##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-Q


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|  
|   |  | For the quarterly period ended September 30, 2005                                           
|  
|or
|  
|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                                                                                                 |  | 20-0122092                                                            
|(State or other jurisdiction of
    incorporation or organization)                                       |  | (I.R.S. Employer
    Identification No.)                              
|                                                                                                        
|1551 N. Tustin Avenue, Suite 200
    Santa Ana, California 92705(Address of principal executive offices) |  | (714) 667-8252(Registrants telephone number,
    including area code)

N/A


(Former name)


þ o


o þ


o þ












---










NNN 2003 VALUE FUND, LLC


(A Delaware Corporation)


TABLE OF CONTENTS


|                                   |  |                                                                                                                                                                         |    |  |    | 
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- |  | -- | 
|PART I  FINANCIAL
    INFORMATION
|Item 1.                            |  | Financial Statements (unaudited)                                                                                                                                        |    |  | 3  | 
|                                   |  | Condensed Consolidated Balance Sheets as of
    September 30, 2005 and December 31, 2004
    (unaudited)                                                                |    |  | 4  | 
|                                   |  | Condensed Consolidated Statements of
    Operations and Comprehensive Income (Loss) For the Three and
    Nine Months Ended September 30, 2005 and 2004
    (unaudited) |    |  | 5  | 
|                                   |  | Condensed Consolidated Statement of
    Members Equity For the Nine Months Ended
    September 30, 2005 (unaudited)                                                    |    |  | 6  | 
|                                   |  | Condensed Consolidated Statements of Cash
    Flows For the Nine Months Ended September 30, 2005 and 2004
    (unaudited)                                               |    |  | 7  | 
|                                   |  | Notes to Condensed Consolidated Financial
    Statements (unaudited)                                                                                                    |    |  | 8  | 
|Item 2.                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                                                               |    |  | 28 | 
|Item 3.                            |  | Qualitative and Quantitative Disclosures
    About Market Risk                                                                                                          |    |  | 43 | 
|Item 4.                            |  | Controls and Procedures                                                                                                                                                 |    |  | 43 | 
|PART II  OTHER
    INFORMATION   
|Item 1.                            |  | Legal Proceedings                                                                                                                                                       |    |  | 46 | 
|Item 2.                            |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                                                                                         |    |  | 46 | 
|Item 3.                            |  | Defaults Upon Senior Securities                                                                                                                                         |    |  | 47 | 
|Item 4.                            |  | Submission of Matters to a Vote of Security
    Holders                                                                                                                 |    |  | 47 | 
|Item 5.                            |  | Other Information                                                                                                                                                       |    |  | 47 | 
|Item 6.                            |  | Exhibits                                                                                                                                                                |    |  | 47 | 
|Signatures                         |  |                                                                                                                                                                         | 48 | 
|EXHIBIT 10.6                      
|EXHIBIT 10.7                      
|EXHIBIT 10.8                      
|EXHIBIT 31.1                      
|EXHIBIT 31.2                      
|EXHIBIT 32.1                      
|EXHIBIT 32.2                      



2



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##### Table of Contents






PART I  FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements



3



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##### Table of Contents



NNN 2003 VALUE FUND, LLC





CONDENSED CONSOLIDATED BALANCE SHEETS


September 30, 2005 and December 31, 2004


|                                                           |                                           |               |            |            |              |   |            |            | 
|---------------------------------------------------------- | ----------------------------------------- | ------------- | ---------- | ---------- | ------------ | - | ---------- | ---------- | 
|                                                           |                                           | September 30, |            |            | December 31, |  
|                                                           |                                           | 2005          |            |            | 2004         |  
|                                                           |                                           |               |            |            |              |  
|                                                           |                                           | (Unaudited)   |           
|ASSETS                                                    
|Real estate investments:                                   |                                           |               |            |            |              |   |            |           
|                                                           | Operating properties, net                 |               | $          | 33,158,000 |              |   | $          | 6,525,000  | 
|                                                           | Properties held for sale, net             |               |            | 14,541,000 |              |   |            | 30,209,000 | 
|                                                           | Investments in unconsolidated real estate |               |            | 6,239,000  |              |   |            | 11,482,000 | 
|                                                           |                                           |               |            |            |              |  
|                                                           |                                           |               | 53,938,000 |            |              |   | 48,216,000 |           
|Cash and cash equivalents                                  |                                           |               | 9,032,000  |            |              |   | 9,896,000  |           
|Investment in marketable securities                        |                                           |               | 2,251,000  |            |              |   |           |           
|Accounts receivable, net                                   |                                           |               | 1,199,000  |            |              |   | 498,000    |           
|Accounts receivable from related parties                   |                                           |               | 141,000    |            |              |   | 180,000    |           
|Restricted cash                                            |                                           |               | 416,000    |            |              |   | 325,000    |           
|Real estate deposits                                       |                                           |               | 25,000     |            |              |   |           |           
|Identified intangible assets, net                          |                                           |               | 5,612,000  |            |              |   | 1,523,000  |           
|Other assets, net                                          |                                           |               | 626,000    |            |              |   | 149,000    |           
|Other assets  properties held for sale                    |                                           |               | 2,141,000  |            |              |   | 6,547,000  |           
|Notes receivable                                           |                                           |               | 2,300,000  |            |              |   |           |           
|                                                           |                                           |               |            |            |              |  
|Total assets                                               |                                           | $             | 77,681,000 |            |              | $ | 67,334,000 |           
|                                                           |                                           |               |            |            |              |  
|                                                          
|LIABILITIES, MINORITY INTERESTS AND MEMBERS EQUITY       
|Mortgage loans payable and other debt                      |                                           | $             | 26,415,000 |            |              | $ | 4,500,000  |           
|Mortgage loans payable secured by properties held for sale |                                           |               | 6,337,000  |            |              |   | 19,125,000 |           
|Accounts payable and accrued liabilities                   |                                           |               | 2,398,000  |            |              |   | 1,711,000  |           
|Accounts payable due to related parties                    |                                           |               | 142,000    |            |              |   | 233,000    |           
|Other liabilities  properties held for sale               |                                           |               | 80,000     |            |              |   | 591,000    |           
|Security deposits and prepaid rent                         |                                           |               | 204,000    |            |              |   | 104,000    |           
|                                                           |                                           |               |            |            |              |  
|                                                           |                                           |               | 35,576,000 |            |              |   | 26,264,000 |           
|Minority interests                                         |                                           |               | 1,406,000  |            |              |   | 2,397,000  |           
|Minority interests  properties held for sale              |                                           |               | 1,546,000  |            |              |   | 1,571,000  |           
|                                                           |                                           |               |            |            |              |  
|                                                           |                                           |               | 2,952,000  |            |              |   | 3,968,000  |           
|Commitments and contingencies (Note 12):                   |                                           |               |            |            |              |   |            |           
|Members equity                                            |                                           |               | 39,170,000 |            |              |   | 37,102,000 |           
|Accumulated other comprehensive loss                       |                                           |               | (17,000    | )          |              |   |           |           
|                                                           |                                           |               |            |            |              |  
|Total members equity                                      |                                           |               | 39,153,000 |            |              |   | 37,102,000 |           
|                                                           |                                           |               |            |            |              |  
|Total liabilities and members equity                      |                                           | $             | 77,681,000 |            |              | $ | 67,334,000 |           
|                                                           |                                           |               |            |            |              |  

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NNN 2003 VALUE FUND, LLC





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


AND COMPREHENSIVE INCOME (LOSS)


