Unassociated Document






Consolidated Financial Statements
(Unaudited)
 
Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)
September 30, 2011









 
 
 
 
Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Financial Statements (Unaudited)

September 30, 2011
 
Contents

Consolidated Portfolio Asset Allocation
2
   
Consolidated Financial Statements
  
   
Consolidated Statement of Assets and Liabilities
3
Consolidated Statement of Investments
4
Consolidated Statement of Operations
10
Consolidated Statements of Changes in Net Assets
11
Consolidated Statement of Cash Flows
12
Notes to Consolidated Financial Statements
13
Consolidated Schedule of Changes in Investments in Affiliates
27
Consolidated Schedule of Restricted Securities of Unaffiliated Issuers
28
   
Supplemental Information
  
   
Consolidating Statement of Assets and Liabilities
29
Consolidating Statement of Operations
30

Special Value Continuation Fund, LLC (the “Company”) files a schedule of its investment in Special Value Continuation Partners, LP (the “Partnership”) with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q.  Investments listed in the Consolidated Statement of Investments are held by the Partnership, which also files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q.  The Forms N-Q of the Company and the Partnership are available on the SEC’s website at http://www.sec.gov.  The Forms N-Q of the Company and the Partnership may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C.  Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
 
A free copy of the proxy voting guidelines of the Company and the Partnership and information regarding how the Company and the Partnership voted proxies relating to portfolio investments during the most recent twelve-month period may be obtained without charge on the SEC’s website at http://www.sec.gov or by calling the advisor of the Company and the Partnership, Tennenbaum Capital Partners, LLC, at (310) 566-1000.  Collect calls for this purpose are accepted.

 
 
 
 
Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Portfolio Asset Allocation (Unaudited)

September 30, 2011

   
Percent of Cash
  
 
Industry
and Investments
  
       
 
Nonferrous Metal (except Aluminum) Production and Processing
11.8%
  
 
Wired Telecommunications Carriers
8.3%
  
 
Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing
6.9%
  
 
Business Support Services
6.7%
  
 
Metal and Mineral (except Petroleum) Merchant Wholesalers
6.0%
  
 
Radio and Television Broadcasting
5.7%
  
 
Scheduled Air Transportation
5.0%
  
 
Accounting, Tax Preparation, Bookkeeping, and Payroll Services
4.9%
  
 
Architectural, Engineering, and Related Services
4.7%
  
 
Data Processing, Hosting, and Related Services
4.2%
  
 
Motion Picture and Video Industries
4.1%
  
 
Electronic Shopping and Mail-Order Houses
3.6%
  
 
Full-Service Restaurants
3.2%
  
 
Communications Equipment Manufacturing
2.6%
  
 
Commercial and Industrial Machinery and Equipment Rental and Leasing
2.6%
  
 
Software Publishers
2.3%
  
 
Other Financial Investment Activities
2.0%
  
 
Aerospace Product and Parts Manufacturing
2.0%
  
 
Industrial Machinery Manufacturing
1.6%
  
 
Other Electrical Equipment and Component Manufacturing
1.4%
  
 
Oil and Gas Extraction
1.2%
  
 
Gambling Industries
1.2%
  
 
Electric Power Generation, Transmission and Distribution
1.0%
  
 
Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing
1.0%
  
 
Support Activities for Mining
0.8%
  
 
Offices of Real Estate Agents and Brokers
0.8%
  
 
Semiconductor and Other Electronic Component Manufacturing
0.6%
  
 
Depository Credit Intermediation
0.3%
  
 
Other Amusement and Recreation Industries
0.0%
  
 
Cash and Cash Equivalents
3.5%
  
 
Total
100.0%
  
 
 
2
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Assets and Liabilities (Unaudited)

September 30, 2011

Assets
      
Investments, at fair value:
      
Unaffiliated issuers (cost $387,866,786)
   $ 303,689,506  
Controlled companies (cost $26,711,048)
     527,321  
Other affiliates (cost $68,604,573)
     89,570,616  
Total investments (cost $483,182,407)
     393,787,443  
         
Cash and cash equivalents
     14,170,852  
Accrued interest income:
        
Unaffiliated issuers
     5,171,088  
Affiliates
     718,755  
Receivable for investments sold
     4,580,979  
Deferred debt issuance costs
     1,248,490  
Prepaid expenses and other assets
     1,291,624  
Total assets
     420,969,231  
         
Liabilities
        
Credit facility payable
     29,000,000  
Payable for investments purchased
     13,349,115  
Management and advisory fees payable
     565,599  
Unrealized depreciation on swaps
     93,009  
Interest payable
     82,783  
Payable to the Investment Manager
     56,924  
Accrued expenses and other liabilities
     452,220  
Total liabilities
     43,599,650  
         
Preferred equity facility
        
Series A preferred limited partner interests in Special Value Continuation Partners, LP; $20,000/interest liquidation preference; 6,700 interests authorized, issued and outstanding
     134,000,000  
Accumulated dividends on Series A preferred equity facility
     424,268  
Total preferred limited partner interests
     134,424,268  
         
Net assets applicable to common shareholders
   $ 242,945,313  
         
Composition of net assets applicable to common shareholders
        
Common stock, $0.001 par value; unlimited shares authorized, 418,955.777 shares issued and outstanding
   $ 419  
Paid-in capital in excess of par, net of contributed unrealized gains
     364,742,957  
Accumulated net investment income
     14,963,815  
Accumulated net realized losses
     (47,097,536 )
Accumulated net unrealized depreciation
     (89,664,342 )
Net assets applicable to common shareholders
   $ 242,945,313  
         
Common stock, NAV per share
   $ 579.88  

See accompanying notes.

 
3
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Investments (Unaudited)

September 30, 2011

Showing Percentage of Total Cash and Investments of the Company

               
Percent of
  
   
Principal
    
Fair
    
Cash and
  
Investment
  
Amount
    
Value
    
Investments
  
                   
Debt Investments (78.79%)
                  
Bank Debt (44.22%) (1)
                  
Accounting, Tax Preparation, Bookkeeping, and Payroll Services (0.30%)
                  
NCO Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 5.5%, 2.5% LIBOR Floor, due 11/15/13
   $ 1,234,316     $ 1,209,630       0.30 %
                         
Aerospace Product and Parts Manufacturing (0.98%)
                        
Hawker Beechcraft, Inc., Senior Secured 1st Lien Series A New Term Loan, LIBOR + 8.5%, 2% LIBOR Floor, due 3/26/14
   $ 570,202       497,501       0.12 %
Hawker Beechcraft, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 2%, due 3/26/14
   $ 4,801,947       3,313,344       0.81 %
Hawker Beechcraft, Inc., Senior Secured Letters of Credit, LIBOR + 2%, due 3/26/14
   $ 296,941       204,889       0.05 %
Total Aerospace Product and Parts Manufacturing
             4,015,734          
                         
Business Support Services (6.31%)
                        
STG-Fairway Acquisitions, Inc., Senior Secured 1st Lien Term Loan, 13.5%, due 12/29/15
   $ 25,257,913       25,763,071       6.31 %
                         
Commercial and Industrial Machinery and Equipment Rental and Leasing (2.55%)
                        
AerCap Holdings N.V., Secured 1st Lien Term Loan, 10.25%, due 12/3/15 - (Netherlands)
   $ 10,411,593       10,411,593       2.55 %
                         
Communications Equipment Manufacturing (2.64%)
                        
Mitel US Holdings, Inc., 1st Lien Term Loan, LIBOR + 3.25%, due 8/16/14
   $ 10,411,593       1,742,200       0.43 %
Mitel US Holdings, Inc., 2nd Lien Term Loan, LIBOR + 7%, due 8/16/15
   $ 1,872,075       9,006,345       2.21 %
Total Communications Equipment Manufacturing
             10,748,545          
                         
Data Processing, Hosting, and Related Services (1.76%)
                        
The Telx Group, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6.5%, 1.25% LIBOR  Floor, due 9/22/17
   $ 7,500,000       7,162,500       1.76 %
                         
Electric Power Generation, Transmission and Distribution (1.04%)
                        
La Paloma Generating Company, Residual Bank Debt Claim (3)
   $ 1,830,453       51,436       0.01 %
Texas Competitive Electric Holdings Company, LLC, Extended Term Loan, LIBOR + 4.5%, due 10/10/17
   $ 6,232,239       4,197,026       1.03 %
Total Electric Power Generation, Transmission and Distribution
             4,248,462          
                         
