Special Value Continuation Partners, LP - FORM 10-Q

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - Special Value Continuation Partners, LP	v393282_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - Special Value Continuation Partners, LP	v393282_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - Special Value Continuation Partners, LP	v393282_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended September 30, 2014

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 814-00897

SPECIAL VALUE CONTINUATION PARTNERS, LP

(Exact Name of Registrant as Specified in Charter)

Delaware

68-0631675

(State or Other Jurisdiction

of Incorporation)

(IRS Employer

Identification No.)

2951 28 ^th Street, Suite 1000

Santa Monica, California

90405

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code (310) 566-1000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days: Yes x No ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨		Accelerated filer x

Non-accelerated filer ¨		Smaller Reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of the Registrant’s common limited partner interests, outstanding as of September 30, 2014 was 758,688,769.

SPECIAL VALUE CONTINUATION PARTNERS, LP

FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014

TABLE OF CONTENTS

		Page
Part I.	Financial Information

Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of September 30, 2014 (unaudited) and December 31, 2013	2
	Consolidated Statements of Investments as of September 30, 2014 (unaudited) and December 31, 2013	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2014 (unaudited) and September 30, 2013 (unaudited)	13
	Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2014 (unaudited) and year ended December 31, 2013	14
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 (unaudited) and September 30, 2013 (unaudited)	15
	Notes to Consolidated Financial Statements (unaudited)	16
	Consolidated Schedule of Changes in Investments in Affiliates for the nine months ended September 30, 2014 (unaudited) and year ended December 31, 2013	31
	Consolidated Schedule of Restricted Securities of Unaffiliated Issuers as of September 30, 2014 (unaudited) and December 31, 2013	33

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45

Item 4.	Controls and Procedures	45

Part II.	Other Information

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	47

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statements of Assets and Liabilities

	September 30, 2014			December 31, 2013
	(unaudited)
Assets
Investments, at fair value:
Companies less than 5% owned (cost of $1,012,619,777 and $684,569,508, respectively)	$	1,010,685,137		$	678,326,915
Companies 5% to 25% owned (cost of $54,987,297 and $73,946,547, respectively)		48,193,229			69,068,808
Companies more than 25% owned (cost of $40,807,126 and $42,588,724 respectively)		15,918,961			18,867,236
Total investments (cost of $1,108,414,200 and $801,104,779, respectively)		1,074,797,327			766,262,959

Cash and cash equivalents		24,144,075			22,984,182
Receivable for investments sold		-			3,605,964
Accrued interest income:
Companies less than 5% owned		9,677,087			6,282,353
Companies 5% to 25% owned		650,326			415,061
Companies more than 25% owned		31,901			41,691
Deferred debt issuance costs		4,313,655			2,969,085
Unrealized appreciation on swaps		1,071,130			-
Options (cost $51,750)		1,327			14,139
Prepaid expenses and other assets		1,594,868			723,275
Total assets		1,116,281,696			803,298,709

Liabilities
Debt		213,500,000			95,000,000
Incentive allocation payable		3,767,604			3,318,900
Payable for investments purchased		1,250,031			14,706,942
Interest payable		825,837			430,969
Payable to Parent		633,589			531,717
Payable to the Investment Manager		282,605			287,371
Unrealized depreciation on swaps		-			331,183
Accrued expenses and other liabilities		2,133,239			1,923,750
Total liabilities		222,392,905			116,530,832

Commitments and contingencies (Note 5)

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			134,000,000
Accumulated dividends on Series A preferred equity facility		498,858			504,252
Total preferred limited partner interests		134,498,858			134,504,252

Net assets applicable to common limited and general partners	$	759,389,933		$	552,263,625

Composition of net assets applicable to common limited and general partners
Paid-in capital in excess of par		875,112,706			666,530,318
Accumulated net investment income		27,731,167			26,850,149
Accumulated net realized losses		(110,736,362	)		(105,802,644	)
Accumulated net unrealized depreciation		(32,717,578	)		(35,314,198	)
Net assets applicable to common shareholders	$	759,389,933		$	552,263,625

See accompanying notes.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Unaudited)

September 30, 2014

Showing Percentage of Total Cash and Investments of the Partnership

														% of
Issuer	Instrument	Ref	Spread	Floor	Maturity	Principal		Cost			Value			Portfolio			Notes

Debt Investments ^(A)
Accounting, Tax Preparation, Bookkeeping, and Payroll Services
Expert Global Solutions, LLC	First Lien Term Loan B	LIBOR (Q)	7.25%	1.25%	4/3/2018	$	683,590	$	696,318		$	684,728			0.06	%
Expert Global Solutions, LLC	Second Lien Term Loan	LIBOR (Q)	11.00%	1.50%	10/3/2018	$	7,448,973		7,266,578			7,363,310			0.67	%
									7,962,896			8,048,038			0.73	%
Activities Related to Real Estate
Greystone Select Holdings, LLC	First Lien Term Loan	LIBOR (Q)	8.00%	1.00%	3/26/2021	$	16,511,362		16,284,331			16,560,896			1.51	%