For the Three and Nine Months Ended September 30, 2005
and 2004


|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |           |   |   |            |            |  
|-------------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------ | --------- | --------- | ----------------- | - | -------- | -------- | - | - | --------- | --------- | - | - | ---------- | ---------- | -
|                                                                     |                                                                              | Three Months Ended |           |           | Nine Months Ended |  
|                                                                     |                                                                              | September 30,      |           |           | September 30,     |  
|                                                                     |                                                                              |                    |           |           |                   |  
|                                                                     |                                                                              | 2005               |           |           | 2004              |   |          | 2005     |   |   | 2004      |          
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|                                                                     |                                                                              | (Unaudited)        |          
|Revenues:                                                            |                                                                              |                    |           |           |                   |   |          |          |   |   |           |           |   |   |            |           
|                                                                     | Rental income                                                                |                    | $         | 492,000   |                   |   | $        | 205,000  |   |   | $         | 1,248,000 |   |   | $          | 490,000    |  
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|Expenses:                                                            |                                                                              |                    |           |           |                   |   |          |          |   |   |           |           |   |   |            |           
|                                                                     | Rental expenses                                                              |                    |           | 339,000   |                   |   |          | 293,000  |   |   |           | 1,076,000 |   |   |            | 821,000    |  
|                                                                     | General and administrative                                                   |                    |           | 138,000   |                   |   |          | 75,000   |   |   |           | 405,000   |   |   |            | 272,000    |  
|                                                                     | Depreciation and amortization                                                |                    |           | 161,000   |                   |   |          | 118,000  |   |   |           | 450,000   |   |   |            | 283,000    |  
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|                                                                     |                                                                              |                    | 638,000   |           |                   |   | 486,000  |          |   |   | 1,931,000 |           |   |   | 1,376,000  |           
|Loss before other income (expense) and discontinued
    operations   |                                                                              |                    | (146,000  | )         |                   |   | (281,000 | )        |   |   | (683,000  | )         |   |   | (886,000   | )         
|Other income (expense):                                              |                                                                              |                    |           |           |                   |   |          |          |   |   |           |           |   |   |            |           
|                                                                     | Interest expense (including amortization of deferred financing
    costs)    |                    |           | (130,000  | )                 |   |          | (184,000 | ) |   |           | (574,000  | ) |   |            | (461,000   | )
|                                                                     | Interest and dividend income                                                 |                    |           | 159,000   |                   |   |          | 25,000   |   |   |           | 277,000   |   |   |            | 25,000     |  
|                                                                     | Gain on sale of marketable securities                                        |                    |           | 10,000    |                   |   |          |         |   |   |           | 94,000    |   |   |            |           |  
|                                                                     | Equity in earnings (loss) and gain on sale of unconsolidated
    real estate |                    |           | 1,985,000 |                   |   |          | (158,000 | ) |   |           | 1,871,000 |   |   |            | (489,000   | )
|                                                                     | Minority interests                                                           |                    |           | (286,000  | )                 |   |          | 30,000   |   |   |           | (258,000  | ) |   |            | 107,000    |  
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|Income (loss) from continuing operations                             |                                                                              |                    | 1,592,000 |           |                   |   | (568,000 | )        |   |   | 727,000   |           |   |   | (1,704,000 | )         
|Discontinued operations:                                             |                                                                              |                    |           |           |                   |   |          |          |   |   |           |           |   |   |            |           
|                                                                     | Gain (loss) on sale on real estate                                           |                    |           | (4,000    | )                 |   |          |         |   |   |           | 3,407,000 |   |   |            |           |  
|                                                                     | Income (loss) from discontinued operations                                   |                    |           | 228,000   |                   |   |          | (73,000  | ) |   |           | 556,000   |   |   |            | (83,000    | )
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|                                                                     |                                                                              |                    | 224,000   |           |                   |   | (73,000  | )        |   |   | 3,963,000 |           |   |   | (83,000    | )         
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|Net income (loss)                                                    |                                                                              | $                  | 1,816,000 |           |                   | $ | (641,000 | )        |   | $ | 4,690,000 |           |   | $ | (1,787,000 | )         
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|Comprehensive income (loss):                                         |                                                                              |                    |           |           |                   |   |          |          |   |   |           |           |   |   |            |           
|                                                                     | Net income (loss)                                                            |                    | $         | 1,816,000 |                   |   | $        | (641,000 | ) |   | $         | 4,690,000 |   |   | $          | (1,787,000 | )
|                                                                     | Unrealized loss on marketable securities                                     |                    |           | (7,000    | )                 |   |          |         |   |   |           | (17,000   | ) |   |            |           |  
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|Comprehensive income (loss)                                          |                                                                              | $                  | 1,809,000 |           |                   | $ | (641,000 | )        |   | $ | 4,673,000 |           |   | $ | (1,787,000 | )         
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|Net income (loss) per unit:                                          |                                                                              |                    |           |           |                   |   |          |          |   |   |           |           |   |   |            |           
|                                                                     | Continuing operations  basic and diluted                                    |                    | $         | 159.20    |                   |   | $        | (72.56   | ) |   | $         | 72.70     |   |   | $          | (348.82    | )
|                                                                     | Discontinued operations  basic and diluted                                  |                    |           | 22.40     |                   |   |          | (9.33    | ) |   |           | 396.30    |   |   |            | (16.99     | )
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|Net income (loss) per unit  basic and diluted                       |                                                                              | $                  | 181.60    |           |                   | $ | (81.89   | )        |   | $ | 469.00    |           |   | $ | (365.81    | )         
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          
|Weighted average number of units outstanding  basic
    and diluted |                                                                              |                    | 10,000    |           |                   |   | 7,828    |          |   |   | 10,000    |           |   |   | 4,885      |           
|                                                                     |                                                                              |                    |           |           |                   |   |          |          |   |   |           |          

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NNN 2003 VALUE FUND, LLC





CONDENSED CONSOLIDATED STATEMENT OF MEMBERS EQUITY


For the Nine Months Ended September 30, 2005


|                                         |  |             |        |  |       |   |            |  
|---------------------------------------- |  | ----------- | ------ |  | ----- | - | ---------- | -
|                                         |  | Number of   |        |  |      
|                                         |  | Units       |        |  | Total |  
|                                         |  |             |        |  |       |  
|                                         |  | (Unaudited) |       
|BALANCE  December 31, 2004              |  |             | 10,000 |  |       | $ | 37,102,000 |  
|Distributions                            |  |             |       |  |       |   | (2,622,000 | )
|Net income                               |  |             |       |  |       |   | 4,690,000  |  
|Unrealized loss on marketable securities |  |             |       |  |       |   | (17,000    | )
|                                         |  |             |        |  |       |  
|Comprehensive income                     |  |             |       |  |       |   | 4,673,000  |  
|                                         |  |             |        |  |       |  
|BALANCE  September 30, 2005             |  |             | 10,000 |  |       | $ | 39,153,000 |  
|                                         |  |             |        |  |       |  

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NNN 2003 VALUE FUND, LLC





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Nine Months Ended September 30, 2005 and 2004


|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |   |            |             |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | --------- | ----------- | ---------- | - | ---------- | ----------- | ----------- | -
|                                                                                                                                                                                                                 |                                                                                                               | Nine Months Ended                         |          
|                                                                                                                                                                                                                 |                                                                                                               | September 30,                             |          
|                                                                                                                                                                                                                 |                                                                                                               |                                           |          
|                                                                                                                                                                                                                 |                                                                                                               | 2005                                      |           |             | 2004       |  
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 |                                                                                                               | (Unaudited)                               |          
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                                                                             |                                                                                                               |                                           |           |             |            |   |            |            
|Net income (loss)                                                                                                                                                                                                |                                                                                                               | $                                         | 4,690,000 |             |            | $ | (1,787,000 | )          
|Adjustments to reconcile net income (loss) to net cash provided
    by operating activities                                                                                                                      |                                                                                                               |                                           |           |             |            |   |            |            
|                                                                                                                                                                                                                 | Gain on sale of real estate                                                                                   |                                           |           | (3,407,000  | )          |   |            |            |            
|                                                                                                                                                                                                                 | Gain on sale of marketable securities                                                                         |                                           |           | (94,000     | )          |   |            |            |            
|                                                                                                                                                                                                                 | Depreciation and amortization (including deferred financing
    costs, deferred rent and above market leases) |                                           |           | 1,586,000   |            |   |            | 1,400,000   |            
|                                                                                                                                                                                                                 | Distributions received in excess of earnings from investments in
    unconsolidated real estate               |                                           |           | (1,106,000  | )          |   |            | 1,366,000   |            
|                                                                                                                                                                                                                 | Minority interests                                                                                            |                                           |           | 355,000     |            |   |            | (135,000    | )          
|                                                                                                                                                                                                                 | Provision for doubtful accounts                                                                               |                                           |           | 4,000       |            |   |            |            |            
|Change in operating assets and liabilities:                                                                                                                                                                      |                                                                                                               |                                           |           |             |            |   |            |            
|                                                                                                                                                                                                                 | Accounts receivable, including receivables from related parties                                               |                                           |           | 180,000     |            |   |            | (342,000    | )          
|                                                                                                                                                                                                                 | Other assets                                                                                                  |                                           |           | (548,000    | )          |   |            | 14,000      |            
|                                                                                                                                                                                                                 | Accounts payable and accrued liabilities, including payables to
    related parties                           |                                           |           | (94,000     | )          |   |            | 126,000     |            
|                                                                                                                                                                                                                 | Prepaid rent                                                                                                  |                                           |           | (523,000    | )          |   |            | 26,000      |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 |                                                                                                               | Net cash provided by operating activities |           |             | 1,043,000  |   |            |             | 668,000     |  
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                                                                             |                                                                                                               |                                           |           |             |            |   |            |            
|                                                                                                                                                                                                                 | Acquisition of real estate operating properties                                                               |                                           |           | (32,359,000 | )          |   |            | (8,279,000  | )          
|                                                                                                                                                                                                                 | Acquisition of investments in unconsolidated real estate                                                      |                                           |           | (810,000    | )          |   |            | (10,603,000 | )          
|                                                                                                                                                                                                                 | Proceeds from sale of real estate operating properties                                                        |                                           |           | 25,273,000  |            |   |            |            |            
|                                                                                                                                                                                                                 | Proceeds from sale of unconsolidated real estate                                                              |                                           |           | 7,158,000   |            |   |            |            |            
|                                                                                                                                                                                                                 | Returns of capital on investments in unconsolidated real estate                                               |                                           |           |            |            |   |            |            |            
|                                                                                                                                                                                                                 | Capital expenditures                                                                                          |                                           |           | (3,735,000  | )          |   |            | (37,000     | )          
|                                                                                                                                                                                                                 | Purchase of marketable securities                                                                             |                                           |           | (6,996,000  | )          |   |            |            |            
|                                                                                                                                                                                                                 | Proceeds from sale of marketable securities                                                                   |                                           |           | 4,822,000   |            |   |            |            |            
|                                                                                                                                                                                                                 | Restricted cash                                                                                               |                                           |           | 214,000     |            |   |            |            |            
|                                                                                                                                                                                                                 | Real estate deposits                                                                                          |                                           |           | (25,000     | )          |   |            | (500,000    | )          
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 |                                                                                                               | Net cash used in investing activities     |           |             | (6,458,000 | ) |            |             | (19,419,000 | )
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                                                                             |                                                                                                               |                                           |           |             |            |   |            |            
|                                                                                                                                                                                                                 | Borrowings on mortgages payable and other debt                                                                |                                           |           | 34,067,000  |            |   |            | 4,000,000   |            
|                                                                                                                                                                                                                 | Principal repayments on mortgages payable and other debt                                                      |                                           |           | (24,940,000 | )          |   |            |            |            
|                                                                                                                                                                                                                 | Minority interests contributions                                                                              |                                           |           |            |            |   |            | 3,981,000   |            
|                                                                                                                                                                                                                 | Minority interests distributions                                                                              |                                           |           | (1,371,000  | )          |   |            | (315,000    | )          
|                                                                                                                                                                                                                 | Payment of deferred financing costs                                                                           |                                           |           | (583,000    | )          |   |            |            |            
|                                                                                                                                                                                                                 | Distributions                                                                                                 |                                           |           | (2,622,000  | )          |   |            | (1,054,000  | )          
|                                                                                                                                                                                                                 | Issuance of member units, net of offering costs                                                               |                                           |           |            |            |   |            | 34,157,000  |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 |                                                                                                               | Net cash provided by financing activities |           |             | 4,551,000  |   |            |             | 40,769,000  |  
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                                                                                                                             |                                                                                                               |                                           | (864,000  | )           |            |   | 22,018,000 |            
|CASH AND CASH EQUIVALENTS  beginning of period                                                                                                                                                                  |                                                                                                               |                                           | 9,896,000 |             |            |   | 2,625,000  |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|CASH AND CASH EQUIVALENTS  end of period                                                                                                                                                                        |                                                                                                               | $                                         | 9,032,000 |             |            | $ | 24,643,000 |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |   |            |            
|Cash paid during the period for:                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |   |            |            
|                                                                                                                                                                                                                 | Interest                                                                                                      |                                           | $         | 842,000     |            |   | $          | 600,000     |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|NONCASH INVESTING ACTIVITIES                                                                                                                                                                                     |                                                                                                               |                                           |           |             |            |   |            |            
|Accrual for tenant improvements and capital expenditures                                                                                                                                                         |                                                                                                               | $                                         | 599,000   |             |            | $ |           |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|The following represents certain assets acquired and liabilities
    assumed in connection with our acquisitions and dispositions of
    operating properties and investments in unconsolidated real
    estate: |                                                                                                               |                                           |           |             |            |   |            |            
|                                                                                                                                                                                                                 | Increase in intangible assets less intangible liabilities of
    acquisitions and dispositions                |                                           | $         | 227,000     |            |   | $          | 2,093,000   |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 | Restricted cash                                                                                               |                                           | $         | 305,000     |            |   | $          |            |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 | Other assets                                                                                                  |                                           | $         | (82,000     | )          |   | $          | 30,000      |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 | Accrued expenses and security deposits                                                                        |                                           | $         | (204,000    | )          |   | $          |            |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 | Minority interests contributions                                                                              |                                           | $         |            |            |   | $          | 1,775,000   |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  
|                                                                                                                                                                                                                 | Notes receivable                                                                                              |                                           | $         | 2,300,000   |            |   | $          |            |            
|                                                                                                                                                                                                                 |                                                                                                               |                                           |           |             |            |  

