Edgar Filing: Special Value Continuation Fund, LLC

Unassociated Document

Consolidated Financial Statements

(Unaudited)

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

March 31, 2009

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Consolidated Financial Statements

(Unaudited)

March 31, 2009

Contents

Performance Summary	1
Consolidated Portfolio Asset Allocation	2

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities	3
Consolidated Statement of Investments	4
Consolidated Statement of Operations	9
Consolidated Statements of Changes in Net Assets	10
Consolidated Statement of Cash Flows	11
Notes to Consolidated Financial Statements	12
Consolidated Schedule of Changes in Investments in Affiliates	25

Supplemental Information

Consolidating Statement of Assets and Liabilities	26
Consolidating Statement of Operations	27

Special Value Continuation Fund, LLC (the “Company”) files a schedule of its investment in Special Value Continuation Partners, LP (the “Partnership”) with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Investments listed in the Consolidated Statement of Investments are held by the Partnership, which also files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Forms N-Q of the Company and the Partnership are available on the SEC’s website at http://www.sec.gov. The Forms N-Q of the Company and the Partnership may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

A free copy of the proxy voting guidelines of the Company and the Partnership and information regarding how the Company and the Partnership voted proxies relating to portfolio investments during the most recent twelve-month period may be obtained without charge on the SEC’s website at http://www.sec.gov or by calling the advisor of the Company and the Partnership, Tennenbaum Capital Partners, LLC, at (310) 566-1000. Collect calls for this purpose are accepted.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Performance Summary

Fund Inception (July 31, 2006) through March 31, 2009

Fund Returns v. Merrill Lynch US High Yield and S&P 500 Indices

	Return on Equity (1)				IRR (2)
					Annualized
	2006*	2007	2008	2009**	Inception-to-Date
Special Value Continuation Fund	8.2%	9.2%	-48.8%	-13.4%	-17.8%

Merrill Lynch US High Yield Index	7.3%	2.2%	-26.2%	5.3%	-5.9%

S&P 500 Total Return Index	12.0%	5.5%	-37.0%	-11.0%	-14.3%

* Period from inception (July 31, 2006) through December 31, 2006

** Year to date

Past performance of Special Value Continuation Fund, LLC (the "Company") is not a guarantee of future performance. Company returns are net of dividends to preferred shareholders, performance allocations and Company expenses, including financing costs and management fees.

(1) Return on equity (net of dividends to preferred shareholders, performance allocations and Company expenses, including financing costs and management fees) calculated on a monthly geometrically liked, time-weighted basis. Returns are reduced in earlier periods because organizational costs and other expenses are high relative to assets.

(2) Internal rate of return ("IRR") is the imputed annual return over an investment period and, mathematically, is the rate of return at which the discounted cash flows equal the initial outlays. The IRR presented assumes a liquidation of the Company at net asset value as of the period end date.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Consolidated Portfolio Asset Allocation

March 31, 2009

Portfolio Holdings by Investment Type (% of Cash and Investments)

Portfolio Holdings by Industry (% of Cash and Investments)

Data Processing, Hosting, and Related Services	14.3	%
Other Electrical Equipment and Component Manufacturing	13.8	%
Telecom Wireline	12.7	%
Satellite Telecommunications	10.5	%
Nonferrous Metal (except Aluminum) Production and Processing	8.9	%
Architectural, Engineering, and Related Services	6.8	%
Other Information Services	5.9	%
Communications Equipment Manufacturing	4.3	%
Semiconductor and Other Electronic Component Manufacturing	3.3	%
Industrial Machinery Manufacturing	2.0	%
Offices of Real Estate Agents and Brokers	1.5	%
Other Amusement and Recreation Industries	1.5	%
Motor Vehicle Manufacturing	1.4	%
Grocery Stores	0.9	%
Depository Credit Intermediation	0.7	%
Plastics Product Manufacturing	0.3	%
Computer and Peripheral Equipment Manufacturing	0.2	%
Electric Power Generation, Transmission and Distribution	0.1	%
Nondepository Credit Intermediation	0.1	%
Radio and Television Broadcasting	0.1	%
Support Activities for Air Transportation	0.1	%
Couriers and Express Delivery Services	0.0	%
Management, Scientific, and Technical Consulting Services	0.0	%
Other General Merchandise Stores	0.0	%
Securities and Commodity Contracts Intermediation and Brokerage	0.0	%
Tobacco Manufacturing	0.0	%
Cash and Cash Equivalents	10.6	%

