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 811-21936
SPECIAL
VALUE CONTINUATION 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)
ELIZABETH
GREENWOOD, SECRETARY
SPECIAL
VALUE CONTINUATION 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: DECEMBER 31, 2008
Date of
reporting period: DECEMBER 31, 2008
ITEM 1. REPORTS
TO STOCKHOLDERS.
Annual
Shareholder Report
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
December
31, 2008
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Annual
Shareholder Report
December
31, 2008
Contents
|
Performance
Summary
|
1
|
|
|
Consolidated
Portfolio Asset Allocation
|
2
|
|
|
Consolidated
Financial Statements
|
||
|
Report
of Independent Registered Public Accounting Firm
|
3
|
|
|
Consolidated
Statement of Assets and Liabilities
|
4
|
|
|
Consolidated
Statement of Investments
|
5
|
|
|
Consolidated
Statement of Operations
|
10
|
|
|
Consolidated
Statements of Changes in Net Assets
|
11
|
|
|
Consolidated
Statement of Cash Flows
|
12
|
|
|
Notes
to Consolidated Financial Statements
|
13
|
|
|
Consolidated
Schedule of Changes in Investments in Affiliates
|
28
|
|
|
Supplemental
Information (Unaudited)
|
||
|
Consolidating
Statement of Assets and Liabilities
|
29
|
|
|
Consolidating
Statement of Operations
|
30
|
|
|
Directors
and Officers
|
31
|
|
|
Supplemental
Tax Information
|
36
|
Special
Value Continuation Fund, LLC (the “Company”) files a schedule of its investment
in Special Value Continuation Partners, LP (the “Partnership”) with the
Securities and Exchange Commission (“SEC”) for the first and third quarters of
each fiscal year on Form N-Q. Investments listed in the Consolidated
Statement of Investments are held by the Partnership, which also 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 Forms N-Q of the Company and the Partnership are available
on the SEC’s website at http://www.sec.gov. The Forms N-Q of the
Company and the Partnership 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 proxy voting guidelines of the Company and the Partnership and
information regarding how the Company and the Partnership voted proxies relating
to portfolio investments during the most recent twelve-month period may be
obtained without charge on the SEC’s website at http://www.sec.gov or by calling
the advisor of the Company and the Partnership, Tennenbaum Capital Partners,
LLC, at (310) 566-1000. Collect calls for this purpose are
accepted.
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Performance
Summary
Fund
Inception (July 31, 2006) through December 31, 2008
Fund
Returns v. Merrill Lynch US High Yield and S&P 500 Indices
|
Return on Equity (1)
|
IRR
(2)
|
|||||||||||||||
|
Annualized
|
||||||||||||||||
| 2006 | * |
2007
|
2008
|
Inception-to-Date
|
||||||||||||
|
Special
Value Continuation Fund
|
8.2 | % | 9.2 | % | -48.8 | % | -15.0 | % | ||||||||
|
Merrill
Lynch US High Yield Index
|
7.3 | % | 2.2 | % | -26.2 | % | -8.4 | % | ||||||||
|
Standard
& Poor's 500 Index
|
12.0 | % | 5.5 | % | -36.9 | % | -11.5 | % | ||||||||
* Period
from inception (July 31, 2006) through December 31, 2006
Past
performance of Special Value Continuation Fund, LLC (the "Company") is not a
guarantee of future performance. Company returns are net of dividends
to preferred shareholders, performance allocations and Company expenses,
including financing costs and management fees.
(1) Return
on equity (net of dividends to preferred shareholders, performance allocations
and Company expenses, including financing costs and management fees) calculated
on a monthly geometrically liked, time-weighted basis. Returns are reduced in
earlier periods because organizational costs and other expenses are high
relative to assets.
(2)
Internal rate of return ("IRR") is the imputed annual return over an investment
period and, mathematically, is the rate of return at which the discounted cash
flows equal the initial outlays. The IRR presented assumes a liquidation of the
Company at net asset value as of the period end date.