7



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##### Table of Contents



NNN 2003 VALUE FUND, LLC





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




|   |                                         
|-- | ----------------------------------------
|1. | Organization and Description of Business









|   |                                           
|-- | ------------------------------------------
|2. | Summary of Significant Accounting Policies





| |                      
| | ---------------------
| | Basis of Presentation

Consolidation of Variable Interest
Entities




| |                       
| | ----------------------
| | Interim Financial Data



8



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                
| | ---------------
| | Restricted Cash





| |                                     
| | ------------------------------------
| | Allowance for Uncollectible Accounts





| |                                    
| | -----------------------------------
| | Investment in Marketable Securities





| |                          
| | -------------------------
| | Purchase Price Allocation

Business Combinations


9



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












| |                     
| | --------------------
| | Operating Properties







| |                         
| | ------------------------
| | Properties Held for Sale

Accounting for
Impairment or Disposal of Long-Lived Assets


10



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | management, having the authority to approve the action, commits
    to a plan to sell the asset;                                                             
|
| |  | the asset is available for immediate sale in its present
    condition subject only to terms that are usual and customary for
    sales of such assets;      
|
| |  | an active program to locate a buyer and other actions required
    to complete the plan to sell the asset have been initiated;                               
|
| |  | the sale of the asset is probable and the transfer of the asset
    is expected to qualify for recognition as a completed sale
    within one year;          
|
| |  | the asset is being actively marketed for sale at a price that is
    reasonable in relation to its current fair value; and                                   
|
| |  | given the actions required to complete the plan, it is unlikely
    that significant changes to the plan will be made or that the
    plan will be withdrawn.



| |                                 
| | --------------------------------
| | Derivative Financial Instruments





| |                    
| | -------------------
| | Revenue Recognition

Accounting for
Leases




| |                             
| | ----------------------------
| | Concentration of Credit Risk





11



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |              |           |               |             |  |       |          |  |        |                    |  |            |      |        |  |  |  |          | 
|------------------------------ |  | ------------ | --------- | ------------- | ----------- |  | ----- | -------- |  | ------ | ------------------ |  | ---------- | ---- | ------ |  |  |  | -------- | 
|                               |  |              |           | Percentage of |             |  |       |          |  |        | Lease              | 
|                               |  | 2005 Annual  |           |               | 2005 Annual |  |       |          |  | Square |                    |  | Expiration |     
|Tenant                         |  | Base Rent(*) |           |               | Base Rent   |  |       | Property |  |        | Footage            |  |            | Date |       
|                               |  |              |           |               |             |  |       |          |  |        |                    |  |            |      |       
|Administaff Services, LP       |  | $            | 1,012,000 |               |             |  | 20.3% |          |  |        | Interwood          |  |            |      | 52,000 |  |  |  | 09/30/14 | 
|Westwood College of Technology |  | $            | 763,000   |               |             |  | 15.3% |          |  |        | Executive Center I |  |            |      | 44,000 |  |  |  | 01/31/13 | 
|Veritas Software Global, LLC   |  | $            | 653,000   |               |             |  | 13.1% |          |  |        | Woodside           |  |            |      | 24,000 |  |  |  | 04/30/08 | 






|  |                                                                                                         
|- | --------------------------------------------------------------------------------------------------------
|* | Annualized rental income based on contractual base rent from
    leases in effect at September 30, 2005.



|                               |  |             |           |               |             |  |       |          |  |        |                    |  |            |      |        |  |  |  |          | 
|------------------------------ |  | ----------- | --------- | ------------- | ----------- |  | ----- | -------- |  | ------ | ------------------ |  | ---------- | ---- | ------ |  |  |  | -------- | 
|                               |  |             |           | Percentage of |             |  |       |          |  |        | Lease              | 
|                               |  | 2004 Annual |           |               | 2004 Annual |  |       |          |  | Square |                    |  | Expiration |     
|Tenant                         |  | Base Rent*  |           |               | Base Rent   |  |       | Property |  |        | Footage            |  |            | Date |       
|                               |  |             |           |               |             |  |       |          |  |        |                    |  |            |      |       
|Internal Revenue Service (GSA) |  | $           | 2,913,000 |               |             |  | 79.7% |          |  |        | Oakey Building     |  |            |      | 84,000 |  |  |  | 05/31/05 | 
|Westwood College of Technology |  | $           | 539,000   |               |             |  | 14.8% |          |  |        | Executive Center I |  |            |      | 33,000 |  |  |  | 01/31/13 | 






|  |                                                                                                         
|- | --------------------------------------------------------------------------------------------------------
|* | Annualized rental income based on contractual base rent from
    leases in effect at September 30, 2004.