Total	100.0	%

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Consolidated Statement of Assets and Liabilities

March 31, 2009

Assets
Investments, at fair value:
Unaffiliated issuers (cost $310,304,890)	$	168,156,442
Controlled companies (cost $36,430,813)		12,666,130
Other affiliates (cost $123,890,068)		120,557,067
Total investments (cost $470,625,771)		301,379,639

Cash and cash equivalents		35,879,516
Accrued interest income:
Unaffiliated issuers		1,738,099
Controlled companies		11,604
Other affiliates		54,068
Deferred debt issuance costs		2,349,814
Receivable for investment securities sold		4,349,684
Prepaid expenses and other assets		177,977
Total assets		345,940,401

Liabilities
Credit facility payable		29,000,000
Payable for investment securities purchased		11,653,203
Management and advisory fees payable		565,599
Interest payable		62,162
Unrealized depreciation on swaps		35,925
Payable to affiliate		70,728
Accrued expenses and other liabilities		554,416
Total liabilities		41,942,033

Preferred stock
Series Z; $500/share liquidation preference; 400 shares authorized, 47 shares
issued and outstanding		23,500
Accumulated dividends on Series Z preferred stock		480
Total Series Z preferred stock		23,980

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		402,659
Total preferred limited partner interests		134,402,659

Minority interest
General partner interest in Special Value Continuation Partners, LP		-

Net assets applicable to common shareholders	$	169,571,729

Composition of net assets applicable to common shareholders
Common stock, $0.001 par value; unlimited shares authorized, 418,955.777 shares
issued and outstanding	$	419
Paid-in capital in excess of par, net of contributed unrealized gains		364,767,103
Accumulated net investment income		3,238,125
Accumulated net realized losses		(29,092,820	)
Accumulated net unrealized depreciation		(169,340,618	)
Accumulated dividends to Series Z preferred shareholders		(480	)
Net assets applicable to common shareholders	$	169,571,729

Common stock, NAV per share	$	404.75

See accompanying notes.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Statement of Investments (Unaudited)

March 31, 2009

Showing Percentage of Total Cash and Investments of the Company

	Principal		Fair		Percent of Cash
Investment	Amount		Value		and Investments

Debt Investments (56.49%)
Bank Debt (36.97%) (1)
Communications Equipment Manufacturing (4.34%)
Mitel Networks Corporation, 1st Lien Term Loan, LIBOR + 3.25%, due 8/10/14
(Acquired 12/13/07, Amortized Cost $18,649,294)	$	19,839,674	$	14,641,680		4.34	%

Computer and Peripheral Equipment Manufacturing (0.19%)
Palm, Inc., Tranche B Term Loan, LIBOR + 3.5%, due 4/24/14
(Acquired 5/24/07, Amortized Cost $1,184,611)	$	1,316,234		644,955		0.19	%

Data Processing, Hosting, and Related Services (10.59%)
GXS Worldwide, Inc., 1st Lien Term Loan, LIBOR + 5.75%, due 3/31/13
(Acquired 10/12/07, Amortized Cost $9,010,152) (4)	$	9,194,033		7,079,405		2.10	%
GXS Worldwide, Inc., 2nd Lien Term Loan, LIBOR + 10.25%, due 9/30/13
(Acquired 10/12/07, Amortized Cost $14,379,238) (4)	$	14,598,211		11,021,649		3.27	%
Terremark Worldwide, Inc., 1st Lien Term Loan, LIBOR + 3.75%, due 7/31/12
(Acquired 8/1/07, Amortized Cost $5,631,130) (4)	$	5,631,130		4,552,769		1.35	%
Terremark Worldwide, Inc., 2nd Lien Term Loan, LIBOR + 3.25% cash + 4.5% PIK, due 1/31/13
(Acquired 8/1/07, Amortized Cost $14,819,686) (4)	$	14,901,563		13,064,945		3.87	%
Total Data Processing, Hosting, and Related Services				35,718,768

Electric Power Generation, Transmission and Distribution (0.07%)
La Paloma Generating Company Residual Bank Debt
(Acquired 2/2/05, 3/18/05, and 5/6/05, Cost $1,885,234) (3)	$	23,218,324		229,161		0.07	%

Motor Vehicle Manufacturing (1.38%)
General Motors Corporation, Revolver, LIBOR + 2.50%, due 7/20/11
(Acquired 9/27/07, 11/27/07, and 12/14/07 Amortized Cost $13,667,603)	$	15,000,000		4,648,853		1.38	%