1
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Portfolio Asset Allocation
December
31, 2008
Portfolio Holdings by Investment Type
(% of Cash and Investments)
Portfolio Holdings by Industry
(% of Cash and Investments)
|
Other
Electrical Equipment and Component Manufacturing
|
14.7 | % | ||
|
Data
Processing, Hosting, and Related Services
|
13.7 | % | ||
|
Architectural,
Engineering, and Related Services
|
12.6 | % | ||
|
Telecom
Wireline
|
12.2 | % | ||
|
Nonferrous
Metal (except Aluminum) Production and Processing
|
10.1 | % | ||
|
Satellite
Telecommunications
|
9.1 | % | ||
|
Semiconductor
and Other Electronic Component Manufacturing
|
5.4 | % | ||
|
Other
Information Services
|
5.3 | % | ||
|
Communications
Equipment Manufacturing
|
4.0 | % | ||
|
Industrial
Machinery Manufacturing
|
1.9 | % | ||
|
Motor
Vehicle Manufacturing
|
1.7 | % | ||
|
Depository
Credit Intermediation
|
1.7 | % | ||
|
Other
Amusement and Recreation Industries
|
1.5 | % | ||
|
Offices
of Real Estate Agents and Brokers
|
1.4 | % | ||
|
Computer
and Peripheral Equipment Manufacturing
|
1.0 | % | ||
|
Plastics
Product Manufacturing
|
0.3 | % | ||
|
Radio
and Television Broadcasting
|
0.1 | % | ||
|
Support
Activities for Air Transportation
|
0.1 | % | ||
|
Electric
Power Generation, Transmission and Distribution
|
0.1 | % | ||
|
Cash
and Cash Equivalents
|
3.1 | % | ||
|
Total
|
100.0 | % |
2
Report
of Independent Registered Public Accounting Firm
To the
Shareholders and Board of Directors of
Special
Value Continuation Fund, LLC
We have
audited the accompanying consolidated statement of assets and liabilities of
Special Value Continuation Fund, LLC (a Delaware Limited Liability Company) (the
Company), including the consolidated statement of investments, as of December
31, 2008, and the related consolidated statements of operations and cash flows
for the year then ended, the consolidated statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Company’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 Company’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 Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements 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
securities owned as of December 31, 2008, by correspondence with the custodian
and brokers and confirmation of securities not held by the custodian by
correspondence with others, or by other appropriate auditing procedures where
replies from brokers were not received. 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 consolidated financial position of
Special Value Continuation Fund, LLC at December 31, 2008, the consolidated
results of its operations and its cash flows for the year then ended, the
consolidated changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein, in conformity with U.S. generally accepted accounting
principles.
|
/s/
Ernst & Young LLP
|
Los
Angeles, California
February
27, 2009
3
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statement of Assets and Liabilities
December
31, 2008
|
Assets
|
||||
|
Investments,
at fair value:
|
||||
|
Unaffiliated
issuers (cost $311,573,451)
|
$ | 180,424,489 | ||
|
Controlled
companies (cost $36,117,128)
|
13,312,825 | |||
|
Other
affiliates (cost $150,042,927)
|
154,766,911 | |||
|
Total
investments (cost $497,733,506)
|
348,504,225 | |||
|
Cash
and cash equivalents
|
11,063,341 | |||
|
Accrued
interest income:
|
||||
|
Unaffiliated
issuers
|
3,426,214 | |||
|
Controlled
companies
|
12,310 | |||
|
Other
affiliates
|
505,434 | |||
|
Deferred
debt issuance costs
|
2,458,379 | |||
|
Dividends
receivable
|
2,137,796 | |||
|
Prepaid
expenses and other assets
|
74,093 | |||
|
Total
assets
|
368,181,792 | |||
|
Liabilities
|
||||
|
Credit
facility payable
|
34,000,000 | |||
|
Payable
for investment securities purchased
|
699,890 | |||
|
Management
and advisory fees payable
|
690,599 | |||
|
Interest
payable
|
675,205 | |||
|
Unrealized
depreciation on swaps
|
541,730 | |||
|
Payable
to affiliate
|
104,843 | |||
|
Accrued
expenses and other liabilities
|
526,964 | |||
|
Total
liabilities
|
37,239,231 | |||
|
Preferred
stock
|
||||
|
Series
Z; $500/share liquidation preference; 400 shares authorized, 47 shares
issued and outstanding
|
23,500 | |||
|
Accumulated
dividends on Series Z preferred stock
|
16 | |||
|
Total
Series Z preferred stock
|
23,516 | |||
|
Preferred
equity facility
|
||||
|
Series
A preferred limited partner interest in Special Value Continuation
Partners, LP; $20,000/interest liquidation preference; 6,700 interests
authorized, issued and outstanding
|
134,000,000 | |||
|
Accumulated
distributions on Series A preferred limited partner
interests
|
1,173,468 | |||
|
Total
preferred limited partner interest
|
135,173,468 | |||
|
Minority
interest
|
||||
|
General
partner interest in Special Value Continuation Partners,
LP
|
- | |||
|
Net
assets applicable to common shareholders
|
$ | 195,745,577 | ||
|
Composition
of net assets applicable to common shareholders
|
||||
|
Common
stock, $0.001 par value; unlimited shares authorized, 418,955.777 shares
issued and outstanding
|
$ | 419 | ||
|
Paid-in
capital in excess of par, net of contributed unrealized
gains
|
364,767,103 | |||
|
Accumulated
net investment income
|
180,425 | |||
|
Accumulated
net realized losses
|
(19,453,227 | ) | ||
|
Accumulated
net unrealized depreciation
|
(149,749,127 | ) | ||
|
Accumulated
dividends to Series Z preferred shareholders
|
(16 | ) | ||
|
Net
assets applicable to common shareholders
|
$ | 195,745,577 | ||
|
Common
stock, NAV per share
|
$ | 467.22 | ||
See
accompanying notes.