12



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |             
| | ------------
| | Income Taxes





| |                            
| | ---------------------------
| | Comprehensive Income (Loss)

Reporting Comprehensive Income
(Loss).




| |              
| | -------------
| | Per Unit Data

Earnings Per Share.




|                                                                      |                                             |                    |           |        |                   |   |          |        |   |   |           |        |  |   |            |         |  
|--------------------------------------------------------------------- | ------------------------------------------- | ------------------ | --------- | ------ | ----------------- | - | -------- | ------ | - | - | --------- | ------ |  | - | ---------- | ------- | -
|                                                                      |                                             | Three Months Ended |           |        | Nine Months Ended |  
|                                                                      |                                             | September 30,      |           |        | September 30,     |  
|                                                                      |                                             |                    |           |        |                   |  
|                                                                      |                                             | 2005               |           |        | 2004              |   |          | 2005   |   |   | 2004      |       
|                                                                      |                                             |                    |           |        |                   |   |          |        |   |   |           |       
|Income (loss) from continuing operations                              |                                             | $                  | 1,592,000 |        |                   | $ | (568,000 | )      |   | $ | 727,000   |        |  | $ | (1,704,000 | )      
|Income (loss) from discontinued operations                            |                                             |                    | 224,000   |        |                   |   | (73,000  | )      |   |   | 3,963,000 |        |  |   | (83,000    | )      
|                                                                      |                                             |                    |           |        |                   |   |          |        |   |   |           |       
|Net income (loss)                                                     |                                             | $                  | 1,816,000 |        |                   | $ | (641,000 | )      |   | $ | 4,690,000 |        |  | $ | (1,787,000 | )      
|                                                                      |                                             |                    |           |        |                   |   |          |        |   |   |           |       
|Net income (loss) per unit:                                           |                                             |                    |           |        |                   |   |          |        |   |   |           |        |  |   |            |        
|                                                                      | Continuing operations  basic and diluted   |                    | $         | 159.20 |                   |   | $        | (72.56 | ) |   | $         | 72.70  |  |   | $          | (348.82 | )
|                                                                      | Discontinued operations  basic and diluted |                    |           | 22.40  |                   |   |          | (9.33  | ) |   |           | 396.30 |  |   |            | (16.99  | )
|                                                                      |                                             |                    |           |        |                   |   |          |        |   |   |           |       
|Net income (loss) per unit  basic and diluted                        |                                             | $                  | 181.60    |        |                   | $ | (81.89   | )      |   | $ | 469.00    |        |  | $ | (365.81    | )      
|                                                                      |                                             |                    |           |        |                   |   |          |        |   |   |           |       
|Weighted average number of units outstanding   basic
    and diluted |                                             |                    | 10,000    |        |                   |   | 7,828    |        |   |   | 10,000    |        |  |   | 4,885      |        
|                                                                      |                                             |                    |           |        |                   |   |          |        |   |   |           |       



| |                 
| | ----------------
| | Use of Estimates



13



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |         
| | --------
| | Segments





| |                   
| | ------------------
| | Minority Interests





| |                                          
| | -----------------------------------------
| | Recently Issued Accounting Pronouncements

Accounting Changes and Error Corrections  A
Replacement of APB Opinion No. 20 and
SFAS No. 3.


Determining Whether a General Partner, or
the General Partners as a Group, Controls a Limited Partnership
or Similar Entity When the Limited Partners Have Certain Rights


Accounting for Certain
Investments in Debt and Equity Securities.




| |                  
| | -----------------
| | Reclassifications



14



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                        
|-- | -----------------------
|3. | Real Estate Investments



| |                        
| | -----------------------
| | Consolidated Properties



|                                  |  |               |            |   |              |   |           |  
|--------------------------------- |  | ------------- | ---------- | - | ------------ | - | --------- | -
|                                  |  | September 30, |            |   | December 31, |  
|                                  |  | 2005          |            |   | 2004         |  
|                                  |  |               |            |   |              |  
|Buildings and tenant improvements |  | $             | 25,768,000 |   |              | $ | 4,517,000 |  
|Land                              |  |               | 7,847,000  |   |              |   | 2,190,000 |  
|                                  |  |               |            |   |              |  
|                                  |  |               | 33,615,000 |   |              |   | 6,707,000 |  
|Less: accumulated depreciation    |  |               | (457,000   | ) |              |   | (182,000  | )
|                                  |  |               |            |   |              |  
|                                  |  | $             | 33,158,000 |   |              | $ | 6,525,000 |  
|                                  |  |               |            |   |              |  





| |                                           
| | ------------------------------------------
| | 2005 Acquisitions of Consolidated Property



| |                           
| | --------------------------
| | Interwood  Houston, Texas





| |                                            
| | -------------------------------------------
| | Woodside Corporate Park  Beaverton, Oregon





| |                              
| | -----------------------------
| | 2005 Properties Held for Sale



| |                              
| | -----------------------------
| | Southwood Tower  Houston, TX



15



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                             
| | --------------------------------------------
| | 2005 Dispositions of Consolidated Properties



| |                                  
| | ---------------------------------
| | Financial Plaza  Omaha, Nebraska





| |                                   
| | ----------------------------------
| | Satellite Place  Atlanta, Georgia





| |                                          
| | -----------------------------------------
| | Investments in Unconsolidated Real Estate



|                             |  |          |                   |            |       |  |               |      |  |              |           |  |  |   |            | 
|---------------------------- |  | -------- | ----------------- | ---------- | ----- |  | ------------- | ---- |  | ------------ | --------- |  |  | - | ---------- | 
|                             |  |          |                   | Percentage |       |  | September 30, |      |  | December 31, |          
|Description                  |  | Location |                   |            | Owned |  |               | 2005 |  |              | 2004      | 
|                             |  |          |                   |            |       |  |               |      |  |              |           | 
|801 K Street                 |  |          | Sacramento, CA    |            |       |  | 18.3          | %    |  | $            |          |  |  | $ | 5,103,000  | 
|Emerald Plaza                |  |          | San Diego, CA     |            |       |  | 4.6           | %    |  |              | 1,406,000 |  |  |   | 1,529,000  | 
|Enterprise Technology Center |  |          | Scotts Valley, CA |            |       |  | 8.5           | %    |  |              | 2,845,000 |  |  |   | 2,808,000  | 
|Executive Center II & III    |  |          | Dallas, TX        |            |       |  | 38.1          | %    |  |              | 1,988,000 |  |  |   | 2,042,000  | 
|                             |  |          |                   |            |       |  |               |      |  |              |           |  |  |   |            | 
|Total                        |  |          |                   |            |       |  |               |      |  | $            | 6,239,000 |  |  | $ | 11,482,000 | 
|                             |  |          |                   |            |       |  |               |      |  |              |           |  |  |   |            | 

16



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                      |  |               |             |  |              |   |             | 
|------------------------------------- |  | ------------- | ----------- |  | ------------ | - | ----------- | 
|                                      |  | September 30, |             |  | December 31, |  
|                                      |  | 2005          |             |  | 2004         |  
|                                      |  |               |             |  |              |  
|Balance Sheet Data:                   |  |               |             |  |              |   |             | 
|Assets (primarily real estate)        |  | $             | 192,867,000 |  |              | $ | 260,296,000 | 
|                                      |  |               |             |  |              |  
|Mortgage loans and other debt payable |  | $             | 120,759,000 |  |              | $ | 160,771,000 | 
|Other liabilities                     |  |               | 32,434,000  |  |              |   | 10,603,000  | 
|Equity                                |  |               | 39,674,000  |  |              |   | 88,922,000  | 
|                                      |  |               |             |  |              |  
|Total liabilities and equity          |  | $             | 192,867,000 |  |              | $ | 260,296,000 | 
|                                      |  |               |             |  |              |  
|Our share of equity                   |  | $             | 6,239,000   |  |              | $ | 11,482,000  | 
|                                      |  |               |             |  |              |  

|                                                                             |  |                    |            |   |                   |   |            |      |  |   |            |   |  |   |            |  
|---------------------------------------------------------------------------- |  | ------------------ | ---------- | - | ----------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                             |  | Three Months Ended |            |   | Nine Months Ended |  
|                                                                             |  | September 30,      |            |   | September 30,     |  
|                                                                             |  |                    |            |   |                   |  
|                                                                             |  | 2005               |            |   | 2004              |   |            | 2005 |  |   | 2004       |  
|                                                                             |  |                    |            |   |                   |   |            |      |  |   |            |  
|Revenues                                                                     |  | $                  | 16,698,000 |   |                   | $ | 8,129,000  |      |  | $ | 33,080,000 |   |  | $ | 14,733,000 |  
|Rental and other expenses                                                    |  |                    | 15,631,000 |   |                   |   | 11,348,000 |      |  |   | 33,100,000 |   |  |   | 16,872,000 |  
|                                                                             |  |                    |            |   |                   |   |            |      |  |   |            |  
|Net income (loss)                                                            |  | $                  | 1,067,000  |   |                   | $ | (3,219,000 | )    |  | $ | (20,000    | ) |  | $ | (2,139,000 | )
|                                                                             |  |                    |            |   |                   |   |            |      |  |   |            |  
|Our equity in loss                                                           |  | $                  | (7,000     | ) |                   | $ | (158,000   | )    |  | $ | (121,000   | ) |  | $ | (489,000   | )
|                                                                             |  |                    |            |   |                   |   |            |      |  |   |            |  
|Gain on sale                                                                 |  | $                  | 1,992,000  |   |                   | $ |           |      |  | $ | 1,992,000  |   |  | $ |           |  
|                                                                             |  |                    |            |   |                   |   |            |      |  |   |            |  
|Equity in earnings (loss) and gain on sale of unconsolidated
    real estate |  | $                  | 1,985,000  |   |                   | $ | (158,000   | )    |  | $ | 1,871,000  |   |  | $ | (489,000   | )
|                                                                             |  |                    |            |   |                   |   |            |      |  |   |            |  







