UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2011


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-51295

NNN 2003 Value Fund, LLC

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		20-0122092 (I.R.S. Employer Identification No.)
1551 N. Tustin Avenue, Suite 300, Santa Ana, California (Address of principal executive offices)		92705 (Zip Code)
1551 N. Tustin Avenue, Suite 300, Santa Ana, California		92705
(Address of principal executive offices)		(Zip Code)

(714) 667-8252
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). oþ Yes þo No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o (Do not check if a smaller reporting company) ~~Smaller reporting company o~~

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

As of ~~August~~November 1214, 2011, there were 9,970 units of NNN 2003 Value Fund, LLC outstanding.

NNN 2003 VALUE FUND, LLC
(A Delaware limited liability company)
TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 2011 (Unaudited) and December 31, 2010		2
Condensed Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010		2
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2011 and 2010		3
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2011 and 2010		3
Unaudited Condensed Consolidated Statement of Equity (Deficit) for the Six Months Ended June 30, 2011		4
Unaudited Condensed Consolidated Statement of Equity (Deficit) for the Nine Months Ended September 30, 2011		4
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010		5
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2010		5
Notes to Unaudited Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1716
Item 3. Quantitative and Qualitative Disclosures About Market Risk		2423
Item 4. Controls and Procedures		2423
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		2524
Item 1A. Risk Factors		2524
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		2725
Item 3. Defaults Upon Senior Securities		2725
Item 4. [Removed and Reserved.]		2725
Item 5. Other Information		2725
Item 6. Exhibits		2826
Signatures		2927
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION


Item 1.		Financial Statements.

NNN 2003 VALUE FUND, LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2011		December 31, 2010
	September 30, 2011		December 31, 2010
	(Unaudited)
ASSETS
Real estate investments:
Properties held for non-sale disposition, net	$	—	$	27,218,000
Investments in unconsolidated real estate		~~12,000~~—		24,000
		12,000		27,242,000
		—		27,242,000
Cash and cash equivalents		~~663~~593,000		2,031,000
Accounts receivable, net		—		79,000
Restricted cash		217,000		646,000
Intangible assets related to properties held for non-sale disposition, net		—		1,951,000
Other assets related to properties held for non-sale disposition, net		—		738,000
Total assets	$	~~892~~810,000	$	32,687,000
LIABILITIES AND EQUITY (DEFICIT)
Mortgage loans payable secured by properties held for non-sale disposition	$	—	$	43,471,000
Accounts payable and accrued liabilities		~~104~~75,000		613,000
Accounts payable due to related parties		—		32,000
Other liabilities related to properties held for non-sale disposition, net		—		422,000
Other liabilities		217,000		217,000
Total liabilities		~~321~~292,000		44,755,000
Commitments and contingencies (Note 11)
Equity (deficit):
NNN 2003 Value Fund, LLC unit holders’ equity (deficit)		~~571~~518,000		(12,068,000	)
Noncontrolling interest equity		—		—
Total equity (deficit)		~~571~~518,000		(12,068,000	)
Total liabilities and equity (deficit)	$	~~892~~810,000	$	32,687,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

NNN 2003 VALUE FUND, LLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2011			2010			2011			2010
Interest and dividend income	$	—1,000		$	73,000		$	—1,000		$	2023,000
Other income		—			113,000			—			1720,000
General and administrative expense		(~~119~~56,000	)		(~~134~~73,000	)		(~~175~~231,000	)		(~~231~~304,000	)
Equity in (losses) income of unconsolidated real estate		(6,000	)		1,016,000			(12,000	)		609,000
Equity in earnings of unconsolidated real estate		13,000			6,000			1,000			615,000
(Loss) income from continuing operations		(~~125~~42,000	)		~~900~~(61,000	)		(~~187~~229,000	)		~~415~~354,000
Income from discontinued operations		—			963,000			13,326,000			5,000
(Loss) income from discontinued operations		(11,000	)		(214,000	)		13,315,000			(209,000	)
Consolidated net (loss) income		(~~125~~53,000	)		1(275,~~863,~~000	)		13,~~139~~086,000			~~420~~145,000
Loss attributable to noncontrolling interests		—			—			—			(98,000	)
Net (loss) income attributable to NNN 2003 Value Fund, LLC	$	(~~125~~53,000	)	$	1(275,~~863,~~000	)	$	13,~~139~~086,000		$	~~518~~243,000
Comprehensive (loss) income:
Consolidated net (loss) income	$	(~~125~~53,000	)	$	1(275,~~863,~~000	)	$	13,~~139~~086,000		$	~~420~~145,000
Other comprehensive (loss) income		—			—			—			—
Comprehensive (loss) income		(~~125~~53,000	)		1(275,~~863,~~000	)		13,~~139~~086,000			~~420~~145,000
Comprehensive (loss) income attributable to noncontrolling interests		—			—			—			(98,000	)
Comprehensive (loss) income attributable to NNN 2003 Value Fund, LLC	$	(~~125~~53,000	)	$	1(275,~~863,~~000	)	$	13,~~139~~086,000		$	~~518~~243,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

NNN 2003 VALUE FUND, LLC

CONDENSED CONSOLIDATED STATEMENT OF EQUITY (DEFICIT)
(Unaudited)

						NNN 2003 Value
						NNN 2003
	Number		Total Equity			Value Fund, LLC			Noncontrolling
	of Units		(Deficit)			Equity (Deficit)			Interests
Deficit Balance — December 31, 2010		9,970	$	(12,068,000	)	$	(12,068,000	)	$	—
Distributions		—		(500,000	)		(500,000	)		—
Net income		—		13,~~139~~086,000			13,~~139~~086,000			—
Equity Balance — June 30, 2011		9,970	$	571,000		$	571,000		$	—
Equity Balance — September 30, 2011		9,970	$	518,000		$	518,000		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

NNN 2003 VALUE FUND, LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	13,~~139~~086,000		$	~~420~~145,000
Adjustments to reconcile net income to net cash used in operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Real estate related impairments		—			5,300,000
Gain on extinguishment of debt		(13,~~634~~623,000	)		(6,~~667~~658,000	)
Depreciation and amortization (including deferred financing costs, deferred rent, lease inducements and above/below market leases)		157,000			1,~~394~~852,000
Equity in losses (earnings) of unconsolidated real estate		12,000			(609,000	)
Equity in earnings of unconsolidated real estate		(1,000	)		(615,000	)
Allowance for doubtful accounts		44,000			~~118~~105,000
Change in operating assets and liabilities:
Accounts receivable, including accounts and loans receivable due from related parties		(138,000	)		~~260~~378,000
Other assets		38,000			(~~317~~403,000	)
Restricted cash		(21,000	)		(~~389~~624,000	)
Accounts payable and accrued liabilities, including accounts payable to related parties		(~~235~~275,000	)		~~384~~574,000
Security deposits, prepaid rent and other liabilities		(181,000	)		(198,000	)
Net cash used in operating activities		(819,000	)		(125,000	)
Net cash (used in) provided by operating activities		(914,000	)		46,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		—			(~~296~~316,000	)
Distributions from unconsolidated real estate		—25,000			1,~~268~~327,000
Proceeds from repayment of loans receivable from related parties		—			579,000
Net cash provided by investing activities		—25,000			1,~~551~~590,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Restricted cash		—			1,000
Borrowings on mortgage loans payable		—			~~180~~203,000
Distributions to unit holders		(500,000	)		(2,~~000~~500,000	)
Cash transferred to lender in connection with transfer of property		(49,000	)		(213,000	)
Net cash used in financing activities		(549,000	)		(2,~~032~~509,000	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,~~368~~438,000	)		(~~606~~873,000	)
CASH AND CASH EQUIVALENTS — beginning of period		2,031,000			2,724,000
CASH AND CASH EQUIVALENTS — end of period	$	~~663~~593,000		$	21,~~118~~851,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	—		$	12,~~850~~578,000
NONCASH INVESTING AND FINANCING ACTIVITIES:
Accrual for tenant improvements and capital expenditures	$	—		$	124,000
Transfer of real estate and other assets and liabilities in connection with debt extinguishment	$	29,~~788~~799,000		$	10,~~749~~758,000
Cancellation of debt and accrued interest in connection with transfer of real estate and other assets and liabilities	$	43,471,000		$	17,629,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The use of the words “we,” “us,” or “our” refers to NNN 2003 Value Fund, LLC and its subsidiaries, except where the context otherwise requires.

1. Organization and Description of Business

NNN 2003 Value Fund, LLC was formed as a Delaware limited liability company on June 19, 2003. We were organized to acquire, own, operate and subsequently sell our ownership interests in a number of unspecified properties believed to have higher than average potential for capital appreciation, or value-added properties. As of December 31, 2010, we held interests in three commercial office properties, comprised of two consolidated properties and one unconsolidated property. Our two consolidated properties consisted of Sevens Building, located in St. Louis, Missouri, or the Sevens Building property, and Four Resource Square, located in Charlotte, North Carolina, or the Four Resource Square property. Our unconsolidated property consisted of an 8.5% interest in Enterprise Technology Center, located in Scotts Valley, California, or the Enterprise Technology Center property.

The mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and was in default due to non-payment of the outstanding principal balance upon maturity. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. On March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. On March 25, 2011, the successor trustee appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, or the buyer, for a sale price of $17,400,000. As a result of the sale, our 100% ownership interest in the Sevens Building property was sold and conveyed to the buyer and a trustee’s deed was recorded on the Sevens Building property in favor of the buyer. We did not receive any cash proceeds from the sale of the property. Further, on April 29, 2011, we transferred $850,000 to the Sevens Building lender, which represented the approximate amount of net cash generated by the property subsequent to the default on the mortgage loan on October 31, 2010.

In addition, the mortgage loan for the Four Resource Square property, which had an outstanding principal balance of $21,977,000 as of December 31, 2010, had an original maturity date of November 30, 2010 but was extended to January 20, 2011. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond November 30, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Four Resource Square property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, on January 20, 2011, we sold the Four Resource Square property to an entity affiliated with the Four Resource Square lender for a sales price equal to the outstanding principal balance of the mortgage loan of $21,977,000. We did not receive any cash proceeds from the sale of the property.

As of ~~June~~September 30, 2011, our sole remaining property interest consisted of our 8.5% interest in in the Enterprise Technology Center property. On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., an an entity affiliated with UBS Real Estate Investments, Inc., or the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 tenant-in-common, or TIC, owners of the Enterprise Technology Center property seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice. The trustee’s sale is scheduled to occur on November 29, 2011. Subsequent to this sale, we intend to pay distributions to ~~our~~ our unit holders from available funds, if any, and wind up our operations, which we expect will be completed within the next six to twelve months, at which point we will cease to be a going concern.

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

~~Grubb~~On &August 10, ~~Ellis~~2011, Daymark Realty Advisors, Inc., parent company of our manager, NNN Realty Investors, LLC (formerly, or Grubb & Ellis Realty Investors, LLC), was acquired by IUC-SOV, LLC, an entity affiliated with Sovereign Capital Management and Infinity Real Estate. NNN Realty Investors, LLC, or our manager, manages us pursuant to the terms of an operating agreement, or the Operating Agreement. While we have no employees, certain executive officers and employees of our manager provide services to us pursuant to the Operating Agreement. Our manager engages affiliated entities, including Triple Net Properties Realty, Inc., or Realty, to provide certain services to us. Realty serves as our property manager pursuant to the terms of the Operating Agreement and a property management agreement, or the Management Agreement. The Operating Agreement terminates upon our dissolution. The unit holders may not vote to terminate our manager prior to the termination of the Operating Agreement or our dissolution, except for cause. The Management Agreement terminates with respect to each of our properties upon the earlier of the sale of each respective property or December 31, 2013. Realty may be terminated without cause prior to the termination of the Management Agreement or our dissolution, subject to certain conditions, including the payment by us to Realty of a termination fee as provided in the Management Agreement.

2. Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding our interim unaudited condensed consolidated financial statements. Such interim unaudited condensed consolidated financial statements and accompanying notes thereto are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing the accompanying interim unaudited condensed consolidated financial statements.

Interim Financial Data

Our accompanying interim unaudited condensed consolidated financial statements have been prepared by us in accordance with GAAP and in conjunction with the rules and regulations of the United States Securities and Exchange Commission, or the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying interim unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying interim unaudited condensed consolidated financial statements reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable.

In preparing our accompanying condensed consolidated financial statements, management has evaluated subsequent events through the financial statement issuance date. We believe that, although the disclosures contained herein are adequate to prevent the information presented from being misleading, our accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our 2010 Annual Report on Form 10-K, as filed with the SEC on March 18, 2011.

Principles of Consolidation and Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries, any majority-owned subsidiaries and any variable interest entities, or VIEs, that we have concluded should be consolidated in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or Codification, Topic 810, Consolidation. All material intercompany transactions and account balances have been eliminated in consolidation. We account for all other unconsolidated real estate investments using the equity method of accounting. Accordingly, our share of the earnings (losses) of these real estate investments is included in consolidated net income (loss).

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As a result of the planned disposal of our remaining property interest, there is substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classifications of liabilities that may be necessary if we are unable to continue as a going concern.

We have evaluated subsequent events through the date of issuance of these financial statements.

Use of Estimates

The preparation of our interim unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets and liabilities as of ~~June~~September 30, 2011 and December 31, 2010 and the disclosure of contingent assets and liabilities as of the date of the interim unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses for the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010. Actual results could differ from those estimates, perhaps in in material adverse ways, and those estimates could be different under different assumptions or conditions.

Real Estate Related Impairments

We assess the impairment of a real estate asset when events or changes in circumstances indicate that its carrying amount may not be recoverable. Indicators we consider important which could trigger an impairment review include the following:

	•		a significant negative industry or economic trend;

	•		a significant underperformance relative to historical or projected future operating results; and

	•		a significant change in the manner in which the asset is used.

In the event that the carrying amount of a property exceeds the sum of the undiscounted cash flows (excluding interest) that are expected to result from the use and eventual disposition of the property, we would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. The estimation of expected future net cash flows is inherently uncertain and relies on subjective assumptions dependent upon current and future market conditions and events that affect the ultimate value of the property. It requires us to make assumptions related to future rental rates, tenant allowances, operating expenditures, property taxes, capital improvements, occupancy levels, and the estimated proceeds generated from the future sale of the property. The estimation of proceeds to be generated from the future sale of the property requires us to also make estimates about capitalization rates and discount rates.

In accordance with FASB Codification Topic 360, Property, Plant and Equipment, during the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, we assessed the values of our consolidated properties. We determined that no impairment charges were required related to our consolidated real estate investments during the three and ~~six~~nine months ended ~~June~~September 30, 2011 or the three months ended September 30, 2010; however, a $5,300,000 real estate related impairment charge was recorded against the carrying value of one of our consolidated properties during the ~~three~~nine ~~and six~~ months ended ~~June~~ September 30, 2010. Additionally, our unconsolidated properties were also assessed for impairment and impairment charges of $18,000,000 were recorded against their carrying values during the ~~six~~ nine months ended ~~June~~September 30, 2010. Our share of these impairment charges was approximately $374,000, which is included in “Equity in (losses) income of unconsolidated real estate” in our accompanying condensed consolidated statements of operations. Our share of the impairment charges recorded during the ~~six~~nine months ended ~~June~~September 30, 2010 was limited to the amount of our remaining investment in the unconsolidated property. We determined that no impairment charges were required related to our unconsolidated real estate investments during the three months ended ~~June~~ September 30, 2010 or during the three or ~~six~~nine months ended ~~June~~September 30, 2011.

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Properties Held for Non-Sale Disposition

Our properties held for non-sale disposition are stated at historical cost less accumulated depreciation, net of real estate related impairment charges. The cost of our properties held for non-sale disposition includes the cost of land and completed buildings and related improvements. Expenditures that increase the service life of the property are capitalized and the cost of maintenance and repairs is charged to expense as incurred. The cost of buildings and improvements are depreciated on a straight-line basis over the estimated useful lives of the buildings and improvements, ranging from six to 39 years and the shorter of the lease term or useful life, ranging from one to six years for tenant improvements. When depreciable property is retired or disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is reflected in income (loss) from discontinued operations in our accompanying condensed consolidated statements of operations.

As of December 31, 2010, our properties held for non-sale disposition consisted of the Sevens Building and Four Resource Square properties. As discussed in Note 1, Organization and Description of Business, both of these properties were disposed of during the first quarter of 2011.

Fair Value of Financial Instruments

FASB Codification Topic 825, Financial Instruments, requires disclosure of the fair value of financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. Fair value is defined as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using presently available market information and judgments about the financial instrument, such as estimates of timing and amount of expected future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument.

Financial instruments in our accompanying condensed consolidated balance sheets consist of cash and cash equivalents, accounts and loans receivable, accounts payable and accrued expenses, and mortgage loans payable. We consider the carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued expenses to approximate fair value for those financial instruments because of the short period of time between origination of the instruments and their expected realization. The fair value of amounts due to related parties is not determinable due to their related party nature. As of December 31, 2010, we estimated the fair value of our consolidated mortgage loans payable to be approximately $30,250,000, compared to their carrying values of $43,471,000. The fair value of the mortgage loans payable are estimated using borrowing rates for debt instruments with similar terms and maturities. For non-recourse mortgage loans payable secured by properties with estimated fair values of less than their respective loan balances, we estimate the fair value of the mortgage loans to be equal to the estimated fair value of the properties.

Income Taxes

We are a pass-through entity for income tax purposes and taxable income is reported by our unit holders on their individual tax returns. Accordingly, no provision has been made for income taxes in the accompanying condensed consolidated statements of operations except for insignificant amounts related to state franchise and income taxes.