4
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statement of Investments
December
31, 2008
Showing
Percentage of Total Cash and Investments of the Company
|
Principal
|
Fair
|
Percent of Cash
|
||||||||||
|
Security
|
Amount
|
Value
|
and Investments
|
|||||||||
|
Debt
Securities (61.71%)
|
||||||||||||
|
Bank
Debt (44.57%) (1)
|
||||||||||||
|
Architectural,
Engineering, and Related Services (4.59%)
|
||||||||||||
|
ESP
Holdings, Inc., 1st Lien Revolver, LIBOR + 4.5%, due
6/30/09
|
||||||||||||
|
(Acquired 4/27/07,
Amortized Cost $79,902) (2),
(12)
|
$ | 79,822 | $ | 79,263 | 0.02 | % | ||||||
|
ESP
Holdings, Inc., 1st Lien Term Loan, LIBOR + 4.5%, due
6/30/09
|
||||||||||||
|
(Acquired 4/25/07 and
4/27/07, Amortized Cost $1,344,327) (2),
(12)
|
$ | 1,330,537 | 1,244,052 | 0.35 | % | |||||||
|
ESP
Holdings, Inc., 2nd Lien Term Loan, LIBOR + 10%, due
9/12/14
|
||||||||||||
|
(Acquired 9/12/07,
Amortized Cost $18,154,571) (2),
(12)
|
$ | 18,080,857 | 15,187,920 | 4.22 | % | |||||||
|
Total
Architectural, Engineering, and Related Services
|
16,511,235 | |||||||||||
|
Communications
Equipment Manufacturing (3.98%)
|
||||||||||||
|
Mitel
Networks Corporation, 1st Lien Term Loan, LIBOR + 3.25%, due
8/10/14
|
||||||||||||
|
(Acquired
12/13/07, Amortized Cost $18,664,795)
|
$ | 19,856,165 | 14,316,295 | 3.98 | % | |||||||
|
Computer
and Peripheral Equipment Manufacturing (0.98%)
|
||||||||||||
|
Palm,
Inc., Tranche B Term Loan, LIBOR + 3.5%, due 4/24/14
|
||||||||||||
|
(Acquired
5/24/07, Amortized Cost $10,187,617)
|
$ | 11,319,575 | 3,537,367 | 0.98 | % | |||||||
|
Data
Processing, Hosting, and Related Services (9.97%)
|
||||||||||||
|
GXS
Worldwide, Inc., 1st Lien Term Loan, LIBOR + 4%, due
3/31/13
|
||||||||||||
|
(Acquired 10/12/07,
Amortized Cost $9,033,021) (12)
|
$ | 9,217,368 | 7,304,764 | 2.03 | % | |||||||
|
GXS
Worldwide, Inc., 2nd Lien Term Loan, LIBOR + 7.5%, due
9/30/13
|
||||||||||||
|
(Acquired 10/12/07,
Amortized Cost $14,379,238) (12)
|
$ | 14,598,211 | 11,715,064 | 3.26 | % | |||||||
|
Terremark
Worldwide, Inc., 1st Lien Term Loan, LIBOR + 3.75%, due
7/31/12
|
||||||||||||
|
(Acquired
8/1/07, Amortized Cost $5,645,458)
|
$ | 5,645,459 | 4,440,153 | 1.23 | % | |||||||
|
Terremark
Worldwide, Inc., 2nd Lien Term Loan, LIBOR + 3.25% cash + 4.5% PIK, due
1/31/13
|
||||||||||||
|
(Acquired
8/1/07, Amortized Cost $14,652,087)
|
$ | 14,733,964 | 12,405,998 | 3.45 | % | |||||||
|
Total
Data Processing, Hosting, and Related Services
|
35,865,979 | |||||||||||
|
Electric
Power Generation, Transmission and Distribution (0.06%)
|
||||||||||||
|
La
Paloma Generating Company Residual Bank Debt
|
||||||||||||
|
(Acquired 2/2/05,
3/18/05, and 5/6/05, Cost $1,885,234) (3)
|
$ | 23,218,324 | 229,161 | 0.06 | % | |||||||
|
Motor
Vehicle Manufacturing (1.74%)
|
||||||||||||
|
General
Motors Corporation, Revolver, LIBOR + 1.75%, due 7/20/11
|
||||||||||||
|
(Acquired
9/27/07, 11/27/07, and 12/14/07 Amortized Cost
$13,667,603)
|
$ | 15,000,000 | 6,253,853 | 1.74 | % | |||||||
|
Offices
of Real Estate Agents and Brokers (1.08%)
|
||||||||||||
|
Realogy
Corporation, Revolver, LIBOR + 2.25%, due 4/10/13
|
||||||||||||
|
(Acquired
6/28/07, 7/9/07 and 7/13/07, Amortized Cost $9,530,000)
|
$ | 15,000,000 | 3,868,750 | 1.08 | % | |||||||
|
Other
Electrical Equipment and Component Manufacturing (3.56%)
|
||||||||||||
|
EaglePicher