Electronic Shopping and Mail-Order Houses (3.39%)
                        
Shopzilla, Inc., Senior Secured 2nd Lien Term Loan, 13%, due 6/1/14
   $ 13,948,150       13,843,539       3.39 %
                         
Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (1.02%)
                        
Precision Partners Holdings, 1st Lien Delayed Draw Term Loan, Prime + 6.5%, 4.5% Prime Floor, due 10/1/13
   $ 290,510       270,174       0.07 %
Precision Partners Holdings, 1st Lien Term Loan, Prime + 6.5%, 4.5% Prime Floor, due 10/1/13
   $ 4,152,799       3,862,103       0.95 %
Total Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing
             4,132,277          
                         
Motion Picture and Video Industries (4.07%)
                        
CKX Entertainment Inc., Senior Secured Bridge Term Loan, LIBOR + 7%, 1.5% LIBOR Floor, due 6/21/12
   $ 17,032,016       16,589,184       4.07 %
                         
Offices of Real Estate Agents and Brokers (0.79%)
                        
Realogy Corporation, 2nd Lien Term Loan A, 13.5%, due 10/15/17
   $ 3,261,809       3,207,989       0.79 %

 
4
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2011

Showing Percentage of Total Cash and Investments of the Company

               
Percent of
  
   
Principal
    
Fair
    
Cash and
  
Investment
  
Amount
    
Value
    
Investments
  
                   
Debt Investments (continued)
                  
Other Financial Investment Activities (2.05%)
                  
Marsico Capital Management, Senior Secured 1st Lien Term Loan, LIBOR + 5%, due 12/14/14
   $ 16,601,279     $ 8,362,894       2.05 %
                         
Radio and Television Broadcasting (4.88%)
                        
Encompass Digital Media, Inc., 1st Lien Term Loan, LIBOR + 6%, 1.75% LIBOR Floor, due 2/28/16
   $ 2,720,703       2,702,202       0.66 %
Encompass Digital Media, Inc., 2nd Lien Term Loan, 16.5%, due 8/28/16
   $ 15,956,220       16,746,053       4.10 %
Hubbard Radio, LLC, Senior Secured 2nd Lien Term Loan, LIBOR + 7.25%, 1.5% LIBOR Floor, due 4/11/18
   $ 500,000       486,250       0.12 %
Total Radio and Television Broadcasting
             19,934,505          
                         
Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (3.56%)
                        
Gundle/SLT Environmental, Inc., Senior Secured 2nd Lien Term Loan, LIBOR + 9.5% Cash + 2% PIK, 1.5% LIBOR Floor, due 11/27/16
   $ 15,033,219       14,507,057       3.56 %
                         
Scheduled Air Transportation (3.45%)
                        
United Air Lines, Inc., Aircraft Secured Mortgage (N510UA), 20%, due 9/26/16 (2)
   $ 492,046       665,247       0.16 %
United Air Lines, Inc., Aircraft Secured Mortgage (N512UA), 20%, due 10/26/16 (2)
   $ 494,225       670,663       0.16 %
United Air Lines, Inc., Aircraft Secured Mortgage (N536UA), 16%, due 8/21/14 (2)
   $ 401,613       466,273       0.11 %
United Air Lines, Inc., Aircraft Secured Mortgage (N545UA), 16%, due 7/17/15 (2)
   $ 512,047       613,688       0.15 %
United Air Lines, Inc., Aircraft Secured Mortgage (N585UA), 20%, due 10/25/16 (2)
   $ 580,294       787,749       0.19 %
United Air Lines, Inc., Aircraft Secured Mortgage (N659UA), 12%, due 3/28/16 (2)
   $ 4,799,885       5,371,072       1.32 %
United Air Lines, Inc., Aircraft Secured Mortgage (N661UA), 12%, due 5/4/16 (2)
   $ 4,908,744       5,539,517       1.36 %
Total Scheduled Air Transportation
             14,114,209          
                         
Software Publishers (2.28%)
                        
Blackboard, Inc., Senior Secured 1st Lien Term Loan, LIBOR + 6%, 1.5% LIBOR Floor, due 9/23/18
   $ 10,000,000       9,315,000       2.28 %
                         
Support Activities for Mining (0.10%)
                        
Trico Shipping AS, 1st Lien Term Loan A, LIBOR + 8.5%, 1.5% LIBOR Floor, due 5/13/14 - (Norway)
   $ 402,845       402,845       0.10 %
Trico Shipping AS, 1st Lien Term Loan B, LIBOR + 8.5%, 1.5% LIBOR Floor, due 5/13/14 - (Norway)
   $ 402,714       -       -  
Total Support Activities for Mining
             402,845          

 
5
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2011

Showing Percentage of Total Cash and Investments of the Company

               
Percent of
  
   
Principal
    
Fair
    
Cash and
  
Investment
  
Amount
    
Value
    
Investments
  
                   
Debt Investments (continued)
                  
Wired Telecommunications Carriers (3.05%)
                  
Bulgaria Telecom Company AD, 1st Lien Tranche B Term Loan, EURIBOR + 2.75%, due 8/9/15 - (Bulgaria) (4)
   € 2,084,507     $ 2,127,779       0.52 %
Integra Telecom Holdings, Inc., 1st Lien Term Loan, LIBOR + 7.25%, 2% LIBOR Floor, due 4/15/15
   $ 1,568,408       1,472,343       0.36 %
NEF Telecom Company BV, 1st Lien Tranche C Term Loan, EURIBOR + 3.5%, due 8/9/16 - (Netherlands) (4)
   € 4,927,730       4,733,169       1.16 %
NEF Telecom Company BV, 2nd Lien Tranche D Term Loan, EURIBOR + 5.5%, due 2/16/17 - (Netherlands) (3), (4)
   € 4,736,002       4,121,056       1.01 %
Total Wired Telecommunications Carriers
             12,454,347          
                         
Total Bank Debt (Cost $179,576,611)
             180,423,381          
                         
Other Corporate Debt Securities (34.57%)
                        
Accounting, Tax Preparation, Bookkeeping, and Payroll Services (4.61%)
                        
NCO Group, Inc., Senior Subordinated Notes, 11.875%, due 11/15/14
   $ 9,655,000       8,882,600       2.18 %
NCO Group, Inc., Senior Unsecured Floating Rate Notes, LIBOR + 4.875%, due 11/15/13
   $ 10,446,000       9,923,700       2.43 %
Total Accounting, Tax Preparation, Bookkeeping, and Payroll Services
             18,806,300          
                         
Aerospace Product and Parts Manufacturing (1.03%)
                        
Hawker Beechcraft, Inc., Senior Unsecured Notes, 8.5%, due 4/1/15
   $ 7,448,000       3,206,438       0.79 %
Hawker Beechcraft, Inc., Senior Unsecured Notes, 8.875%, due 4/1/15
   $ 2,175,000       991,604       0.24 %
Total Aerospace Product and Parts Manufacturing
             4,198,042          
                         
Architectural, Engineering, and Related Services (2.43%)
                        
Alion Science & Technology Corporation, Senior Secured Notes, 10% Cash + 2% PIK, due 11/1/14
   $ 4,242,302       3,702,300       0.91 %
ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 18% PIK, due 3/31/15 (2), (5)
   $ 6,209,347       6,209,347       1.52 %
Total Architectural, Engineering, and Related Services
             9,911,647          
                         
Data Processing, Hosting, and Related Services (2.28%)
                        
GXS Worldwide, Inc., Fixed Notes, 9.75%, due 6/15/15
   $ 2,066,000       1,958,113       0.48 %
The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19 (5)
   $ 7,500,000       7,350,000       1.80 %
Total Data Processing, Hosting, and Related Services
             9,308,113          
                         
Full-Service Restaurants (3.17%)
                        
Real Mex Restaurants, Inc., Senior Secured Notes, 14%, due 1/1/13 (3)
   $ 13,161,000       12,924,102       3.17 %
                         
Gambling Industries (1.20%)
                        
Harrah's Operating Company, Inc., 2nd Priority Secured Notes, 10%, due 12/15/18
   $ 8,169,000       4,880,978       1.20 %
                         
Industrial Machinery Manufacturing (1.16%)
                        
GSI Group, Inc., Senior Secured Notes, 12.25% Cash or 13% PIK, due 1/15/14 (5)
   $ 4,714,907       4,714,907       1.16 %
                         
Metal and Mineral (except Petroleum) Merchant Wholesalers (5.95%)
                        
Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16 (5)
   $ 12,500,000       12,437,500       3.05 %
Edgen Murray Corporation, Senior Secured Notes, 12.25%, due 1/15/15
   $ 13,076,000       11,837,572       2.90 %
Total Metal and Mineral (except Petroleum) Merchant Wholesalers
             24,275,072          

 
6
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2011

Showing Percentage of Total Cash and Investments of the Company

   
Principal
          
Percent of
  
   
Amount
    
Fair
    
Cash and
  
Investment
  
or Shares
    
Value
    
Investments
  
                   
Debt Investments (continued)
                  
Nonferrous Metal (except Aluminum) Production and Processing (4.32%)
                  
International Wire Group Holdings, Inc., Senior Notes, 11.5% Cash or 12.25% PIK, due 4/15/15 (2), (5)
   $ 18,000,000     $ 17,640,000       4.32 %
                         
Oil and Gas Extraction (1.25%)
                        
Geokinetics Holdings, Inc., Senior Secured Notes, 9.75%, due 12/15/14
   $ 1,342,000       1,066,890       0.26 %
Saratoga Resources, Inc., Senior Secured Notes, 12.5%, due 7/1/16 (5)
   $ 4,000,000       4,020,000       0.99 %
Total Oil and Gas Extraction
             5,086,890          
                         
Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing (3.34%)
                        
AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/14
   $ 18,536,000       13,624,145       3.34 %
                         
Wired Telecommunications Carriers (3.83%)
                        
ITC^DeltaCom, Inc., Senior Secured Notes, 10.5%, due 4/1/16 (5)
   $ 9,830,000       10,075,750       2.47 %
NEF Telecom Company BV, Mezzanine Term Loan, EURIBOR + 4.5% Cash + 7.5% PIK, due 8/16/17 - (Netherlands) (3), (4), (5)
   € 20,523,306       1,373,728       0.34 %
Zayo Group, LLC, Senior Secured 1st Lien Notes, 10.25%, due 3/15/17
   $ 3,933,000       4,144,399       1.02 %
Total Wired Telecommunications Carriers
             15,593,877          
                         
Total Other Corporate Debt Securities (Cost $167,983,851)
             140,964,073          
                         
Total Debt Investments (Cost $347,560,462)
             321,387,454          
                         
Equity Securities (17.73%)
                        
Architectural, Engineering, and Related Services (2.31%)
                        
Alion Science & Technology Corporation, Warrants (3)
     3,225       170,119       0.04 %
ESP Holdings, Inc., 15% PIK, Preferred Stock (2), (5), (6)
     20,297       3,186,281       0.78 %
ESP Holdings, Inc., Common Stock (2), (3), (5), (6)
     88,670       6,079,283       1.49 %
Total Architectural, Engineering, and Related Services
             9,435,683          
                         
Business Support Services (0.41%)
                        
STG-Fairway Holdings, LLC, Class A Units (3), (5)
     80,396       1,660,578       0.41 %
                         
Data Processing, Hosting, and Related Services (0.13%)
                        
Anacomp, Inc., Class A Common Stock (2), (3), (5), (7)
     1,255,527       527,321       0.13 %
                         
Depository Credit Intermediation (0.29%)
                        
Doral Financial Corporation, Common Stock (3)
     1,077,795       1,174,797       0.29 %
                         
Electronic Shopping and Mail-Order Houses (0.24%)
                        
Shop Holding, LLC, Class A Units (3), (5)
     490,037       773,425       0.19 %
Shop Holding, LLC, Warrants to Purchase Class A Units (3), (5)
     326,691       188,997       0.05 %
Total Electronic Shopping and Mail-Order Houses
             962,422          
                         
Industrial Machinery Manufacturing (0.42%)
                        
GSI Group, Inc., Common Stock (3), (5)
     221,404       1,700,383       0.42 %

 
7
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2011

Showing Percentage of Total Cash and Investments of the Company

               
Percent of
  
         
Fair
    
Cash and
  
Investment
  
Shares
    
Value
    
Investments
  
                   
Equity Securities (continued)
                  
Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing (0.00%)
                  
Precision Holdings, LLC, Class C Membership Interests (3), (5)
     33     $ 7,160       -  
                         
Nonferrous Metal (except Aluminum) Production and Processing (7.48%)
                        
International Wire Group Holdings, Inc., Common Stock (2), (5), (6)
     1,979,441       30,522,979       7.48 %
                         
Other Amusement and Recreation Industries (0.03%)
                        
Bally Total Fitness Holding Corporation, Common Stock (3), (5)
     6,058       86,024       0.02 %
Bally Total Fitness Holding Corporation, Warrants (3), (5)
     10,924       52,435       0.01 %
Total Other Amusement and Recreation Industries
             138,459          
                         
Other Electrical Equipment and Component Manufacturing (1.41%)
                        
EPMC HoldCo, LLC, Membership Units (2), (5), (6)
     1,312,720       5,762,841       1.41 %
                         
Radio and Television Broadcasting (0.78%)
                        
Encompass Digital Media Group, Inc., Common Stock (3), (5)
     183,824       3,187,507       0.78 %
                         
Scheduled Air Transportation (1.47%)
                        
United Air Lines, Inc., Equipment Trust Beneficial Interests (N510UA) (2), (5), (6)
     33       420,627       0.10 %
United Air Lines, Inc., Equipment Trust Beneficial Interests (N512UA) (2), (5), (6)
     33       414,005       0.10 %
United Air Lines, Inc., Equipment Trust Beneficial Interests (N536UA) (2), (5), (6)
     43       577,476       0.14 %
United Air Lines, Inc., Equipment Trust Beneficial Interests (N545UA) (2), (5), (6)
     37       528,949       0.13 %
United Air Lines, Inc., Equipment Trust Beneficial Interests (N585UA) (2), (5), (6)
     33       452,537       0.11 %
United N659UA-767, LLC (N659UA) (2), (5), (6)
     203       1,851,396       0.45 %
United N661UA-767, LLC (N661UA) (2), (5), (6)
     197       1,810,685       0.44 %
Total Scheduled Air Transportation
             6,055,675          
                         
Semiconductor and Other Electronic Component Manufacturing (0.56%)
                        
AIP/IS Holdings, LLC, Membership Units (3), (5)
     352       2,287,226       0.56 %
                         
Support Activities for Mining (0.74%)
                        
DeepOcean Group Holding AS, Common Stock - (Norway) (3), (5)
     145,824       3,039,890       0.74 %
                         
Wired Telecommunications Carriers (1.46%)
                        
Integra Telecom, Inc., Common Stock (3), (5)
     1,274,522       5,904,196       1.45 %
Integra Telecom, Inc., Warrants (3), (5)
     346,939       -       -  
NEF Kamchia Co-Investment Fund, LP Interest - (Cayman Islands) (3), (4), (5)
     2,455,500       32,872       0.01 %
Total Wired Telecommunications Carriers
             5,937,068          
                         
Total Equity Securities (Cost $135,621,945)
             72,399,989          
                         
Total Investments (Cost $483,182,407) (8)
             393,787,443          

 
8
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2011

Showing Percentage of Total Cash and Investments of the Company

               
Percent of
  
   
Principal
    
Fair
    
Cash and
  
Investment
  
Amount
    
Value
    
Investments
  
                   
Cash and Cash Equivalents (3.48%)
                  
Wells Fargo & Company, Overnight Repurchase Agreement, 0.05%, Collateralized by Federal Home Loan Banks Bonds
   $ 6,022,702     $ 6,022,702       1.48 %
Union Bank of California, Commercial Paper, 0.05%, due 10/3/11
   $ 3,000,000       3,000,000       0.74 %
Cash Denominated in Foreign Currencies
   CAD 15,078       14,356       -  
Cash Denominated in Foreign Currencies
   € 3,373,595       4,516,231       1.11 %
Cash Denominated in Foreign Currencies
   £ 35,597       55,475       0.01 %
Cash Held on Account at Various Institutions
   $ 562,088       562,088       0.14 %
Total Cash and Cash Equivalents
             14,170,852          
                         
Total Cash and Investments
           $ 407,958,295       100.00 %

Notes to Statement of Investments:
 
(1)
Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933.  Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.
 
(2)
Affiliated issuer - as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer).
 
(3)
Non-income producing security.
 
(4)
Principal amount denominated in foreign currency.  Amortized cost and fair value converted from foreign currency to US dollars.
 
(5)
Restricted security.
 
(6)
Investment is not a controlling position.
 
(7)
Issuer is a controlled company.
 