Offices of Real Estate Agents and Brokers (1.04%)
Realogy Corporation, Revolver, LIBOR + 2.25%, due 4/10/13
(Acquired 6/28/07, 7/9/07 and 7/13/07, Amortized Cost $9,720,000)	$	13,000,000		3,510,000		1.04	%

Other Electrical Equipment and Component Manufacturing (2.10%)
EaglePicher Corporation, 1st Lien Tranche B Term Loan, LIBOR + 4.5%, due 12/31/12
(Acquired 12/31/07, Amortized Cost $7,887,625) (2), (4)	$	7,887,625		7,079,144		2.10	%

Radio and Television Broadcasting (0.11%)
Newport Television LLC, Term Loan B, LIBOR + 5%, due 9/14/16
(Acquired 5/1/08 and 5/29/08, Amortized Cost $681,770)	$	749,198		297,806		0.09	%
High Plains Broadcasting Operating Company, Term Loan, LIBOR + 5%, due 9/14/16
(Acquired 9/15/08, Amortized Cost $180,370)	$	198,208		78,788		0.02	%
Total Radio and Television Broadcasting				376,594

Satellite Telecommunications (8.62%)
WildBlue Communications, Inc., 1st Lien Delayed Draw Term Loan, LIBOR + 4% Cash
+ 2.5% PIK, due 12/31/09
(Acquired 9/29/06, Amortized Cost $13,841,169) (4)	$	13,774,748		13,086,011		3.88	%
WildBlue Communications, Inc., 2nd Lien Delayed Draw Term Loan, LIBOR + 8.5% Cash
+ 7.25% PIK, due 8/15/11
(Acquired 9/29/06, Amortized Cost $17,457,913) (4)	$	17,870,204		15,981,323		4.74	%
Total Satellite Telecommunications				29,067,334

Semiconductor and Other Electronic Component Manufacturing (3.33%)
Celerity, Inc., Senior Secured Notes, LIBOR + 12%, due 11/30/09
(Acquired 4/15/08 , Amortized Cost $21,650,419) (3)	$	21,687,540		10,864,440		3.22	%
Celerity, Inc., Senior Second Lien Secured Convertible Notes, 12% PIK, due 12/31/09
(Acquired 4/15/08, Amortized Cost $7,316,697) (3)	$	7,316,697		365,835		0.11	%
Total Semiconductor and Other Electronic Component Manufacturing				11,230,275

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Statement of Investments (Continued) (Unaudited)

March 31, 2009

Showing Percentage of Total Cash and Investments of the Company

	Principal		Fair		Percent of Cash
Investment	Amount		Value		and Investments

Debt Investments (continued)
Telecom Wireline (5.20%)
Cavalier Telephone Corporation, Senior Secured 1st Lien Term Loan
6.25 Cash + 1% PIK, due 12/31/12
(Acquired 4/24/08, Amortized Cost $703,006)	$	899,616	$	267,636		0.08	%
Integra Telecom, Inc., 2nd Lien Term Loan, LIBOR + 7%, due 2/28/14
(Acquired 9/05/07, Amortized Cost $3,360,000)	$	3,500,000		1,446,813		0.43	%
Integra Telecom, Inc., Term Loan, LIBOR + 10% PIK, due 8/31/14
(Acquired 9/05/07, Amortized Cost $4,896,458)	$	4,896,458		871,569		0.26	%
Interstate Fibernet, Inc., 1st Lien Term Loan, LIBOR + 4%, due 7/31/13
(Acquired 8/01/07, Amortized Cost $10,968,015) (2), (4)	$	11,278,165		6,919,154		2.05	%
Interstate Fibernet, Inc., 2nd Lien Term Loan, LIBOR + 7.5%, due 7/31/14
(Acquired 7/31/07, Amortized Cost $8,281,636) (2), (4)	$	8,281,636		6,741,252		2.00	%
NEF Telecom Company BV, 2nd Lien Tranche D Term Loan, EURIBOR + 5.5%, due 2/16/17
(Acquired 8/29/07, and 11/29/07 Amortized Cost $2,111,865) - (Netherlands) (9), (4)	€	1,538,600		1,273,134		0.38	%
Total Telecom Wireline				17,519,558

Total Bank Debt (Cost $188,283,891)				124,666,322

Other Corporate Debt Securities (19.52%)

Architectural, Engineering, and Related Services (1.75%)
ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 18% PIK due 3/31/15 (2), (4)	$	6,162,958		5,897,951		1.75	%