Corporation, 1st Lien Tranche B Term Loan, LIBOR + 4.5%, due
12/31/12
|
||||||||||||
|
(Acquired 12/31/07,
Amortized Cost $7,907,594) (2),
(12)
|
$ | 7,907,594 | 6,946,821 | 1.93 | % | |||||||
|
EaglePicher
Corporation, 2nd Lien Term Loan, LIBOR + 7.5%, due
12/31/13
|
||||||||||||
|
(Acquired 12/31/07,
Amortized Cost $7,000,000) (2),
(12)
|
$ | 7,000,000 | 5,862,500 | 1.63 | % | |||||||
|
Total
Other Electrical Equipment and Component Manufacturing
|
12,809,321 | |||||||||||
|
Radio
and Television Broadcasting (0.09%)
|
||||||||||||
|
Newport
Television LLC, Term Loan B, LIBOR + 5%, due 9/14/16
|
||||||||||||
|
(Acquired
5/1/08 and 5/29/08, Amortized Cost $681,770)
|
$ | 749,198 | 265,965 | 0.07 | % | |||||||
|
High
Plains Broadcasting Operating Company, Term Loan, LIBOR + 5%, due
9/14/16
|
||||||||||||
|
(Acquired
9/15/08, Amortized Cost $180,370)
|
$ | 198,208 | 70,364 | 0.02 | % | |||||||
|
Total
Radio and Television Broadcasting
|
336,329 | |||||||||||
5
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statement of Investments (Continued)
December
31, 2008
Showing
Percentage of Total Cash and Investments of the Company
|
Principal
|
Fair
|
Percent of Cash
|
||||||||||
|
Security
|
Amount
|
Value
|
and Investments
|
|||||||||
|
Debt
Securities (continued)
|
||||||||||||
|
Satellite
Telecommunications (7.47%)
|
||||||||||||
|
WildBlue
Communications, Inc., 1st Lien Delayed Draw Term Loan, LIBOR + 4%
Cash
|
||||||||||||
|
+
2.5% PIK, due 12/31/09
|
||||||||||||
|
(Acquired 9/29/06,
Amortized Cost $13,755,612) (12)
|
$ | 13,755,612 | $ | 12,428,416 | 3.46 | % | ||||||
|
WildBlue
Communications, Inc., 2nd Lien Delayed Draw Term Loan, LIBOR + 8.5%
Cash
|
||||||||||||
|
+
7.25% PIK, due 8/15/11
|
||||||||||||
|
(Acquired 9/29/06,
Amortized Cost $17,139,781)
(12)
|
$ | 17,139,781 | 14,417,272 | 4.01 | % | |||||||
|
Total
Satellite Telecommunications
|
26,845,688 | |||||||||||
|
Semiconductor
and Other Electronic Component Manufacturing (5.44%)
|
||||||||||||
|
Celerity,
Inc., Senior Secured Notes, LIBOR + 12%, due 12/31/09
|
||||||||||||
|
(Acquired 4/15/08 ,
Amortized Cost $20,578,307)
(12)
|
$ | 23,816,298 | 18,244,654 | 5.07 | % | |||||||
|
Celerity,
Inc., Senior Second Lien Secured Convertible Notes, 12% PIK, due
12/31/09
|
||||||||||||
|
(Acquired 4/15/08,
Amortized Cost $7,316,698)
(12)
|
$ | 7,769,822 | 1,317,006 | 0.37 | % | |||||||
|
Total
Semiconductor and Other Electronic Component Manufacturing
|
19,561,660 | |||||||||||
|
Telecom
Wireline (5.61%)
|
||||||||||||
|
Cavalier
Telephone Corporation, Senior Secured 1st Lien Term Loan, 6.25 Cash + 1%
PIK, due 12/31/12
|
||||||||||||
|
(Acquired 4/24/08,
Amortized Cost $702,833)
|
$ | 900,115 | 234,030 | 0.07 | % | |||||||
|
Integra
Telecom, Inc., 2nd Lien Term Loan, LIBOR + 7%, due 2/28/14
|
||||||||||||
|
(Acquired
9/05/07, Amortized Cost $3,360,000)
|
$ | 3,500,000 | 1,713,688 | 0.48 | % | |||||||
|
Integra
Telecom, Inc., Term Loan, LIBOR + 10% PIK, due 8/31/14
|
||||||||||||
|
(Acquired
9/05/07, Amortized Cost $4,750,018)
|
$ | 4,750,018 | 2,110,195 | 0.59 | % | |||||||
|
Interstate
Fibernet, Inc., 1st Lien Term Loan, LIBOR + 4%, due
7/31/13
|
||||||||||||
|
(Acquired 8/01/07,
Amortized Cost $11,036,156) (2),
(12)
|
$ | 11,348,232 | 8,189,645 | 2.28 | % | |||||||
|
Interstate
Fibernet, Inc., 2nd Lien Term Loan, LIBOR + 7.5%, due
7/31/14
|
||||||||||||
|