(8)
Includes investments with an aggregate market value of $2,693,271 that have been segregated to collateralize certain unfunded commitments.
 
Aggregate purchases and aggregate sales of investments, other than government securities, totaled $150,939,763 and $178,429,393, respectively, during the nine months ended September 30, 2011.  Aggregate purchases includes investment assets received as payment in-kind.  Aggregate sales includes principal paydowns on debt investments.
 
The total value of restricted securities and bank debt as of September 30, 2011 was $315,299,687, or 77.29% of total cash and investments of the Company.
 
Swaps at September 30, 2011 were as follows:

Investment
  
Notional Amount
    
Fair Value
  
             
Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 5/16/14
   $ 6,040,944     $ (93,009 )

See accompanying notes.
 
 
9
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Operations (Unaudited)

Nine Months Ended September 30, 2011

Investment income
      
Interest income:
      
Unaffiliated issuers
   $ 28,609,340  
Affiliates
     2,621,717  
Dividend income:
        
Affiliates
     12,542,394  
Other income:
        
Unaffiliated issuers
     1,068,874  
Affiliates
     912,052  
Total investment income
     45,754,377  
         
Operating expenses
        
Management and advisory fees
     5,090,391  
Amortization of deferred debt issuance costs
     329,312  
Interest expense
     268,852  
Legal fees, professional fees and due diligence expenses
     146,625  
Director fees
     140,210  
Commitment fees
     123,661  
Insurance expense
     84,913  
Custody fees
     68,159  
Other operating expenses
     189,979  
Total expenses
     6,442,102  
         
Net investment income
     39,312,275  
         
Net realized and unrealized gain (loss)
        
Net realized gain:
        
Investments in unaffiliated issuers
     15,486,614  
Investments in affiliates
     261,308  
Net realized gain
     15,747,922  
Net change in net unrealized appreciation/depreciation
     (51,646,770 )
Net realized and unrealized loss
     (35,898,848 )
         
Dividends paid on Series A preferred equity facility
     (1,108,574 )
Net change in accumulated dividends on Series A preferred equity facility
     (46,399 )
Dividends paid to Series Z preferred shareholders
     (752 )
Net change in reserve for dividends to Series Z preferred shareholders
     27  
         
Net increase in net assets applicable to common shareholders resulting from operations
   $ 2,257,729  



See accompanying notes.

 
10
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statements of Changes in Net Assets

   
Nine Months Ended
        
   
September 30, 2011
    
Year Ended
  
   
(Unaudited)
    
December 31, 2010
  
             
Net assets applicable to common shareholders, beginning of period
   $ 264,187,584     $ 232,879,791  
                 
Net investment income
     39,312,275       38,906,533  
Net realized gain
     15,747,922       18,675,609  
Net change in unrealized appreciation/depreciation
     (51,646,770 )     12,945,410  
Dividends on Series A preferred equity facility
     (1,108,574 )     (1,508,341 )
Net change in accumulated dividends on Series A preferred equity facility
     (46,399 )     (9,532 )
Dividends to Series Z preferred shareholders from net investment income
     (752 )     (3,750 )
Net change in reserve for dividends to Series Z preferred shareholders
     27       1,864  
Net increase in net assets applicable to common shareholders resulting from operations
     2,257,729       69,007,793  
                 
Distributions to common shareholders from:
                
Net investment income
     (23,500,000 )     (37,700,000 )
                 
Net assets applicable to common shareholders, end of period (including accumulated net investment income of $14,963,815 and $307,266, respectively)
   $ 242,945,313     $ 264,187,584  



See accompanying notes.

 
11
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Statement of Cash Flows (Unaudited)

Nine Months Ended September 30, 2011

Operating activities
      
Net increase in net assets applicable to common shareholders resulting from operations
   $ 2,257,729  
Adjustments to reconcile net increase in net assets applicable to common shareholders resulting from operations to net cash provided by operating activities:
        
Net realized gain
     (15,747,922 )
Net change in unrealized appreciation/depreciation
     51,376,888  
Dividends paid on Series A preferred equity facility
     1,108,574  
Dividends paid to Series Z preferred shareholders
     752  
Net change in accumulated dividends on Series A preferred equity facility
     46,399  
Net change in reserve for dividends to Series Z preferred shareholders
     (27 )
Accretion of original issue discount
     (768,423 )
Net accretion of market discount/premium
     (2,777,838 )
Accrual of interest and dividend income paid in kind
     (4,687,164 )
Amortization of deferred debt issuance costs
     329,312  
Changes in assets and liabilities:
        
Purchases of investment securities
     (146,252,599 )
Proceeds from sales, maturities and paydowns of investments
     178,429,393  
Decrease in accrued interest income - unaffiliated issuers
     12,469  
Increase in accrued interest income - affiliates
     (506,042 )
Decrease in receivable for investments sold
     680,245  
Increase in prepaid expenses and other assets
     (1,096,180 )
Increase in payable for investments purchased
     9,410,999  
Decrease in payable to the Investment Manager
     (35,901 )
Increase in interest payable
     3,181  
Decrease in accrued expenses and other liabilities
     (29,910 )
Net cash provided by operating activities
     71,753,935  
         
Financing activities
        
Proceeds from draws on credit facility
     86,000,000  
Principal repayments on credit facility
     (107,000,000 )
Redemption of Series Z preferred equity
     (23,500 )
Dividends paid on Series A preferred equity facility
     (1,108,574 )
Distributions paid to common shareholders
     (43,200,000 )
Dividends paid to Series Z preferred shareholders
     (752 )
Net cash used in financing activities
     (65,332,826 )
         
Net increase in cash and cash equivalents
     6,421,109  
Cash and cash equivalents at beginning of period
     7,749,743  
Cash and cash equivalents at end of period
   $ 14,170,852  
         
Supplemental cash flow information
        
Interest payments
   $ 265,671  



See accompanying notes.

 
12
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited)

September 30, 2011

1.  Organization and Nature of Operations

Special Value Continuation Fund, LLC (the “Company”), a Delaware Limited Liability Company, is registered as a nondiversified, closed-end management investment company under the Investment Company Act of 1940 (the “1940 Act”).  The Company was established for the purpose of enabling qualified investors to participate indirectly in the investment objectives of Special Value Continuation Partners, LP, a Delaware Limited Partnership (the “Partnership”), of which the Company owns 100% of the common limited partner interests.  The Partnership is also registered as a nondiversified, closed-end management investment company under the 1940 Act.  The Partnership was formed to acquire a portfolio of investments consisting primarily of bank loans, distressed debt, stressed high yield debt, mezzanine investments and public equities.  The stated objective of the Company is to achieve high total returns while minimizing losses.
 
The Company has elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes.  As a RIC, the Company will not be taxed on its income to the extent that it distributes such income each year and satisfies other applicable income tax requirements.  The Partnership has elected to be treated as a partnership for U.S. federal income tax purposes.  Investment operations commenced and initial funding was received on July 31, 2006.

These consolidated financial statements include the accounts of the Company and the Partnership.  All significant intercompany transactions and balances have been eliminated in the consolidation.

The General Partner of the Partnership is SVOF/MM, LLC (“SVOF/MM”).  The managing member of SVOF/MM is Tennenbaum Capital Partners, LLC (“TCP”), which serves as the Investment Manager of both the Company and the Partnership.  Babson Capital Management LLC serves as Co-Manager of both the Company and the Partnership.  Substantially all of the equity interests in the General Partner are owned directly or indirectly by TCP, Babson Capital Management LLC and employees of TCP.

Company management consists of the Investment Manager and the Board of Directors.  Partnership management consists of the General Partner and the Board of Directors.  The Investment Manager and the General Partner direct and execute the day-to-day operations of the Company and the Partnership, respectively, subject to oversight from the respective Board of Directors, which sets the broad policies of the Company and performs certain functions required by the 1940 Act in the case of the Partnership.  The Board of Directors of the Partnership has delegated investment management of the Partnership’s assets to the Investment Manager and the Co-Manager.  Each Board of Directors consists of three persons, two of whom are independent.  If the Company or the Partnership has preferred equity interests outstanding, as each currently does, the holders of the preferred interests voting separately as a class will be entitled to elect

 
13
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

1.  Organization and Nature of Operations (continued)

two of the Directors.  The remaining directors will be subject to election by holders of the common shares and preferred interests voting together as a single class.