Couriers and Express Delivery Services (0.03%)
Federal Express, Fixed Rate Notes, 5.5%, due 8/15/09	$	100,000		101,101		0.03	%

Data Processing, Hosting, and Related Services (2.47%)
Anacomp, Inc., Promissory Note, LIBOR + 6.5% PIK, due 8/31/09 (2), (10)	$	1,201,288		1,141,824		0.34	%
Anacomp, Inc., Senior Secured Subordinated Notes, 14% PIK, due 3/12/13 (2), (10)	$	8,518,477		7,198,113		2.13	%
Total Data Processing, Hosting, and Related Services				8,339,937

Depository Credit Intermediation (0.06%)
Citigroup FNDG, Floating Note, LIBOR, Due 4/23/09	$	100,000		99,471		0.03	%
Wells Fargo & Company, Senior Unsecured Notes, 3.55175%, due 5/1/09	$	100,000		103,293		0.03	%
Total Depository Credit Intermediation				202,764

Grocery Stores (0.85%)
Kroger Co, 7.25% Notes, due 6/01/2009	$	200,000		201,048		0.06	%
Safeway Inc Sr Unsecured Notes, 7.5%, due 9/15/09	$	2,600,000		2,651,116		0.79	%
Total Grocery Stores				2,852,164

Industrial Machinery Manufacturing (1.97%)
GSI Group Corporation, Senior Notes, 11%, due 8/20/13
(Acquired 8/20/08, Amortized Cost $ 6,738,771) (5)	$	7,778,000		6,642,412		1.97	%

Management, Scientific, and Technical Consulting Services (0.03%)
IBM, Senior Unsecured Notes, 4.25%, due 9/15/09	$	100,000		101,510		0.03	%

Nondepository Credit Intermediation (0.15%)
American Express, Senior Unsecured Notes, 4.75%, due 6/17/09	$	100,000		100,171		0.03	%
Fannie Mae, Notes, 5.125%, due 7/13/09	$	100,000		101,051		0.03	%
Federal Farm Credit Bank, Fixed Notes, 5.25%, due 8/3/09	$	100,000		101,298		0.03	%
Federal Home Loan Bank, Notes, 4.75%, due 4/24/09	$	100,000		100,220		0.03	%
Freddie Mac, Notes,3.375%, due 4/15/09	$	100,000		100,080		0.03	%
Total Nondepository Credit Intermediation				502,820

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Statement of Investments (Continued) (Unaudited)

March 31, 2009

Showing Percentage of Total Cash and Investments of the Company

	Principal Amount		Fair		Percent of Cash
Investment	or Shares		Value		and Investments

Debt Investments (continued)
Other General Merchandise Stores (0.03%)
Walmart, Senior Unsecured Notes, 6.875%, due 8/10/09	$	100,000	$	101,944		0.03	%

Offices of Real Estate Agents and Brokers (0.40%)
Realogy Corporation, Senior Note, 10.5%, due 4/15/14	$	1,965,000		550,986		0.16	%
Realogy Corporation, Senior Subordinated Notes, 12.375%, due 4/15/15	$	4,915,000		811,712		0.24	%
Total Offices of Real Estate Agents and Brokers				1,362,698

Plastics Product Manufacturing (0.28%)
Pliant Corporation, Senior Secured 2nd Lien Notes, 11.125%, due 9/1/09 (3)	$	13,477,000		950,802		0.28	%

Securities and Commodity Contracts Intermediation and Brokerage (0.03%)
Goldman Sachs Group Inc. Senior Unsecured FRN, LIBOR + 0.09%, due 6/23/09	$	100,000		98,720		0.03	%

Tobacco Manufacturing (0.03%)
Philip Morris, Senior Unsecured Notes, 7.5%, due 7/16/09	$	115,000		116,556		0.03	%

Other Amusement and Recreation Industries (1.42%)
Bally Total Fitness Holdings, Inc., Senior Subordinated Notes, 14% Cash or 15.625% PIK, due 10/1/13
(Acquired 10/01/07, Amortized Cost $45,025,305) (3), (5)	$	44,090,666		4,805,883		1.42	%

Other Information Services (5.52%)
IRI Holdco (RW), LLC Note Receivable, 8 %, due 2/12/11
(Acquired 10/31/08, Cost $18,336,377) (4), (5)		19,797,911		18,629,834		5.52	%