(Acquired 7/31/07,
Amortized Cost $8,281,636) (2),
(12)
|
$ | 8,281,636 | 6,360,297 | 1.77 | % | |||||||
|
NEF
Telecom Company BV, 2nd Lien Tranche D Term Loan, EURIBOR + 5.5%, due
2/16/17
|
||||||||||||
|
(Acquired 8/29/07,
and 11/29/07 Amortized Cost $2,111,865) - (Netherlands) (9),
(12)
|
€ | 1,538,600 | 1,497,181 | 0.42 | % | |||||||
|
Total
Telecom Wireline
|
20,105,036 | |||||||||||
|
Total
Bank Debt (Cost $222,027,056)
|
160,240,674 | |||||||||||
|
Other
Corporate Debt Securities (17.14%)
|
||||||||||||
|
Architectural,
Engineering, and Related Services (1.52%)
|
||||||||||||
|
ESP Holdings, Inc.,
Junior Unsecured Subordinated Promissory Notes, 18% PIK due 3/31/15 (2),
(12)
|
$ | 5,648,907 | 5,479,440 | 1.52 | % | |||||||
|
Data
Processing, Hosting, and Related Services (2.32%)
|
||||||||||||
|
Anacomp, Inc.,
Promissory Note, LIBOR + 6.5% PIK, due 8/31/09 (2),
(10)
|
$ | 1,175,667 | 1,081,614 | 0.30 | % | |||||||
|
Anacomp, Inc., Senior
Secured Subordinated Notes, 14% PIK, due 3/12/13 (2),
(10)
|
$ | 8,230,413 | 7,259,224 | 2.02 | % | |||||||
|
Total
Data Processing, Hosting, and Related Services
|
8,340,838 | |||||||||||
|
Industrial
Machinery Manufacturing (1.85%)
|
||||||||||||
|
GSI
Group Corporation, Senior Notes, 11%, due 8/20/13
|
||||||||||||
|
(Acquired 8/20/08,
Amortized Cost $ 6,697,834)
(5)
|
$ | 7,778,000 | 6,642,412 | 1.85 | % | |||||||
|
Plastics
Product Manufacturing (0.30%)
|
||||||||||||
|
Pliant
Corporation, Senior Secured 2nd Lien Notes, 11.125%, due
9/1/09
|
$ | 13,477,000 | 1,090,559 | 0.30 | % | |||||||
6
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statement of Investments (Continued)
December
31, 2008
Showing
Percentage of Total Cash and Investments of the Company
|
Principal Amount
|
Fair
|
Percent of Cash
|
||||||||||
|
Security
|
or Shares
|
Value
|
and Investments
|
|||||||||
|
Debt
Securities (continued)
|
||||||||||||
|
Offices
of Real Estate Agents and Brokers (0.27%)
|
||||||||||||
|
Realogy
Corporation, Senior Note, 10.5%, due 4/15/14
|
$ | 1,965,000 | $ | 335,956 | 0.09 | % | ||||||
|
Realogy
Corporation, Senior Subordinated Notes, 12.375%, due
4/15/15
|
$ | 4,915,000 | 656,644 | 0.18 | % | |||||||
|
Total
Offices of Real Estate Agents and Brokers
|
992,600 | |||||||||||
|
Other
Amusement and Recreation Industries (1.53%)
|
||||||||||||
|
Bally
Total Fitness Holdings, Inc., Senior Subordinated Notes, 14% Cash or
15.625% PIK, due 10/1/13
|
||||||||||||
|
(Acquired 10/01/07,
Amortized Cost $45,025,305) (3),
(5)
|
$ | 44,090,666 | 5,511,333 | 1.53 | % | |||||||
|
Other
Information Services (4.99%)
|
||||||||||||
|
IRI
Holdco (RW), LLC Note Receivable, 8 %, due 2/12/11
|
||||||||||||
|
(Acquired 10/31/08,
Cost $18,336,377) (3), (5),
(12)
|
19,506,784 | 17,946,241 | 4.99 | % | ||||||||
|
Telecom
Wireline (4.36%)
|
||||||||||||
|
NEF
Telecom Company BV, Mezzanine Term Loan, EURIBOR + 10% PIK, due
8/16/17
|
||||||||||||
|
(Acquired 8/29/07,
Amortized Cost $19,561,122) - (Netherlands) (9), (5),
(12)
|
€ | 14,073,015 | 15,670,144 | 4.36 | % | |||||||
|
Total
Other Corporate Debt Securities (Cost $121,108,127)
|
61,673,567 | |||||||||||
|
Total
Debt Securities (Cost $343,135,183)
|
221,914,241 | |||||||||||
|
Equity
Securities (35.21%)
|
||||||||||||
|
Architectural,
Engineering, and Related Services(6.52%)
|
||||||||||||
|
ESP
Holdings, Inc., Common Stock
|
||||||||||||
|
(Acquired 9/12/07