Company Structure

Total capitalization of the consolidated Company is approximately $678.8 million, consisting of approximately $419.0 million of initial contributed common equity, an approximately $9.8 million initial general partner interest (the “GP Interest”) in the Partnership held by SVOF/MM, $134 million of preferred limited partner interests in the Partnership (the “Series A Preferred”), and $116 million under a senior secured revolving credit facility issued by the Partnership (the “Senior Facility”).  The GP Interest in the Partnership is shown as a minority interest in these consolidated financial statements. The contributed common equity, GP Interest, preferred limited interests and the amount drawn under the Senior Facility are used to purchase Partnership investments and to pay certain fees and expenses of the Partnership and the Company.  Most of the cash and investments of the Partnership are included in the collateral for the Senior Facility.

The Company will liquidate and distribute its assets and will be dissolved on June 30, 2016, subject to up to two one-year extensions if requested by the Investment Manager and approved by the outstanding common shares.  The Partnership will liquidate and distribute its assets and will be dissolved on June 30, 2016, subject to up to two one-year extensions if requested by the General Partner and approved by SVCF as the holder of the common limited partner interests in the Partnership.  However, the Operating Agreement and Partnership Agreement will prohibit liquidation of the Company and the Partnership, respectively, prior to June 30, 2016 if the Series A Preferred are not redeemed in full prior to such liquidation.

Preferred Equity Facility

At September 30, 2011, the Partnership had 6,700 Series A preferred limited partner interests (the “Series A Preferred”) issued and outstanding with a liquidation preference of $20,000 per Preferred Limited Interest. The Series A Preferred are redeemable at the option of the Partnership, subject to certain conditions. Additionally, under certain conditions, the Partnership may be required to either redeem certain of the Series A Preferred or repay indebtedness, at the Partnership’s option.  Such conditions would include a failure by the Partnership to maintain adequate collateral as required by its credit facility agreement or by the Statement of Preferences of the Series A Preferred or a failure by the Partnership to maintain sufficient asset coverage as required by the 1940 Act.  As of September 30, 2011, the Partnership was in full compliance with such requirements.

The Series A Preferred accrue dividends at an annual rate equal to LIBOR plus 0.85% or, in the case of any holders of Series A Preferred that are CP Conduits (as defined in the leveraging

 
14
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

1.  Organization and Nature of Operations (continued)

documents), the higher of (i) LIBOR plus 0.85% or (ii) the CP Conduit’s cost of funds rate plus 0.85%, subject to certain limitations and adjustments.

2.  Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The following is a summary of the significant accounting policies of the Company and the Partnership.

Use of Estimates

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions to be reasonable, actual results could differ from those estimates.

Investment Valuation

All of the Company’s investments are generally held by the Partnership. Management values investments held by the Partnership at fair value based upon the principles and methods of valuation set forth in policies adopted by the Partnership’s Board of Directors and in conformity with procedures set forth in the Senior Facility and Statement of Preferences for the Preferred Limited Interest.  Fair value is generally defined as the amount for which an investment would be sold in an orderly transaction between market participants at the measurement date.

Investments listed on a recognized exchange or market quotation system, whether U.S. or foreign, are valued for financial reporting purposes as of the last business day of the reporting period using the closing price on the date of valuation. Liquid investments not listed on a recognized exchange or market quotation system are priced by a nationally recognized pricing service or by using quotations from broker-dealers.  Investments not priced by a pricing service or for which market quotations are either not readily available or are determined to be unreliable are valued by one or more independent valuation services or, for investments aggregating less than 5% of the total capitalization of the Partnership, by the Investment Manager.

Fair valuations of investments are determined under guidelines adopted by the Partnership’s Board of Directors, and are subject to their approval. Generally, to increase objectivity in valuing

 
15
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

2.  Summary of Significant Accounting Policies (continued)

the Partnership’s investments, the Investment Manager will utilize external measures of value, such as public markets or third-party transactions, whenever possible. The Investment Manager’s valuation is not based on long-term work-out value, immediate liquidation value, nor incremental value for potential changes that may take place in the future.  The values assigned to investments that are valued by the Investment Manager are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated. The foregoing policies apply to all investments, including those in companies and groups of affiliated companies aggregating more than 5% of the Company’s assets.

Fair valuations of investments in each asset class are determined using one or more methodologies including the market approach, income approach, or, in the case of recent investments, the cost approach, as appropriate.  The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets.  The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted).  The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that may be taken into account include, as relevant:  available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market and enterprise values, among other factors.

Investments of the Partnership may be categorized based on the types of inputs used in valuing such investments.  The level in the GAAP valuation hierarchy in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. Transfers between levels are recognized as of the beginning of the reporting period.

 
16
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

2.  Summary of Significant Accounting Policies (continued)

At September 30, 2011, the investments of the Partnership were categorized as follows:

Level
  
Basis for Determining Fair Value
  
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
1
  
Quoted prices in active markets for identical assets
   $ -     $ 4,880,978     $ 2,875,180  
2
  
Other observable market inputs*
     40,383,764       99,491,011       -  
3
  
Independent third-party pricing sources that employ significant unobservable inputs
     139,988,181       29,242,084       66,394,525  
3
  
Investment Manager valuations with significant unobservable inputs
     51,436       7,350,000       3,130,285  
Total
       $ 180,423,381     $ 140,964,073     $ 72,399,990  

* For example, quoted prices in inactive markets or quotes for comparable instruments.

Changes in investments categorized as Level 3 during the nine months ended September 30, 2011 were as follows:

   
Independent Third Party Valuation
  
   
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
   $ 113,346,599     $ 49,978,032     $ 117,368,154  
Net realized and unrealized gains (losses)
     1,224,163       (10,587,723 )     (7,583,705 )
Acquisitions
     89,430,675       7,400,065       8,213,646  
Dispositions
     (62,500,225 )     (18,851,527 )     (50,517,539 )
Transfers into Level 3
     -       13,168,606       -  
Transfers out of Level 3†
     (13,378,400 )     -       -  
Reclassifications within Level 3‡
     11,865,369       (11,865,369 )     (1,086,031 )
Ending balance
   $ 139,988,181     $ 29,242,084     $ 66,394,525  
                         
Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
   $ 1,428,566     $ (9,908,562 )   $ (9,145,854 )

† Comprised of one investment that transferred to Level 2 due to increased trading volumes.
‡ Comprised of one investment with a beginning-of-period fair value of $11,865,369 that was reclassified as bank debt and one investment with a beginning-of-period fair value of $1,086,031 that transferred to Investment Manager Valuation.

 
17
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

2.  Summary of Significant Accounting Policies (continued)

   
Investment Manager Valuation
  
   
Bank Debt
    
Other
Corporate Debt
    
Equity
Securities
  
Beginning balance
   $ 63,163     $ -     $ 4,314,940  
Net realized and unrealized gains (losses)
     4,096       -       (2,271,428 )
Acquisitions
     -       7,350,000       742  
Dispositions
     (15,823 )     -       -  
Reclassifications within Level 3#
     -       -       1,086,031  
Ending balance
   $ 51,436     $ 7,350,000     $ 3,130,285  
                         
Net change in unrealized appreciation/ depreciation during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)
   $ 4,096     $ -     $ (2,238,501 )

# Comprised of one investment that transferred from Independent Third Party Valuation.

During the nine months ended September 30, 2011, one investment with a beginning-of-period fair value of $3,477,314 transferred from Level 2 to Level 1 following commencement of active trading on a national exchange.

Investment Transactions

The Partnership records investment transactions on the trade date, except for private transactions that have conditions to closing, which are recorded on the closing date. The cost of investments purchased is based upon the purchase price plus those professional fees which are specifically identifiable to the investment transaction. Realized gains and losses on investments are recorded based on the specific identification method, which typically allocates the highest cost inventory to the basis of investments sold.

Cash and Cash Equivalents

Cash consists of amounts held in accounts with brokerage firms and the custodian bank.  Cash equivalents consist of highly liquid investments with an original maturity of three months or less.

 
18
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

2.  Summary of Significant Accounting Policies (continued)

Repurchase Agreements

In connection with transactions in repurchase agreements, it is the Partnership’s policy that its custodian take possession of the underlying collateral, the fair value of which is required to exceed the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral by the Partnership may be delayed or limited.

Restricted Investments

The Partnership may invest without limitation in instruments that are subject to legal or contractual restrictions on resale. These instruments generally may be resold to institutional investors in transactions exempt from registration or to the public if the securities are registered. Disposal of these investments may involve time-consuming negotiations and additional expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted investments is included at the end of the Consolidated Statement of Investments. Restricted investments, including any restricted investments in affiliates, are valued in accordance with the investment valuation policies discussed above.