Telecom Wireline (4.50%)
NEF Telecom Company BV, Mezzanine Term Loan, EURIBOR + 10% PIK, due 8/16/17
(Acquired 8/29/07, Amortized Cost $20,949,884) - (Netherlands) (4), (5), (9)	€	15,156,885		15,172,610		4.50	%

Total Other Corporate Debt Securities (Cost $127,743,558)				65,879,706

Total Debt Investments (Cost $316,027,449)				190,546,028

Equity Securities (32.86%)
Architectural, Engineering, and Related Services(5.02%)
ESP Holdings, Inc., Common Stock
(Acquired 9/12/07 Cost $9,311,782) (2), (3), (5), (6), (8)		88,670		12,421,754		3.68	%
ESP Holdings, Inc., 15% PIK, Preferred Stock
(Acquired 9/12/07 Cost $4,502,521) (2), (4), (3), (5), (6),		40,618		4,502,399		1.33	%
Total Architectural, Engineering, and Related Services				16,924,153

Data Processing, Hosting, and Related Services (1.28%)
Anacomp, Inc., Common Stock
(Acquired during 2002, 2003, 2005, and 2006, Cost $26,711,048) (2), (3), (5), (10)		1,253,969		4,326,193		1.28	%

Depository Credit Intermediation (0.59%)
Doral Holdings, LP Interest
(Acquired 7/12/07, Cost $11,138,132) (3), (5)		11,138,132		1,982,800		0.59	%

Industrial Machinery Manufacturing (0.06%)
GSI Group Inc. Common Shares
(Acquired 8/20/08, Amortized Cost $ 1,136,228) (3), (5)		216,987		206,138		0.06	%

Nonferrous Metal (except Aluminum) Production and Processing (8.90%)
International Wire Group, Inc., Common Stock
(Acquired 10/20/04, Cost $29,012,690) (2), (4), (5), (6)		1,979,441		30,018,223		8.90	%

Other Electrical Equipment and Component Manufacturing (11.73%)
EaglePicher Holdings, Inc., Common Stock
(Acquired 3/9/05, Cost $24,285,461) (2), (3), (4), (5), (6), (7)		1,312,720		39,571,944		11.73	%

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Statement of Investments (Continued) (Unaudited)

March 31, 2009

Showing Percentage of Total Cash and Investments of the Company


	Principal Amount		Fair		Percent of Cash
Investment	or Shares		Value		and Investments

Equity Securities (continued)
Other Information Services (0.31%)
IRI Holdco (RW), LLC Warrants to Purchase IRI Preferred Stock
(Acquired 10/31/08, Cost $1,170,407) (3), (4), (5)		4,063,913	$	1,056,618		0.31	%

Plastics Product Manufacturing (0.00%)
Pliant Corporation, Common Stock
(Acquired 7/18/06, Cost $177) (3), (5), (13)		422		-		0.00	%
Pliant Corporation, 13% PIK, Preferred Stock (3)		5,570,318		-		0.00	%
Total Plastics Product Manufacturing				-

Satellite Telecommunications (1.85%)
WildBlue Communications, Inc., Non-Voting Warrants
(Acquired 10/23/06, Cost $673,094) (3), (4), (5)		51,896		6,232,710		1.85	%

Semiconductor and Other Electronic Component Manufacturing (0.00%)
Celerity, Inc., Common Stock
(Acquired 12/23/04, 9/8/05 and 2/1/06, Cost $12,135,924) (3), (5)		2,427,185		-		0.00	%
Kinetics Holdings, LLC, Common Units
(Acquired 1/7/05, Cost $2,587,349) (3), (5)		3,384,000		1		0.00	%
Total Semiconductor and Other Electronic Component Manufacturing				1

Support Activities for Air Transportation (0.07%)
Alabama Aircraft Industries, Inc., Common Stock
(Acquired 3/12/02, 3/13/02 and 12/11/02, Cost $3,550,121) (3), (5)		164,636		233,783		0.07	%

Telecom Wireline (3.05%)
Interstate Fibernet, Inc., Common Stock
(Acquired 7/31/07 Cost $23,477,380) (2), (3), (5), (6), (12)		10,890,068		7,405,246		2.20	%
NEF Kamchia Co-Investment Fund, LP Interest
(Acquired 7/31/07, Cost $3,367,227) - (Caymans Islands) (3), (4), (5), (9)		2,455,500		2,875,802		0.85	%
Total Telecom Wireline				10,281,048