We follow FASB Codification Topic 740, Income Taxes, to recognize, measure, present and disclose in our accompanying condensed consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of ~~June~~September 30, 2011 and December 31, 2010, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our condensed consolidated financial statements.

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Segments

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have determined that we have one reportable segment, with activities related to investing in office buildings and value-add commercial office properties. As each of our properties have similar economic characteristics, tenants, and products and services, our properties have been aggregated into one reportable segment for the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010.

3. Real Estate Investments — Properties Held for Non-Sale Disposition

Our investments in properties held for non-sale disposition consisted of the following as of ~~June~~September 30, 2011 and December 31, 2010:

	June 30, 2011		December 31, 2010
	September 30, 2011		December 31, 2010
Buildings and tenant improvements	$	—	$	26,813,000
Land		—		4,137,000
		—		30,950,000
Less: accumulated depreciation		—		(3,732,000	)
	$	—	$	27,218,000

4. Real Estate Investments — Unconsolidated Real Estate

Our investments in unconsolidated real estate consisted of the following as of ~~June~~September 30, ~~2011~~ 2011 and December 31, 2010:

Property	Location	September 30, 2011		~~June 30, 2011~~		December 31, 2010		~~December 31, 2010~~
Chase Tower	Austin, TX	$	—	$	~~8,000~~	$	6,000	$	~~6,000~~
Enterprise Technology Center	Scotts Valley, CA				—				—
Executive Center II and III	Dallas, TX		—				18,000
Executive Center II and III	Dallas, TX				4,000				18,000
Enterprise Technology Center	Scotts Valley, CA		—				—
		$	—	$	~~12,000~~	$	24,000	$	~~24,000~~

~~Summarized~~Chase ~~Financial Information~~Tower

~~Summarized~~On ~~condensed~~January 25, ~~combined~~2010, ~~financial~~we, ~~information~~along ~~about~~with ~~our~~NNN ~~unconsolidated~~Chase ~~real~~Tower ~~estate~~REO, asLP, ofan entity managed by our manager, ~~June 30~~NNN OF 8 Chase Tower REO, ~~2011~~LP, an entity also managed by our manager, and ~~December 31~~CBD Chase Tower, ~~2010~~LP ~~and~~(f/k/a ERG Chase Tower, LP), an unaffiliated third party, sold Chase Tower, located in Austin, Texas, or the Chase Tower property, to 221 West Sixth Street, LLC, an unaffiliated third party, for an aggregate sales price of $73,850,000. We owned a 14.8% interest in the ~~three~~Chase Tower property. Our portion of the net cash proceeds was $526,000 after payment of the related mortgage loan, closing costs and ~~six~~other ~~months~~transaction expenses. Our manager waived the disposition fee it was entitled to receive in connection with the sale of the Chase Tower property; therefore, a disposition fee was not paid to our manager. We also received distributions of excess cash from the Chase Tower property totaling $260,000 during the year ended ~~June~~December 3031, ~~2011~~2010 and ~~2010~~received a final isdistribution asof ~~follows:~~$6,000 in the third quarter of 2011.

	June 30, 2011			December 31, 2010
Assets (primarily real estate)	$	17,331,000		$	18,591,000
Mortgage loans and other debt payable	$	32,562,000		$	32,562,000
Other liabilities		6,866,000			5,258,000
(Deficit) equity		(22,097,000	)		(19,229,000	)
Total liabilities and (deficit) equity	$	17,331,000		$	18,591,000
Our share of equity	$	12,000		$	24,000

Executive Center II and III

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Revenues	$	240,000		$	539,000		$	496,000		$	2,218,000
Rental and other expenses		1,684,000			1,997,000			3,345,000			21,699,000
Loss from continuing operations		(1,444,000	)		(1,458,000	)		(2,849,000	)		(19,481,000	)
(Loss) income from discontinued operations		(30,000	)		3,219,000			(48,000	)		2,741,000
Net (loss) income	$	(1,474,000	)	$	1,761,000		$	(2,897,000	)	$	(16,740,000	)
Our equity in (losses) income of unconsolidated real estate	$	(6,000	)	$	635,000		$	(12,000	)	$	261,000

On May 24, 2010, we, through NNN Executive Center II and III 2003, LP, our indirect subsidiary, along with NNN Executive Center, LLC, an entity also managed by our manager, and sixteen unaffiliated third party entities sold Executive Center II and III, located in Dallas, Texas, or the Executive Center II and III property, to Boxer F2, L.P., an unaffiliated third party, for an aggregate sales price of $17,000,000. We owned a 41.1% interest in the Executive Center II and III property. Our portion of the net cash proceeds was $541,000 after payment of the related mortgage loan, closing costs and other transaction expenses. In connection with the sale of the Executive II and III property, we also received approximately $787,000 as full repayment of a note receivable and accrued interest due to us from the property. Our manager waived the disposition fee it was entitled to receive in connection with the sale of the Executive Center II and III property, therefore, a disposition fee was not paid to our manager. We also received distributions of excess cash from the Executive Center II and III property totaling $80,000 during the year ended December 31, 2010 and received a final distribution of $19,000 in the third quarter of 2011.

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Total real estate related impairment charges of $18,000,000 were recorded against land, buildings, capital improvements and intangible assets of our unconsolidated properties during the six months ended June 30, 2010. Our share of these real estate related impairment charges was approximately $374,000 during the six months ended June 30, 2010, and is included in our accompanying condensed consolidated statements of operations in the line item entitled “Equity in (losses) income of unconsolidated real estate.” Since we have no commitment to fund deficit capital accounts, the amount of losses from unconsolidated real estate that we record is limited to the amount of our remaining investment in each respective unconsolidated property. During the six months ended June 30, 2010, our share of the $18,000,000 real estate related impairment charge recorded by one of our unconsolidated properties was limited to our remaining investment in that property. No real estate related impairment charges were recorded against land, buildings, capital improvements and intangible assets of our unconsolidated properties during the six months ended June 30, 2010. No real estate related impairment charges were recorded against land, buildings, capital improvements and intangible assets of our unconsolidated properties during the three months ended June 30, 2010 or during the three or six months ended June 30, 2011.

In addition, during the three and six months ended June 30, 2010, we recorded $381,000 and $348,000 of net reversals of the allowances previously recorded against the carrying values of our notes receivable from the Executive Center II and III property, which were paid in full upon the sale of the property. These allowance reversals are included in the line item entitled “Equity in (losses) income of unconsolidated real estate.” The allowances were recorded during the year ended December 31, 2009 and the three months ended March 31, 2010, and were required under FASB Codification Topic 323, Investments — Equity Method and Joint Ventures, as our share of losses incurred by the Executive Center II and III property exceeded the amount of our equity investment.

Total mortgage loans and other debt payable of our unconsolidated properties consisted of the following as of June 30, 2011 and December 31, 2010:

	Ownership
Property	Percentage			June 30, 2011		December 31, 2010
Enterprise Technology Center		8.5	%	$	32,562,000	$	32,562,000

As discussed below, the mortgage loan on the Enterprise Technology Center property is in default.

Enterprise Technology Center

On April 11, 2010, the Enterprise Technology Center property was unable to pay in full the monthly interest and principal payment due on its non-recourse mortgage loan on that date or within five days of that date, thereby triggering an event of default under the mortgage loan documents. On May 11, 2011, the mortgage loan for the Enterprise Technology Center property, which had an outstanding balance of $32,562,000, matured and was not repaid. Therefore, an additional event of default was triggered under the mortgage loan documents. Pursuant to the terms of the loan agreement, these events of default could allow the Enterprise Technology Center lender to immediately: (i) increase the interest rate of the loan from 6.44% per annum to the default interest rate of 11.44% per annum; (ii) impose a late charge equal to the lesser of 5.0% of the amount of any payment not timely paid, or the maximum amount which may be charged under applicable law; and/or (iii) foreclose on the Enterprise Technology Center property.

On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., an entity affiliated with UBS Real Estate Investments, Inc., or the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 tenant-in-common, or TIC, owners of the Enterprise Technology Center property seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice. The trustee’s sale is scheduled to occur on November 29, 2011.

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Executive Center II and III

Chase Tower

On January 25, 2010, we, along with NNN Chase Tower REO, LP, an entity managed by our manager, NNN OF 8 Chase Tower REO, LP, an entity also managed by our manager, and CBD Chase Tower, LP (f/k/a ERG Chase Tower, LP), an unaffiliated third party, sold Chase Tower, located in Austin, Texas, or the Chase Tower property, to 221 West Sixth Street, LLC, an unaffiliated third party, for an aggregate sales price of $73,850,000. We owned a 14.8% interest in the Chase Tower property. Our portion of the net cash proceeds was $526,000 after payment of the related mortgage loan, closing costs and other transaction expenses. Our manager waived the disposition fee it was entitled to receive in connection with the sale of the Chase Tower property; therefore, a disposition fee was not paid to our manager. We also received distributions of excess cash from the Chase Tower property totaling $260,000 during the year ended December 31, 2010.