Cost $9,311,782) (2), (3),
(5), (6), (8)
|
88,670 | 18,169,132 | 5.05 | % | ||||||||
|
ESP
Holdings, Inc., 15% PIK, Preferred Stock
|
||||||||||||
|
(Acquired 9/12/07
Cost $4,502,521) (2), (3),
(5), (6), (8)
|
40,618 | 5,283,853 | 1.47 | % | ||||||||
|
Total
Architectural, Engineering, and Related Services
|
23,452,985 | |||||||||||
|
Data
Processing, Hosting, and Related Services (1.38%)
|
||||||||||||
|
Anacomp,
Inc., Common Stock
|
||||||||||||
|
(Acquired during
2002, 2003, 2005, and 2006, Cost $26,711,048) (2), (3),
(5), (10)
|
1,253,969 | 4,971,987 | 1.38 | % | ||||||||
|
Depository
Credit Intermediation (1.73%)
|
||||||||||||
|
Doral
Holdings, LP Interest
|
||||||||||||
|
(Acquired 7/12/07,
Cost $11,138,132) (3),
(5)
|
11,138,132 | 6,203,785 | 1.73 | % | ||||||||
|
Industrial
Machinery Manufacturing (0.03%)
|
||||||||||||
|
GSI
Group Inc. Common Shares
|
||||||||||||
|
(Acquired 8/20/08,
Amortized Cost $ 1,136,228) (3),
(5)
|
216,987 | 124,160 | 0.03 | % | ||||||||
|
Nonferrous
Metal (except Aluminum) Production and Processing (10.14%)
|
||||||||||||
|
International
Wire Group, Inc., Common Stock
|
||||||||||||
|
(Acquired 10/20/04,
Cost $29,012,690) (2), (5),
(6), (12)
|
1,979,441 | 36,461,303 | 10.14 | % | ||||||||
|
Other
Electrical Equipment and Component Manufacturing (11.14%)
|
||||||||||||
|
EaglePicher
Holdings, Inc., Common Stock
|
||||||||||||
|
(Acquired 3/9/05,
Cost $24,285,461) (2), (3),
(5), (6), (7), (12)
|
1,312,720 | 40,057,651 | 11.14 | % | ||||||||
|
Other
Information Services (0.31%)
|
||||||||||||
|
IRI
Holdco (RW), LLC Warrants to Purchase IRI Preferred Stock
|
||||||||||||
|
(Acquired 10/31/08,
Cost $1,170,407) (3), (5),
(12)
|
4,063,913 | 1,097,257 | 0.31 | % | ||||||||
|
Plastics
Product Manufacturing (0.00%)
|
||||||||||||
|
Pliant
Corporation, Common Stock
|
||||||||||||
|
(Acquired 7/18/06,
Cost $177) (3), (5),
(13)
|
422 | - | 0.00 | % | ||||||||
|
Pliant Corporation,
13% PIK, Preferred Stock
(3)
|
5,570,318 | - | 0.00 | % | ||||||||
|
Total
Plastics Product Manufacturing
|
- | |||||||||||
7
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statement of Investments (Continued)
December
31, 2008
Showing
Percentage of Total Cash and Investments of the Company
|
Principal Amount
|
Fair
|
Percent of Cash
|
||||||||||
|
Security
|
or Shares
|
Value
|
and Investments
|
|||||||||
|
Equity
Securities (continued)
|
||||||||||||
|
Satellite
Telecommunications (1.63%)
|
||||||||||||
|
WildBlue
Communications, Inc., Non-Voting Warrants
|
||||||||||||
|
(Acquired 10/23/06,
Cost $673,094) (3), (5),
(12)
|
51,896 | $ | 5,853,867 | 1.63 | % | |||||||
|
Semiconductor
and Other Electronic Component Manufacturing (0.00%)
|
||||||||||||
|
Celerity,
Inc., Common Stock
|
||||||||||||
|
(Acquired 12/23/04,
9/8/05 and 2/1/06, Cost $12,135,924) (3),
(5)
|
2,427,185 | - | 0.00 | % | ||||||||
|
Kinetics
Holdings, LLC, Common Units
|
||||||||||||
|
(Acquired 1/7/05,
Cost $2,587,349) (3),
(5)
|
3,384,000 | 1 | 0.00 | % | ||||||||
|
Total
Semiconductor and Other Electronic Component Manufacturing
|
1 | |||||||||||
|
Support
Activities for Air Transportation (0.08%)
|
||||||||||||
|
Alabama
Aircraft Industries, Inc., Common Stock
|
||||||||||||
|
(Acquired 3/12/02,
3/13/02 and 12/11/02, Cost $3,550,121) (3),
(5)
|
164,636 | 278,235 | 0.08 | % | ||||||||
|
Telecom
Wireline (2.25%)
|
||||||||||||
|
Interstate