Advertising, Public Relations, and Related Services
Doubleplay III Limited (United Kingdom)	First Lien Facility A1 Term Loan	EURIBOR (Q)	6.25%	1.25%	3/18/2018	€	13,165,705		16,717,182			16,213,862			1.48	%	D/I

Artificial Synthetic Fibers and Filaments Manufacturing
AGY Holding Corp.	Sr Secured Term Loan	Fixed	12.00%	-	9/15/2016	$	2,298,418		2,298,418			2,298,418			0.21	%	B
AGY Holding Corp.	Second Lien Notes	Fixed	11.00%	-	11/15/2016	$	9,268,000		7,586,318			8,637,777			0.79	%	B/E
									9,884,736			10,936,195			1.00	%
Basic Chemical Manufacturing
M&G Chemicals S.A. (Luxembourg)	Sr Secured Term Loan	LIBOR (Q)	7.50%	-	3/18/2016	$	15,632,077		15,632,077			15,632,077			1.42	%	I
PeroxyChem, LLC	First Lien Term Loan	LIBOR (Q)	6.50%	1.00%	2/28/2020	$	8,955,000		8,794,870			9,089,325			0.83	%
									24,426,947			24,721,402			2.25	%
Beverage Manufacturing
Carolina Beverage Group, LLC	Secured Notes	Fixed	10.625%	-	8/1/2018	$	7,780,000		7,780,000			8,091,200			0.74	%	E/G

Business Support Services
STG-Fairway Acquisitions, Inc.	Second Lien Term Loan	LIBOR (Q)	9.25%	1.25%	8/28/2019	$	14,643,455		14,012,131			14,863,107			1.35	%

Chemical Manufacturing
Archroma	Term Loan B	LIBOR (Q)	8.25%	1.25%	9/30/2018	$	19,946,579		19,627,478			20,208,378			1.84	%

Communications Equipment Manufacturing
Globecomm Systems, Inc.	First Lien Term Loan	LIBOR (Q)	7.625%	1.25%	12/11/2018	$	14,887,500		14,738,625			14,746,069			1.34	%	B

Computer Equipment Manufacturing
ELO Touch Solutions, Inc.	Second Lien Term Loan	LIBOR (Q)	10.50%	1.50%	12/1/2018	$	10,000,000		9,704,432			9,150,000			0.84	%

Computer Systems Design and Related Services
Autoalert, LLC	First Lien Term Loan	LIBOR (Q)	4.75% Cash + 4% PIK	0.25%	3/31/2019	$	30,613,101		30,061,099			30,980,458			2.82	%
Blue Coat Systems, Inc.	First Lien Revolver	LIBOR (Q)	3.50%	1.00%	5/31/2018	$	–		(780,948	)		(570,240	)		(0.05	%)	L
Blue Coat Systems, Inc.	Second Lien Term Loan	LIBOR (Q)	8.50%	1.00%	6/28/2020	$	15,000,000		14,878,125			15,000,000			1.36	%
MSC Software Corporation	Second Lien Term Loan	LIBOR (M)	7.50%	1.00%	5/29/2021	$	11,993,035		11,873,105			11,813,140			1.07	%
OnX Enterprise Solutions, Ltd.	First Lien Term Loan B	LIBOR (Q)	8.00%	-	9/3/2018	$	2,367,400		2,367,400			2,352,012			0.21	%
OnX Enterprise Solutions, Ltd.	First Lien Term Loan	LIBOR (Q)	7.00%	-	9/3/2018	$	10,560,000		10,433,374			10,317,120			0.94	%
OnX USA, LLC	First Lien Term Loan B	LIBOR (Q)	8.00%	-	9/3/2018	$	4,734,800		4,734,800			4,704,024			0.43	%
OnX USA, LLC	First Lien Term Loan	LIBOR (Q)	7.00%	-	9/3/2018	$	5,280,000		5,220,412			5,158,560			0.47	%
Vistronix, LLC	First Lien Revolver	LIBOR (Q)	7.50%	1.00%	12/4/2018	$	131,329		125,092			131,329			0.01	%
Vistronix, LLC	First Lien Term Loan	LIBOR (M)	7.50%	1.00%	12/4/2018	$	6,595,001		6,521,724			6,529,051			0.59	%
Websense, Inc.	Second Lien Term Loan	LIBOR (Q)	7.25%	1.00%	12/27/2020	$	7,200,000		7,164,000			7,200,000			0.66	%
									92,598,183			93,615,454			8.51	%