5. Intangible Assets Related to Properties Held for Non-Sale Disposition

Identified intangible assets related to our properties held for non-sale disposition consisted of the following as of ~~June~~September 30, 2011 and December 31, 2010:

	June 30, 2011		December 31, 2010
	September 30, 2011		December 31, 2010
In-place leases and tenant relationships, net of accumulated amortization of $1,881,000 as of December 31, 2010	$	—	$	1,951,000

6. Other Assets Related to Properties Held for Non-Sale Disposition

Other assets related to our properties held for non-sale disposition consisted of the following as of ~~June~~September 30, 2011 and December 31, 2010:

	June 30, 2011		December 31, 2010
	September 30, 2011		December 31, 2010
Deferred rent receivable	$	—	$	277,000
Lease commissions, net of accumulated amortization of $286,000 as of December 31, 2010		—		321,000
Prepaid expenses, deposits and other		—		140,000
	$	—	$	738,000

1211

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

7. Mortgage Loans Payable Secured by Properties Held for Non-Sale Disposition

We had no mortgage loans payable outstanding on our consolidated properties as of ~~June~~ September 30, 2011. As of December 31, 2010, we had fixed and variable rate mortgage loans payable secured by ~~our~~ our consolidated properties held for non-sale disposition of $43,471,000. As of December 31, 2010, ~~the~~ the effective interest rates on mortgage loans payable ranged from 7.25% to 10.95% per annum, and ~~the~~ the weighted-average effective interest rate was 9.04% per annum.

The composition of our consolidated mortgage loans payable as of December 31, 2010 was as follows:


	Total Mortgage		Weighted Average
	Loans Payable		Interest Rate
Variable rate	$	22,471,000		7.26	%
Fixed rate		21,000,000		10.95	%

	$	43,471,000		9.04	%

Sevens Building Mortgage Loan

The mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and was in default due to non-payment of the outstanding principal balance upon maturity. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, we had been in discussions with the Sevens Building lender regarding our options for transferring the Sevens Building property to the Sevens Building lender, including foreclosure, deed-in-lieu of foreclosure, or another form of transfer. However, on March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. On March 25, 2011, the successor trustee appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, or the buyer, for a sale price of $17,400,000. As a result of the sale, our 100% ownership interest in the Sevens Building property was sold and conveyed to the buyer and a trustee’s deed was recorded on the Sevens Building property in favor of the buyer. This mortgage loan was cancelled upon the transfer of the property, and we recorded a gain on extinguishment of debt of $5,~~591~~580,000.

Four Resource Square Mortgage Loan

The mortgage loan for the Four Resource Square property, which had an outstanding principal balance of $21,977,000 as of December 31, 2010, had an original maturity date of November 30, 2010 but was extended to January 20, 2011. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond November 30, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Four Resource Square property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. As such, on January 20, 2011, we sold the Four Resource Square property to an entity affiliated with the Four Resource Square lender for a sales price equal to the outstanding principal balance of the mortgage loan of $21,977,000. This mortgage loan was cancelled upon the transfer of the property, and we recorded a gain on extinguishment of debt of $8,043,000.

1312

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

8. Noncontrolling Interests

Noncontrolling interests relate to interests in the following consolidated limited liability company and property with tenant-in-common, or TIC, ownership interests that are not wholly-owned by us as of ~~June~~September 30, 2011 and December 31, 2010:


Entity	Date Acquired		Noncontrolling Interests
NNN Enterprise Way, LLC		05/07/2004		26.7	%

9. NNN 2003 Value Fund, LLC Unit Holders’ Equity

Pursuant to our Private Placement Memorandum, we offered for sale to the public a minimum of 1,000 and a maximum of 10,000 units at a price of $5,000 per unit. We relied on the exemptions from registration provided by Rule 506 under Regulation D and Section 4(2) of the Securities Act of 1933, as amended.

There are three classes of membership interests, or units, each having different rights with respect to distributions. As of ~~June~~September 30, 2011 and December 31, 2010, there were 4,000 Class A units, 3,170 Class B units and 2,800 Class C units issued and outstanding. The rights and obligations of all unit holders are governed by the Operating Agreement.

Cash from Operations, as defined in the Operating Agreement, is first distributed to all unit holders pro rata until all Class A unit holders, Class B unit holders and Class C unit holders have received a 10.0%, 9.0% and 8.0% cumulative (but not compounded) annual return on their contributed and unrecovered capital, respectively. In the event that any distribution of Cash from Operations is not sufficient to pay the return described above, all unit holders receive identical pro rata distributions, except that Class C unit holders do not receive more than an 8.0% return on their Class C units, and Class B unit holders do not receive more than a 9.0% return on their Class B units. Excess Cash from Operations is then allocated pro rata to all unit holders on a per outstanding unit basis and further distributed to the unit holders and our manager based on predetermined ratios providing our manager with a share of 15.0%, 20.0% and 25.0% of the distributions available to Class A units, Class B units and Class C units, respectively, of such excess Cash from Operations.

Cash from Capital Transactions, as defined in the Operating Agreement, is first used to satisfy our debt and liability obligations; then distributed pro rata to all unit holders in accordance with their membership interests until all capital contributions are reduced to zero; and lastly, in accordance with the distributions as outlined above in the Cash from Operations.

Since the suspension of regular, monthly cash distributions to unit holders in the fourth quarter of 2008, we make periodic distributions to unit holders from available funds, if any. During the ~~six~~nine months ended ~~June~~September 30, 2011, distributions of $50 per unit were declared, ~~resulting~~ resulting in aggregate distributions paid of approximately $500,000 during the period. To date, Class A units, Class B units and Class C units have received identical per-unit distributions; however, distributions may vary among the three classes of units in the future.

10. Related Party Transactions

The Management Agreement

Our manager manages us pursuant to the terms of the Operating Agreement and the Management Agreement. While we have no employees, certain employees of our manager provide services to us in connection with the Operating Agreement. In addition, Realty serves as our property manager pursuant to the terms of the Operating Agreement and the Management Agreement.

Pursuant to the Operating Agreement and the Management Agreement, Realty is entitled to receive the payments and fees described below. Certain fees paid to Realty during the three and ~~six~~ nine months ended ~~June~~September 30, 2011 and 2010 were passed through to our manager or its affiliate pursuant to an agreement between our manager and Realty, or the Realty Agreement.

1413

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

Property Management Fees

We pay Realty a monthly property management fee of up to 5.0% of the gross revenue of the properties. For the three months ended ~~June~~September 30, 2011 and 2010, we incurred property management ~~fees~~ fees to Realty of $0 and $~~103~~83,000, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, we incurred property management fees to Realty of $47,000 and $~~230~~313,000, respectively.

Real Estate Acquisition Fees

We pay Realty or its affiliate a real estate acquisition fee up to 3.0% of the gross purchase price of a property. For the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, we did not ~~incur~~ incur any real estate acquisition fees.

Real Estate Disposition Fees

We pay Realty or its affiliate a real estate disposition fee up to 5.0% of the gross sales price of a property. For the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, we did not ~~incur~~ incur any real estate disposition fees.

Leasing Commissions

We pay Realty a leasing commission for its services in leasing any of our properties equal to 6.0% of the value any lease entered into during the term of the Management Agreement and 3.0% with respect to any renewals. For the three months ended ~~June~~September 30, 2011 and 2010, we incurred ~~leasing~~ leasing commissions to Realty of $0 and $8224,000, respectively. For the ~~six~~nine months ended ~~June~~ September 30, 2011 and 2010, we incurred leasing commissions to Realty of $0 and $~~203~~227,000, respectively.

Accounting Fees

We pay our manager accounting fees for record keeping services provided to us. Beginning January 1, 2010, all accounting fees have been waived by our manager and, as such, we did not incur any accounting fees orfor the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010.

Construction Management Fees

We pay Realty a construction management fee for its services in supervising any construction or repair project in or about our properties equal to 5.0% of any amount up to $25,000, 4.0% of any amount over $25,000 but less than $50,000 and 3.0% of any amount over $50,000, which is expended in any calendar year for construction or repair projects. For the three and ~~six~~nine months ended ~~June~~ September 30, 2011 and 2010, we did not incur any construction management fees.

Loan Fees

We pay Realty or its affiliate a loan fee of 1.0% of the principal amount of the loan for its services in obtaining loans for our properties during the term of the Management Agreement. For the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, we did not incur any loan fees.

Related Party Accounts Payable

Related party accounts payable consist primarily of amounts due related to the Management Agreement, as discussed above, and for operating expenses incurred by us and paid by our manager or its affiliates. As of ~~June~~September 30, 2011 and December 31, 2010, the amount payable by us was $0 and $32,000, respectively, and is included in our accompanying condensed consolidated balance sheets in the line item entitled “Accounts payable due to related parties.”

1514

NNN 2003 VALUE FUND, LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — Continued

11. Commitments and Contingencies

Litigation

Neither we nor any of our properties are presently subject to any material litigation and, to our knowledge, no material litigation is threatened against us or any of our properties that, if determined unfavorably to us, would have a material adverse effect on our financial condition, results of operations or cash flows.

