##### Table of Contents









UNITED STATES


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 March 31, 2006                                               
|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                                    |  | (714) 667-8252                                          
|Santa Ana, California 92705(Address of principal executive offices) |  | (Registrants telephone number,
    including area code)

N/A


(Former name)


þ o


12b-2


o o þ


12b-2 o þ












---



##### 










NNN 2003 VALUE FUND, LLC


(A Delaware Corporation)


TABLE OF CONTENTS


|                                   |  |                                                                                                                                                        |    |  |    | 
|---------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------ | -- |  | -- | 
|PART I  FINANCIAL
    INFORMATION
|Item 1.                            |  | Financial Statements                                                                                                                                   |    |  | 3  | 
|                                   |  | Condensed Consolidated Balance Sheets as of
    March 31, 2006 (Unaudited) and December 31, 2005
    (Unaudited)                                       |    |  | 4  | 
|                                   |  | Condensed Consolidated Statements of
    Operations and Comprehensive Income (Loss) For the Three Months
    Ended March 31, 2006 and 2005 (Unaudited) |    |  | 5  | 
|                                   |  | Condensed Consolidated Statement of Unit
    Holders Equity For the Three Months Ended March 31,
    2006 (Unaudited)                                 |    |  | 6  | 
|                                   |  | Condensed Consolidated Statements of Cash
    Flows For the Three Months Ended March 31, 2006 and 2005
    (Unaudited)                                 |    |  | 7  | 
|                                   |  | Notes to Condensed Consolidated Financial
    Statements (Unaudited)                                                                                   |    |  | 8  | 
|Item 2.                            |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                                              |    |  | 22 | 
|Item 3.                            |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                                         |    |  | 33 | 
|Item 4.                            |  | Controls and Procedures                                                                                                                                |    |  | 33 | 
|                                  
|PART II  OTHER
    INFORMATION   
|Item 1.                            |  | Legal Proceedings                                                                                                                                      |    |  | 34 | 
|Item 1A.                           |  | Risk Factors                                                                                                                                           |    |  | 35 | 
|Item 2.                            |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                                                                                        |    |  | 35 | 
|Item 3.                            |  | Defaults Upon Senior Securities                                                                                                                        |    |  | 35 | 
|Item 4.                            |  | Submission of Matters to a Vote of Security
    Holders                                                                                                |    |  | 35 | 
|Item 5.                            |  | Other Information                                                                                                                                      |    |  | 35 | 
|Item 6.                            |  | Exhibits                                                                                                                                               |    |  | 35 | 
|Signatures                         |  |                                                                                                                                                        | 36 | 
|EXHIBIT 31.1                      
|EXHIBIT 31.2                      
|EXHIBIT 32.1                      
|EXHIBIT 32.2                      



2



---



##### Table of Contents






PART I  FINANCIAL INFORMATION







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

10-Q 10-K,


3



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC





CONDENSED CONSOLIDATED BALANCE SHEETS


As of March 31, 2006 (Unaudited) and December 31,
2005 (Unaudited)


|                                                                   |                                           |           |             |            |              |   |             |            | 
|------------------------------------------------------------------ | ----------------------------------------- | --------- | ----------- | ---------- | ------------ | - | ----------- | ---------- | 
|                                                                   |                                           | March 31, |             |            | December 31, |  
|                                                                   |                                           | 2006      |             |            | 2005         |  
|                                                                   |                                           |           |             |            |              |  
|ASSETS                                                            
|Real estate investments:                                           |                                           |           |             |            |              |   |             |           
|                                                                   | Operating properties, net                 |           | $           | 32,873,000 |              |   | $           | 32,952,000 | 
|                                                                   | Land held for development                 |           |             | 730,000    |              |   |             | 730,000    | 
|                                                                   | Properties held for sale, net             |           |             | 49,475,000 |              |   |             | 62,019,000 | 
|                                                                   | Investments in unconsolidated real estate |           |             | 5,874,000  |              |   |             | 5,631,000  | 
|                                                                   |                                           |           |             |            |              |  
|                                                                   |                                           |           | 88,952,000  |            |              |   | 101,332,000 |           
|Cash and cash equivalents                                          |                                           |           | 14,267,000  |            |              |   | 10,760,000  |           
|Investment in marketable securities                                |                                           |           | 2,550,000   |            |              |   | 1,860,000   |           
|Accounts receivable, net                                           |                                           |           | 540,000     |            |              |   | 273,000     |           
|Accounts receivable from related parties                           |                                           |           | 643,000     |            |              |   | 721,000     |           
|Restricted cash                                                    |                                           |           | 4,216,000   |            |              |   | 4,049,000   |           
|Identified intangible assets, net                                  |                                           |           | 4,942,000   |            |              |   | 5,240,000   |           
|Other assets  properties held for sale                            |                                           |           | 16,308,000  |            |              |   | 17,861,000  |           
|Other assets, net                                                  |                                           |           | 764,000     |            |              |   | 794,000     |           
|Notes receivable                                                   |                                           |           | 2,420,000   |            |              |   | 2,300,000   |           
|                                                                   |                                           |           |             |            |              |  
|Total assets                                                       |                                           | $         | 135,602,000 |            |              | $ | 145,190,000 |           
|                                                                   |                                           |           |             |            |              |  
|                                                                  
|LIABILITIES, MINORITY INTERESTS AND UNIT HOLDERS
    EQUITY      
|Mortgage loans payable                                             |                                           | $         | 26,415,000  |            |              | $ | 26,415,000  |           
|Mortgage loans payable secured by properties held for sale         |                                           |           | 58,320,000  |            |              |   | 67,077,000  |           
|Other debt                                                         |                                           |           | 540,000     |            |              |   |            |           
|Accounts payable and accrued liabilities                           |                                           |           | 3,438,000   |            |              |   | 3,833,000   |           
|Accounts payable due to related parties                            |                                           |           | 352,000     |            |              |   | 330,000     |           
|Advances from related parties                                      |                                           |           |            |            |              |   | 1,385,000   |           
|Other liabilities  properties held for sale, net                  |                                           |           | 1,686,000   |            |              |   | 2,242,000   |           
|Security deposits and prepaid rent                                 |                                           |           | 402,000     |            |              |   | 406,000     |           
|                                                                   |                                           |           |             |            |              |  
|                                                                   |                                           |           | 91,153,000  |            |              |   | 101,688,000 |           
|Minority interests                                                 |                                           |           | 701,000     |            |              |   | 1,368,000   |           
|Minority interests  properties held for sale                      |                                           |           | 3,293,000   |            |              |   | 1,613,000   |           
|                                                                   |                                           |           |             |            |              |  
|                                                                   |                                           |           | 3,994,000   |            |              |   | 2,981,000   |           
|Commitments and contingencies (Note 12)                            |                                           |           |             |            |              |   |             |           
|Unit holders equity                                               |                                           |           | 40,435,000  |            |              |   | 40,522,000  |           
|Accumulated other comprehensive income (loss)                      |                                           |           | 20,000      |            |              |   | (1,000      | )         
|                                                                   |                                           |           |             |            |              |  
|Total unit holders equity                                         |                                           |           | 40,455,000  |            |              |   | 40,521,000  |           
|                                                                   |                                           |           |             |            |              |  
|Total liabilities, minority interests and unit holders
    equity |                                           | $         | 135,602,000 |            |              | $ | 145,190,000 |           
|                                                                   |                                           |           |             |            |              |  