17



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                             
|-- | ----------------------------
|4. | Marketable Equity Securities



|                   |                   |            |   |                  |       |  |   |           |  |  |            |        |  |  |   |           | 
|------------------ | ----------------- | ---------- | - | ---------------- | ----- |  | - | --------- |  |  | ---------- | ------ |  |  | - | --------- | 
|                   |                   |            |   | Gross Unrealized |       |  |  
|                   |                   | Historical |   |                  |       |  |   | Estimated | 
|                   |                   | Cost       |   |                  | Gains |  |   | Losses    |  |  | Fair Value |       
|                   |                   |            |   |                  |       |  |   |           |  |  |            |       
|September 30, 2005 |                   |            |   |                  |       |  |   |           |  |  |            |        |  |  |   |          
|                   | Equity securities |            | $ | 2,268,000        |       |  | $ | 28,000    |  |  | $          | 45,000 |  |  | $ | 2,251,000 | 
|                   |                   |            |   |                  |       |  |   |           |  |  |            |       





|   |                             
|-- | ----------------------------
|5. | Identified Intangible Assets



|                                                                                                                                                                                                                                                                    |  |               |           |  |              |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- |  | ------------ | - | --------- | 
|                                                                                                                                                                                                                                                                    |  | September 30, |           |  | December 31, |  
|                                                                                                                                                                                                                                                                    |  | 2005          |           |  | 2004         |  
|                                                                                                                                                                                                                                                                    |  |               |           |  |              |  
|In-place leases, above market leases and tenant relationships,
    net of accumulated amortization of $487,000 and $176,000 at
    September 30, 2005 and December 31, 2004, respectively
    (with a weighted average life of 43 and 106 months,
    respectively) |  | $             | 5,612,000 |  |              | $ | 1,523,000 | 
|                                                                                                                                                                                                                                                                    |  |               |           |  |              |  





|   |             
|-- | ------------
|6. | Other Assets



|                                                                                                                                                    |                    |               |         |         |              |   |        |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------------- | ------- | ------- | ------------ | - | ------ | ------- | 
|                                                                                                                                                    |                    | September 30, |         |         | December 31, |  
|                                                                                                                                                    |                    | 2005          |         |         | 2004         |  
|                                                                                                                                                    |                    |               |         |         |              |  
|Deferred rent receivable                                                                                                                            |                    | $             | 92,000  |         |              | $ | 38,000 |        
|Deferred financing costs, net of accumulated amortization of
    $44,000 and $109,000 at September 30, 2005 and
    December 31, 2004, respectively |                    |               | 376,000 |         |              |   | 34,000 |        
|Lease commissions, net of accumulated amortization of $6,000 and
    $0 at September 30, 2005 and December 31, 2004                                 |                    |               | 120,000 |         |              |   | 77,000 |        
|Prepaid expenses, deposits and other                                                                                                                |                    |               | 38,000  |         |              |   |       |        
|                                                                                                                                                    |                    |               |         |         |              |  
|                                                                                                                                                    | Total other assets |               | $       | 626,000 |              |   | $      | 149,000 | 
|                                                                                                                                                    |                    |               |         |         |              |  



|   |                 
|-- | ----------------
|7. | Notes Receivable



18



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                                      
|-- | -------------------------------------
|8. | Mortgage Loans Payable and Other Debt

Mortgage Loans
Payable


















Other Debt




19



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|   |                   
|-- | ------------------
|9. | Minority Interests



|                             |  |          |          |          |                |  |       | 
|---------------------------- |  | -------- | -------- | -------- | -------------- |  | ----- | 
|                             |  |          |          | Minority |               
|                             |  | Date     |          |          | Interests      | 
|Entity                       |  | Acquired |          |          | (Unaffiliated) | 
|                             |  |          |          |          |                | 
|NNN Enterprise Way, LLC      |  |          | 05/07/04 |          |                |  | 26.7% | 
|NNN Executive Center, LLC    |  |          | 08/01/03 |          |                |  | 23.2% | 
|NNN 801 K Street, LLC        |  |          | 03/31/04 |          |                |  | 15.0% | 
|NNN Oakey Building 2003, LLC |  |          | 04/02/04 |          |                |  | 14.8% | 



|    |                
|--- | ---------------
|10. | Members Equity











20



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                           
|--- | --------------------------
|11. | Related Party Transactions



| |                  
| | -----------------
| | Offering Expenses





| |                
| | ---------------
| | Accounting Fees





| |                        
| | -----------------------
| | Real Estate Commissions





| |                            
| | ---------------------------
| | Real Estate Disposition Fee



21



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                         
| | ------------------------
| | Property Management Fees







| |                  
| | -----------------
| | Lease Commissions





| |                  
| | -----------------
| | Construction Fees





| |          
| | ---------
| | Loan Fees





| |                 
| | ----------------
| | Acquisition Fees



22



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                           
| | ------------------------------------------
| | Related Party Accounts Receivable/ Payable





| |                                           
| | ------------------------------------------
| | Unconsolidated Debt Due to Related Parties



Cunningham Lending
Group, LLC




|                           |          |           |   |             |               |  |   |         |         | 
|-------------------------- | -------- | --------- | - | ----------- | ------------- |  | - | ------- | ------- | 
|                           |          |           |   | NNN 2003    |              
|                           |          |           |   | Value Fund, |              
|                           |          | Amount of |   |             | LLCs Portion | 
|Property/Origination Date  |          | Loan      |   |             | of Debt       | 
|                           |          |           |   |             |               | 
|Emerald Plaza:             |          |           |   |             |               |  |   |        
|                           | 02/07/05 |           | $ | 232,000     |               |  | $ | 11,000  |        
|                           | 03/04/05 |           |   | 232,000     |               |  |   | 11,000  |        
|                           | 04/06/05 |           |   | 279,000     |               |  |   | 13,000  |        
|Executive Center II & III: |          |           |   |             |               |  |   |        
|                           | 06/09/05 |           |   | 1,000,000   |               |  |   | 381,000 |        
|                           | 09/12/05 |           |   | 200,000     |               |  |   | 76,000  |        
|                           |          |           |   |             |               | 
|                           |          | Total     |   | $           | 1,943,000     |  |   | $       | 492,000 | 
|                           |          |           |   |             |               | 



|    |                              
|--- | -----------------------------
|12. | Commitments and Contingencies



| |                  
| | -----------------
| | SEC Investigation

In the matter of Triple Net Properties, LLC.


Accounting for Contingencies.




| |                         
| | ------------------------
| | Prior Performance Tables



23



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |           
| | ----------
| | Litigation





| |                      
| | ---------------------
| | Environmental Matters





| |      
| | -----
| | Other





| |                    
| | -------------------
| | Unconsolidated Debt



|                             |  |            |       |                    |                    |          |             |               |  |                    |                    |  |             |               |             |  |  |   |            | 
|---------------------------- |  | ---------- | ----- | ------------------ | ------------------ | -------- | ----------- | ------------- |  | ------------------ | ------------------ |  | ----------- | ------------- | ----------- |  |  | - | ---------- | 
|                             |  |            |       |                    |                    | NNN 2003 |             |               |  |                    | NNN 2003           | 
|                             |  |            |       | Mortgage and Other |                    |          | Value Fund, |               |  | Mortgage and Other |                    |  | Value Fund, |              
|                             |  | Ownership  |       |                    | Debt Balance as of |          |             | LLCs Portion |  |                    | Debt Balance as of |  |             | LLCs Portion |            
|Property                     |  | Percentage |       |                    | September 30, 2005 |          |             | of Debt       |  |                    | December 31, 2004  |  |             | of Debt       |            
|                             |  |            |       |                    |                    |          |             |               |  |                    |                    |  |             |               |            
|801 K Street                 |  |            | 18.3% |                    |                    | $        |            |               |  | $                  |                   |  |             | $             | 41,350,000  |  |  | $ | 7,557,000  | 
|Emerald Plaza                |  |            | 4.6%  |                    |                    |          | 69,243,000  |               |  |                    | 3,185,000          |  |             |               | 68,500,000  |  |  |   | 3,117,000  | 
|Enterprise Technology Center |  |            | 8.5%  |                    |                    |          | 35,734,000  |               |  |                    | 3,037,000          |  |             |               | 36,177,000  |  |  |   | 3,076,000  | 
|Executive Center II & III    |  |            | 38.1% |                    |                    |          | 15,782,000  |               |  |                    | 6,013,000          |  |             |               | 14,744,000  |  |  |   | 5,616,000  | 
|                             |  |            |       |                    |                    |          |             |               |  |                    |                    |  |             |               |            
|                             |  |            |       |                    |                    | $        | 120,759,000 |               |  | $                  | 12,235,000         |  |             | $             | 160,771,000 |  |  | $ | 19,366,000 | 
|                             |  |            |       |                    |                    |          |             |               |  |                    |                    |  |             |               |            