On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., an entity affiliated with the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 TIC owners of the Enterprise Technology Center property in the Superior Court of California, County of Santa Cruz (Case No. CV 171625), seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice. The trustee’s sale is scheduled to occur on November 29, 2011.

Environmental Matters

We follow the policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liability with respect to the properties that would have a material adverse effect on our financial condition, results of operations or cash flows. Further, we are not aware of any environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

12. Discontinued Operations

In accordance with FASB Codification Topic 360, Property, Plant and Equipment, the net income (loss) from consolidated properties sold, as well as those classified as held for sale, are reflected in our consolidated statements of operations as discontinued operations for all periods presented. For the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, discontinued operations includes the results of the following properties:


Property		Disposition Date
Tiffany Square		May 7, 2010
Executive Center I		June 2, 2010
Four Resource Square		January 20, 2011
Sevens Building		March 25, 2011

The following table summarizes the revenue and expense components that comprised income from discontinued operations for the three and ~~six~~nine months ended ~~June~~September 30, 2011 and 2010:

	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2011			2010			2011			2010
Rental revenue	$	—		$	21,~~036~~790,000		$	964,000		$	46,~~366~~156,000
Rental expense (including general, administrative, depreciation and amortization)		—			(1,~~623~~228,000	)		(727,000	)		(34,~~569~~797,000	)
Real estate related impairments		—			~~(5,300,000~~—	)		—			(5,300,000	)
Interest expense		—			(~~817~~767,000	)		(545,000	)		(2,~~159~~926,000	)
Gains on extinguishment of debt		—			6,667,000			13,634,000			6,667,000
(Loss) gain on extinguishment of debt		(11,000	)		(9,000	)		13,623,000			6,658,000
Income (loss) from discontinued operations		—			963,000			13,326,000			5,000
(Loss) income from discontinued operations		(11,000	)		(214,000	)		13,315,000			(209,000	)
Income (loss) from discontinued operations attributable to noncontrolling interests		—			—			—			—
(Loss) income from discontinued operations attributable to noncontrolling interests		—			—			—			—
Income (loss) from discontinued operations attributable to NNN 2003 Value Fund, LLC	$	—		$	963,000		$	13,326,000		$	5,000
(Loss) income from discontinued operations attributable to NNN 2003 Value Fund, LLC	$	(11,000	)	$	(214,000	)	$	13,315,000		$	(209,000	)

1615


Item 2.		Management’s Discussion and Analysis Financial Condition and Results of Operations.

The use of the words “we,” “us,” or “our” refers to NNN 2003 Value Fund, LLC and its subsidiaries, except where the context otherwise requires.

The following discussion should be read in conjunction with our financial statements and notes appearing elsewhere in this Quarterly Report on Form 10-Q. Such financial statements and information have been prepared to reflect our financial position as of ~~June~~September 30, 2011 and ~~December~~ December 31, 2010, together with our results of operations and cash flows for the three and ~~six~~ nine months ended ~~June~~ September 30, 2011 and 2010.

Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations. Our statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Actual results may differ materially from those included in the forward-looking statements. We intend those forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of us, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “prospects,” or similar expressions. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; sales prices, lease renewals and new leases; legislative/regulatory changes; availability of capital; changes in interest rates; our ability to service our debt, competition in the real estate industry; the supply and demand for operating properties in our current and proposed market areas; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to us; our ongoing relationship with our manager (as defined below); and litigation. These risks and uncertainties should be considered in evaluating forward looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the United States Securities and Exchange Commission, or the SEC.

Overview and Background

The mortgage loan for the Sevens Building property, which had an outstanding principal balance of $21,494,000 as of December 31, 2010, matured on October 31, 2010 and was in default due to non-payment of the outstanding principal balance upon maturity. The mortgage loan documents included an option to extend the maturity date for an additional 12 months beyond October 31, 2010; however, we determined that it was not in the best interest of our unit holders to attempt to extend the maturity date due to the unfavorable terms of the extension option, including additional cash outlays for an extension fee and partial principal prepayment, which we did not expect would be recovered through property operations over the subsequent 12 months. Further, the estimated value of the Sevens Building property was significantly less than the outstanding principal balance of the mortgage loan, and we did not expect that the value of the property would exceed the principal balance by the end of the potential extension term. On March 7, 2011, we received a letter from the Sevens Building lender indicating that it had initiated a foreclosure action on the Sevens Building property pursuant to our default on the mortgage loan for the Sevens Building property. On March 25, 2011, the successor ~~trustee appointed by the Sevens Building lender~~ conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, or the buyer, for a sale price of $17,400,000. As a result of the sale, our 100% ownership interest in the Sevens Building property was sold and conveyed to the buyer and a trustee’s deed was recorded on the Sevens Building property in favor of the buyer. We did not receive any cash proceeds from the sale of the property. Further, on April 29, 2011, we transferred $850,000 to the Sevens Building lender, which represented the approximate amount of net cash generated by the property subsequent to the default on the mortgage loan on October 31, 2010.

1716

trustee appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, or the buyer, for a sale price of $17,400,000. As a result of the sale, our 100% ownership interest in the Sevens Building property was sold and conveyed to the buyer and a trustee’s deed was recorded on the Sevens Building property in favor of the buyer. We did not receive any cash proceeds from the sale of the property. Further, on April 29, 2011, we transferred $850,000 to the Sevens Building lender, which represented the approximate amount of net cash generated by the property subsequent to the default on the mortgage loan on October 31, 2010.

As of ~~June~~September 30, 2011, our sole remaining property interest consisted of our 8.5% interest in in the Enterprise Technology Center property. On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., an an entity affiliated with UBS Real Estate Investments, Inc., or the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 tenant-in-common, or TIC, owners of the Enterprise Technology Center property seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice. The trustee’s sale is scheduled to occur on November 29, 2011. Subsequent to this sale, we intend to pay distributions to our unit holders from available funds, if any, and wind up our operations, which we expect will be completed within the next six to twelve months, at which point we will cease to be a going concern.

Business Strategy

Our primary business strategy was to acquire, own, operate and subsequently sell our ownership interests in a number of unspecified properties believed to have higher than average potential for capital appreciation, or value-added properties. Our principal objectives initially were to: (i) have the potential within approximately one to five years, subject to market conditions, to realize income on the sale of our properties; (ii) realize income through the acquisition, operation, development and sale of our properties or our interests in our properties; and (iii) make periodic distributions to our unit holders from cash generated from operations and capital transactions. We currently intend to dispose of our remaining property interest, which is currently the subject of a judicial foreclosure as discussed above, and pay distributions to our unit holders from available funds, if any. We do not anticipate acquiring any additional real estate properties.

Acquisitions and Dispositions

We did not acquire any consolidated properties during the three and ~~six~~nine months ended ~~June~~ September 30, 2011 and 2010.

On January 20, 2011, we sold the Four Resource Square property to Four Resource Square, LLC, an entity affiliated with the Four Resource Square lender, for a sales price of $21,977,000, which was equal to the outstanding principal balance of the loan.

On March 25, 2011, the successor trustee appointed by the Sevens Building lender conducted a public auction and sold the Sevens Building property to General Electric Credit Equities, an entity affiliated with the Sevens Building lender, or the buyer, for a sale price of $17,400,000. As a result of the sale, our ownership interest in the Sevens Building property was sold and conveyed to the buyer and a trustee’s deed was recorded on the Sevens Building property in favor of the buyer.

Critical Accounting Policies

The complete listing of our critical accounting policies was previously disclosed in our 2010 Annual Report on Form 10-K, as filed with the SEC on March 18, 2011, and there have been no material changes to our Critical Accounting Policies disclosed therein.

Interim Financial Data

Our accompanying interim unaudited condensed consolidated financial statements have been prepared by us in accordance with GAAP and in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying interim unaudited condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying interim unaudited condensed consolidated financial statements reflect all adjustments, which are, in our opinion, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such results may be less favorable.

Factors Which May Influence Results of Operations

We are not aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally, the financial impact of the downturn of the credit markets, and the risk factors listed in Part II, Item 1A. Risk Factors of this report and those risk factors previously disclosed in our 2010 Annual Report on Form 10-K filed with the SEC on March 18, 2011, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, management and operation or disposition of our properties.

~~As of June 30, 2011, our sole remaining property interest consisted of our 8.5% interest in~~18 the Enterprise Technology Center property, which, as discussed above, we expect will be sold pursuant to a judicial foreclosure process. Subsequent to this sale, we intend to pay distributions to our unit holders from available funds, if any, and wind up our operations, which we expect will be completed within the next six to twelve months, at which point we will cease to be a going concern.

As of September 30, 2011, our sole remaining property interest consisted of our 8.5% interest in the Enterprise Technology Center property, which, as discussed above, we expect will be sold pursuant to a judicial foreclosure process. Subsequent to this sale, we intend to pay distributions to our unit holders from available funds, if any, and wind up our operations, which we expect will be completed within the next six to twelve months, at which point we will cease to be a going concern.