4



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


AND COMPREHENSIVE INCOME (LOSS)


For the Three Months Ended March 31, 2006 and 2005


(Unaudited)


|                                                                     |                                                                                |                    |           |            |      |   |          |          |  
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------ | --------- | ---------- | ---- | - | -------- | -------- | -
|                                                                     |                                                                                | Three Months Ended |          
|                                                                     |                                                                                | March 31,          |          
|                                                                     |                                                                                |                    |          
|                                                                     |                                                                                | 2006               |           |            | 2005 |  
|                                                                     |                                                                                |                    |           |            |      |  
|Revenues:                                                            |                                                                                |                    |           |            |      |   |          |         
|                                                                     | Rental income                                                                  |                    | $         | 976,000    |      |   | $        | 363,000  |  
|                                                                     |                                                                                |                    |           |            |      |  
|Expenses:                                                            |                                                                                |                    |           |            |      |   |          |         
|                                                                     | Rental expenses                                                                |                    |           | 581,000    |      |   |          | 322,000  |  
|                                                                     | General and administrative                                                     |                    |           | 225,000    |      |   |          | 57,000   |  
|                                                                     | Depreciation and amortization                                                  |                    |           | 467,000    |      |   |          | 136,000  |  
|                                                                     |                                                                                |                    |           |            |      |  
|                                                                     |                                                                                |                    | 1,273,000 |            |      |   | 515,000  |         
|Loss before other income (expense) and discontinued operations       |                                                                                |                    | (297,000  | )          |      |   | (152,000 | )       
|Other income (expense):                                              |                                                                                |                    |           |            |      |   |          |         
|                                                                     | Interest expense (including amortization of deferred financing
    costs)      |                    |           | (594,000   | )    |   |          | (220,000 | )
|                                                                     | Interest and dividend income                                                   |                    |           | 174,000    |      |   |          | 31,000   |  
|                                                                     | Gain on sale of marketable securities                                          |                    |           | 75,000     |      |   |          |         |  
|                                                                     | Equity in earnings (losses) and gain on sale of unconsolidated
    real estate |                    |           | (209,000   | )    |   |          | 159,000  |  
|                                                                     | Other income                                                                   |                    |           | 66,000     |      |   |          |         |  
|                                                                     | Minority interests                                                             |                    |           | (5,000     | )    |   |          | (48,000  | )
|                                                                     |                                                                                |                    |           |            |      |  
|Loss from continuing operations before discontinued operations       |                                                                                |                    | (790,000  | )          |      |   | (230,000 | )       
|Discontinued operations:                                             |                                                                                |                    |           |            |      |   |          |         
|                                                                     | Gain on sale of real estate                                                    |                    |           | 5,656,000  |      |   |          | 389,000  |  
|                                                                     | Income (loss) from discontinued operations                                     |                    |           | (1,444,000 | )    |   |          | 211,000  |  
|                                                                     |                                                                                |                    |           |            |      |  
|                                                                     |                                                                                |                    | 4,212,000 |            |      |   | 600,000  |         
|                                                                     |                                                                                |                    |           |            |      |  
|Net income                                                           |                                                                                | $                  | 3,422,000 |            |      | $ | 370,000  |         
|                                                                     |                                                                                |                    |           |            |      |  
|Comprehensive income:                                                |                                                                                |                    |           |            |      |   |          |         
|                                                                     | Net income                                                                     |                    | $         | 3,422,000  |      |   | $        | 370,000  |  
|                                                                     | Unrealized gain (loss) on marketable securities                                |                    |           | 21,000     |      |   |          | (25,000  | )
|                                                                     |                                                                                |                    |           |            |      |  
|Comprehensive income                                                 |                                                                                | $                  | 3,443,000 |            |      | $ | 345,000  |         
|                                                                     |                                                                                |                    |           |            |      |  
|Net income (loss) per unit:                                          |                                                                                |                    |           |            |      |   |          |         
|                                                                     | Continuing operations  basic and diluted                                      |                    | $         | (79.06     | )    |   | $        | (23.00   | )
|                                                                     | Discontinued operations  basic and diluted                                    |                    |           | 421.50     |      |   |          | 60.00    |  
|                                                                     |                                                                                |                    |           |            |      |  
|Total net income per unit  basic and diluted                        |                                                                                | $                  | 342.44    |            |      | $ | 37.00    |         
|                                                                     |                                                                                |                    |           |            |      |  
|Weighted average number of units outstanding  basic
    and diluted |                                                                                |                    | 9,993     |            |      |   | 10,000   |         
|                                                                     |                                                                                |                    |           |            |      |  



5



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC





CONDENSED CONSOLIDATED STATEMENT OF UNIT HOLDERS
EQUITY


For the Three Months Ended March 31, 2006


(Unaudited)


|                                         |  |           |        |   |       |   |            |  
|---------------------------------------- |  | --------- | ------ | - | ----- | - | ---------- | -
|                                         |  | Number of |        |   |      
|                                         |  | Units     |        |   | Total |  
|                                         |  |           |        |   |       |  
|BALANCE  December 31, 2005              |  |           | 10,000 |   |       | $ | 40,521,000 |  
|Units repurchased                        |  |           | (30    | ) |       |   | (134,000   | )
|Distributions                            |  |           |       |   |       |   | (3,375,000 | )
|Net income                               |  |           |       |   |       |   | 3,422,000  |  
|Unrealized gain on marketable securities |  |           |       |   |       |   | 21,000     |  
|                                         |  |           |        |   |       |  
|BALANCE  March 31, 2006                 |  |           | 9,970  |   |       | $ | 40,455,000 |  
|                                         |  |           |        |   |       |  



6



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC





CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Three Months Ended March 31, 2006 and 2005


(Unaudited)