Fibernet, Inc., Common Stock
|
||||||||||||
|
(Acquired 7/31/07
Cost $23,477,380) (2), (3),
(4), (5), (6),
|
10,890,068 | 5,445,034 | 1.51 | % | ||||||||
|
NEF
Kamchia Co-Investment Fund, LP Interest
|
||||||||||||
|
(Acquired
7/31/07, Cost $3,367,227) (3), (5),
(9) (Cayman Islands)
|
2,455,500 | 2,643,719 | 0.74 | % | ||||||||
|
Total
Telecom Wireline
|
8,088,753 | |||||||||||
|
Total
Equity Securities (Cost $154,598,323)
|
126,589,984 | |||||||||||
|
Total Investments
(Cost $497,733,506) (11)
|
348,504,225 | |||||||||||
|
Cash
and Cash Equivalents (3.08%)
|
||||||||||||
|
Cash
denominated in foreign currencies (Cost $157,978)
|
€ | 130,239 | 181,956 | 0.05 | % | |||||||
|
Wells
Fargo Overnight Repurchase Agreement, 0.10%,
|
||||||||||||
|
Collateralized
by FHLB Discount Notes
|
$ | 3,000,000 | 3,000,000 | 0.84 | % | |||||||
|
Cash
Held on Account at Various Institutions
|
$ | 7,881,385 | 7,881,385 | 2.19 | % | |||||||
|
Total
Cash and Cash Equivalents
|
11,063,341 | |||||||||||
|
Total
Cash and Investments
|
$ | 359,567,566 | 100.00 | % | ||||||||
8
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statement of Investments (Continued)
December
31, 2008
Notes
to Statement of Investments:
|
(1)
|
Investments
in bank debt generally are bought and sold among institutional investors
in transactions not subject to registration under the Securities Act of
1933. Such
transactions are generally subject to contractual restrictions, such as
approval of the agent or
borrower.
|
|
(2)
|
Affiliated
issuer - as defined under the Investment Company Act of 1940 (ownership of
5% or more of the outstanding voting securities of this
issuer).
|
|
(3)
|
Non-income
producing security.
|
|
(4)
|
Priced
using the closing price per Pink
Sheets.
|
|
(5)
|
Restricted
security.
|
|
(6)
|
Investment
is not a controlling position.
|
|
(7)
|
The
Partnership's advisor may demand registration at any time more than 180
days following the first initial public offering of common equity by the
issuer.
|
|
(8)
|
Priced
by Investment Manager.
|
|
(9)
|
Principal
amount denominated in euros. Amortized cost and fair value
converted from euros to US dollars.
|
|
(10)
|
Issuer
is a controlled company.
|
|
(11)
|
Includes
investments with an aggregate market value of $7,798,740 that have been
segregated to collateralize certain unfunded
commitments.
|
|
(12)
|
Priced
by an independent third party pricing
service.
|
|
(13)
|
The
Partnership may demand registration of the shares as part of a majority
(by interest) of the holders of the registrable shares of the issuer, or
in connection with an initial public offering by the
issuer.
|
Aggregate
purchases and aggregate sales of investment securities, other than Government
securities, totaled $181,894,579 and $257,390,048 respectively.
Aggregate
purchases includes securities received as payment in-kind. Aggregate sales
includes principal paydowns on debt securities.
The total
value of restricted securities as of December 31, 2008 was $332,600,788, or
92.5% of total cash and investments of the Company.
Swaps at
December 31, 2008 were as follows:
|
Number
of
|
||||||||
|
Contracts
or
|
Fair
|
|||||||
|
Instrument
|
Notional
Amount
|
Value
|
||||||
|
Swaps
|
||||||||
|
Euro/US
Dollar Cross Currency Basis Swap, Pay Euros/Receive USD, Expires
5/16/14
|
$ | 12,081,888 | $ | (541,730 | ) | |||
See
accompanying notes.
