted proxies relating to the Funds during the most recent 12-month period, is available upon request, without charge by taking the specified action. G. CONTROL PROCESS To ensure compliance with these Policies and Procedures, at the time of a fund's investment in an Investment Fund, the subscription document will be reviewed to ensure that voting rights have been waived, as is current practice. In the event a fund does not waive voting rights, the Adviser will adhere to these Policies and Procedures. H. RECORD-KEEPING The Adviser shall maintain the following records relating to proxy-voting in an easily accessible place for a period of not less than six years from the end of the fiscal year during which the last entry was made on such record, the first two years on-site: - A copy of the Adviser's current Proxy-Voting Policies and Procedures; - A record of each vote cast by the Adviser on behalf of the Fund(s); - A copy of each proxy solicitation (including proxy statements) and related materials with regard to each vote; - A copy of any document relating to the identification and resolution of conflicts of interest; - A copy of any document created by the Adviser that was material to a proxy - voting decision or that memorialized the basis for that decision; and - A copy of each written investor request for information on how the Adviser voted proxies on behalf of the Fund(s), and a copy of any written response from the Adviser to any (written or oral) investor request for information on how the Adviser voted proxies on behalf of the Fund(s). Revised: June 26, 2006 Rebranded:10/1/2010 ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. O'CONNOR FUND OF FUNDS: LONG/SHORT CREDIT STRATEGIES LLC PORTFOLIO MANAGER DISCLOSURE The Fund is managed by a portfolio management team, each member of which (each, a "Portfolio Manager" and together, the "Portfolio Managers") is responsible for the day-to-day management of the Fund's portfolio. Norman E. Sienko, Jr., the lead member of the portfolio management team, is primarily responsible for the selection of the Fund's investments, and is jointly responsible for the allocation of the Fund's assets among Investment Funds. Russell Sinder, Joseph M. Sciortino and Matthew Woodbury, the other members of the portfolio management team, are jointly and primarily responsible for the allocation of the Fund's investments. Mr. Sienko has served as a Portfolio Manager of the Fund since its inception. He served as head of UBS Alternative Investments US' ("AI - US") portfolio management group from 1998 to 2010, prior to his group joining UBS Alternative and Quantitative Investments LLC, the Fund's investment adviser (the "Adviser"). He is also currently an Executive Director of the Adviser. Mr. Sinder has been a Portfolio Manager of the Fund since 2007. Mr. Sinder was associated with AI - US from 1998 to 2010, prior to joining the Adviser, and is an Executive Director of the Adviser. Mr. Sciortino joined the portfolio management team in 2007. He was associated with AI - US from December 2006 to October 2010, prior to joining the Adviser, and is a Director of the Adviser. Previously, Mr. Sinder served as Senior Analyst at Lake Partners, Inc. from April 2001 through August 2006. Mr. Woodbury was associated with AI - US from 2008 to 2010, prior to joining the Adviser, and is a Director of the Adviser. Previously, he served as an Analyst at Allianz Hedge Fund Partners, LP (2002-2008) and an Accountant at Arthur Anderson LLP (1999-2002). The Fund's Portfolio Managers manage multiple accounts for the Adviser, including registered closed-end funds and private domestic and offshore pooled investment vehicles. Potential conflicts of interest may arise because of the Portfolio Managers' management of the Fund and other accounts. For example, conflicts of interest may arise with the allocation of investment transactions and allocation of limited investment opportunities. Allocations of investment opportunities generally could raise a potential conflict of interest to the extent that the Portfolio Managers may have an incentive to allocate investments that are expected to increase in value to preferred accounts. Conversely, a Portfolio Manager could favor one account over another in the amount or the sequence in which orders to redeem investments are placed. The Portfolio Managers may be perceived to have a conflict of interest if there are a large number of other accounts, in addition to the Fund, that they are managing on behalf of the Adviser. In addition, each Portfolio Manager could be viewed as having a conflict of interest to the extent that one or more Portfolio Managers have an investment in accounts other than the Fund. The Adviser periodically reviews the Portfolio Managers' overall responsibilities to ensure that they are able to allocate the necessary time and resources to effectively manage the Fund. Other accounts may have investment objectives, strategies and risks that differ from those of the Fund. For these or other reasons, the Portfolio Managers may purchase different investments for the Fund and the other accounts, and the performance of investments purchased for the Fund may vary from the performance of the investments purchased for other accounts. The