Sarbanes-Oxley Act

The Sarbanes-Oxley Act of 2002, as amended, and related laws, regulations and standards relating to corporate governance and disclosure requirements applicable to public companies, have increased the costs of compliance with corporate governance, reporting and disclosure practices which are now required of us. These costs were unanticipated at the time of our formation and may have a material impact on our results of operations. Furthermore, we expect that these costs will increase in the future due to our continuing implementation of compliance programs mandated by these requirements. Any increased costs may already affect our liquidity or capital resources and/or future distribution of funds, if any, to our unit holders. As part of our compliance with the Sarbanes-Oxley Act, we provided management’s assessment of our internal control over our financial reporting as of December 31, 2010 and continue to comply with such regulations.

In addition, these laws, rules and regulations create new legal bases for potential administrative enforcement, civil and criminal proceedings against us in case of non-compliance, thereby increasing the risks of liability and potential sanctions against us. We expect that our efforts to comply with these laws and regulations will continue to involve significant, and potentially increasing costs and, our failure to comply, could result in fees, fines, penalties or administrative remedies against us.

Results of Operations

Our operating results were primarily comprised of income derived from our portfolio of properties, as described below. Because our primary business strategy historically was acquiring properties with greater than average appreciation potential, enhancing value and realizing gains upon disposition of these properties, our operations historically have reflected significant property acquisitions and dispositions from period to period. As a result, the comparability of our financial data is generally very limited and varies significantly from period to period.

We have reclassified the results of all properties sold as of ~~June~~September 30, 2011 from “(Loss) income from continuing operations” to “Income from discontinued operations” for all periods presented to conform with the current year financial statement presentation.

Comparison of the Three Months Ended ~~June~~September 30, 2011 and 2010

	Three Months Ended
	June 30,
	September 30,
	2011			2010			Change
Interest and dividend income	$	—1,000		$	73,000		$	(72,000	)
Other income		—			113,000			(113,000	)
General and administrative expense		(~~119~~56,000	)		(~~134~~73,000	)		1517,000
Equity in (losses) income of unconsolidated real estate		(6,000	)		1,016,000			(1,022,000	)
Equity in earnings of unconsolidated real estate		13,000			6,000			7,000
(Loss) income from continuing operations		(125,000	)		900,000			(1,025,000	)
Loss from continuing operations		(42,000	)		(61,000	)		19,000
Income from discontinued operations		—			963,000			(963,000	)
Loss from discontinued operations		(11,000	)		(214,000	)		203,000
Consolidated net (loss) income	$	(125,000	)	$	1,863,000		$	(1,988,000	)
Consolidated net loss	$	(53,000	)	$	(275,000	)	$	222,000

Interest and Dividend Income

Interest and dividend income was $01,000 and $73,000 during the three months ended ~~June~~September 30, 2011 and 2010, respectively. ~~The decrease is due to all cash being held in non-interest bearing accounts~~ ~~during the three months ended June 30, 2011.~~

~~Other Income~~19

Other income was $0 and $11,000 during the three months ended June 30, 2011 and 2010, respectively.

Other Income

Other income was $0 and 3,000 during the three months ended September 30, 2011 and 2010, respectively.

General and Administrative Expense

General and administrative expense decreased $1517,000, ~~or 11.2%,~~ to $~~119~~56,000, during the three months ended ~~June~~ September 30, 2011, compared to general and administrative expense of $~~134~~73,000 for the three months ended ~~June~~September 30, 2010. The decrease was primarily due to lower external audit ~~and printing~~ fees.

Equity in ~~(Losses)~~Earnings ~~Income~~ of Unconsolidated Real Estate

Equity in ~~losses~~earnings of unconsolidated real estate was $613,000 during the three months ended ~~June~~ September 30, 2011, compared to equity in ~~income~~earnings of unconsolidated real estate of $16,~~016,~~000 during the three months ended ~~June~~September 30, 2010. The equity in ~~income~~earnings of unconsolidated real estate for ~~the three months~~ ~~ended~~both ~~June 30,~~periods ~~2010~~ was ~~comprised~~due ~~of:~~to ~~(i) our~~residual ~~share~~activity ofat the ~~gain~~Chase onTower ~~sale~~ and ~~gains on the forgiveness of debt and forgiveness of management fees payable to our manager, upon the sale of the~~ Executive Center II ~~and~~& III ~~property and (ii) the reversal of an allowance against the notes and~~ ~~interest~~properties, ~~receivable~~which ~~from~~were ~~the~~sold ~~Executive~~in ~~Center~~January 2010 II and ~~III property~~May 2010, ~~as the amounts were fully repaid upon the sale of the property~~respectively.

~~Income~~Loss from Discontinued Operations

~~There~~Loss ~~was no income or loss~~ from discontinued operations was $11,000 during the three months ended ~~June~~ September 30, 2011, ascompared noto ~~properties~~a ~~were~~loss ~~disposed of during the period or classified as held for sale. Income~~ from discontinued operations ~~was~~of $~~963~~214,000 during the three months ended ~~June~~ September 30, 2010. The ~~income~~ ~~from~~loss ~~discontinued operations~~ during the three months ended ~~June~~September 30, ~~2010~~2011 ~~resulted~~was ~~primarily from~~due ~~the~~to ~~gains~~residual activity ~~recognized~~related onto the ~~extinguishment~~Sevens ofBuilding ~~debt~~property, inwhich ~~connection~~was ~~with~~disposed ~~the~~in ~~dispositions~~March 2011. ofThe ~~the~~loss from ~~Tiffany~~discontinued ~~Square~~operations ~~and~~during ~~Executive~~the ~~Center~~three Imonths ~~properties~~ended ~~of $4~~September 30,~~144,000~~ ~~and~~2010 ~~$2,523,000,~~was ~~respectively, partially~~primarily ~~offset~~due byto operating ~~the~~losses ~~$5,300,000~~incurred ~~real~~related ~~estate~~to ~~related~~our ~~impairment~~Four ~~charge~~Resource ~~recorded~~Square ~~against~~property, ~~the Sevens~~which ~~Building~~was ~~property~~disposed in January 2011.

Consolidated Net (Loss~~) Income~~

As a result of the above, consolidated net loss was $~~125~~53,000 for the three months ended ~~June~~ September 30, 2011, compared to a consolidated net ~~income~~loss of $1275,~~863,~~000 for the three months ended ~~June~~ September 30, 2010.

Comparison of the ~~Six~~Nine Months Ended ~~June~~September 30, 2011 and 2010

	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2011			2010			Change
Interest and dividend income	$	—1,000		$	2023,000		$	(2022,000	)
Other income		—			1720,000			(1720,000	)
General and administrative expense		(~~175~~231,000	)		(~~231~~304,000	)		5673,000
Equity in (losses) income of unconsolidated real estate		(12,000	)		609,000			(621,000	)
Equity in earnings of unconsolidated real estate		1,000			615,000			(614,000	)
(Loss) income from continuing operations		(~~187~~229,000	)		~~415~~354,000			(~~602~~583,000	)
Income from discontinued operations		13,326,000			5,000			13,321,000
Income (loss) from discontinued operations		13,315,000			(209,000	)		13,524,000
Consolidated net income	$	13,~~139~~086,000		$	~~420~~145,000		$	12,~~719~~941,000

Interest and Dividend Income

Interest and dividend income was $01,000 and $2023,000 during the ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, respectively. The decrease is due to all cash being held in non-interest bearing ~~accounts~~ accounts during the ~~six~~nine months ended ~~June~~September 30, 2011.

Other Income

Other income was $0 and $1720,000 during the ~~six~~nine months ended ~~June~~September 30, 2011 and 2010, respectively.

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General and Administrative Expense

General and administrative expense decreased $5673,000, ~~or 24.2%,~~ to $~~175~~231,000, during the ~~six~~ nine months ended ~~June~~ September 30, 2011, compared to general and administrative expense of $~~231~~304,000 for the ~~six months~~nine months ended ~~June~~September 30, 2010. The decrease was primarily due to lower external audit ~~and printing~~ fees.

Equity in ~~(Losses)~~Earnings ~~Income~~ of Unconsolidated Real Estate

Equity in ~~losses~~earnings of unconsolidated real estate was $121,000 during the ~~six~~nine months ended ~~June~~ September 30, 2011, compared to equity in ~~income~~earnings of unconsolidated real estate of $~~609~~615,000 during the ~~six~~ nine months ended ~~June~~September 30, 2010. The equity in ~~income~~earnings of unconsolidated real estate for the ~~six~~nine months ended ~~June~~September 30, ~~2010~~2011 was ~~comprised~~due ~~of: (i) our share of the gain on sale and gains on the forgiveness of debt and forgiveness of management fees payable~~ to ~~our~~residual ~~manager,~~activity ~~upon~~at the ~~sale~~Chase ofTower ~~the Executive Center II~~ and ~~III property, (ii) the reversal of an allowance against the notes and~~ ~~interest receivable from the~~ Executive Center II ~~and~~& III ~~property~~properties, aswhich ~~the amounts~~ were ~~fully~~sold ~~repaid upon~~in ~~the~~January 2010 ~~sale of the property,~~ and ~~(iii)~~May ~~our share of the $18~~2010,~~000,000~~ ~~real estate related impairment charge recorded by the Enterprise Technology Center property, which was limited to the amount of our remaining investment in the property~~respectively.