Cut and Sew Apparel Manufacturing
Jones Apparel, LLC	First Lien FILO Term Loan	LIBOR (M)	9.60%	1.00%	4/8/2019	$	14,329,403		14,186,109			14,479,862			1.32	%

Data Processing, Hosting, and Related Services
Asset International, Inc.	Delayed Draw Term Loan	LIBOR (M)	7.00%	1.00%	7/31/2020	$	–		(42,880	)		(34,304	)		0.00	%	L
Asset International, Inc.	Revolver	LIBOR (M)	7.00%	1.00%	7/31/2020	$	355,485		345,667			347,406			0.03	%
Asset International, Inc.	First Lien Term Loan	LIBOR (M)	7.00%	1.00%	7/31/2020	$	8,212,337		8,051,574			8,130,214			0.74	%
Rightside Group, Ltd.	Second Lien Term Loan	LIBOR (Q)	8.75%	0.50%	8/6/2019	$	5,000,000		3,994,082			4,280,000			0.39	%
The Telx Group, Inc.	Senior Notes	Fixed	13.5% PIK	-	7/9/2021	$	4,165,481		4,165,481			4,332,100			0.39	%	E
United TLD Holdco, Ltd. (Cayman Islands)	Second Lien Term Loan	LIBOR (Q)	8.75%	0.50%	8/6/2019	$	10,000,000		7,988,163			8,560,000			0.78	%	I
									24,502,087			25,615,416			2.33	%

Electric Power Generation, Transmission and Distribution
Panda Sherman Power, LLC	First Lien Term Loan	LIBOR (Q)	7.50%	1.50%	9/14/2018	$	11,045,948		10,926,541			11,301,385			1.03	%

Electrical Equipment and Component Manufacturing
Palladium Energy, Inc.	First Lien Term Loan	LIBOR (Q)	9.00%	1.00%	12/26/2017	$	16,153,317		15,912,128			16,234,084			1.48	%

Electrical Equipment Manufacturing
API Technologies Corp.	First Lien Term Loan	LIBOR (Q)	7.50%	1.50%	2/6/2018	$	6,773,900		6,706,161			6,746,804			0.61	%

Fabricated Metal Product Manufacturing
Constellation Enterprises, LLC	First Lien Notes	Fixed	10.625%	-	2/1/2016	$	2,900,000		2,858,907			2,646,250			0.24	%	E

Financial Investment Activities
Institutional Shareholder Services, Inc.	Second Lien Term Loan	LIBOR (Q)	7.50%	1.00%	4/30/2022	$	6,471,492		6,406,777			6,439,135			0.59	%
Marsico Capital Management	First Lien Term Loan	LIBOR (M)	5.00%	-	12/31/2022	$	10,520,758		13,247,034			3,892,680			0.35	%	J
									19,653,811			10,331,815			0.94	%

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2014

Showing Percentage of Total Cash and Investments of the Partnership

												% of
Issuer	Instrument	Ref	Spread	Floor	Maturity	Principal		Cost		Value		Portfolio			Notes

Debt Investments (continued)
Full-Service Restaurants
RM Holdco, LLC	Subordinated Convertible Term Loan	Fixed	1.12% PIK	-	3/21/2018	$	5,164,796	$	5,164,796	$	15,494		-		B
RM OpCo, LLC	Convertible Second Lien Term Loan Tranche B-1	Fixed	12% Cash + 7% PIK	-	3/21/2016	$	1,565,489		1,543,886		1,565,489		0.14	%	B
RM OpCo, LLC	First Lien Term Loan Tranche A	Fixed	11.00%	-	3/21/2016	$	3,763,095		3,763,095		3,763,095		0.34	%	B
RM OpCo, LLC	Second Lien Term Loan Tranche B	Fixed	12% Cash + 7% PIK	-	3/21/2016	$	7,800,294		7,800,294		6,891,560		0.63	%	B
RM OpCo, LLC	Second Lien Term Loan Tranche B-1	Fixed	12% Cash + 7% PIK	-	3/21/2016	$	2,456,579		2,427,363		2,456,579		0.22	%	B
									20,699,434		14,692,217		1.33	%
Gaming Industries
AP Gaming I, LLC	First Lien Revolver	LIBOR (Q)	8.25%	1.00%	12/20/2018	$	2,500,000		2,879,797		3,000,000		0.27	%
AP Gaming I, LLC	First Lien Term Loan B	LIBOR (Q)	8.25%	1.00%	12/20/2020	$	14,887,500		14,474,462		15,036,375		1.37	%
									17,354,259		18,036,375		1.64	%
General Medical and Surgical Hospitals
RegionalCare Hospital Partners, Inc.	Second Lien Term Loan	LIBOR (M)	9.50%	1.00%	10/23/2019	$	21,017,525		20,718,500		21,227,700		1.93	%