24



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|    |                                                       
|--- | ------------------------------------------------------
|13. | Discontinued Operations  Properties Held for
    Sale





| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | Oakey Building, which was acquired on April 2, 2004, was
    listed for sale on June 8, 2005;    
|
| |  | Southwood Tower, which was acquired on October 27, 2004,
    was listed for sale on June 1, 2005;
|
| |  | Financial Plaza, which was acquired on October 29, 2004,
    was sold on April 13, 2005;         
|
| |  | Satellite Place, which was acquired on November 29, 2004,
    was sold on February 24, 2005.     



|                                                                               |  |                    |          |   |                   |   |          |      |  |   |            |   |  |   |           |  
|------------------------------------------------------------------------------ |  | ------------------ | -------- | - | ----------------- | - | -------- | ---- |  | - | ---------- | - |  | - | --------- | -
|                                                                               |  | Three Months Ended |          |   | Nine Months Ended |  
|                                                                               |  | September 30,      |          |   | September 30,     |  
|                                                                               |  |                    |          |   |                   |  
|                                                                               |  | 2005               |          |   | 2004              |   |          | 2005 |  |   | 2004       |  
|                                                                               |  |                    |          |   |                   |   |          |      |  |   |            |  
|Rental income                                                                  |  | $                  | 472,000  |   |                   | $ | 532,000  |      |  | $ | 2,894,000  |   |  | $ | 1,054,000 |  
|Rental expenses                                                                |  |                    | (170,000 | ) |                   |   | (277,000 | )    |  |   | (1,209,000 | ) |  |   | (458,000  | )
|Depreciation and amortization                                                  |  |                    | (37,000  | ) |                   |   | (252,000 | )    |  |   | (738,000   | ) |  |   | (485,000  | )
|                                                                               |  |                    |          |   |                   |   |          |      |  |   |            |  
|Income before other expense                                                    |  |                    | 265,000  |   |                   |   | 3,000    |      |  |   | 947,000    |   |  |   | 111,000   |  
|Interest expense                                                               |  |                    | 18,000   |   |                   |   | (100,000 | )    |  |   | (294,000   | ) |  |   | (221,000  | )
|Minority interests                                                             |  |                    | (55,000  | ) |                   |   | 24,000   |      |  |   | (97,000    | ) |  |   | 27,000    |  
|                                                                               |  |                    |          |   |                   |   |          |      |  |   |            |  
|Income (loss) from discontinued operations 
    properties held for sale, net |  |                    | 228,000  |   |                   |   | (73,000  | )    |  |   | 556,000    |   |  |   | (83,000   | )
|Gain (loss) on sale of real estate                                             |  |                    | (4,000   | ) |                   |   |         |      |  |   | 3,407,000  |   |  |   |          |  
|                                                                               |  |                    |          |   |                   |   |          |      |  |   |            |  
|Discontinued operations                                                        |  | $                  | 224,000  |   |                   | $ | (73,000  | )    |  | $ | 3,963,000  |   |  | $ | (83,000   | )
|                                                                               |  |                    |          |   |                   |   |          |      |  |   |            |  

25



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##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                 |  |               |            |  |              |   |            | 
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ---------- |  | ------------ | - | ---------- | 
|                                                                                                                                                 |  | September 30, |            |  | December 31, |  
|                                                                                                                                                 |  | 2005          |            |  | 2004         |  
|                                                                                                                                                 |  |               |            |  |              |  
|Operating properties, net of accumulated amortization of
    $271,000 and $214,000 at September 30, 2005 and
    December 31, 2004, respectively |  | $             | 14,541,000 |  |              | $ | 30,209,000 | 
|Intangible assets, net of accumulated amortization of $209,000
    and $1,564,000 at September 30, 2005 and December 31,
    2004, respectively  |  | $             | 845,000    |  |              | $ | 5,944,000  | 
|Lease commissions, net of accumulated amortization of $31,000
    and $3,000 at September 30, 2005 and December 31,
    2004, respectively       |  | $             | 769,000    |  |              | $ | 74,000     | 
|Loan fees, net of accumulated amortization of $7,000 and $41,000
    at September 30, 2005 and December 31, 2004,
    respectively               |  | $             | 297,000    |  |              | $ | 193,000    | 
|Other assets                                                                                                                                     |  | $             | 230,000    |  |              | $ | 336,000    | 
|Mortgage loans payable                                                                                                                           |  | $             | 6,337,000  |  |              | $ | 19,125,000 | 
|Security deposits and prepaid rent                                                                                                               |  | $             | 80,000     |  |              | $ | 591,000    | 
|Minority interests                                                                                                                               |  | $             | 1,546,000  |  |              | $ | 1,571,000  | 



|    |                      
|--- | ---------------------
|14. | Business Combinations







26



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NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                  
|--- | -----------------
|15. | Subsequent Events













27



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Forward-Looking Statements




Overview and Background






Business Strategy




28



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##### Table of Contents





Critical Accounting Policies




| |                 
| | ----------------
| | Use of Estimates





| |                             
| | ----------------------------
| | Unaudited Interim Statements





| |                         
| | ------------------------
| | Properties Held for Sale

Accounting for the Impairment or
Disposal of Long Lived Assets




29



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| |                                                            
| | -----------------------------------------------------------
| | Revenue Recognition and Allowance for Doubtful
    Accounts





| |           
| | ----------
| | Impairment





| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | 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.                                      







| |                          
| | -------------------------
| | Purchase Price Allocation

Business Combinations






30



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##### Table of Contents







Factors Which May Influence Results of Operations




| |              
| | -------------
| | Rental Income





| |                            
| | ---------------------------
| | Scheduled Lease Expirations







| |                   
| | ------------------
| | Sarbanes-Oxley Act



31



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##### Table of Contents









| |         
| | --------
| | Expenses



2005 Acquisitions






| |                           
| | --------------------------
| | Interwood  Houston, Texas





| |                                                
| | -----------------------------------------------
| | Woodside Corporate Park  Beaverton,
    Oregon



2005 Dispositions






| |                                      
| | -------------------------------------
| | 801 K Street  Sacramento, California



32



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| |                                  
| | ---------------------------------
| | Financial Plaza  Omaha, Nebraska





| |                                   
| | ----------------------------------
| | Satellite Place  Atlanta, Georgia



2005 Properties Held for Sale




| |                              
| | -----------------------------
| | Southwood Tower  Houston, TX



Results of Operations




33



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| |                                                                              
| | -----------------------------------------------------------------------------
| | Comparison of the Three and Nine Months Ended
    September 30, 2005 and 2004