|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |             |          |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------------- | ---------- | -------- | ----------- | ---------- | ----------- | -------- | ---------- | -
|                                                                                                                                                                                                                 |                                                                                                                                     | Three Months Ended March 31,                                                        |                                          
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                          
|                                                                                                                                                                                                                 |                                                                                                                                     | 2006                                                                                |                                           |            | 2005     |            
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                                                                                                             |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |            
|Net income                                                                                                                                                                                                       |                                                                                                                                     | $                                                                                   | 3,422,000                                 |            |          | $           | 370,000    |            
|Adjustments to reconcile net income to net cash provided by
    operating activities                                                                                                                             |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |            
|                                                                                                                                                                                                                 | Gain on sale of real estate                                                                                                         |                                                                                     |                                           | (5,656,000 | )        |             |            |            |         
|                                                                                                                                                                                                                 | Gain on sale of marketable securities                                                                                               |                                                                                     |                                           | (75,000    | )        |             |            |            |         
|                                                                                                                                                                                                                 | Depreciation and amortization (including deferred financing
    costs, above/below market leases and deferred rent)                 |                                                                                     |                                           | 275,000    |          |             |            | 872,000     |         
|                                                                                                                                                                                                                 | Distributions received in excess of equity in earnings (losses)
    from investments and gain on sale in unconsolidated real estate |                                                                                     |                                           | 245,000    |          |             |            | 194,000     |         
|                                                                                                                                                                                                                 | Minority interests                                                                                                                  |                                                                                     |                                           | 1,214,000  |          |             |            | 48,000      |         
|                                                                                                                                                                                                                 | Provision for doubtful accounts                                                                                                     |                                                                                     |                                           |           |          |             |            | 51,000      |         
|                                                                                                                                                                                                                 | Change in operating assets and liabilities:                                                                                         |                                                                                     |                                           |            |          |             |            |             |         
|                                                                                                                                                                                                                 |                                                                                                                                     | Accounts receivable, including receivables from related parties                     |                                           |            | (106,000 | )           |            |             | (10,000  | )         
|                                                                                                                                                                                                                 |                                                                                                                                     | Other assets                                                                        |                                           |            | 127,000  |             |            |             | 97,000   |           
|                                                                                                                                                                                                                 |                                                                                                                                     | Accounts payable and accrued liabilities, including payables to
    related parties |                                           |            | 787,000  |             |            |             | (551,000 | )         
|                                                                                                                                                                                                                 |                                                                                                                                     | Security deposits and prepaid rent                                                  |                                           |            | 7,000    |             |            |             | 26,000   |           
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     | Net cash provided by operating activities |            |          | 240,000     |            |             |          | 1,097,000  |  
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|CASH FLOWS FROM INVESTING ACTIVITIES                                                                                                                                                                             |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |            
|                                                                                                                                                                                                                 | Acquisition of real estate operating properties                                                                                     |                                                                                     |                                           |           |          |             |            | (8,154,000  | )       
|                                                                                                                                                                                                                 | Acquisition of investments in unconsolidated real estate                                                                            |                                                                                     |                                           | (157,000   | )        |             |            | (650,000    | )       
|                                                                                                                                                                                                                 | Proceeds from sale of real estate operating properties                                                                              |                                                                                     |                                           | 20,299,000 |          |             |            | 18,493,000  |         
|                                                                                                                                                                                                                 | Capital expenditures                                                                                                                |                                                                                     |                                           | (1,356,000 | )        |             |            | (437,000    | )       
|                                                                                                                                                                                                                 | Purchase of marketable securities                                                                                                   |                                                                                     |                                           | (2,441,000 | )        |             |            | (2,565,000  | )       
|                                                                                                                                                                                                                 | Proceeds from sale of marketable securities                                                                                         |                                                                                     |                                           | 1,847,000  |          |             |            |            |         
|                                                                                                                                                                                                                 | Restricted cash                                                                                                                     |                                                                                     |                                           | (167,000   | )        |             |            | (53,000     | )       
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     | Net cash provided by investing activities |            |          | 18,025,000  |            |             |          | 6,634,000  |  
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                                                                                                             |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |            
|                                                                                                                                                                                                                 | Borrowings on mortgages payable and other debt                                                                                      |                                                                                     |                                           | 540,000    |          |             |            | 5,564,000   |         
|                                                                                                                                                                                                                 | Principal repayments on mortgages payable and other debt                                                                            |                                                                                     |                                           | (8,757,000 | )        |             |            | (11,015,000 | )       
|                                                                                                                                                                                                                 | Principal repayments on related parties borrowings                                                                                  |                                                                                     |                                           | (2,245,000 | )        |             |            |            |         
|                                                                                                                                                                                                                 | Minority interests contributions                                                                                                    |                                                                                     |                                           | 1,952,000  |          |             |            |            |         
|                                                                                                                                                                                                                 | Minority interests distributions                                                                                                    |                                                                                     |                                           | (2,739,000 | )        |             |            | (128,000    | )       
|                                                                                                                                                                                                                 | Distributions                                                                                                                       |                                                                                     |                                           | (3,375,000 | )        |             |            | (872,000    | )       
|                                                                                                                                                                                                                 | Repurchase of member units, net of costs                                                                                            |                                                                                     |                                           | (134,000   | )        |             |            |            |         
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     | Net cash used in financing activities     |            |          | (14,758,000 | )          |             |          | (6,451,000 | )
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                                                                                                                                        |                                                                                                                                     |                                                                                     | 3,507,000                                 |            |          |             | 1,280,000  |            
|CASH AND CASH EQUIVALENTS  beginning of period                                                                                                                                                                  |                                                                                                                                     |                                                                                     | 10,760,000                                |            |          |             | 9,896,000  |            
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|CASH AND CASH EQUIVALENTS  end of period                                                                                                                                                                        |                                                                                                                                     | $                                                                                   | 14,267,000                                |            |          | $           | 11,176,000 |            
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |            
|Cash paid during the period for:                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |            
|                                                                                                                                                                                                                 | Interest                                                                                                                            |                                                                                     | $                                         | 1,352,000  |          |             | $          | 380,000     |         
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|NONCASH INVESTING ACTIVITIES                                                                                                                                                                                     |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |            
|Accrual for tenant improvements and capital expenditures                                                                                                                                                         |                                                                                                                                     | $                                                                                   | (1,195,000                                | )          |          | $           |           |            
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|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: |                                                                                                                                     |                                                                                     |                                           |            |          |             |            |            
|                                                                                                                                                                                                                 | Restricted cash                                                                                                                     |                                                                                     | $                                         |           |          |             | $          | (32,000     | )       
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|                                                                                                                                                                                                                 | Other assets                                                                                                                        |                                                                                     | $                                         |           |          |             | $          | (85,000     | )       
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            
|                                                                                                                                                                                                                 | Accrued expenses and security deposits                                                                                              |                                                                                     | $                                         |           |          |             | $          | 11,000      |         
|                                                                                                                                                                                                                 |                                                                                                                                     |                                                                                     |                                           |            |          |            



7



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




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





vice-president




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



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

10-K,


8



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                            
| | ---------------------------
| | Principles of Consolidation

Consolidation of Variable Interest
Entities




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





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





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



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



|                                  |  |           |            |   |              |   |            |  
|--------------------------------- |  | --------- | ---------- | - | ------------ | - | ---------- | -
|                                  |  | March 31, |            |   | December 31, |  
|                                  |  | 2006      |            |   | 2005         |  
|                                  |  |           |            |   |              |  
|Buildings and tenant improvements |  | $         | 26,465,000 |   |              | $ | 26,289,000 |  
|Land                              |  |           | 7,389,000  |   |              |   | 7,389,000  |  
|                                  |  |           |            |   |              |  
|                                  |  |           | 33,854,000 |   |              |   | 33,678,000 |  
|Less: accumulated depreciation    |  |           | (981,000   | ) |              |   | (726,000   | )
|                                  |  |           |            |   |              |  
|                                  |  | $         | 32,873,000 |   |              | $ | 32,952,000 |  
|                                  |  |           |            |   |              |  





| |                                             
| | --------------------------------------------
| | 2006 Dispositions of Consolidated Properties



| |                                   
| | ----------------------------------
| | Oakey Building  Las Vegas, Nevada