Grocery Stores
Bashas, Inc.	First Lien FILO Term Loan	LIBOR (M)	9.35%	1.50%	12/28/2015	$	12,537,855		12,502,700		12,531,586		1.14	%
The Great Atlantic & Pacific Tea Company, Inc.	Term Loan Tranche B	LIBOR (M)	8.85%	1.00%	9/17/2019	$	21,162,842		20,794,482		21,236,912		1.93	%
									33,297,182		33,768,498		3.07	%
Insurance Carriers
Acrisure, LLC	Second Lien Notes	LIBOR (Q)	10.50%	1.00%	3/7/2020	$	1,265,299		1,169,087		1,311,491		0.12	%	E
Acrisure, LLC	Second Lien Notes	LIBOR (Q)	10.50%	1.00%	3/7/2020	$	20,627,638		20,219,076		20,823,601		1.90	%	E
US Apple Holdco, LLC	First Lien Term Loan	LIBOR (Q)	11.50%	0.50%	8/29/2019	$	20,000,000		19,209,747		19,800,000		1.80	%
									40,597,910		41,935,092		3.82	%
Insurance Related Activities
Confie Seguros Holding II Co.	Second Lien Term Loan	LIBOR (M)	9.00%	1.25%	5/8/2019	$	7,861,809		7,772,384		7,940,466		0.72	%

Lessors of Nonfinancial Intangible Assets
ABG Intermediate Holdings 2, LLC	Second Lien Term Loan	LIBOR (S)	8.00%	1.00%	5/27/2022	$	15,990,714		15,830,807		15,970,726		1.45	%

Lessors of Real Estate
Hunt Companies, Inc.	Senior Secured Notes	Fixed	9.625%	-	3/1/2021	$	13,084,000		12,931,013		13,672,780		1.24	%	E/G

Merchant Wholesalers
Envision Acquisition Company, LLC	Second Lien Term Loan	LIBOR (Q)	8.75%	1.00%	11/4/2021	$	9,079,011		8,897,430		9,124,406		0.83	%

Motion Picture and Video Industries
CORE Entertainment, Inc.	First Lien Term Loan	Fixed	9.00%	-	6/21/2017	$	9,462,231		9,396,582		8,279,452		0.75	%
CORE Entertainment, Inc.	Second Lien Term Loan	Fixed	13.50%	-	6/21/2018	$	7,569,785		7,513,892		6,812,807		0.62	%
									16,910,474		15,092,259		1.37	%
Newspaper, Periodical, Book, and Directory Publishers
Hanley-Wood, LLC	First Lien FILO Term Loan	LIBOR (Q)	6.75%	1.25%	7/15/2018	$	16,301,800		16,301,800		16,407,762		1.49	%
MediMedia USA, Inc.	First Lien Revolver	LIBOR (Q)	6.75%	-	5/20/2018	$	3,875,000		3,005,743		3,458,283		0.31	%
MediMedia USA, Inc.	First Lien Term Loan	LIBOR (Q)	6.75%	1.25%	11/20/2018	$	9,591,911		9,360,784		9,376,093		0.85	%
									28,668,327		29,242,138		2.65	%
Nondepository Credit Intermediation
Caribbean Financial Group (Cayman Islands)	Sr Secured Notes	Fixed	11.50%	-	11/15/2019	$	10,000,000		9,840,428		10,875,000		0.99	%	E/G/I
Trade Finance Funding I, Ltd. (Cayman Islands)	Secured Class B Notes	Fixed	10.75%	-	11/13/2018	$	15,084,000		15,084,000		15,084,000		1.37	%	E/I
									24,924,428		25,959,000		2.36	%
Nonscheduled Air Transportation
One Sky Flight, LLC	Second Lien Term Loan	Fixed	12% Cash + 3% PIK	-	6/3/2019	$	18,518,669		17,275,660		19,074,229		1.74	%

Oil and Gas Extraction
Jefferson Gulf Coast Energy Partner, LLC	First Lien Term Loan B	LIBOR (M)	8.00%	1.00%	2/27/2018	$	15,000,000		14,850,000		14,943,750		1.36	%
MD America Energy, LLC	Second Lien Term Loan	LIBOR (Q)	8.50%	1.00%	8/4/2019	$	10,000,000		9,514,338		9,779,150		0.89	%
Willbros Group, Inc.	First Lien Term Loan	LIBOR (Q)	9.75%	1.25%	8/7/2019	$	13,622,801		13,292,164		13,781,711		1.25	%
									37,656,502		38,504,611		3.50	%
Other Information Services
TCH-2 Holdings, LLC	Second Lien Term Loan	LIBOR (M)	7.75%	1.00%	11/6/2021	$	19,988,392		19,688,567		19,488,683		1.77	%