Total Equity Securities (Cost $154,598,322)				110,833,611

Total Investments (Cost $470,625,771) (11)				301,379,639

Cash and Cash Equivalents (10.65%)
Cash Denominated in Foreign Currencies (Cost $339,408)	€	213,542		282,943		0.08	%
Toyota Motor Credit Corp., Commercial Paper, 0.18%, due 4/01/09	$	1,000,000		1,000,000		0.30	%
Toyota Motor Credit Corp., Commercial Paper, 0.20%, due 4/06/09	$	12,000,000		11,999,667		3.56	%
US Treasury Bill, matures 5/14/09	$	9,000,000		8,998,603		2.67	%
Wells Fargo, Commercial Paper, 0.25%, due 4/1/09	$	1,500,000		1,500,000		0.45	%
Cash Held on Account at Various Institutions	$	12,098,303		12,098,303		3.60	%
Total Cash and Cash Equivalents				35,879,516

Total Cash and Investments			$	337,259,155		100.00	%

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Statement of Investments (Continued) (Unaudited)

March 31, 2009

Notes to Statement of Investments:

(1)	Investments in bank debt generally are bought and sold among institutional investors in transactions not subject to registration under the Securities Act of 1933. Such transactions are generally subject to contractual restrictions, such as approval of the agent or borrower.

(2)	Affiliated issuer - as defined under the Investment Company Act of 1940 (ownership of 5% or more of the outstanding voting securities of this issuer).

(3)	Non-income producing security.

(4)	Priced by an independent third party pricing service.

(5)	Restricted security.

(6)	Investment is not a controlling position.

(7)	The Company's advisor may demand registration at any time more than 180 days following the first initial public offering of common equity by the issuer.

(8)	Priced by Investment Manager.

(9)	Principal amount denominated in euros. Amortized cost and fair value converted from euros to US dollars.

(10)	Issuer is a controlled company.

(11)	Includes investments with an aggregate market value of $6,098,881 that have been segregated to collateralize certain unfunded commitments.

(12)	Priced using the closing price per Pink Sheets.

(13)	The Company may demand registration of the shares as part of a majority (by interest) of the holders of the registrable shares of the issuer, or in connection with an initial public offering by the issuer.

Aggregate purchases and aggregate sales of investments, other than Government securities, totaled $11,081,489 and $28,592,539 respectively.

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 March 31, 2009 was $280,750,672, or 83.3% of total cash and investments of the Company.

Swaps at March 31, 2009 were as follows:

Instrument	Notional Amount		Fair Value

Euro/US Dollar Cross Currency Basis Swap, Pay Euros/Receive USD, Expires 5/16/14	$	12,081,888	$	(35,925	)

See accompanying notes.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Consolidated Statement of Operations

Three Months Ended March 31, 2009

Investment income
Interest income:
Unaffiliated issuers	$	4,390,033
Controlled companies		312,978
Other affiliates		1,046,126
Other income:
Other affiliates		9,111
Total investment income		5,758,248

Operating expenses
Management and advisory fees		1,696,797
Amortization of deferred debt issuance costs		108,564
Interest expense		100,439
Commitment fees		53,715
Legal fees, professional fees and due diligence expenses		49,303
Director fees		46,250
Insurance expense		25,284
Custody fees		24,507
Other operating expenses		149,480
Total expenses		2,254,339

Net investment income		3,503,909

Net realized and unrealized loss
Net realized gain (loss) from:
Investments in unaffiliated issuers		(5,585,940	)
Investments in affiliated issuers		(4,128,345	)
Foreign currency transactions		74,692
Net realized loss		(9,639,593	)

Net change in net unrealized appreciation/depreciation on:
Investments		(19,511,049	)
Foreign currency		(80,442	)
Net change in unrealized appreciation/depreciation		(19,591,491	)
Net realized and unrealized loss		(29,231,084	)

Dividends paid on Series A preferred equity facility		(1,217,018	)
Net change in accumulated dividends on Series A preferred equity facility		770,809
Net change in reserve for dividends to Series Z preferred shareholders		(464	)

Net decrease in net assets applicable to common shareholders
resulting from operations	$	(26,173,848	)

See accompanying notes.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Consolidated Statements of Changes in Net Assets

	Three Months Ended			Year Ended
	March 31, 2009			December 31, 2008

Net assets applicable to common shareholders, beginning of period	$	195,745,577		$	392,541,013