|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |          |          |   |           |          |           |   |           |        |          |  
|------------------------------------------------------------------ | ------------------------------------------------------------- | -------------------------------------------------------------------------- | --------- | -------- | ------------- | - | -------- | -------- | ----------------- | ------- | --------- | ------- | ------------- | ---- | ------- | ------------- | --------- | - | --------- | --------- | --------- | - | ---------- | -------- | -------- | - | --------- | -------- | --------- | - | --------- | ------ | -------- | -
|                                                                   |                                                               | Three Months Ended                                                         |           |          |               |   |          |          | Nine Months Ended |         |           |         |               |     
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |     
|                                                                   |                                                               | September 30,                                                              |           |          | September 30, |   |          |          |                   | Percent |           |         | September 30, |      |         | September 30, |           |   |           |           | Percent   |  
|                                                                   |                                                               | 2005                                                                       |           |          | 2004          |   |          | Change   |                   |         | Change    |         |               | 2005 |         |               | 2004      |   |           | Change    |           |   | Change     |         
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         
|Revenues:                                                          |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |          |          |   |           |          |           |   |           |       
|                                                                   | Rental income                                                 |                                                                            | $         | 492,000  |               |   | $        | 205,000  |                   |         | $         | 287,000 |               |      |         | 140.00        | %         |   | $         | 1,248,000 |           |   | $          | 490,000  |          |   | $         | 758,000  |           |   |           | 154.69 | %       
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         
|Expenses:                                                          |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |          |          |   |           |          |           |   |           |       
|                                                                   | Rental expenses                                               |                                                                            |           | 339,000  |               |   |          | 293,000  |                   |         |           | 46,000  |               |      |         | 15.70         |           |   |           | 1,076,000 |           |   |            | 821,000  |          |   |           | 255,000  |           |   |           | 31.06  |         
|                                                                   | General and administrative                                    |                                                                            |           | 138,000  |               |   |          | 75,000   |                   |         |           | 63,000  |               |      |         | 84.00         |           |   |           | 405,000   |           |   |            | 272,000  |          |   |           | 133,000  |           |   |           | 48.90  |         
|                                                                   | Depreciation and amortization                                 |                                                                            |           | 161,000  |               |   |          | 118,000  |                   |         |           | 43,000  |               |      |         | 36.44         |           |   |           | 450,000   |           |   |            | 283,000  |          |   |           | 167,000  |           |   |           | 59.01  |         
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         
|                                                                   |                                                               |                                                                            | 638,000   |          |               |   | 486,000  |          |                   |         | 152,000   |         |               |      | 31.28   |               |           |   | 1,931,000 |           |           |   | 1,376,000  |          |          |   | 555,000   |          |           |   | 40.33     |       
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         
|Loss before other income (expense) and discontinued
    operations |                                                               |                                                                            | (146,000  | )        |               |   | (281,000 | )        |                   |         | 135,000   |         |               |      | (48.04  | )             |           |   | (683,000  | )         |           |   | (886,000   | )        |          |   | 203,000   |          |           |   | (22.91    | )     
|Other (expense) income:                                            |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |          |          |   |           |          |           |   |           |       
|                                                                   | Interest (including amortization of deferred financing costs) |                                                                            |           | (130,000 | )             |   |          | (184,000 | )                 |         |           | 54,000  |               |      |         | (29.35        | )         |   |           | (574,000  | )         |   |            | (461,000 | )        |   |           | (113,000 | )         |   |           | 24.51  |         
|                                                                   |                                                               | Interest and dividend income                                               |           |          | 159,000       |   |          |          | 25,000            |         |           |         | 134,000       |      |         |               | 536.00    |   |           |           | 277,000   |   |            |          | 25,000   |   |           |          | 252,000   |   |           |        | 1,008.00 |  
|                                                                   |                                                               | Gain on sale of marketable securities                                      |           |          | 10,000        |   |          |          |                  |         |           |         | 10,000        |      |         |               |          |   |           |           | 94,000    |   |            |          |         |   |           |          | 94,000    |   |           |        |         |  
|                                                                   |                                                               | Equity in income (loss) and gain on sale of unconsolidated real
    estate |           |          | 1,985,000     |   |          |          | (158,000          | )       |           |         | 2,143,000     |      |         |               | (1,356.33 | ) |           |           | 1,871,000 |   |            |          | (489,000 | ) |           |          | 2,360,000 |   |           |        | (482.62  | )
|                                                                   |                                                               | Minority interests                                                         |           |          | (286,000      | ) |          |          | 30,000            |         |           |         | (316,000      | )    |         |               | (1,053.33 | ) |           |           | (258,000  | ) |            |          | 107,000  |   |           |          | (365,000  | ) |           |        | (341.12  | )
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         
|Income (loss) from continuing operations                           |                                                               |                                                                            | 1,592,000 |          |               |   | (568,000 | )        |                   |         | 2,160,000 |         |               |      | (380.28 | )             |           |   | 727,000   |           |           |   | (1,704,000 | )        |          |   | 2,431,000 |          |           |   | (142.66   | )     
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         
|Discontinued operations:                                           |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |          |          |   |           |          |           |   |           |       
|Gain (loss) on sale of real estate                                 |                                                               |                                                                            | (4,000    | )        |               |   |         |          |                   |         | (4,000    | )       |               |      |        |               |           |   | 3,407,000 |           |           |   |           |          |          |   | 3,407,000 |          |           |   |          |       
|Income (loss) from discontinued operations                         |                                                               |                                                                            | 228,000   |          |               |   | (73,000  | )        |                   |         | 301,000   |         |               |      | (412.33 | )             |           |   | 556,000   |           |           |   | (83,000    | )        |          |   | 639,000   |          |           |   | (769.88   | )     
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         
|                                                                   |                                                               |                                                                            | 224,000   |          |               |   | (73,000  | )        |                   |         | 297,000   |         |               |      | (406.85 | )             |           |   | 3,963,000 |           |           |   | (83,000    | )        |          |   | 4,046,000 |          |           |   | (4,874.70 | )     
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         
|Net income (loss)                                                  |                                                               | $                                                                          | 1,816,000 |          |               | $ | (641,000 | )        |                   | $       | 2,457,000 |         |               |      | (383.31 | )%            |           | $ | 4,690,000 |           |           | $ | (1,787,000 | )        |          | $ | 6,477,000 |          |           |   | (362.45   | )%    
|                                                                   |                                                               |                                                                            |           |          |               |   |          |          |                   |         |           |         |               |      |         |               |           |   |           |           |           |   |            |         







34



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35



---



##### Table of Contents









| |           
| | ----------
| | Cash Flows



| |                                              
| | ---------------------------------------------
| | Nine Months Ended September 30, 2005 and 2004











| |                  
| | -----------------
| | Capital Resources



| |        
| | -------
| | General





36



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##### Table of Contents













Other Liquidity Needs








37



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##### Table of Contents













| |                                
| | -------------------------------
| | Sale of Unregistered Securities





| |          
| | ---------
| | Financing



38



---



##### Table of Contents











| |                    
| | -------------------
| | Unconsolidated Debt



|                             |  |            |       |                    |                    |          |             |               |  |               |                   |  |             |               |             |  |  |   |            | 
|---------------------------- |  | ---------- | ----- | ------------------ | ------------------ | -------- | ----------- | ------------- |  | ------------- | ----------------- |  | ----------- | ------------- | ----------- |  |  | - | ---------- | 
|                             |  |            |       |                    |                    | NNN 2003 |             |               |  |               | NNN 2003          | 
|                             |  |            |       | Mortgage and Other |                    |          | Value Fund, |               |  | Mortgage Debt |                   |  | Value Fund, |              
|                             |  | Ownership  |       |                    | Debt Balance as of |          |             | LLCs Portion |  |               | Balance as of     |  |             | LLCs Portion |            
|Property                     |  | Percentage |       |                    | September 30, 2005 |          |             | of Debt       |  |               | December 31, 2004 |  |             | of Debt       |            
|                             |  |            |       |                    |                    |          |             |               |  |               |                   |  |             |               |            
|801 K Street                 |  |            | 18.3% |                    |                    | $        |            |               |  | $             |                  |  |             | $             | 41,350,000  |  |  | $ | 7,557,000  | 
|Emerald Plaza                |  |            | 4.6%  |                    |                    |          | 69,243,000  |               |  |               | 3,185,000         |  |             |               | 68,500,000  |  |  |   | 3,117,000  | 
|Enterprise Technology Center |  |            | 8.5%  |                    |                    |          | 35,734,000  |               |  |               | 3,037,000         |  |             |               | 36,177,000  |  |  |   | 3,076,000  | 
|Executive Center II & III    |  |            | 38.1% |                    |                    |          | 15,782,000  |               |  |               | 6,013,000         |  |             |               | 14,744,000  |  |  |   | 5,616,000  | 
|                             |  |            |       |                    |                    |          |             |               |  |               |                   |  |             |               |            
|                             |  |            |       |                    |                    | $        | 120,759,000 |               |  | $             | 12,235,000        |  |             | $             | 160,771,000 |  |  | $ | 19,366,000 | 
|                             |  |            |       |                    |                    |          |             |               |  |               |                   |  |             |               |            





39



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| |                              
| | -----------------------------
| | Cunningham Lending Group, LLC



|                           |          |           |   |             |               |  |   |         |         | 
|-------------------------- | -------- | --------- | - | ----------- | ------------- |  | - | ------- | ------- | 
|                           |          |           |   | NNN 2003    |              
|                           |          |           |   | Value Fund, |              
|                           |          | Amount of |   |             | LLCs Portion | 
|Property/Issue Date        |          | Loan      |   |             | of Debt       | 
|                           |          |           |   |             |               | 
|Emerald Plaza:             |          |           |   |             |               |  |   |        
|                           | 02/07/05 |           | $ | 232,000     |               |  | $ | 11,000  |        
|                           | 03/04/05 |           |   | 232,000     |               |  |   | 11,000  |        
|                           | 04/06/05 |           |   | 279,000     |               |  |   | 13,000  |        
|Executive Center II & III: |          |           |   |             |               |  |   |        
|                           | 06/09/05 |           |   | 1,000,000   |               |  |   | 381,000 |        
|                           | 09/12/05 |           |   | 200,000     |               |  |   | 76,000  |        
|                           |          |           |   |             |               | 
|                           |          | Total     |   | $           | 1,943,000     |  |   | $       | 492,000 | 
|                           |          |           |   |             |               | 



| |          
| | ---------
| | Insurance



| |                                                                     
| | --------------------------------------------------------------------
| | Property Damage, Business Interruption, Earthquake and
    Terrorism



|                                          |  |                                                                                                                                
|----------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Type of Insurance Coverage                |  | Loss Exposure/Deductible                                                                                                       
|                                          |  |                                                                                                                                
|Property damage and business interruption |  | $200 million annual aggregate loss limit, subject
    to a $10,000 per occurrence deductible                                   
|Earthquake (all states)                   |  | $10 million annual aggregate loss sublimit subject
    to a 5% ($100,000 minimum) per occurrence deductible                    
|Earthquake (California properties only)   |  | $90 million in excess of $10 million annual aggregate
    loss limit                                                           
|Flood  named storm                       |  | $10 million annual aggregate loss sublimit subject
    to a 5% ($100,000 minimum) per occurrence deductible                    
|Flood  100 year flood zone               |  | $10 million annual aggregate loss sublimit subject
    to a 5% ($1,000,000 minimum) per occurrence deductible                  
|Flood  all other                         |  | $10 million annual aggregate loss sublimit subject
    to a 5% ($25,000 minimum/$100,000 maximum)
    per occurrence deductible
|Acts of terrorism                         |  | $100 million aggregate loss limit subject to a
    $10,000 per occurrence deductible                                           
|General liability                         |  | $2 million annual aggregate limit of liability and a
    $1 million each occurrence limit of liability, including
    terrorism
|Umbrella (excess liability)               |  | $100 million annual aggregate limit of liability, including
    terrorism                                                      