9



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                          
| | -----------------------------------------
| | 3500 Maple  Dallas, Texas (partial sale)

tenant-in




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



|                             |  |          |                   |            |       |  |           |      |  |              |           |  |  |   |           | 
|---------------------------- |  | -------- | ----------------- | ---------- | ----- |  | --------- | ---- |  | ------------ | --------- |  |  | - | --------- | 
|                             |  |          |                   | Percentage |       |  | March 31, |      |  | December 31, |          
|Description                  |  | Location |                   |            | Owned |  |           | 2006 |  |              | 2005      | 
|                             |  |          |                   |            |       |  |           |      |  |              |           | 
|Enterprise Technology Center |  |          | Scotts Valley, CA |            |       |  | 8.5       | %    |  | $            | 2,618,000 |  |  | $ | 2,638,000 | 
|Executive Center II & III    |  |          | Dallas, TX        |            |       |  | 41.1      | %    |  |              | 3,256,000 |  |  |   | 2,993,000 | 
|                             |  |          |                   |            |       |  |           |      |  |              |           | 
|Total                        |  |          |                   |            |       |  |           |      |  | $            | 5,874,000 |  |  | $ | 5,631,000 | 
|                             |  |          |                   |            |       |  |           |      |  |              |           | 



|                                      |  |           |            |  |              |   |            | 
|------------------------------------- |  | --------- | ---------- |  | ------------ | - | ---------- | 
|                                      |  | March 31, |            |  | December 31, |  
|                                      |  | 2006      |            |  | 2005         |  
|                                      |  |           |            |  |              |  
|Balance Sheet Data:                   |  |           |            |  |              |   |            | 
|Assets (primarily real estate)        |  | $         | 86,214,000 |  |              | $ | 87,238,000 | 
|                                      |  |           |            |  |              |  
|Mortgage loans and other debt payable |  | $         | 51,397,000 |  |              | $ | 50,851,000 | 
|Other liabilities                     |  |           | 6,118,000  |  |              |   | 6,614,000  | 
|Equity                                |  |           | 28,699,000 |  |              |   | 29,773,000 | 
|                                      |  |           |            |  |              |  
|Total liabilities and equity          |  | $         | 86,214,000 |  |              | $ | 87,238,000 | 
|                                      |  |           |            |  |              |  
|Our share of equity                   |  | $         | 5,874,000  |  |              | $ | 5,631,000  | 
|                                      |  |           |            |  |              |  

|                                                                               |  |                    |           |   |      |   |           |  
|------------------------------------------------------------------------------ |  | ------------------ | --------- | - | ---- | - | --------- | -
|                                                                               |  | Three Months Ended |          
|                                                                               |  | March 31,          |          
|                                                                               |  |                    |          
|                                                                               |  | 2006               |           |   | 2005 |  
|                                                                               |  |                    |           |   |      |  
|Revenues                                                                       |  | $                  | 3,400,000 |   |      | $ | 8,221,000 |  
|Rental and other expenses                                                      |  |                    | 3,797,000 |   |      |   | 8,835,000 |  
|                                                                               |  |                    |           |   |      |  
|Net loss                                                                       |  | $                  | (397,000  | ) |      | $ | (614,000  | )
|                                                                               |  |                    |           |   |      |  
|Equity in earnings (losses) and gain on sale of
    unconsolidated real estate |  | $                  | (209,000  | ) |      | $ | 159,000   |  
|                                                                               |  |                    |           |   |      |  



10



---



##### 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 |       
|               |                   |            |   |                  |       |  |   |           |  |  |            |       
|March 31, 2006 |                   |            |   |                  |       |  |   |           |  |  |            |        |  |  |   |          
|               | Equity securities |            | $ | 2,530,000        |       |  | $ | 46,000    |  |  | $          | 26,000 |  |  | $ | 2,550,000 | 
|               |                   |            |   |                  |       |  |   |           |  |  |            |       





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



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |           |           |  |              |   |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | --------- |  | ------------ | - | --------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | March 31, |           |  | December 31, |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 2006      |           |  | 2005         |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |           |           |  |              |  
|In-place leases, above market leases and tenant relationships,
    net of accumulated amortization of $1,098,000 and $800,000 as of
    March 31, 2006 and December 31, 2005, respectively
    (with a weighted average life of 48 months, 55 months,
    and 93 months for in-place leases, above market leases and
    tenant relationships, respectively, as of March 31, 2006
    and a weighted-average life of 50 months, 57 months,
    and 96 months for in-place leases, above market leases and
    tenant relationships, respectively, as of December 31, 2005) |  | $         | 4,942,000 |  |              | $ | 5,240,000 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |           |           |  |              |  



11



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




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



|                                                                                                                                                   |                    |           |         |         |              |   |         |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | --------- | ------- | ------- | ------------ | - | ------- | ------- | 
|                                                                                                                                                   |                    | March 31, |         |         | December 31, |  
|                                                                                                                                                   |                    | 2006      |         |         | 2005         |  
|                                                                                                                                                   |                    |           |         |         |              |  
|Deferred rent receivable                                                                                                                           |                    | $         | 208,000 |         |              | $ | 158,000 |        
|Deferred financing costs, net of accumulated amortization of
    $137,000 and $92,000 as of March 31, 2006 and
    December 31, 2005, respectively |                    |           | 285,000 |         |              |   | 331,000 |        
|Lease commissions, net of accumulated amortization of $17,000
    and $10,000 as of March 31, 2006 and December 31,
    2005, respectively         |                    |           | 160,000 |         |              |   | 158,000 |        
|Prepaid expenses, deposits and other                                                                                                               |                    |           | 111,000 |         |              |   | 147,000 |        
|                                                                                                                                                   |                    |           |         |         |              |  
|                                                                                                                                                   | Total other assets |           | $       | 764,000 |              |   | $       | 794,000 | 
|                                                                                                                                                   |                    |           |         |         |              |  



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





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









| |           
| | ----------
| | Other Debt



12



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






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



|                               |  |          |          |  |           |  |       | 
|------------------------------ |  | -------- | -------- |  | --------- |  | ----- | 
|                               |  | Date     |          |  | Minority  | 
|Entity                         |  | Acquired |          |  | Interests | 
|                               |  |          |          |  |           | 
|NNN Enterprise Way, LLC        |  |          | 05/07/04 |  |           |  | 26.7% | 
|3500 Maple  Other TIC members |  |          | 12/27/05 |  |           |  | 15.0% | 



|    |                     
|--- | --------------------
|10. | Unit Holders Equity











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



| |                                                 
| | ------------------------------------------------
| | The Operating Agreement and Management Agreement



13



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)








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





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





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





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





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





| |               
| | --------------
| | Incentive Fees



14



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






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





| |                         
| | ------------------------
| | Related Party Financings





|                           |          |           |   |             |               |  |   |         |         | 
|-------------------------- | -------- | --------- | - | ----------- | ------------- |  | - | ------- | ------- | 
|                           |          |           |   | NNN 2003    |              
|                           |          |           |   | Value Fund, |              
|                           |          | Amount of |   |             | LLCs Portion | 
|Property/Issue Date        |          | Loan      |   |             | of Debt       | 
|                           |          |           |   |             |               | 
|Executive Center II & III: |          |           |   |             |               |  |   |        
|                           | 06/09/05 |           | $ | 1,000,000   |               |  | $ | 411,000 |        
|                           | 09/12/05 |           |   | 200,000     |               |  |   | 82,000  |        
|                           | 10/18/05 |           |   | 240,000     |               |  |   | 99,000  |        
|                           | 11/14/05 |           |   | 5,000       |               |  |   | 2,000   |        
|                           |          |           |   |             |               | 
|                           |          | Total     |   | $           | 1,445,000     |  |   | $       | 594,000 | 
|                           |          |           |   |             |               | 



| |                              
| | -----------------------------
| | Advances from Related Parties