Net investment income		3,503,909			22,519,973
Net realized loss on investments and foreign currency		(9,639,593	)		(22,817,266	)
Net change in unrealized appreciation/depreciation on
investments and foreign currency		(19,591,491	)		(186,457,070	)
Net change in undistributed earnings of minority interestholder		-			3,149,915
Dividends on Series A preferred equity facility		(1,217,018	)		(5,953,838	)
Net change in accumulated dividends on Series A preferred
equity facility		770,809			764,735
Dividends to Series Z preferred shareholders from net
investment income		-			(4,542	)
Net change in reserve for dividends to Series Z preferred
shareholders		(464	)		2,657
Net decrease in net assets applicable to common shareholders
resulting from operations		(26,173,848	)		(188,795,436	)

Distributions to common shareholders from:
Net investment income		-			(8,000,000	)

Net assets applicable to common shareholders, end of period
(including accumulated net investment income of $3,238,125
and $180,425, respectively)	$	169,571,729		$	195,745,577

See accompanying notes.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Consolidated Statement of Cash Flows

Three Months Ended March 31, 2009

Operating activities
Net decrease in net assets applicable to common shareholders resulting
from operations	$	(26,173,848	)
Adjustments to reconcile net decrease in net assets applicable to common
shareholders resulting from operations to net cash provided by operating
activities:
Net realized loss on investments and foreign currency		9,639,593
Net change in unrealized depreciation on investments		19,511,049
Dividends paid on Series A preferred equity facility		1,217,018
Net change in accumulated dividends on Series A preferred equity facility		(770,809	)
Net change in reserve for dividends to Series Z preferred shareholders		464
Accretion of original issue discount		(40,937	)
Accretion of market discount		(1,973	)
Income from paid in-kind capitalization		(3,225,352	)
Amortization of deferred debt issuance costs		108,564
Changes in assets and liabilities:
Purchases of investments		(7,856,137	)
Proceeds from sales, maturities and paydowns of investments		28,592,539
Decrease in accrued interest income-unaffiliated issuers		1,688,115
Decrease in accrued interest income-controlled companies		706
Decrease in accrued interest income-other affiliates		451,366
Decrease in dividends receivable		2,137,796
Increase in receivable for investments sold		(4,349,684	)
Increase in prepaid expenses and other assets		(103,884	)
Increase in payable for investments purchased		10,953,313
Decrease in interest payable		(613,043	)
Decrease in management and advisory fees payable		(125,000	)
Decrease in payable to affiliate		(34,115	)
Increase in accrued expenses and other liabilities		27,452
Net cash provided by operating activities		31,033,193

Financing activities
Principal repayments on credit facility		(5,000,000	)
Dividends paid on Series A preferred equity facility		(1,217,018	)
Net cash used in financing activities		(6,217,018	)

Net increase in cash and cash equivalents		24,816,175
Cash and cash equivalents at beginning of period		11,063,341
Cash and cash equivalents at end of period	$	35,879,516

Supplemental cash flow information:
Interest payments	$	713,482
See accompanying notes.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2009

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. The Company, the Partnership, TCP, SVOF/MM and their members and affiliates may be considered related parties.

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

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2009

1. Organization and Nature of Operations (continued)

Directors consist of three persons, two of whom are independent. If the Company has preferred limited partner interests outstanding, as it currently does, the holders of the preferred limited partner interests voting separately as a class will be entitled to elect two of the Directors. The remaining directors will be subject to election by holders of the common shares and preferred limited 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”), $116 million under a senior secured revolving credit facility (the “Senior Facility”) held by the Partnership and $23,500 in Series Z preferred shares of the Company. 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 these investments 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 March 31, 2009, 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 interest. The Series A Preferred are redeemable at the option of the Partnership, subject to certain limitations. 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

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2009

1. Organization and Nature of Operations (continued)

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 March 31, 2009, the Partnership was in full compliance with such requirements.

The Series A Preferred accrue dividends at an annual rate equal to LIBOR plus 0.75%, or in the case of any holders of Series A Preferred that are CP Conduits (as defined in the leveraging documents), the higher of (i) LIBOR plus 0.75% or (ii) the CP Conduit’s cost of funds rate plus 0.75%, 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”). In the opinion of the Investment Manager, the consolidated financial results of the Company included herein contain all adjustments necessary to present fairly the consolidated financial position of the Company as of March 31, 2009, the consolidated results of its operations and its consolidated cash flows for the three months then ended, and the consolidated changes in net assets for the three months then ended and for the year ended December 31, 2008. The following is a summary of the significant accounting policies of the Company and the Partnership.