Debt Service Requirements




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Contractual Obligations




|                                                                           |  |           |         |  |             |   |            |             |           |   |              |  |       |   |   |  |  |   |            | 
|-------------------------------------------------------------------------- |  | --------- | ------- |  | ----------- | - | ---------- | ----------- | --------- | - | ------------ |  | ----- | - | - |  |  | - | ---------- | 
|                                                                           |  | Less Than |         |  |             |   |            |             | More Than |   |             
|                                                                           |  | 1 Year    |         |  | 1-3 Years   |   |            | 4-5 Years   |           |   | 5 Years      |  |      
|                                                                           |  | (2005)    |         |  | (2006-2007) |   |            | (2008-2009) |           |   | (After 2009) |  | Total |  
|                                                                           |  |           |         |  |             |   |            |             |           |   |              |  |       |  
|Principal payments  fixed rate debt                                       |  | $         |        |  |             | $ | 5,000,000  |             |           | $ |             |  |       | $ |  |  |  | $ | 5,000,000  | 
|Interest payments  fixed rate debt                                        |  |           | 125,000 |  |             |   | 875,000    |             |           |   |             |  |       |   |  |  |  |   | 1,000,000  | 
|Principal payments  variable rate debt                                    |  |           |        |  |             |   | 11,837,000 |             |           |   | 15,915,000   |  |       |   |  |  |  |   | 27,752,000 | 
|Interest payments  variable rate debt (rate as of
    September 30, 2005) |  |           | 480,000 |  |             |   | 3,334,000  |             |           |   | 870,000      |  |       |   |  |  |  |   | 4,684,000  | 
|                                                                           |  |           |         |  |             |   |            |             |           |   |              |  |       |   |  
|Total                                                                      |  | $         | 605,000 |  |             | $ | 21,046,000 |             |           | $ | 16,785,000   |  |       | $ |  |  |  | $ | 38,436,000 | 
|                                                                           |  |           |         |  |             |   |            |             |           |   |              |  |       |   |  



| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements





| |                  
| | -----------------
| | SEC Investigation

In the matter of Triple Net Properties, LLC.


Accounting for Contingencies.




| |                         
| | ------------------------
| | Prior Performance Tables



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Inflation




Subsequent Events














42



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|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures About Market
    Risk





|                                         |  |      |   |      |  |      |   |  |      |   |            |      |  |            |            |       |  |   |   |  |  |   |   |  |  |   |            |  
|---------------------------------------- |  | ---- | - | ---- |  | ---- | - |  | ---- | - | ---------- | ---- |  | ---------- | ---------- | ----- |  | - | - |  |  | - | - |  |  | - | ---------- | -
|                                         |  | 2005 |   | 2006 |  | 2007 |   |  | 2008 |   |            | 2009 |  | Thereafter |            | Total | 
|                                         |  |      |   |      |  |      |   |  |      |   |            |      |  |            |            |       | 
|Fixed rate debt  principal payments     |  | $    |  |      |  | $    |  |  |      | $ | 5,000,000  |      |  | $          |           |       |  | $ |  |  |  | $ |  |  |  | $ | 5,000,000  |  
|Average interest rate on maturing debt   |  |      |  |      |  |      |  |  |      |   | 10         | %    |  |            |           |       |  |   |  |  |  |   |  |  |  |   | 10         | %
|Variable rate debt   principal payments |  | $    |  |      |  | $    |  |  |      | $ | 11,837,000 |      |  | $          | 15,915,000 |       |  | $ |  |  |  | $ |  |  |  | $ | 27,752,000 |  
|Average interest rate on maturing debt   |  |      |  |      |  |      |  |  |      |   | 6.17       | %    |  |            | 7.21       | %     |  |   |  |  |  |   |  |  |  |   | 6.77       | %








|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

Evaluation of disclosure controls and
procedures.






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##### Table of Contents









| |   |                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our need to formalize and follow policies and procedures for
    estimating and recording certain fees and charges;                                                                                                                                                                             
|
| |  | implementation of management information systems;                                                                                                                                                                                                                                               
|
| |  | our need to formalize and follow policies and procedures for the
    accounting for our real estate properties (including the
    appropriateness of useful lives of intangible assets and the
    recoverability of certain intangible assets that relate to
    existing and vacated tenants);
|
| |  | the need to develop a fixed asset software system to track
    additions and dispositions of fixed assets;                                                                                                                                                                                      
|
| |  | the need to perform and review reconciliations of all
    significant accounts in a timely manner;                                                                                                                                                                                              
|
| |  | the need for formal policies and procedures for estimating and
    recording management fees and common area maintenance charges;                                                                                                                                                               
|
| |  | the need to identify and record all accounts payable and accrued
    expenses in a timely manner; and                                                                                                                                                                                           
|
| |  | the need to develop policies regarding formalized management
    information systems.                                                                                                                                                                                                           





44



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Changes in internal control over financial
reporting.


45



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##### Table of Contents






PART II  OTHER INFORMATION







|        |                   
|------- | ------------------
|Item 1. | Legal Proceedings.

SEC Investigation


In the matter of Triple Net Properties, LLC.


Accounting for Contingencies.




| |                         
| | ------------------------
| | Prior Performance Tables







| |           
| | ----------
| | Litigation








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



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|        |                                 
|------- | --------------------------------
|Item 3. | Defaults Upon Senior Securities.








|        |                                                         
|------- | --------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders.








|        |                   
|------- | ------------------
|Item 5. | Other Information.








|        |          
|------- | ---------
|Item 6. | Exhibits.



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SIGNATURES






| |                         
| | ------------------------
| | NNN 2003 Value Fund, LLC
| | (Registrant)            



| |     |                           
| | --- | --------------------------
| | By: | /s/ Richard T. Hutton, Jr.

| |                        
| | -----------------------
| |                        
| | Richard T. Hutton, Jr. 
| | Chief Executive Officer



| |     |                    
| | --- | -------------------
| | By: | /s/ Kelly J. Caskey

| |                        
| | -----------------------
| |                        
| | Kelly J. Caskey        
| | Chief Financial Officer



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##### Table of Contents






EXHIBIT INDEX






|        |    |             |  |                                                                                                                                                                                                                                                                                                                                      
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 3  | .1          |  | Articles of Organization of NNN 2003 Value Fund, LLC, dated
    June 19, 2003, (included as Exhibit 3.1 to our
    Form 10 filed by us on May 2, 2005 and incorporated
    herein by reference).                                                                                                                                     
|        | 10 | .1          |  | Purchase and Sale Agreement and Escrow Instructions dated as of
    July 1, 2005 by and between PS Business Parks, L.P. and
    Triple Net Properties, LLC (included as Exhibit 10.01 to
    the Form 8-K filed by us on October 7, 2005 and
    incorporated herein by reference).                                                  
|       
|        | 10 | .2          |  | First Amendment to Purchase and Sale Agreement and Escrow
    Instructions dated as of September 12, 2005 by and between
    PS Business Parks, L.P. and Triple Net Properties, LLC (included
    as Exhibit 10.02 to the Form 8-K filed by us on
    October 7, 2005 and incorporated herein by reference).                         
|       
|        | 10 | .3          |  | Second Amendment to Purchase and Sale Agreement and Escrow
    Instructions dated as of September 1, 2005 by and between
    PS Business Parks, L.P. and Triple Net Properties, LLC (included
    as Exhibit 10.03 to the Form 8-K filed by us on
    October 7, 2005 and incorporated herein by reference).                         
|       
|        | 10 | .4          |  | Addendum To and Assignment Of Real Estate Purchase Contract and
    Receipt for Deposit Phase I by and between PS Business
    Parks, L.P. and Triple Net Properties, LLC dated as of
    September 26, 2005 (included as Exhibit 10.04 to the
    Form 8-K filed by us on October 7, 2005 and
    incorporated herein by reference).
|       
|        | 10 | .5          |  | Third Amendment to Purchase and Sale Agreement and Escrow
    Instructions dated as of September 29, 2005 by and between
    PS Business Parks, L.P. and Triple Net Properties, LLC (included
    as Exhibit 10.05 to the Form 8-K filed by us on
    October 7, 2005 and incorporated herein by reference).                         
|       
|        | 10 | .6*         |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions by and between NNN VF Southwood Tower, LP and
    Rancho Pacific Development dated as of August 8, 2005.                                                                                                                                                
|       
|        | 10 | .7*         |  | Addendum to Purchase Agreement by and between NNN VF Southwood
    Tower, LP and Rancho Pacific Development dated as of
    September 9, 2005.                                                                                                                                                                                       
|       
|        | 10 | .8*         |  | Agreement for Purchase and Sale of Real Property and Escrow
    Instructions dated November 3, 2005, by and between NNN Oakley
    Building 2003, LLC and Trans-Aero Land & Development
    Corporation.                                                                                                                             
|       
|        | 31 | .1*         |  | Certification of Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                             
|       
|        | 31 | .2*         |  | Certification of Chief Financial Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                             
|       
|        | 32 | .1*         |  | Certification of Chief 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 Chief Financial Officer, pursuant to
    18 U.S.C. Section 1350, as created by Section 906
    of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                   






|  |                
|- | ---------------
|* | Filed herewith.