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



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

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


Accounting for
Contingencies


15



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




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







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





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





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



16



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




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



|                             |  |            |      |               |           |   |             |               |              |               |              |  |             |               |            |  |  |   |           | 
|---------------------------- |  | ---------- | ---- | ------------- | --------- | - | ----------- | ------------- | ------------ | ------------- | ------------ |  | ----------- | ------------- | ---------- |  |  | - | --------- | 
|                             |  |            |      | Mortgage and  |           |   |             |               | Mortgage and |               |              | 
|                             |  |            |      | Other Debt    |           |   | NNN 2003    |               |              | Other Debt    |              |  | NNN 2003    |              
|                             |  |            |      | Balance as of |           |   | Value Fund, |               |              | Balance as of |              |  | Value Fund, |              
|                             |  | Ownership  |      |               | March 31, |   |             | LLCs Portion |              |               | December 31, |  |             | LLCs Portion |           
|Property                     |  | Percentage |      |               | 2006      |   |             | of Debt       |              |               | 2005         |  |             | of Debt       |           
|                             |  |            |      |               |           |   |             |               |              |               |              |  |             |               |           
|Enterprise Technology Center |  |            | 8.5  | %             |           | $ | 35,417,000  |               |              | $             | 3,010,000    |  |             | $             | 35,580,000 |  |  | $ | 3,024,000 | 
|Executive Center II & III    |  |            | 41.1 |               |           |   | 15,980,000  |               |              |               | 6,568,000    |  |             |               | 15,271,000 |  |  |   | 6,276,000 | 
|                             |  |            |      |               |           |   |             |               |              |               |              |  |             |               |           
|                             |  |            |      |               |           | $ | 51,397,000  |               |              | $             | 9,578,000    |  |             | $             | 50,851,000 |  |  | $ | 9,300,000 | 
|                             |  |            |      |               |           |   |             |               |              |               |              |  |             |               |           







|    |                             
|--- | ----------------------------
|13. | Concentration of Credit Risk





17



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                             |  |              |           |               |             |  |       |          |  |            |       |  |            |  |  |  |          | 
|---------------------------- |  | ------------ | --------- | ------------- | ----------- |  | ----- | -------- |  | ---------- | ----- |  | ---------- |  |  |  | -------- | 
|                             |  |              |           | Percentage of |             |  |       |          |  |            | Lease | 
|                             |  | 2006 Annual  |           |               | 2006 Annual |  |       |          |  | Square     |       |  | Expiration | 
|Tenant                       |  | Base Rent(*) |           |               | Base Rent   |  |       | Property |  | Footage    |       |  | Date       | 
|                             |  |              |           |               |             |  |       |          |  |            |       |  |            | 
|Heritage Capital Corporation |  | $            | 1,575,000 |               |             |  | 14.7% |          |  | 3500 Maple |       |  | 75,000     |  |  |  | 06/30/15 | 






|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
|* | Annualized rental income based on contractual base rent from
    leases in effect as of March 31, 2006.



|                                      |  |             |           |               |             |  |      |          |  |        |                    |  |            |      |        |  |  |  |         | 
|------------------------------------- |  | ----------- | --------- | ------------- | ----------- |  | ---- | -------- |  | ------ | ------------------ |  | ---------- | ---- | ------ |  |  |  | ------- | 
|                                      |  |             |           | Percentage of |             |  |      |          |  |        | Lease              | 
|                                      |  | 2005 Annual |           |               | 2005 Annual |  |      |          |  | Square |                    |  | Expiration |     
|Tenant                                |  | Base Rent*  |           |               | Base Rent   |  |      | Property |  |        | Footage            |  |            | Date |       
|                                      |  |             |           |               |             |  |      |          |  |        |                    |  |            |      |       
|General Services Administration (IRS) |  | $           | 1,214,000 |               |             |  | 22.8 | %        |  |        | Oakey Building     |  |            |      | 81,000 |  |  |  | 5/31/05 | 
|Administaff Services, LP              |  |             | 1,012,000 |               |             |  | 19.0 |          |  |        | Interwood          |  |            |      | 52,000 |  |  |  | 9/30/14 | 
|Westwood College of Technology        |  |             | 572,000   |               |             |  | 10.7 |          |  |        | Executive Center I |  |            |      | 44,000 |  |  |  | 1/31/13 | 






|  |                                                                                                        
|- | -------------------------------------------------------------------------------------------------------
|* | Annualized rental income based on contractual base rent from
    leases in effect as of March 31, 2005.



|    |                                                       
|--- | ------------------------------------------------------
|14. | Discontinued Operations  Properties Held for
    Sale

Accounting for
Impairment or Disposal of Long-Lived Assets


|                    |  |                |                   |  |                        |  |                   |           |  |  |                                 | 
|------------------- |  | -------------- | ----------------- |  | ---------------------- |  | ----------------- | --------- |  |  | ------------------------------- | 
|Property            |  | Date Purchased |                   |  | Date Approved for Sale |  |                   | Date Sold | 
|                    |  |                |                   |  |                        |  |                   |           | 
|3500 Maple Building |  |                | December 27, 2005 |  |                        |  | December 27, 2005 |           |  |  | 14.0% sold on February 10, 2006 | 
|Oakey Building      |  |                | April 2, 2004     |  |                        |  | June 8, 2005      |           |  |  | January 24, 2006                | 
|Southwood Tower     |  |                | October 27, 2004  |  |                        |  | June 1, 2005      |           |  |  | December 19, 2005               | 
|Financial Plaza     |  |                | October 29, 2004  |  |                        |  | January 15, 2005  |           |  |  | April 13, 2005                  | 
|Satellite Place     |  |                | November 29, 2004 |  |                        |  | December 17, 2004 |           |  |  | February 24, 2005               | 

18



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                               |  |                    |            |   |      |   |           |  
|------------------------------------------------------------------------------ |  | ------------------ | ---------- | - | ---- | - | --------- | -
|                                                                               |  | Three Months Ended |           
|                                                                               |  | March 31,          |           
|                                                                               |  |                    |           
|                                                                               |  | 2006               |            |   | 2005 |  
|                                                                               |  |                    |            |   |      |  
|Rental income                                                                  |  | $                  | 2,108,000  |   |      | $ | 1,528,000 |  
|Rental expenses                                                                |  |                    | (1,345,000 | ) |      |   | (655,000  | )
|Depreciation and amortization                                                  |  |                    | (12,000    | ) |      |   | (436,000  | )
|                                                                               |  |                    |            |   |      |  
|Income before other expense                                                    |  |                    | 751,000    |   |      |   | 437,000   |  
|Interest expense (including amortization of deferred financing
    costs)      |  |                    | (985,000   | ) |      |   | (226,000  | )
|Minority interests                                                             |  |                    | (1,210,000 | ) |      |   |          |  
|                                                                               |  |                    |            |   |      |  
|Income (loss) from discontinued operations 
    properties held for sale, net |  |                    | (1,444,000 | ) |      |   | 211,000   |  
|Gain on sale of real estate                                                    |  |                    | 5,656,000  |   |      |   | 389,000   |  
|                                                                               |  |                    |            |   |      |  
|Income from discontinued operations                                            |  | $                  | 4,212,000  |   |      | $ | 600,000   |  
|                                                                               |  |                    |            |   |      |  