Other Telecommunications
Securus Technologies, Inc.	Second Lien Term Loan	LIBOR (Q)	7.75%	1.25%	4/30/2021	$	14,000,000		13,860,000		13,947,500		1.27	%

Petroleum and Coal Products Manufacturing
Boomerang Tube, LLC	Second Lien Term Loan	LIBOR (Q)	9.50%	1.50%	10/11/2017	$	3,879,333		3,819,695		3,481,701		0.32	%

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2014

Showing Percentage of Total Cash and Investments of the Partnership

														% of
Issuer	Instrument	Ref	Spread	Floor	Maturity	Principal		Cost			Value			Portfolio			Notes

Debt Investments (continued)
Pesticide, Fertilizer, and Other Agricultural Chemical Manufacturing
VitAG Holdings, LLC	Sr Secured Term Loan	LIBOR (M)	10.27%	-	2/1/2018	$	7,700,000	$	7,545,323		$	7,766,000			0.71	%

Plastics Products Manufacturing
Iracore International, Inc.	Sr Secured Notes	Fixed	9.50%	-	6/1/2018	$	13,600,000		13,600,000			12,444,000			1.13	%	E/H

Radio and Television Broadcasting
SiTV, Inc.	Sr Secured Notes	Fixed	10.375%	-	7/1/2019	$	7,312,000		7,312,000			7,248,020			0.66	%	E/G
The Tennis Channel, Inc.	First Lien Term Loan	LIBOR (Q)	8.50%	-	5/29/2017	$	18,111,966		17,744,530			18,274,974			1.66	%
									25,056,530			25,522,994			2.32	%
Retail
Kenneth Cole Productions, Inc.	First Lien FILO Term Loan	LIBOR (M)	10.40%	1.00%	9/25/2017	$	10,863,636		10,689,030			10,917,954			0.99	%
Shopzilla, Inc.	Second Lien Term Loan	LIBOR (Q)	12.50%	-	3/31/2016	$	6,630,353		6,536,895			6,567,364			0.60	%
Shop Holding, LLC	Convertible Promissory Note	Fixed	5.00%	-	8/5/2015	$	73,140		73,140			65,899			0.01	%	E
									17,299,065			17,551,217			1.60	%
Satellite Telecommunications
Avanti Communications Group, PLC (United Kingdom)	Sr Secured Notes	Fixed	10.00%	-	10/1/2019	$	9,914,000		9,914,000			9,914,000			0.90	%	E/G/I

Scheduled Air Transportation
Aircraft Leased to Delta Air Lines, Inc.
N913DL	Aircraft Secured Mortgage	Fixed	8.00%	-	3/15/2017	$	226,723		226,723			232,220			0.02	%	F
N918DL	Aircraft Secured Mortgage	Fixed	8.00%	-	8/15/2018	$	332,830		332,830			341,360			0.03	%	F
N954DL	Aircraft Secured Mortgage	Fixed	8.00%	-	3/20/2019	$	450,991		450,991			461,380			0.04	%	F
N955DL	Aircraft Secured Mortgage	Fixed	8.00%	-	6/20/2019	$	472,313		472,313			483,140			0.05	%	F
N956DL	Aircraft Secured Mortgage	Fixed	8.00%	-	5/20/2019	$	470,291		470,291			481,440			0.04	%	F
N957DL	Aircraft Secured Mortgage	Fixed	8.00%	-	6/20/2019	$	476,444		476,444			487,560			0.04	%	F
N959DL	Aircraft Secured Mortgage	Fixed	8.00%	-	7/20/2019	$	482,545		482,545			493,680			0.04	%	F
N960DL	Aircraft Secured Mortgage	Fixed	8.00%	-	10/20/2019	$	504,728		504,728			516,120			0.05	%	F
N961DL	Aircraft Secured Mortgage	Fixed	8.00%	-	8/20/2019	$	496,848		496,848			508,300			0.05	%	F
N976DL	Aircraft Secured Mortgage	Fixed	8.00%	-	2/15/2018	$	330,316		330,316			338,640			0.03	%	F
Aircraft Leased to United Airlines, Inc.
N510UA	Aircraft Secured Mortgage	Fixed	20.00%	-	10/26/2016	$	256,135		256,135			299,915			0.03	%	B
N512UA	Aircraft Secured Mortgage	Fixed	20.00%	-	10/26/2016	$	263,385		263,385			310,270			0.03	%	B
N545UA	Aircraft Secured Mortgage	Fixed	16.00%	-	8/29/2015	$	139,224		139,224			147,345			0.01	%	B
N659UA	Aircraft Secured Mortgage	Fixed	12.00%	-	2/28/2016	$	1,876,367		1,876,367			1,990,292			0.18	%	F
N661UA	Aircraft Secured Mortgage	Fixed	12.00%	-	5/4/2016	$	2,073,525		2,073,525			2,227,375			0.20	%	F
Mesa Air Group, Inc.	Acquisition Delayed Draw Loan	LIBOR (M)	7.25%	-	7/15/2022	$	–		(271,500	)		6,788			-		L
Mesa Air Group, Inc.	Acquisition Loan	LIBOR (M)	7.25%	-	7/15/2022	$	18,100,000		17,738,000			18,109,050			1.65	%
									26,319,165			27,434,875			2.49	%
Scientific Research and Development Services
BPA Laboratories, Inc.	Senior Secured Notes	Fixed	12.25%	-	4/1/2017	$	17,200,000		16,536,295			18,640,500			1.70	%	E/G