Foreign Investments

The Partnership may invest in instruments traded in foreign countries and denominated in foreign currencies.  At September 30, 2011, the Partnership held foreign currency denominated investments comprising approximately 3.2% of the Partnership’s total investments. Such positions were converted at the closing rate in effect at September 30, 2011 and reported in U.S. dollars. Purchases and sales of investments and income and expense items denominated in foreign currencies, when they occur, are translated into U.S. dollars on the respective dates of such transactions.  The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.

Investments in foreign companies and securities of foreign governments may involve special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government.  These risks include, among other things, revaluation of currencies, less reliable information about issuers, different transactions clearance and settlement practices and potential future adverse political and economic developments. Moreover, investments in foreign companies and securities of foreign governments and their markets may be less liquid and their prices more volatile than those of comparable U.S. companies and the U.S. government.

 
19
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

2.  Summary of Significant Accounting Policies (continued)

Derivatives

In order to mitigate certain currency exchange and interest rate risks, the Partnership has entered into several swap and option transactions.  All derivatives are recognized as either assets or liabilities in the statement of assets and liabilities. The transactions entered into are accounted for using the mark-to-market method with the resulting change in fair value recognized in earnings for the current period.  Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in interest rates and the value of foreign currency relative to the U.S. dollar.

Gains and losses from derivative transactions during the nine months ended September 30, 2011 were included in net realized and unrealized loss on investments in the Statement of Operations as follows:

Instrument
  
Realized
    
Unrealized
  
Cross currency basis swaps
   $ -     $ (112,987 )
Forward currency contracts
     (572,621 )     -  
Currency options
     (430,004 )     266,647  

Valuations of swaps held at September 30, 2011 were determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, may be classified as Level 2 in the GAAP valuation hierarchy.

Debt Issuance Costs

Costs of approximately $3.5 million were incurred in connection with placing the Partnership’s Senior Facility. These costs were deferred and are being amortized on a straight-line basis over eight years, the estimated life of the Senior Facility. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Company or the Partnership.

 
20
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

2.  Summary of Significant Accounting Policies (continued)

Purchase Discounts

The majority of the Partnership’s high yield and distressed debt investments are purchased at a considerable discount to par as a result of the underlying credit risks and financial results of the issuer, as well as general market factors that influence the financial markets as a whole. GAAP generally requires that discounts on the acquisition of corporate (investment grade) bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. However, GAAP also requires the Partnership to consider the collectability of interest when making accruals. Accordingly, when accounting for purchase discounts, the Partnership recognizes discount accretion income when it is probable that such amounts will be collected and when such amounts can be estimated.

Income Taxes

The Company intends to comply with the applicable provisions of the Internal Revenue Code of 1986, as amended, pertaining to regulated investment companies and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes. Accordingly, no provision for income taxes is required in the consolidated financial statements.  The Partnership’s income or loss is reported in the partners’ income tax returns.  As of September 30, 2011, all tax years of the Company and the Partnership since January 1, 2007 remain subject to examination by federal tax authorities.  No such examinations are currently pending. Cost of the investments (including derivatives) and unrealized appreciation/depreciation for U.S. federal income tax purposes at September 30, 2011 were as follows:

Unrealized appreciation
   $ 47,110,228  
Unrealized depreciation
     (136,598,201 )
Net unrealized depreciation
     (89,487,973 )
         
Cost
   $ 483,182,407  

3.  Allocations and Distributions

Common distributions are generally based on the estimated taxable earnings of the Company, and are recorded on the ex-dividend date. Distributions to the common shareholders of the Company are generally based on distributions received from the Partnership, less any Company-level expenses and dividends to Series Z preferred shareholders.

Net income and gains of the Partnership are distributed first to the Company until it has received an 8% annual weighted-average return on its undistributed contributed equity, and then to the

 
21
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

3.  Allocations and Distributions (continued)

General Partner until it has received 20% of all cumulative income and gain distributions.  80% of all remaining net income and gain distributions are allocated to the Company, with the remaining 20% allocated to the General Partner.  Net investment income or loss, realized gain or loss on investments, and appreciation or depreciation on investments for the period are allocated to the Company and the General Partner in a manner consistent with that used to determine distributions.

The timing of distributions to the Company is determined by the General Partner, which has provided the Investment Manager with certain criteria for such distributions.  The timing and amount to be paid by the Company as a distribution to its shareholders are determined by its Board of Directors, which has provided the Investment Manager with criteria for such distributions. Any net long-term capital gains are distributed at least annually.  As of September 30, 2011, the Company had declared $184,497,000 in distributions to the common shareholders since inception.

The Company’s Series Z preferred share dividend rate is fixed at 8% per annum.

4.  Management and Advisory Fees and Other Expenses

The Investment Manager receives an annual management and advisory fee, payable monthly in arrears, equal to 1.0% of the sum of the maximum amount of the Series A Preferred, the  maximum amount available under the Senior Facility, the initial value of the contributed general partnership equity and the initial value of the contributed common equity, subject to reduction by the amount of the Senior Facility commitment when the Senior Facility is no longer outstanding, and by the amount of the Series A Preferred when less than $1 million in liquidation preference of preferred securities remains outstanding. In addition to the management fee, the General Partner is entitled to a performance allocation as discussed in Note 3, above.  As compensation for its services, the Co-Manager receives a portion of the management fees paid to the Investment Manager. The Co-Manager also receives a portion of any performance allocation paid to the General Partner.

The Company and the Partnership pay all respective expenses incurred in connection with the business of the Company and the Partnership, including fees and expenses of outside contracted services, such as custodian, administrative, legal, audit and tax preparation fees, costs of valuing investments, insurance costs, brokers’ and finders’ fees relating to investments and any other transaction costs associated with the purchase and sale of investments of the Partnership.

 
22
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

5.  Senior Secured Revolving Credit Facility

The Partnership has entered into a credit agreement with certain lenders, which provides for a senior secured revolving credit facility (the “Senior Facility”), pursuant to which amounts may be drawn up to $116 million. The Senior Facility matures July 31, 2014, subject to extension by the lenders at the request of the Partnership for one 12-month period.

Advances under the Senior Facility bear interest at LIBOR plus 0.44% per annum, except in the case of loans from CP Conduits, which bear interest at the higher of LIBOR plus 0.44% or the CP Conduit’s cost of funds plus 0.44%, subject to certain limitations. The weighted-average interest rate on outstanding borrowings at September 30, 2011 was 0.70%. In addition to amounts due on outstanding debt, the Senior Facility accrues commitment fees of 0.20% per annum on the unused portion of the Senior Facility, or 0.25% per annum when less than $46.4 million in borrowings are outstanding. The Senior Facility may be terminated, and any outstanding amounts thereunder may become due and payable, should the Partnership fail to satisfy certain financial or other covenants.  As of September 30, 2011, the Partnership was in full compliance with such covenants.

6.  Commitments, Concentration of Credit Risk and Off-Balance Sheet Risk

The Partnership conducts business with brokers and dealers that are primarily headquartered in New York and Los Angeles and are members of the major securities exchanges. Banking activities are conducted with a firm headquartered in the New York area.

In the normal course of business, the Partnership’s investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the Partnership’s custodian.  These activities may expose the Company and the Partnership to risk in the event that such parties are unable to fulfill contractual obligations.  Management does not anticipate any material losses from counterparties with whom it conducts business.

Consistent with standard business practice, the Company and the Partnership enter into contracts that contain a variety of indemnifications, and are engaged from time to time in various legal actions.  The maximum exposure of the Company and the Partnership under these arrangements and activities is unknown.  However, the Company and the Partnership expect the risk of material loss to be remote.

 
23
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

7.  Related Parties

The Company, the Partnership, the Investment Manager, the General Partner and their members and affiliates may be considered related parties.  From time to time, the Partnership advances payments to third parties on behalf of the Company which are reimbursable through deductions from distributions to the Company.  At September 30, 2011 the Company had a liability to the Partnership, and the Partnership had a receivable from the Company, in the amount of $60,512, as reflected in the Consolidating Statement of Assets and Liabilities. From time to time, the Investment Manager advances payments to third parties on behalf of the Company and the Partnership and receives reimbursement from the Company and the Partnership.  At September 30, 2011, such reimbursable amounts totaled $56,924, as reflected in the Consolidated Statement of Assets and Liabilities.