|                                                                                                                                            |  |           |            |  |              |   |            | 
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ---------- |  | ------------ | - | ---------- | 
|                                                                                                                                            |  | March 31, |            |  | December 31, |  
|                                                                                                                                            |  | 2006      |            |  | 2005         |  
|                                                                                                                                            |  |           |            |  |              |  
|Operating properties, net of accumulated amortization of $0 and
    $139,000 as of March 31, 2006 and December 31, 2005,
    respectively   |  | $         | 49,475,000 |  |              | $ | 62,019,000 | 
|Identified intangible assets, net of accumulated amortization of
    $0 and $0 as of March 31, 2006 and December 31, 2005,
    respectively |  |           | 15,524,000 |  |              |   | 15,622,000 | 
|Lease commissions, net of accumulated amortization of $0 and
    $39,000 as of March 31, 2006 and December 31, 2005,
    respectively       |  |           |           |  |              |   | 658,000    | 
|Loan fees, net of accumulated amortization of $12,000 and
    $53,000 as of March 31, 2006 and December 31, 2005,
    respectively          |  |           | 456,000    |  |              |   | 730,000    | 
|Other assets                                                                                                                                |  |           | 328,000    |  |              |   | 851,000    | 
|                                                                                                                                            |  |           |            |  |              |  
|Total assets                                                                                                                                |  | $         | 65,783,000 |  |              | $ | 79,880,000 | 
|                                                                                                                                            |  |           |            |  |              |  
|Mortgage loans payable                                                                                                                      |  | $         | 58,320,000 |  |              | $ | 67,077,000 | 
|Security deposits, prepaid rent and other liabilities                                                                                       |  |           | 1,686,000  |  |              |   | 2,242,000  | 
|                                                                                                                                            |  |           |            |  |              |  
|Total liabilities                                                                                                                           |  | $         | 60,006,000 |  |              | $ | 69,319,000 | 
|                                                                                                                                            |  |           |            |  |              |  
|Minority interests                                                                                                                          |  | $         | 3,293,000  |  |              | $ | 1,613,000  | 



|    |              
|--- | -------------
|15. | Per Unit Data

Earnings Per Share


19



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                     |                                             |                    |           |        |      |   |          |        |  
|-------------------------------------------------------------------- | ------------------------------------------- | ------------------ | --------- | ------ | ---- | - | -------- | ------ | -
|                                                                     |                                             | Three Months Ended |          
|                                                                     |                                             | March 31,          |          
|                                                                     |                                             |                    |          
|                                                                     |                                             | 2006               |           |        | 2005 |  
|                                                                     |                                             |                    |           |        |      |  
|Loss from continuing operations                                      |                                             | $                  | (790,000  | )      |      | $ | (230,000 | )     
|Income from discontinued operations                                  |                                             |                    | 4,212,000 |        |      |   | 600,000  |       
|                                                                     |                                             |                    |           |        |      |  
|Net income                                                           |                                             | $                  | 3,422,000 |        |      | $ | 370,000  |       
|                                                                     |                                             |                    |           |        |      |  
|Net income (loss) per unit  basic and diluted:                      |                                             |                    |           |        |      |   |          |       
|                                                                     | Continuing operations  basic and diluted   |                    | $         | (79.06 | )    |   | $        | (23.00 | )
|                                                                     | Discontinued operations  basic and diluted |                    |           | 421.50 |      |   |          | 60.00  |  
|                                                                     |                                             |                    |           |        |      |  
|Total net income per unit  basic and diluted                        |                                             | $                  | 342.44    |        |      | $ | 37.00    |       
|                                                                     |                                             |                    |           |        |      |  
|Weighted average number of units outstanding  basic
    and diluted |                                             |                    | 9,993     |        |      |   | 10,000   |       
|                                                                     |                                             |                    |           |        |      |  



|    |                      
|--- | ---------------------
|16. | Business Combinations



Business Combinations






|    |                  
|--- | -----------------
|17. | Subsequent Events



20



---



##### Table of Contents



NNN 2003 VALUE FUND, LLC


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




21



---



##### Table of Contents








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

10-Q.


Forward-Looking Statements




Overview and Background








22



---



##### Table of Contents



vice-president


Business Strategy




2006 Dispositions of Consolidated Properties






| |                                   
| | ----------------------------------
| | Oakey Building  Las Vegas, Nevada





| |                                          
| | -----------------------------------------
| | 3500 Maple  Dallas, Texas (partial sale)



23



---



##### Table of Contents



Critical Accounting Policies


10-K,




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

10-K,


Factors Which May Influence Results of Operations




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





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





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





24



---



##### Table of Contents





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



Results of Operations






| |                                                                 
| | ----------------------------------------------------------------
| | Comparison of the Three Months Ended March 31, 2006
    and 2005

|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |          |   |  |         |        |  
|-------------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------ | ---------- | -------- | --------- | - | -------- | -------- | - | ------- | ---------- | -------- | - |  | ------- | ------ | -
|                                                               |                                                                              | Three Months Ended |            |          |           |   |         
|                                                               |                                                                              |                    |            |          |           |   |         
|                                                               |                                                                              | March 31,          |            |          | March 31, |   |          |          |   | Percent |           
|                                                               |                                                                              | 2006               |            |          | 2005      |   |          | Change   |   |         | Change     |         
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         
|Revenues:                                                      |                                                                              |                    |            |          |           |   |          |          |   |         |            |          |   |  |         |       
|                                                               | Rental income                                                                |                    | $          | 976,000  |           |   | $        | 363,000  |   |         | $          | 613,000  |   |  |         | 168.9  | %
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         
|Expenses:                                                      |                                                                              |                    |            |          |           |   |          |          |   |         |            |          |   |  |         |       
|                                                               | Rental expenses                                                              |                    |            | 581,000  |           |   |          | 322,000  |   |         |            | 259,000  |   |  |         | 80.4   |  
|                                                               | General and administrative                                                   |                    |            | 225,000  |           |   |          | 57,000   |   |         |            | 168,000  |   |  |         | 294.7  |  
|                                                               | Depreciation and amortization                                                |                    |            | 467,000  |           |   |          | 136,000  |   |         |            | 331,000  |   |  |         | 243.4  |  
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         
|                                                               |                                                                              |                    | 1,273,000  |          |           |   | 515,000  |          |   |         | 758,000    |          |   |  | 147.2   |       
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         
|Loss before other income (expense) and discontinued operations |                                                                              |                    | (297,000   | )        |           |   | (152,000 | )        |   |         | (145,000   | )        |   |  | 95.4    |       
|Other income (expense):                                        |                                                                              |                    |            |          |           |   |          |          |   |         |            |          |   |  |         |       
|                                                               | Interest expense (including amortization of deferred financing
    costs)    |                    |            | (594,000 | )         |   |          | (220,000 | ) |         |            | (374,000 | ) |  |         | 170.0  |  
|                                                               | Interest and dividend income                                                 |                    |            | 174,000  |           |   |          | 31,000   |   |         |            | 143,000  |   |  |         | 461.3  |  
|                                                               | Gain on sale of marketable securities                                        |                    |            | 75,000   |           |   |          |         |   |         |            | 75,000   |   |  |         |       |  
|                                                               | Equity in earnings (loss) and gain on sale of unconsolidated
    real estate |                    |            | (209,000 | )         |   |          | 159,000  |   |         |            | (368,000 | ) |  |         | (231.5 | )
|                                                               | Other income                                                                 |                    |            | 66,000   |           |   |          |         |   |         |            | 66,000   |   |  |         |       |  
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         
|                                                               | Minority interests                                                           |                    |            | (5,000   | )         |   |          | (48,000  | ) |         |            | 43,000   |   |  |         | (89.6  | )
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         
|Loss from continuing operations before discontinued operations |                                                                              |                    | (790,000   | )        |           |   | (230,000 | )        |   |         | (560,000   | )        |   |  | 243.5   |       
|Discontinued operations:                                       |                                                                              |                    |            |          |           |   |          |          |   |         |            |          |   |  |         |       
|Gain on sale of real estate                                    |                                                                              |                    | 5,656,000  |          |           |   | 389,000  |          |   |         | 5,267,000  |          |   |  | 1,354.0 |       
|Income (loss) from discontinued operations                     |                                                                              |                    | (1,444,000 | )        |           |   | 211,000  |          |   |         | (1,655,000 | )        |   |  | (784.4  | )     
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         
|                                                               |                                                                              |                    | 4,212,000  |          |           |   | 600,000  |          |   |         | 3,612,000  |          |   |  | 602.0   |       
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         
|Net income                                                     |                                                                              | $                  | 3,422,000  |          |           | $ | 370,000  |          |   | $       | 3,052,000  |          |   |  | 824.9   |       
|                                                               |                                                                              |                    |            |          |           |   |          |          |   |         |            |         