Semiconductor and Other Electronic Component Manufacturing
Soraa, Inc.	Sr Secured Term Loan	LIBOR (M)	10.27%	-	9/1/2017	$	22,500,000		21,771,128			21,892,500			1.99	%
SunEdison, Inc.	Senior Secured Letters of Credit	LIBOR (Q)	3.75%	-	2/28/2017	$	9,379,246		(1,031,717	)		(937,925	)		(0.09	%)	K/L
									20,739,411			20,954,575			1.90	%
Software Publishers
Acronis International GmbH (Switzerland)	First Lien Revolver	LIBOR (Q)	9.50%	1.00%	2/21/2017	$	5,634,068		5,634,068			5,634,068			0.51	%	I
Acronis International GmbH (Switzerland)	First Lien Term Loan	LIBOR (Q)	9.50%	1.00%	2/21/2017	$	25,000,000		24,774,635			24,612,500			2.25	%	I
ArcServe (USA), LLC	Second Lien Term Loan	LIBOR (Q)	8.50%	0.50%	1/31/2020	$	30,000,000		29,418,442			29,760,000			2.72	%	I
BlackLine Systems, Inc.	First Lien Term Loan	LIBOR (Q)	0.4% Cash + 7.6% PIK	1.50%	9/25/2018	$	13,318,777		12,589,982			13,438,646			1.22	%
Coreone Technologies, LLC	First Lien Term Loan	LIBOR (Q)	3.75% Cash + 5% PIK	1.00%	9/4/2018	$	14,077,353		13,829,562			13,929,541			1.27	%
Deltek, Inc.	Second Lien Term Loan	LIBOR (Q)	8.75%	1.25%	10/10/2019	$	15,000,000		14,824,557			15,237,450			1.39	%
Edmentum, Inc.	Second Lien Term Loan	LIBOR (Q)	9.75%	1.50%	5/17/2019	$	21,500,000		21,351,941			21,876,250			1.99	%
									122,423,187			124,488,455			11.35	%
Specialty Hospitals
UBC Healthcare Analytics, Inc.	First Lien Term Loan	LIBOR (Q)	9.00%	1.00%	7/1/2018	$	4,795,797		4,771,818			4,707,075			0.43	%

Structured Note Funds
Magnolia Finance V plc (Cayman Islands)	Asset-Backed Credit Linked Notes	Fixed	13.125%	-	8/2/2021	$	15,000,000		15,000,000			15,211,500			1.38	%	E/I

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2014

Showing Percentage of Total Cash and Investments of the Partnership

						Principal
						Amount or						%
Issuer	Instrument	Ref	Spread	Floor	Maturity	Shares		Cost		Value		Portfolio			Notes

Debt Investments (continued)
Textile Furnishings Mills
Lexmark Carpet Mills, Inc.	First Lien Term Loan	LIBOR (Q)	10.00%	1.00%	9/30/2018	$	15,758,531	$	15,431,697	$	15,994,909		1.46	%

Utility System Construction
Kawa Solar Holdings Limited	Revolving Credit Facility	Fixed	8.00%	-	7/2/2017	$	25,000,000		25,000,000		25,012,500		2.28	%

Wired Telecommunications Carriers
Alpheus Communications, LLC	First Lien FILO Term Loan	LIBOR (Q)	6.92%	1.00%	5/31/2018	$	374,960		363,777		371,585		0.03	%
Alpheus Communications, LLC	First Lien FILO Term Loan	LIBOR (Q)	6.92%	1.00%	5/31/2018	$	8,196,573		8,115,088		8,171,983		0.74	%
Integra Telecom Holdings, Inc.	Second Lien Term Loan	LIBOR (Q)	8.50%	1.25%	2/22/2020	$	15,000,000		14,728,136		15,225,000		1.39	%
									23,207,001		23,768,568		2.16	%
Wireless Telecommunications Carriers
Gogo, LLC	First Lien Term Loan	LIBOR (Q)	9.75%	1.50%	6/21/2017	$	19,209,212		18,646,792		20,457,811		1.86	%
Gogo, LLC	First Lien Term Loan B-2	LIBOR (Q)	6.50%	1.00%	3/21/2018	$	5,524,797		5,418,641		5,607,669		0.51	%
									24,065,433		26,065,480		2.37	%