Portfolio Managers may place transactions on behalf of other accounts that are directly or indirectly contrary to investment decisions made for the Fund, which could have the potential to adversely impact the Fund, depending on market conditions. A potential conflict of interest may be perceived if the Adviser receives a performance-based advisory fee as to one account but not another, because a Portfolio Manager may favor the account subject to the performance fee, whether or not the performance of that account directly determines the Portfolio Manager's compensation. The Adviser's goal is to provide high quality investment services to all of its clients, while meeting its fiduciary obligation to treat all clients fairly. The Adviser has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, that it believes address the conflicts associated with managing multiple accounts for multiple clients. In addition, the Adviser monitors a variety of areas, including compliance with Fund guidelines. Furthermore, senior investment and business personnel of the Adviser periodically review the performance of the Portfolio Managers. The Portfolio Managers' compensation is comprised primarily of a fixed salary and a discretionary bonus paid by the Adviser or its affiliates and not by the Fund. A portion of the discretionary bonus may be paid in shares of stock or stock options of UBS AG, the ultimate parent company of the Adviser, subject to certain vesting periods. The amount of a Portfolio Manager's discretionary bonus, and the portion to be paid in shares or stock options of UBS AG, is determined by senior officers of the Adviser. In general, the amount of the bonus will be based on a combination of factors, none of which is necessarily weighted more than any other factor. These factors may include: the overall performance of the Adviser; the overall performance of UBS AG; the profitability to the Adviser derived from the management of the Fund and the other accounts managed by the Adviser; the absolute performance of the Fund and such other accounts for the preceding year; contributions by the Portfolio Manager to assisting in managing the Adviser; participation by the Portfolio Manager in training of personnel; and support by the Portfolio Manager generally to colleagues. The bonus is not based on a precise formula, benchmark or other metric. The following table lists the number and types of other accounts advised by the Fund's Portfolio Managers and approximate assets under management in those accounts as of the end of the Fund's most recent fiscal year. NORMAN E. SIENKO JR.
REGISTERED INVESTMENT COMPANIES POOLED ACCOUNTS OTHER ACCOUNTS ----------------------------- ----------------------------- -------------------------- NUMBER OF NUMBER OF NUMBER OF ACCOUNTS (1) ASSETS MANAGED ACCOUNTS (2) ASSETS MANAGED ACCOUNTS ASSETS MANAGED ------------ -------------- ------------ -------------- --------- -------------- 5 $1,114,210,987 5 $384,425,700 0 N/A
RUSSELL SINDER
REGISTERED INVESTMENT COMPANIES POOLED ACCOUNTS OTHER ACCOUNTS ----------------------------- ----------------------------- -------------------------- NUMBER OF NUMBER OF NUMBER OF ACCOUNTS (1) ASSETS MANAGED ACCOUNTS (2) ASSETS MANAGED ACCOUNTS ASSETS MANAGED ------------ -------------- ------------ -------------- --------- -------------- 5 $1,114,210,987 5 $384,425,700 0 N/A
JOSEPH M. SCIORTINO
REGISTERED INVESTMENT COMPANIES POOLED ACCOUNTS OTHER ACCOUNTS ----------------------------- ----------------------------- -------------------------- NUMBER OF NUMBER OF NUMBER OF ACCOUNTS (1) ASSETS MANAGED ACCOUNTS (2) ASSETS MANAGED ACCOUNTS ASSETS MANAGED ------------ -------------- ------------ -------------- --------- -------------- 5 $1,114,210,987 5 $384,425,700 0 N/A
MATTHEW WOODBURY
REGISTERED INVESTMENT COMPANIES POOLED ACCOUNTS OTHER ACCOUNTS ----------------------------- ----------------------------- -------------------------- NUMBER OF NUMBER OF NUMBER OF ACCOUNTS (1) ASSETS MANAGED ACCOUNTS (2) ASSETS MANAGED ACCOUNTS ASSETS MANAGED ------------ -------------- ------------ -------------- --------- -------------- 5 $1,114,210,987 5 $384,425,700 0 N/A
(1) Of these accounts, 3 accounts with total assets of approximately $489,525,737 charge performance-based advisory fees. (2) Of these accounts, 3 accounts with total assets of approximately $119,016,690 charge performance-based advisory fees. None of the Fund's Portfolio Managers beneficially owns any interests in the Fund. (b) Not applicable. 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) O'Connor Fund of Funds: Long/Short Credit Strategies LLC (formerly, UBS Credit Recovery Fund, L.L.C.) By (Signature and Title)* /s/ William Ferri ------------------------------------------ William Ferri, Principal Executive Officer Date March 9, 2011 -------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ William Ferri ------------------------------------------ William Ferri, Principal Executive Officer Date March 9, 2011 -------------------- By (Signature and Title)* /s/ Robert Aufenanger ------------------------------------------ Robert Aufenanger, Principal Financial Officer Date March 9, 2011 -------------------- * Print the name and title of each signing officer under his or her signature.