~~Income~~The equity in earnings of unconsolidated real estate for the nine months ended September 30, 2010 was comprised of: (i) our share of the gain on sale and gains on the forgiveness of debt and forgiveness of management fees payable to our manager, upon the sale of the Executive Center II and III property, (ii) the reversal of an allowance against the notes and interest receivable from ~~Discontinued~~the Executive ~~Operations~~Center II and III property, as the amounts were fully repaid upon the sale of the property, and (iii) our share of the $18,000,000 real estate related impairment charge recorded by the Enterprise Technology Center property, which was limited to the amount of our remaining investment in the property.

Income ~~from~~(Loss) ~~discontinued operations was $13,326,000 during the six months ended June 30, 2011, compared to income~~ from ~~discontinued~~Discontinued ~~operations of $5,000 for the six months ended June 30, 2010.~~Operations The income from discontinued operations during the six months ended June 30, 2011 resulted primarily from the gains recognized on the extinguishment of debt in connection with the dispositions of the Four Resource Square and Sevens Building properties of $8,043,000 and $5,591,000, respectively. The income from discontinued operations during the six months ended June 30, 2010 resulted primarily from the gains recognized on the extinguishment of debt in connection with the dispositions of the Tiffany Square and Executive Center I properties of $4,144,000 and $2,523,000, respectively, which was substantially offset by the $5,300,000 real estate related impairment charge recorded against the Sevens Building property and the operating losses incurred by all of the disposed properties.

Income from discontinued operations was $13,315,000 during the nine months ended September 30, 2011, compared to loss from discontinued operations of $209,000 for the nine months ended September 30, 2010. The income from discontinued operations during the nine months ended September 30, 2011 resulted primarily from the gains recognized on the extinguishment of debt in connection with the dispositions of the Four Resource Square and Sevens Building properties of $8,043,000 and $5,580,000, respectively.

The loss from discontinued operations during the nine months ended September 30, 2010 resulted primarily from the $5,300,000 real estate related impairment charge recorded against the Sevens Building property and the operating losses incurred by all of the disposed properties during the period, partially offset by the gains recognized on the extinguishment of debt in connection with the dispositions of the Tiffany Square and Executive Center I properties of $4,144,000 and $2,523,000, respectively.

Consolidated Net Income

As a result of the above, consolidated net income was $13,~~139~~086,000 for the ~~six~~nine months ended ~~June~~September 30, 2011, compared to $~~420~~145,000 for the ~~six~~nine months ended ~~June~~September 30, 2010.

Liquidity and Capital Resources

Sources of Capital and Liquidity

Our primary sources of capital historically have been derived from: (i) proceeds from the sale of properties; (ii) our ability to obtain debt financing from third parties and related parties including, without limitation, our manager and its affiliates; and (iii) our real estate operations. Our sources of capital are currently extremely limited due to the fact that we do not expect to receive any cash proceeds from the ultimate disposition of our remaining unconsolidated property interest. Currently, our only source of capital and liquidity is our existing cash balance, net of future cash obligations.

Our primary uses of cash historically have been: (i) the payment of principal and interest on indebtedness; (ii) capital investments in our portfolio of properties; (iii) administrative costs; and (iv) distributions to our unit holders. Currently, we expect our future uses of cash to primarily be related to administrative costs and other costs required to dispose of our remaining property interest and dissolve our entities. Any remaining cash will be distributed to unit holders.

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Debt Financing

One of our principal liquidity needs was related to the payment of principal and interest on outstanding indebtedness. As of ~~June~~September 30, 2011, we have no consolidated debt. ~~Information related to~~ ~~the outstanding mortgage loan on our unconsolidated property interest as of June 30, 2011 was as follows:~~

Weighted-

Average

Variable

Principal

Interest

or Fixed

Outstanding

Maturity Date

Rate

Interest Rate

Enterprise Technology Center

32,562,000

05/11/2011

11.44

Fixed

Our sole remaining unconsolidated property, Enterprise Technology Center, has an outstanding mortgage loan with a principal balance of $32,562,000. On April 11, 2010, the Enterprise Technology Center property was unable to pay in full the monthly interest and principal payment due on its non-recourse mortgage loan on that date or within five days of that date, thereby triggering an event of default under the mortgage loan documents. On May 11, 2011, the mortgage loan for the Enterprise Technology Center property matured and was not repaid. Therefore, an additional event of default was triggered under the mortgage loan documents. On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., an entity affiliated with the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 TIC owners of the Enterprise Technology Center property seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice. The trustee’s sale is scheduled to occur on November 29, 2011.

On April 11, 2010, the Enterprise Technology Center property was unable to pay in full the monthly interest and principal payment due on its non-recourse mortgage loan on that date or within five days of that date, thereby triggering an event of default under the mortgage loan documents. On May 11, 2011, the mortgage loan for the Enterprise Technology Center property matured and was not repaid. Therefore, an additional event of default was triggered under the mortgage loan documents. On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., an entity affiliated with the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 TIC owners of the Enterprise Technology Center property seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice.

Cash Flows

Net cash used in operating activities was $~~819~~914,000 for the ~~six~~nine months ended ~~June~~September 30, 2011, compared to cash ~~used~~provided inby operating activities of $~~125~~46,000 for the ~~six~~nine months ended ~~June~~ September 30, 2010. The ~~increase~~decrease in cash ~~used~~flow infrom operating activities for the ~~six~~nine months ended ~~June~~ September 30, 2011 was primarily due to an $~~850~~898,000 transfer of cash to the Sevens Building lender subsequent to the foreclosure of this property, which represented the approximate amount of net cash generated by the property subsequent to the default on the mortgage loan on October 31, 2010.

~~There~~Cash ~~were no cash~~ flows ~~from~~provided by investing activities were $25,000 for the ~~six~~nine months ended ~~June~~ September 30, 2011, compared to ~~cash provided by investing activities of~~ $1,~~551~~590,000 for the ~~six~~nine months ended ~~June~~September 30, 2010. The cash flows from investing activities during the nine months ended September 30, 2011 resulted from final distributions from the Chase Tower and Executive Center II & III properties totaling $25,000. The cash flows from investing activities ~~for~~during the ~~six~~nine months ended ~~June~~September 30, 2010 was primarily due to the sales of the Chase Tower and Executive Center II and III properties, which resulted in distributions ~~from~~totaling ~~unconsolidated real estate of~~ $1,~~268~~327,000, and the receipt of payment on the $579,000 loan receivable from the Executive Center II ~~and~~& III property.

Cash flows used in financing activities was $549,000 for the ~~six~~nine months ended ~~June~~September 30, 2011, compared to cash used in financing activities of $2,~~032~~509,000 for the ~~six~~nine months ended ~~June~~ September 30, 2010. The cash used in financing activities during the ~~six~~nine months ended ~~June~~ September 30, 2011 was primarily due to the $500,000 distribution to our unit holders during the period. The cash used in financing activities during the ~~six~~nine months ended ~~June~~September 30, 2010 was primarily due to $2,~~000~~500,000 of distributions to our unit holders during the period.

Other Liquidity Needs

We have a restricted cash balance of $217,000 as of ~~June~~September 30, 2011, which represents an ~~escrow~~ escrow account that was funded from the proceeds of the sale of Southwood Tower, located in Houston, Texas, or the Southwood Tower property, to pay a rent guaranty to the buyer for a period of five years, which ended in December 2010. The buyer of the Southwood Tower property received ~~payments~~ payments from this escrow account as the vacant space was leased. We are currently finalizing the ~~allocation~~ allocation of the remaining funds in the escrow account, which we expect will be completed in the fourth ~~second~~quarter ~~half~~ of 2011.

Contractual Obligations

As of ~~June~~September 30, 2011, we have no material contractual obligations.

2322

Off-Balance Sheet Arrangements

As of ~~June~~September 30, 2011, we had no off-balance sheet transactions nor do we currently have ~~any~~ any such arrangements or obligations.

Inflation

As of ~~June~~September 30, 2011, we have no significant exposure to inflation.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, the primary market risk to which we were exposed is interest rate risk. However, we currently have no significant interest rate risk, as we have no consolidated debt.


Item 4.		Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our manager’s ~~executive vice~~ president, ~~portfolio~~and ~~management,~~chief executive officer and our manager’s chief accounting officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of ~~June~~ September 30, 2011 was conducted under the supervision and with the participation of our manager, including our manager’s ~~executive~~president ~~vice~~and ~~president,~~chief ~~portfolio~~executive ~~management,~~officer and our manager’s chief accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our manager’s ~~executive vice~~ president, and ~~portfolio~~chief ~~management,~~executive officer and our manager’s chief accounting officer concluded that our ~~disclosure~~ disclosure controls and procedures, as of ~~June~~September 30, 2011, were effective.