25



---



##### Table of Contents





















Liquidity and Capital Resources




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



| |                                                                 
| | ----------------------------------------------------------------
| | Comparison of the Three Months Ended March 31, 2006
    and 2005



26



---



##### Table of Contents













| |                                         
| | ----------------------------------------
| | Current Sources of Capital and Liquidity





| |                                                                        
| | -----------------------------------------------------------------------
| | Factors Which May Influence Future Sources of Capital and
    Liquidity



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

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


Accounting for
Contingencies




| |               
| | --------------
| | Debt Financing



27



---



##### Table of Contents









|                                           |               |            |   |                  |               |  |   |            |  |  |              |       |  |  |  |      |  
|------------------------------------------ | ------------- | ---------- | - | ---------------- | ------------- |  | - | ---------- |  |  | ------------ | ----- |  |  |  | ---- | -
|                                           |               |            |   | Weighted-Average |              
|                                           |               | Total Debt |   |                  | Interest Rate | 
|                                           |               |            |   |                  |               | 
|                                           |               | March 31,  |   |                  | December 31,  |  |   | March 31,  |  |  | December 31, |      
|                                           |               | 2006       |   |                  | 2005          |  |   | 2006       |  |  | 2005         |      
|                                           |               |            |   |                  |               |  |   |            |  |  |              |      
|Mortgage and other debt                    |               |            |   |                  |               |  |   |            |  |  |              |       |  |  |  |     
|                                           | Mortgage      |            | $ | 84,735,000       |               |  | $ | 93,492,000 |  |  |              | 7.09% |  |  |  | 6.85 | %
|                                           | Other debt    |            | $ | 540,000          |               |  | $ | 1,385,000  |  |  |              | 8.88% |  |  |  |     |  
|Fixed rate and variable rate Mortgage debt |               |            |   |                  |               |  |   |            |  |  |              |       |  |  |  |     
|                                           | Fixed rate    |            | $ | 52,000,000       |               |  | $ | 52,000,000 |  |  |              | 6.18% |  |  |  | 6.18 | %
|                                           | Variable rate |            | $ | 32,735,000       |               |  | $ | 41,492,000 |  |  |              | 8.53% |  |  |  | 7.70 | %











28



---



##### Table of Contents





| |                      
| | ---------------------
| | Other Liquidity Needs















29



---



##### Table of Contents



Capital Resources




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











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



|                             |  |            |       |               |           |   |             |               |  |               |              |  |             |               |            |  |  |   |           | 
|---------------------------- |  | ---------- | ----- | ------------- | --------- | - | ----------- | ------------- |  | ------------- | ------------ |  | ----------- | ------------- | ---------- |  |  | - | --------- | 
|                             |  |            |       | Mortgage and  |           |   |             |               |  |               |             
|                             |  |            |       | Other Debt    |           |   | NNN 2003    |               |  | Mortgage Debt |              |  | NNN 2003    |              
|                             |  |            |       | Balance as of |           |   | Value Fund, |               |  | Balance as of |              |  | Value Fund, |              
|                             |  | Ownership  |       |               | March 31, |   |             | LLCs Portion |  |               | December 31, |  |             | LLCs Portion |           
|Property                     |  | Percentage |       |               | 2006      |   |             | of Debt       |  |               | 2005         |  |             | of Debt       |           
|                             |  |            |       |               |           |   |             |               |  |               |              |  |             |               |           
|Enterprise Technology Center |  |            | 8.5%  |               |           | $ | 35,417,000  |               |  | $             | 3,010,000    |  |             | $             | 35,580,000 |  |  | $ | 3,024,000 | 
|Executive Center II & III    |  |            | 41.1% |               |           |   | 15,980,000  |               |  |               | 6,568,000    |  |             |               | 15,271,000 |  |  |   | 6,276,000 | 
|                             |  |            |       |               |           |   |             |               |  |               |              |  |             |               |           
|                             |  |            |       |               |           | $ | 51,397,000  |               |  | $             | 9,578,000    |  |             | $             | 50,851,000 |  |  | $ | 9,300,000 | 
|                             |  |            |       |               |           |   |             |               |  |               |              |  |             |               |           



30



---



##### Table of Contents









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



|                           |          |           |   |             |               |  |   |         |         | 
|-------------------------- | -------- | --------- | - | ----------- | ------------- |  | - | ------- | ------- | 
|                           |          |           |   | NNN 2003    |              
|                           |          |           |   | Value Fund, |              
|                           |          | Amount of |   |             | LLCs Portion | 
|Property/Issue Date        |          | Loan      |   |             | of Debt       | 
|                           |          |           |   |             |               | 
|Executive Center II & III: |          |           |   |             |               |  |   |        
|                           | 06/09/05 |           | $ | 1,000,000   |               |  | $ | 411,000 |        
|                           | 09/12/05 |           |   | 200,000     |               |  |   | 82,000  |        
|                           | 10/18/05 |           |   | 240,000     |               |  |   | 99,000  |        
|                           | 11/14/05 |           |   | 5,000       |               |  |   | 2,000   |        
|                           |          |           |   |             |               | 
|                           |          | Total     |   | $           | 1,445,000     |  |   | $       | 594,000 | 
|                           |          |           |   |             |               | 