Total Debt Investments									1,036,294,182		1,041,145,246		94.73	%

Equity Securities
Business Support Services
Findly Talent, LLC	Membership Units						708,229		230,938		162,184		0.02	%	C/E
STG-Fairway Holdings, LLC	Class A Units						841,479		943,287		2,435,661		0.22	%	C/E
									1,174,225		2,597,845		0.24	%
Communications Equipment Manufacturing
Wasserstein Cosmos Co-Invest, L.P.	Limited Partnership Units						5,000,000		5,000,000		4,375,000		0.40	%	B/C/E

Data Processing, Hosting, and Related Services
Anacomp, Inc.	Class A Common Stock						1,255,527		26,711,048		878,869		0.08	%	C/E/F
Rightside Group, Ltd.	Warrants						498,855		2,778,622		2,391,002		0.22	%	C/E
									29,489,670		3,269,871		0.30	%

Depository Credit Intermediation
Doral Financial Corporation (Puerto Rico)	Common Stock						53,890		11,699,417		357,828		0.03	%	C/K

Financial Investment Activities
Marsico Holdings, LLC	Common Interest Units						168,698		172,694		18,557		-		C/E/J

Full-Service Restaurants
RM Holdco, LLC	Membership Units						13,161,000		2,010,777		-		-		B/C/E

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing
Precision Holdings, LLC	Class C Membership Interest						33		-		2,165		-		C/E

Nonmetallic Mineral Mining and Quarrying
EPMC HoldCo, LLC	Membership Units						1,312,720		-		682,614		0.06	%	B/E

Nonscheduled Air Transportation
Flight Options Holdings I, Inc.	Warrants to Purchase Common Stock						1,843		1,274,000		3,180,876		0.29	%	C/E

Radio and Television Broadcasting
SiTV, Inc.	Warrants to Purchase Common Stock						233,470		300,322		247,478		0.02	%	C/E

Retail
Shop Holding, LLC	Class A Units						507,167		480,049		276,862		0.03	%	C/E
Shop Holding, LLC	Warrants to Purchase Class A Units						326,691		-		3		-		C/E
									480,049		276,865		0.03	%
Scheduled Air Transportation
Aircraft Leased to Delta Air Lines, Inc.
N913DL	Trust Beneficial Interests						937		89,178		119,680		0.01	%	E/F
N918DL	Trust Beneficial Interests						776		98,106		137,713		0.01	%	E/F
N954DL	Trust Beneficial Interests						728		115,597		71,400		0.01	%	E/F
N955DL	Trust Beneficial Interests						705		115,011		111,860		0.01	%	E/F
N956DL	Trust Beneficial Interests						710		114,963		107,440		0.01	%	E/F
N957DL	Trust Beneficial Interests						705		115,695		108,120		0.01	%	E/F
N959DL	Trust Beneficial Interests						699		116,425		109,140		0.01	%	E/F
N960DL	Trust Beneficial Interests						684		119,292		108,460		0.01	%	E/F
N961DL	Trust Beneficial Interests						694		118,520		103,020		0.01	%	E/F
N976DL	Trust Beneficial Interests						824		100,538		102,350		0.01	%	E/F
Aircraft Leased to United Airlines, Inc.
N510UA	Trust Beneficial Interests						63		243,188		416,889		0.04	%	B/E
N512UA	Trust Beneficial Interests						62		237,703		408,217		0.04	%	B/E
N545UA	Trust Beneficial Interests						79		422,890		598,547		0.05	%	B/E
United N659UA-767, LLC (N659UA)	Trust Beneficial Interests						495		2,423,386		2,691,182		0.24	%	E/F
United N661UA-767, LLC (N661UA)	Trust Beneficial Interests						481		2,375,446		2,708,220		0.25	%	E/F
									6,805,938		7,902,238		0.72	%

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Unaudited) (Continued)

September 30, 2014

Showing Percentage of Total Cash and Investments of the Partnership

												% of
Issuer	Instrument	Ref	Spread	Floor	Maturity	Shares		Cost		Value		Portfolio			Notes

Equity Securities (continued)
Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing
KAGY Holding Company, Inc.	Series A Preferred Stock						9,778	$	1,091,200	$	579,951		0.05	%	B/C/E

Semiconductor and Other Electronic Component Manufacturing
Ichor Systems Holdings, LLC	Membership Units						352		-		213,780		0.02	%	C/E
Soraa, Inc.	Warrants to Purchase Common Stock						315,000		408,987		411,611		0.04	%	C/E
									408,987		625,391		0.06	%