9
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statement of Operations
Year
Ended December 31, 2008
|
Investment
income
|
||||
|
Interest
income:
|
||||
|
Unaffiliated
issuers
|
$ | 25,586,830 | ||
|
Controlled
companies
|
843,133 | |||
|
Other
affiliates
|
8,289,047 | |||
|
Dividend
income:
|
||||
|
Unaffiliated
issuers
|
63,162 | |||
|
Controlled
companies
|
49,074 | |||
|
Other
affiliates
|
2,137,796 | |||
|
Other
income:
|
||||
|
Unaffiliated
issuers
|
202,550 | |||
|
Other
affiliates
|
36,444 | |||
|
Total
investment income
|
37,208,036 | |||
|
Operating
expenses
|
||||
|
Management
and advisory fees
|
8,287,188 | |||
|
Interest
expense
|
4,555,112 | |||
|
Legal
fees, professional fees and due diligence expenses
|
442,945 | |||
|
Amortization
of deferred debt issuance costs
|
441,495 | |||
|
Commitment
fees
|
317,735 | |||
|
Director
fees
|
178,171 | |||
|
Insurance
expense
|
113,009 | |||
|
Custody
Fees
|
26,645 | |||
|
Other
operating expenses
|
325,763 | |||
|
Total
expenses
|
14,688,063 | |||
|
Net
investment income
|
22,519,973 | |||
|
Net
realized and unrealized loss
|
||||
|
Net
realized gain (loss) from:
|
||||
|
Investments
in unaffiliated issuers
|
(37,637,081 | ) | ||
|
Investments
in affiliated issuers
|
18,183,853 | |||
|
Foreign
currency transactions
|
(3,364,038 | ) | ||
|
Net
realized loss
|
(22,817,266 | ) | ||
|
Net
change in net unrealized appreciation/depreciation on:
|
||||
|
Investments
|
(186,462,769 | ) | ||
|
Foreign
currency
|
5,699 | |||
|
Net
change in unrealized appreciation/depreciation
|
(186,457,070 | ) | ||
|
Net
realized and unrealized loss
|
(209,274,336 | ) | ||
|
Net
change in undistributed earnings of minority
interestholder
|
3,149,915 | |||
|
Dividends
paid on Series A preferred equity facility
|
(5,953,838 | ) | ||
|
Net
change in accumulated dividends on Series A preferred equity
facility
|
764,735 | |||
|
Dividends
to Series Z preferred shareholders
|
(4,542 | ) | ||
|
Net
change in reserve for dividends to Series Z preferred
shareholders
|
2,657 | |||
|
Net
decrease in net assets applicable to common shareholders resulting
from operations
|
$ | (188,795,436 | ) | |
See
accompanying notes.
10
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
|
December 31, 2008
|
December 31, 2007
|
|||||||
|
Net
assets applicable to common shareholders, beginning of
year
|
$ | 392,541,013 | $ | 434,092,909 | ||||
|
Net
investment income
|
22,519,973 | 69,772,636 | ||||||
|
Net
realized loss on investments and foreign currency
|
(22,817,266 | ) | 37,199,262 | |||||
|
Net
change in unrealized appreciation/depreciation on investments and foreign
currency
|
(186,457,070 | ) | (49,236,173 | ) | ||||
|
Distributions
to minority interestholder from:
|
||||||||
|
Net
investment income
|
- | (12,457,669 | ) | |||||
|
Net
realized loss on investments and foreign currency
|
- | (7,440,326 | ) | |||||
|
Returns
of capital
|
- | (542,005 | ) | |||||
|
Net
change in undistributed earnings of minority
interestholder
|
3,149,915 | 10,426,419 | ||||||
|
Dividends
on Series A preferred equity facility from net investment
income
|
(5,953,838 | ) | (8,364,133 | ) | ||||
|
Net
change in accumulated dividends on Series A preferred equity
facility
|
764,735 | 148,999 | ||||||
|
Dividends
to Series Z preferred shareholders from net investment
income
|
(4,542 | ) | - | |||||
|
Net
change in reserve for dividends to Series Z preferred
shareholders
|
2,657 | (1,906 | ) | |||||
|
Net
decrease in net assets applicable to common shareholders resulting from
operations
|
(188,795,436 | ) | 39,505,104 | |||||
|
Distributions
to common shareholders from:
|
||||||||
|
Net
investment income
|
(8,000,000 | ) | (49,167,853 | ) | ||||
|
Net
realized gains
|
- | (29,761,302 | ) | |||||
|
Returns
of capital
|
- | (2,127,845 | ) | |||||
|
Total
distributions to common shareholders
|
(8,000,000 | ) | (81,057,000 | ) | ||||
| Net assets applicable to common shareholders, end of year | ||||||||
|
(including
accumulated net investment income of $180,425 and $311,064
respectively.)
|
$ | 195,745,577 | $ | 392,541,013 | ||||
See
accompanying notes.
11
Special
Value Continuation Fund, LLC
(A
Delaware Limited Liability Company)
Consolidated
Statement of Cash Flows
Year
Ended December 31, 2008