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 Series A Preferred. Fair value is defined as the price that would be received to sell an investment 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 valued by an approved nationally recognized pricing service or by using bid prices on the date of valuation as supplied by approved broker-dealers.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2009

2. Summary of Significant Accounting Policies (continued)

Semi-liquid investments, illiquid investments, and investments for which market quotations are determined to be unreliable are valued using valuations obtained from independent third party pricing or valuation services, or are valued internally by the Investment Manager under guidelines adopted by the Board of Directors and subject to their approval.

Investments valued internally by the Investment Manager are limited to 5% of the Total Capitalization of the Partnership, as defined in the Senior Facility. Generally, to increase objectivity in valuing the Partnership’s assets, 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.

On January 1, 2008, the Company and the Partnership adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), which defines fair value, expands disclosures about fair value measurements, and establishes a hierarchy that prioritizes the inputs used to measure fair value. The adoption of FAS 157 did not have a material impact on the financial statements of the Company or the Partnership. The level category in which an investment falls is based on the lowest level input that is significant to the valuation of the investment in its entirety. At March 31, 2009, the investments of the Partnership were categorized as follows:

Level		Basis for Determining Fair Value	Aggregate Value
	1	Quoted prices in active markets for identical assets	$	206,138
	2	Other observable market inputs*		44,634,113
	3	Independent third-party pricing sources that employ significant unobservable inputs		239,082,590
	3	Internal valuations with significant unobservable inputs		17,456,798

* E.g. quoted prices in inactive markets or quotes for comparable instruments

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2009

2. Summary of Significant Accounting Policies (continued)

Changes in investments categorized as Level 3 during the three months ended March 31, 2009 were as follows:

	Independent Third Party Valuation			Investment Manager Valuation
Beginning balance	$	268,078,662		$	48,236,979
Net realized and unrealized gains (losses)		(17,175,999	)		(6,452,829	)
Net acquisitions and dispositions		(14,162,126	)		-
Net transfers into (out of) category		2,342,053			(24,327,352	)
Ending balance	$	239,082,590		$	17,456,798

Net change in unrealized gains (losses) during the period on investments still held at period end (included in net realized and unrealized gains/losses, above)	$	(13,045,727	)	$	(6,452,829	)

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. For purposes of reporting cash flows, cash consists of the cash held with brokerage firms and the custodian bank, and cash equivalents maturing within 90 days.

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.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2009

2. Summary of Significant Accounting Policies (continued)

Restricted Investments

The Partnership may invest 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 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 March 31, 2009, the Partnership held foreign currency denominated investments with an aggregate fair value of approximately 5.7% of the Partnership’s total cash and investments. Such positions were converted at the closing rate in effect at March 31, 2009 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 additional 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 some 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.

Derivatives

In order to mitigate certain currency exchange and interest rate risks, the Partnership has entered into several swaps and forward currency 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.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2009

2. Summary of Significant Accounting Policies (continued)

Gains from swaps during the three months ended March 31, 2009 were included in the Statement of Operations as follows:

Instrument		Location		Gains
Cross currency basis swaps		Net change in net unrealized depreciation on investments		$	505,805

Valuations of swap transactions at March 31, 2009 were determined as follows:

Level		Basis for Determining Fair Value		Aggregate Value
2		Other observable market inputs		$	(35,925	)

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 expected to be material to the operations of the Company or the Partnership.

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 requires that discounts on corporate (investment grade) bonds municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. The process of accreting the purchase discount of a debt investment to par over the holding period results in accounting entries that increase the cost basis of the investment and record a noncash income accrual to the statement of operations. The Partnership considers it prudent to follow GAAP guidance that requires the Investment Manager to consider the collectibility of interest when making accruals. AICPA Statement of Position 93-1 discusses financial accounting and reporting for high yield debt investments for which, because of the credit risks associated with high yield and distressed debt investments, income recognition must be carefully considered and constantly evaluated for collectibility.

Special Value Continuation Fund, LLC

(A Delaware Limited Liability Company)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

March 31, 2009

2. Summary of Significant Accounting Policies (continued)

Accordingly, when accounting for purchase discounts, management recognizes discount accretion income when it is probable that such amounts will be collected and when such amounts can be estimated. A reclassification entry is recorded at disposition to reflect purchase discounts on all realized investments. For income tax purposes, the economic gain resulting from the sale of debt investments purchased at a discount is allocated between interest income and realized gains.

Income Taxes

The Company intends to comply with the applicable provisions of the Internal Revenue Code of 19