8.  Series Z Preferred Capital

The Company issued, at inception, 47 shares of Series Z preferred interests. The Series Z preferred shares had a liquidation preference of $500 per share plus accumulated but unpaid dividends and paid dividends at an annual rate equal to 8% of the liquidation preference. On May 24, 2011, the Company redeemed all of the outstanding Series Z preferred shares.

 
24
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

9.  Financial Highlights

   
Nine Months Ended
                            
July 31, 2006
  
   
September 30, 2011
    
Year Ended December 31,
    
(Inception) to
  
   
(Unaudited)
    
2010
    
2009
    
2008
    
2007
    
December 31, 2006
  
                                     
Per Common Share
                                    
Net asset value, beginning of period
   $ 630.59     $ 555.86     $ 467.22     $ 936.95     $ 1,036.13     $ 1,000.00  
                                                 
Investment operations:
                                                
Net investment income
     93.83       92.87       42.80       53.75       166.54       48.14  
Net realized and unrealized gain (loss)
     (85.69 )     75.48       86.27       (499.51 )     (28.73 )     62.27  
Distributions to minority interestholder from:
                                                
Net investment income
     -       -       -       -       (29.74 )     (7.98 )
Net realized gains
     -       -       -       -       (17.76 )     (3.39 )
Returns of capital
     -       -       -       -       (1.30 )     -  
Net change in undistributed earnings of minority interest holder
     -       -       -       7.52       24.89       (9.10 )
Dividends on Series A preferred equity facility
     (2.65 )     (3.60 )     (6.07 )     (14.21 )     (19.96 )     (3.38 )
Net change in accumulated dividends on Series A preferred equity facility
     (0.11 )     (0.02 )     1.92       1.82       0.35       (4.98 )
Dividends to Series Z preferred shareholders from:
                                                
Net investment income
     -       (0.01 )     -       (0.01 )     -       -  
Net change in reserve for dividends to Series Z preferred Shareholders
     -       -       -       0.01       -       -  
                                                 
Total from investment operations
     5.38       164.72       124.92       (450.63 )     94.29       81.58  
                                                 
Distributions to common shareholders from:
                                                
Net investment income
     (56.09 )     (89.99 )     (36.28 )     (19.10 )     (117.36 )     (31.90 )
Net realized gains
     -       -       -       -       (71.03 )     (13.55 )
Returns of capital
     -       -       -       -       (5.08 )     -  
Total distributions to common shareholders
     (56.09 )     (89.99 )     (36.28 )     (19.10 )     (193.47 )     (45.45 )
                                                 
Net asset value, end of period
   $ 579.88     $ 630.59     $ 555.86     $ 467.22     $ 936.95     $ 1,036.13  
                                                 
Return on invested assets (1), (2)
     1.5 %     20.4 %     19.3 %     (31.7 )%     11.7 %     8.4 %
                                                 
Gross return to common shareholders (1)
     0.7 %     31.4 %     27.3 %     (49.3 )%     11.4 %     10.3 %
Less: Allocation to General Partner of Special Value Continuation
Partners, LP (1)
     0.0 %     0.0 %     0.0 %     0.5 %     (2.2 )%     (2.1 )%
Return to common shareholders (1), (3)
     0.7 %     31.4 %     27.3 %     (48.8 )%     9.2 %     8.2 %

 
25
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2011

9.  Financial Highlights (continued)

   
Nine Months Ended
                            
July 31, 2006
  
   
September 30, 2011
    
Year Ended December 31,
    
(Inception) to
  
   
(Unaudited)
    
2010
    
2009
    
2008
    
2007
    
December 31, 2006
  
                                     
Ratios to average common equity:(4), (6)
                                    
Net investment income(5)
     19.9 %     15.5 %     8.7 %     6.9 %     12.8 %     10.4 %
Expenses
     3.3 %     3.6 %     4.5 %     4.5 %     4.6 %     5.7 %
Expenses and General Partner allocation
     3.3 %     3.6 %     4.5 %     3.5 %     6.9 %     7.7 %
                                                 
Ending common shareholder equity
   $ 242,945,313     $ 264,187,584     $ 232,879,791     $ 195,745,577     $ 392,541,013     $ 434,092,909  
Portfolio turnover rate (1), (7)
     35.7 %     47.4 %     44.2 %     33.3 %     64.6 %     17.3 %
Weighted-average debt outstanding
   $ 46,728,938     $ 31,663,014     $ 26,882,192     $ 123,873,973     $ 162,460,274     $ 168,292,208  
Weighted-average interest rate on debt
     0.8 %     0.7 %     1.0 %     3.7 %     5.8 %     5.8 %
Weighted-average number of shares
     418,956       418,956       418,956       418,956       418,956       418,956  
Average debt per share
   $ 111.54     $ 75.58     $ 64.16     $ 295.67     $ 387.77     $ 401.69  
                                                 
Annualized Inception-to-Date Performance Data as of September 30, 2011:
  
                                                 
Return on invested assets (2)
     3.7 %                                        
Internal rate of return (8)
     0.5 %                                        
 
 
(1)
Not annualized for periods of less than one year.
 
(2)
Return on invested assets is a time-weighted, geometrically linked rate of return and excludes cash and cash equivalents.
 
(3)
Returns (net of dividends on the preferred equity facility, allocations to General Partner and fund expenses, including financing costs and management fees) are calculated on a monthly geometrically linked, time-weighted basis.
 
(4)
Annualized for periods of less than one year, except for allocations to the General Partner.
 
(5)
Net of income and expense allocation to the General Partner.
 
(6)
These ratios include interest expense but do not reflect the effect of dividends on the preferred equity facility.
 
(7)
Excludes securities acquired from Special Value Bond Fund II, LLC and Special Value Absolute Return Fund, LLC at the inception of the Company and the Partnership.
 
(8)
Net of dividends on the preferred equity facility of the Partnership, allocation to the General Partner, and fund expenses, including financing costs and management fees. Internal rate of return (“IRR”) is the imputed annual return over an investment period and, mathematically, is the rate of return at which the discounted cash flows equal the initial cash outlays. The IRR presented assumes liquidation of the fund at net asset value as of the balance sheet date, and is reduced by the organizational costs that were expensed at the inception of the Company.

 
26
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Schedule of Changes in Investments in Affiliates (1) (Unaudited)

Nine Months Ended September 30, 2011

Security
  
Value,
Beginning of
Period
    
Acquisitions
    
Dispositions
    
Value,
End of
Period
  
Anacomp, Inc., Class A Common Stock
   $ 1,086,031     $ -     $ -     $ 527,321  
EPMC HoldCo, LLC, Membership Units
     40,727,138       -       (24,308,286 )     5,762,841  
ESP Holdings, Inc., 15% PIK, Preferred Stock
     3,005,832       -       -       3,186,281  
ESP Holdings, Inc., Common Stock
     7,565,535       -       -       6,079,283  
ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 18% PIK, due 3/31/15
     5,321,627       887,719       -       6,209,347  
International Wire Group, Inc., Senior Secured Notes, 9.75%, due 4/15/15
     4,040,000       -       (4,200,000 )     -  
International Wire Group Holdings, Inc., Common Stock
     43,468,524       -       (12,179,595 )     30,522,980  
International Wire Group Holdings, Inc., Senior Notes, 11.5% Cash or 12.25% PIK, due 4/15/15
     -       20,000,000       (2,000,000 )     17,640,000  
United Air Lines, Inc., Aircraft Secured Mortgage (N510UA), 20%, due 9/26/16
     719,200       -       (40,104 )     665,247  
United Air Lines, Inc., Aircraft Secured Mortgage (N512UA), 20%, due 10/26/16
     723,647       -       (39,243 )     670,663  
United Air Lines, Inc., Aircraft Secured Mortgage (N536UA), 16%, due 8/21/14
     558,944       -       (76,525 )     466,273  
United Air Lines, Inc., Aircraft Secured Mortgage (N545UA), 16%, due 7/17/15
     695,004       -       (68,575 )     613,688  
United Air Lines, Inc., Aircraft Secured Mortgage (N585UA), 20%, due 10/25/16
     849,983       -       (46,075 )     787,749  
United Air Lines, Inc., Aircraft Secured Mortgage (N659UA), 12%, due 3/28/16
     -       5,329,739       (529,854 )     5,371,072  
United Air Lines, Inc., Aircraft Secured Mortgage (N661UA), 12%, due 5/4/16
     -       5,351,577       (442,833 )     5,539,517  
United Air Lines, Inc., Equipment Trust Beneficial Interests (N510UA)
     311,102       40,104       (50,904 )     420,627  
United Air Lines, Inc., Equipment Trust Beneficial Interests (N512UA)
     307,754       39,242       (50,904 )     414,005  
United Air Lines, Inc., Equipment Trust Beneficial Interests (N536UA)
     375,796       76,525       (49,059 )     577,476  
United Air Lines, Inc., Equipment Trust Beneficial Interests (N545UA)
     357,648       68,575       (56,970 )     528,949  
United Air Lines, Inc., Equipment Trust Beneficial Interests (N585UA)
     338,830       46,075       (59,769 )     452,537  
United N659UA-767, LLC (N659UA)
     -       2,030,041       (506,034 )     1,851,396  
United N661UA-767, LLC (N661UA)
     -       1,971,350       (442,024 )     1,810,685  

Note to Schedule of Changes in Investments in Affiliates:
 
(1)
The issuers of the securities listed on this schedule are considered affiliates under the 1940 Act due to the ownership by the Partnership of 5% or more of the issuers' voting securities.