Debt Service Requirements




Contractual Obligations




31



---



##### Table of Contents





|                                                                                       |       |                        |           |           |             |   |           |             |  |   |              |            |  |       |            |            |  |   |            |             | 
|-------------------------------------------------------------------------------------- | ----- | ---------------------- | --------- | --------- | ----------- | - | --------- | ----------- |  | - | ------------ | ---------- |  | ----- | ---------- | ---------- |  | - | ---------- | ----------- | 
|                                                                                       |       | Payments Due by Period |          
|                                                                                       |       |                        |          
|                                                                                       |       | Less than              |           |           |             |   | More than |             |  |  
|                                                                                       |       | 1 Year                 |           |           | 1-3 Years   |   |           | 3-5 Years   |  |   | 5 Years      |            |  |      
|                                                                                       |       | (2006)                 |           |           | (2007-2008) |   |           | (2009-2010) |  |   | (After 2010) |            |  | Total |           
|                                                                                       |       |                        |           |           |             |   |           |             |  |   |              |            |  |       |           
|Principal payments  variable rate debt                                                |       | $                      |          |           |             | $ | 5,500,000 |             |  | $ | 15,915,000   |            |  | $     | 11,320,000 |            |  | $ | 32,735,000 |            
|Principal payments  fixed rate debt                                                   |       |                        |          |           |             |   | 5,000,000 |             |  |   |             |            |  |       | 47,000,000 |            |  |   | 52,000,000 |            
|Interest payments  variable rate debt (based on rate
    in effect at March 31, 2006) |       |                        | 2,134,000 |           |             |   | 5,575,000 |             |  |   | 1,104,000    |            |  |       | 5,552,000  |            |  |   | 14,365,000 |            
|Interest payments  fixed rate debt                                                    |       |                        | 2,447,000 |           |             |   | 8,511,000 |             |  |   | 2,712,000    |            |  |       | 13,642,000 |            |  |   | 27,312,000 |            
|Tenant improvement and lease commission obligations                                    |       |                        | 591,000   |           |             |   |          |             |  |   |             |            |  |       |           |            |  |   | 591,000    |            
|                                                                                       |       |                        |           |           |             |   |           |             |  |   |              |            |  |       |           
|                                                                                       | Total |                        | $         | 5,172,000 |             |   | $         | 24,586,000  |  |   | $            | 19,731,000 |  |       | $          | 77,514,000 |  |   | $          | 127,003,000 | 
|                                                                                       |       |                        |           |           |             |   |           |             |  |   |              |            |  |       |           

Off-Balance Sheet Arrangements




Inflation




Subsequent Events






32



---



##### Table of Contents










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

10-K






|                                                                                           |  |      |   |      |  |   |           |   |  |      |            |      |  |            |   |  |       |   |   |  |  |   |            |   |  |   |            |  
|------------------------------------------------------------------------------------------ |  | ---- | - | ---- |  | - | --------- | - |  | ---- | ---------- | ---- |  | ---------- | - |  | ----- | - | - |  |  | - | ---------- | - |  | - | ---------- | -
|                                                                                           |  | 2006 |   | 2007 |  |   | 2008      |   |  | 2009 |            | 2010 |  | Thereafter |   |  | Total |  
|                                                                                           |  |      |   |      |  |   |           |   |  |      |            |      |  |            |   |  |       |  
|Fixed rate debt  principal payments                                                       |  | $    |  |      |  | $ | 5,000,000 |   |  | $    |           |      |  | $          |  |  |       | $ |  |  |  | $ | 47,000,000 |   |  | $ | 52,000,000 |  
|Average interest rate on maturing debt                                                     |  |      |  |      |  |   | 10.00     | % |  |      |           |      |  |            |  |  |       |   |  |  |  |   | 5.77       | % |  |   | 6.18       | %
|Variable rate debt  principal payments                                                    |  | $    |  |      |  | $ | 5,500,000 |   |  | $    | 15,915,000 |      |  | $          |  |  |       | $ |  |  |  | $ | 11,320,000 |   |  | $ | 32,735,000 |  
|Average interest rate on maturing debt (based on rates in effect
    as of March 31, 2006) |  |      |  |      |  |   | 7.63      | % |  |      | 7.98       | %    |  |            |  |  |       |   |  |  |  |   | 9.75       | % |  |   | 8.53       | %








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

Evaluation of disclosure controls and
procedures.


13a-14(a) 15d-14(a) 10-Q


33



---



##### Table of Contents



13a-15(e) 15d-15(e)




Changes in internal control over financial
reporting.





PART II  OTHER INFORMATION







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

SEC Investigation


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


Accounting for Contingencies


Prior Performance Tables




34



---



##### Table of Contents





Litigation







Item 1A.Risk
Factors


10-K,







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








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








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








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








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



35



---



##### Table of Contents






SIGNATURES






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



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

| |                              
| | -----------------------------
| |                              
| | Richard T. Hutton, Jr.       
| | Chief Executive Officer      
| | (principal executive officer)



| |     |                   
| | --- | ------------------
| | By: | /s/Michael OFlynn

| |                               
| | ------------------------------
| |                               
| | Michael OFlynn               
| | Chief Accounting Officer      
| | (principal accounting officer)



36



---



##### Table of Contents



EXHIBIT INDEX


S-K,


10-Q S-K).


|        |    |             |  |                                                                                                                                                                                                                                                                                           
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 on May 2, 2005 and incorporated herein
    by reference).                                                                                                
|        | 10 | .1          |  | Operating Agreement of NNN 2003 Value Fund, LLC, by and between
    Triple Net Properties, LLC, as the Manager, and Anthony W.
    Thompson, as the Initial Member. (included as Exhibit 10.1
    to our Form 10 filed on May 2, 2005 and incorporated
    herein by reference).          
|        | 10 | .2          |  | Management Agreement between NNN 2003 Value Fund, LLC and Triple
    Net Properties Realty, Inc. (included as Exhibit 10.2 to
    our Form 10 filed on May 2, 2005 and incorporated
    herein by reference).                                                                             
|        | 10 | .3          |  | Real Property Purchase Agreement, dated as of, March 27,
    2006, by and between Santa Ana Arts IV, Inc. and Triple Net
    Properties, LLC. (included as Exhibit 10.1 to our
    Form 8-K filed on April 28, 2006 and incorporated
    herein by reference).                            
|        | 10 | .4          |  | First Amendment to Real Property Purchase Agreement, dated as of
    March 30, 2006, by and between Santa Ana Arts IV, Inc. and
    Triple Net Properties, LLC. (included as Exhibit 10.2 to
    our Form 8-K filed on April 28, 2006 and incorporated
    herein by reference).          
|        | 10 | .5          |  | Assignment of Contract dated April 19, 2006 by and between
    Triple Net Properties, LLC, as assignor and NNN 901 Civic, LLC
    and NNN VF 901 Civic, LLC, as assignees (included as
    Exhibit 10.3 to our Form 8-K filed on April 28,
    2006 and incorporated herein by reference).
|        | 31 | .1*         |  | Certification of Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                  
|        | 31 | .2*         |  | Certification of Chief Accounting 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 Accounting Officer, pursuant to
    18 U.S.C. Section 1350, as created by Section 906
    of the Sarbanes-Oxley Act of 2002.                                                                                                                                       






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