(b) Changes in Internal Control Over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2011 ~~that~~ that have materially affected, or are reasonably likely to materially affect, our internal control ~~over~~ over financial reporting.

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PART II — OTHER INFORMATION

The use of the words “we,” “us,” or “our” refers to NNN 2003 Value Fund, LLC and its subsidiaries, except where the context otherwise requires.


Item 1.		Legal Proceedings.

On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., an entity affiliated with UBS Real Estate Investments, Inc., or the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 tenant-in-common, or TIC, owners of the Enterprise Technology Center, located in Scotts Valley, California, or the Enterprise Technology Center property, in the Superior Court of California, County of Santa Cruz (Case No. CV 171625), seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice. The trustee’s sale is scheduled to occur on November 29, 2011.


Item 1A.		Risk Factors.

There were no material changes from risk factors previously disclosed in our 2010 Annual Report on Form 10-K, as filed with the SEC on March 18, 2011, except as noted below.

Our sole remaining property interest is currently undergoing a judicial foreclosure process, whereby a private sale of the property is expected to be pursued by the court-appointed receiver, after which we intend to pay distributions to our unit holders from available funds, if any, and wind up our operations, which we expect will be completed within the next six to twelve months. As a result of the judicial foreclosure of our sole remaining property interest, there is substantial doubt about our ability to continue as a going concern.

As of ~~June~~September 30, 2011, our sole remaining property interest consisted of our 8.5% interest in in the Enterprise Technology Center property. On April 11, 2010, the Enterprise Technology Center property was unable to pay in full the monthly interest and principal payment due on its non-recourse mortgage loan on that date or within five days of that date, thereby triggering an event of default under the mortgage loan documents. On May 11, 2011, the mortgage loan for the Enterprise Technology Center property, which had an outstanding balance of $32,562,000, matured and was not repaid. Therefore, an additional event of default was triggered under the mortgage loan documents. Pursuant to the terms of the loan agreement, this event of default could allow the Enterprise Technology Center lender to immediately: (i) increase the interest rate of the loan from 6.44% per annum to the default interest rate of 11.44% per annum; (ii) impose a late charge equal to the lesser of 5.0% of the amount of any payment not timely paid, or the maximum amount which may be charged under applicable law; and/or (iii) foreclose on the Enterprise Technology Center property.

On July 15, 2011, LBUSB 2004-C4 Enterprise Way, L.P., an entity affiliated with the Enterprise Technology Center lender, filed a complaint against NNN Enterprise Way, LLC and the other 31 TIC owners of the Enterprise Technology Center property seeking judicial foreclosure, specific performance for the appointment of a receiver and injunctive relief. On July 21, 2011, the court ordered the appointment of a receiver and granted injunctive relief. As a result, on July 25, 2011, the receiver appointed by the court took possession of the Enterprise Technology Center property and has been instructed to proceed with a private sale of the property under the supervision of the court. In addition, on July 29, 2011, the appointed trustee filed a notice of default and election to sell under deed of trust on behalf of the Enterprise Technology Center lender, whereby a sale of the Enterprise Technology Center property may proceed after 90 days of filing such notice. The trustee’s sale is scheduled to occur on November 29, 2011.

2524

We currently expect that our sole remaining property interest will be sold pursuant to the judicial foreclosure process, after which we intend to pay distributions to our unit holders from available funds, if any, and wind up our operations, which we expect will be completed within the next six to twelve months. As a result of the judicial foreclosure of our sole remaining property interest, there is substantial doubt about our ability to continue as a going concern.

We rely on the disposition of our properties to generate cash to fund our operations and pay distributions to our unit holders, however, our remaining property interest consists of an 8.5% interest in one unconsolidated property that is currently undergoing a judicial foreclosure process, which greatly limits our ability to generate cash to fund our operations and/or pay future distributions to our unit holders.

During the quarter ended March 31, 2011, we disposed of our two remaining consolidated properties, the Sevens Building and Four Resource Square properties. We did not receive any cash proceeds from the dispositions of these properties.

As of ~~June~~September 30, 2011, our sole remaining property interest consisted of our 8.5% interest in in the Enterprise Technology Center property. As discussed above, the Enterprise Technology Center property is currently undergoing a judicial foreclosure process, and we do not expect to receive any cash proceeds from the disposition of the property.

As a result of the dispositions of the Sevens Building and Four Resource Square properties for no cash proceeds, as well as the judicial foreclosure of our ownership interest in the Enterprise Technology Center property, which is also expected to result in no cash proceeds to us, our ability to generate cash to fund our operations and/or pay future distributions to our unit holders is significantly limited.

Our success is dependent on the performance of our manager, which could be adversely impacted by the recent sale of its parent company, Daymark Realty Advisors, Inc., to an unrelated third party.

On February 10, 2011, Grubb & Ellis Company announced the creation of Daymark Realty Advisors, Inc., or Daymark, a wholly owned and separately managed subsidiary of Grubb & Ellis and parent company of NNN Realty Advisors, Inc., or NNNRA, which is the parent company of our manager. Subsequent thereto Grubb & Ellis announced that it had retained FBR Capital Markets & Co to explore strategic alternatives with respect to Daymark and its portfolio. On August 10, 2011, Grubb & Ellis Company entered into a Stock Purchase Agreement, or the Purchase Agreement, with IUC-SOV, LLC, an entity affiliated with Sovereign Capital Management and Infinity Real Estate. Pursuant to the Purchase Agreement, Grubb & Ellis sold to IUC-SOV, LLC all of the shares of Daymark, whereby IUC-SOV, LLC acquired all the assets and liabilities of Daymark and its subsidiaries, subject to the terms and conditions of the Purchase Agreement. The closing of the transactions contemplated by the Purchase Agreement ~~were~~occurred ~~completed~~ on August 10, 2011. Our ability to achieve our investment objectives and to conduct our operations is dependent upon the performance of our manager and its parent company, and their respective executive officers and employees. If our manager suffers operational problems in connection with the sale of Daymark to IUC-SOV, LLC, which could affect our manager'’s ability to allocate time and/or resources to our operations, our results of operations would be adversely impacted. Furthermore, the effect ~~that~~of the sale transaction will have on our operations is unknown, but could have a material adverse effect on the performance of our manager, which could cause our results of operations and financial condition to suffer.

In addition, NNNRA is a guarantor on the mortgage loans of several TIC programs that it has sponsored. Under the guaranty agreements, NNNRA is required to maintain a specified level of minimum net worth. As of December 31, 2010, NNNRA's net worth was below the contractually specified levels with respect to approximately 30 percent of its managed TIC programs. While this circumstance does not, in and of itself, create any direct recourse liability for NNNRA, failure to meet the minimum net worth on these programs could result in the imposition of an event of default under these TIC loan agreements and NNNRA potentially becoming liable for up to $6.0 million, in the aggregate, of certain partial-recourse guarantee obligations of the underlying mortgage debt for certain of these TIC programs. To date, no events of default have been declared.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.

None.


Item 3.		Defaults Upon Senior Securities.

None.


Item 4.		[Removed and Reserved.]


Item 5.		Other Information.

~~None.~~25

None.


Item 6.		Exhibits.

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this quarterly report.

2826

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		NNN 2003 Value Fund, LLC
		NNN 2003 Value Fund, LLC (Registrant)
		(Registrant)
November 14, 2011 Date		/s/ Todd A. Mikles Todd A. Mikles
August 12, 2011		/s/ Steven M. Shipp
		President and Chief Executive Officer NNN Realty Investors, LLC, the Manager of NNN 2003 Value Fund, LLC (principal executive officer)
Date		Steven M. Shipp
November 14, 2011 Date		/s/ Paul E. Henderson Paul E. Henderson
		Executive Vice President, Portfolio Management
		Chief Accounting Officer NNN Realty Investors, LLC, the Manager of NNN 2003 Value Fund, LLC (principal financial officer)
		Grubb & Ellis Realty Investors, LLC,
		the Manager of NNN 2003 Value Fund, LLC
		(principal executive officer)
August 12, 2011		/s/ Paul E. Henderson
Date		Paul E. Henderson
		Chief Accounting Officer
		Grubb & Ellis Realty Investors, LLC,
		the Manager of NNN 2003 Value Fund, LLC
		(principal financial officer)

2927

EXHIBIT INDEX

Pursuant to Item 601(a)(2) of Regulation S-K, this Exhibit index immediately precedes the exhibits.

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the period ended ~~June~~September 30, 2011 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit
Number			Description
	3.1		Articles of Organization of NNN 2003 Value Fund, LLC, dated March 19, 2003 (included in Exhibit 3.1 to our Form 10 filed on May 2, 2005 and incorporated herein by reference).
	31.1	*	Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	*	Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	**	Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	**	Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.


*		Filed herewith.

**		Furnished herewith.

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