 
27
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers (Unaudited)

September 30, 2011

Investment
  
Acquisition
Date
  
Cost
  
           
AIP/IS Holdings, LLC, Membership Units
  
Var. 2009 & 2010
   $ 723,914  
Bally Total Fitness Holding Corporation, Common Stock
  
4/30/10
     45,186,963  
Bally Total Fitness Holding Corporation, Warrants
  
4/30/10
     -  
Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16
  
1/20/11
     12,322,875  
Encompass Digital Media Group, Inc., Common Stock
  
1/15/10
     883,196  
DeepOcean Group Holding AS, Common Stock
  
5/13/11
     3,477,627  
GSI Group, Inc., Common Stock
  
8/20/08
     1,172,379  
GSI Group, Inc., Senior Secured Notes, 12.25% Cash or 13% PIK, due 1/15/14
  
8/20/08
     3,924,931  
Integra Telecom, Inc., Common Stock
  
11/19/09
     8,433,884  
Integra Telecom, Inc., Warrants
  
11/19/09
     19,920  
ITC^DeltaCom, Inc., Senior Secured Notes, 10.5%, due 4/1/16
  
4/9/10
     9,619,343  
NEF Kamchia Co-Investment Fund, LP Interest
  
7/31/07
     3,367,227  
NEF Telecom Company BV, Mezzanine Term Loan, EURIBOR + 4.5% Cash + 7.5% PIK, due 8/16/17
  
8/29/07
     26,162,416  
Precision Holdings, LLC, Class C Membership Interests
  
Var. 2010 & 2011
     1,396  
Saratoga Resources, Inc., Senior Secured Notes, 12.5%, due 7/1/16
  
7/7/11
     3,928,840  
Shop Holding, LLC, Class A Units
  
6/2/11
     462,576  
Shop Holdings, LLC, Warrants to Purchase Class A Units
  
6/2/11
     -  
STG-Fairway Holdings, LLC, Class A Units
  
12/30/10
     1,100,348  
The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19
  
9/26/11
     7,350,000  

 
28
 

Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidating Statement of Assets and Liabilities (Unaudited)

September 30, 2011

   
Special Value
    
Special Value
          
Special Value
  
   
Continuation
    
Continuation
          
Continuation
  
   
Fund, LLC
    
Partners, LP
          
Fund, LLC
  
   
Standalone
    
Standalone
    
Eliminations
    
Consolidated
  
Assets
                        
Investments:
                        
Unaffiliated issuers
   $ -     $ 303,689,506     $ -     $ 303,689,506  
Investment in subsidiary
     242,769,008       -       (242,769,008 )     -  
Controlled companies
     -       527,321       -       527,321  
Other affiliates
     -       89,570,616       -       89,570,616  
Total investments
     242,769,008       393,787,443       (242,769,008 )     393,787,443  
                                 
Cash and cash equivalents
     -       14,170,852       -       14,170,852  
Receivable for investment securities sold
     -       4,580,979       -       4,580,979  
Accrued interest income
     -       5,889,843       -       5,889,843  
Deferred debt issuance costs
     -       1,248,490       -       1,248,490  
Receivable from parent
     -       60,512       (60,512 )     -  
Prepaid expenses and other assets
     310,781       980,843       -       1,291,624  
Total assets
     243,079,789       420,718,962       (242,829,520 )     420,969,231  
                                 
Liabilities
                                
Credit facility payable
     -       29,000,000       -       29,000,000  
Payable for investment securities purchased
     -       13,349,115       -       13,349,115  
Management and advisory fees payable
     -       565,599       -       565,599  
Unrealized depreciation on swaps
     -       93,009       -       93,009  
Interest payable
     -       82,783       -       82,783  
Payable to the Investment Manager
     14,844       42,080       -       56,924  
Payable to subsidiary
     60,512       -       (60,512 )     -  
Accrued expenses and other liabilities
     59,120       393,100       -       452,220  
Total liabilities
     134,476       43,525,686       (60,512 )     43,599,650  
                                 
Preferred equity facility
                                
Series A preferred limited partner interests
     -       134,000,000       -       134,000,000  
Accumulated dividends on Series A preferred equity facility
     -       424,268       -       424,268  
Total preferred limited partner interests
     -       134,424,268       -       134,424,268  
Net assets
   $ 242,945,313     $ 242,769,008     $ (242,769,008 )   $ 242,945,313  
                                 
Composition of net assets
                                
Common stock
   $ 419     $ -     $ -     $ 419  
Additional paid-in capital
     364,742,957       358,636,781       (358,636,781 )     364,742,957  
Distributable earnings
     (121,798,063 )     (115,867,773 )     115,867,773       (121,798,063 )
Net assets
   $ 242,945,313     $ 242,769,008     $ (242,769,008 )   $ 242,945,313  

 
29
 
 
Special Value Continuation Fund, LLC
(A Delaware Limited Liability Company)

Consolidating Statement of Operations (Unaudited)

Nine Months Ended September 30, 2011

   
Special Value
    
Special Value
          
Special Value
  
   
Continuation
    
Continuation
          
Continuation
  
   
Fund, LLC
    
Partners, LP
          
Fund, LLC
  
   
Standalone
    
Standalone
    
Eliminations
    
Consolidated
  
Investment income
                        
Interest income:
                        
Unaffiliated issuers
   $ -     $ 28,609,340     $ -     $ 28,609,340  
Other affiliates
     -       2,621,717       -       2,621,717  
Dividend income:
                                
Other affiliates
     -       12,542,394       -       12,542,394  
Other income:
                                
Unaffiliated issuers
     -       1,068,874       -       1,068,874  
Other affiliates
     -       912,052       -       912,052  
Total interest and related investment income
     -       45,754,377       -       45,754,377  
                                 
Operating expenses
                                
Management and advisory fees
     -       5,090,391       -       5,090,391  
Amortization of deferred debt issuance costs
     -       329,312       -       329,312  
Interest expense
     -       268,852       -       268,852  
Legal fees, professional fees and due diligence expenses
     52,910       93,715       -       146,625  
Director fees
     46,737       93,473       -       140,210  
Commitment fees
     -       123,661       -       123,661  
Insurance expense
     26,445       58,468       -       84,913  
Custody fees
     2,625       65,534       -       68,159  
Other operating expenses
     (1,559 )     191,538       -       189,979  
Total expenses
     127,158       6,314,944       -       6,442,102  
                                 
Net investment income
     (127,158 )     39,439,433       -       39,312,275  
                                 
Net realized and unrealized gain
                                
Net realized gain:
                                
Investments in unaffiliated issuers
     -       15,486,614       -       15,486,614  
Investments in affiliates
     -       261,308       -       261,308  
Net realized gain
     -       15,747,922       -       15,747,922  
Net change in unrealized appreciation/depreciation
     2,385,612       (51,646,770 )     (2,385,612 )     (51,646,770 )
Net realized and unrealized gain
     2,385,612       (35,898,848 )     (2,385,612 )     (35,898,848 )
                                 
Dividends paid on Series A preferred equity facility
     -       (1,108,574 )     -       (1,108,574 )
Net change in accumulated dividends on Series A preferred equity facility
     -       (46,399 )     -       (46,399 )
Dividends paid to Series Z preferred shareholders
     (752 )     -       -       (752 )
Net change in reserve for dividends to Series Z preferred shareholders
     27       -       -       27  
                                 
Net increase in net assets resulting from operations
   $ 2,257,729     $ 2,385,612     $ (2,385,612 )   $ 2,257,729  
 
 
30