Software Publishers
Blackline Intermediate, Inc.	Warrants						1,232,731		522,678		749,747		0.07	%	C/E

Wired Telecommunications Carriers
Integra Telecom, Inc.	Common Stock						1,274,522		8,433,885		5,200,177		0.47	%	C/E
Integra Telecom, Inc.	Warrants						346,939		19,920		191,406		0.02	%	C/E

V Telecom Investment S.C.A. (Luxembourg)	Common Shares						1,393		3,236,256		3,394,072		0.31	%	C/D/E/I
									11,690,061		8,785,655		0.80	%

Total Equity Securities									72,120,018		33,652,081		3.07	%

Total Investments									1,108,414,200		1,074,797,327		97.80	%

Cash and Cash Equivalents
Wells Fargo & Company Money Market Deposit Account											21,393,112		1.95	%
Cash Denominated in Foreign Currencies											240,156		0.02	%
Cash Held on Account at Various Institutions											2,510,807		0.23	%
Cash and Cash Equivalents											24,144,075		2.20	%

Total Cash and Investments										$	1,098,941,402		100.00	%	M

Notes to Consolidated Statement of Investments:

^(A)

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.

^(B)

Non-controlled affiliate – as defined under the Investment Company Act of 1940 (ownership of between 5% and 25% of the outstanding voting securities of this issuer). See Consolidated Schedule of Changes in Investments in Affiliates.

^(C)

Non-income producing security.

^(D)

Principal amount denominated in foreign currency. Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

^(E)

Restricted security. (See Note 2)

^(F)

Controlled issuer – as defined under the Investment Company Act of 1940 (ownership of 25% or more of the outstanding voting securities of this issuer). Investment is not more than 50% owned nor deemed to be a significant subsidiary. See Consolidated Schedule of Changes in Investments in Affiliates.

^(G)

Investment has been segregated to collateralize certain unfunded commitments.

^(H)

$3,600,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

^(I)

Non-U.S. company or principal place of business outside the U.S. and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company's total assets.

^(J)

Exempt from the definition of investment company under Section 3(c) of the Investment Company Act and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company's total assets.

^(K)

Publicly traded company with a market capitalization greater than $250 million and as a result the investment is not a qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Company may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company's total assets.

^(L)

Negative balances relate to an unfunded commitment that was acquired at a discount.

^(M)

All cash and investments, except those referenced in Notes G above, are pledged as collateral under certain debt as described in Note 4 to the Consolidated Financial Statements.

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $486,041,022, and $177,994,806, respectively, for the nine months ended September 30, 2014. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments. The total value of restricted securities and bank debt as of September 30, 2014 was $1,074,439,499, or 97.8% of total cash and investments of the Company.

Options and swaps at September 30, 2014 were as follows:

Investment	Notional Amount		Fair Value

Interest Rate Cap, 4%, expires 5/15/2016	$	25,000,000	$	1,327
Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/2017	$	4,289,019	$	1,071,130

See accompanying notes.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments

December 31, 2013

Showing Percentage of Total Cash and Investments of the Partnership

														% of
Issuer	Instrument	Ref	Spread		Floor		Maturity	Principal		Cost		Value		Portfolio			Notes

Debt Investments ^(A)
Accounting, Tax Preparation, Bookkeeping, and Payroll Services
Expert Global Solutions, LLC	First Lien Term Loan	LIBOR (Q)		7.25%		1.25%	4/3/2018	$	699,754	$	701,280	$	703,691		0.09	%
Expert Global Solutions, LLC	Second Lien Term Loan	LIBOR (Q)		11.00%		1.50%	10/3/2018	$	7,434,877		7,228,004		7,382,833		0.94	%
											7,929,284		8,086,524		1.03	%
Advertising, Public Relations, and Related Services
Doubleplay III Limited (United Kingdom)	First Lien Facility A1 Term Loan	EURIBOR (Q)		6.25%		1.25%	3/18/2018	€	13,165,705		16,428,630		16,736,606		2.12	%	D/J

Architectural, Engineering, and Related Services
ESP Holdings, Inc.	Jr Unsecured Subordinated Promissory Notes	Fixed		6% Cash + 10% PIK		-	12/31/2019	$	7,959,369		7,959,369		7,959,369		1.01	%	B/E

Artificial Synthetic Fibers and Filaments Manufacturing
AGY Holding Corp.	Sr Secured Term Loan	Fixed		12.00%			9/15/2016	$	2,056,927		2,056,927		2,056,927		0.26	%	B
AGY Holding Corporation	Second Lien Term Loan	Fixed		11.00%		-	11/15/2016	$	9,268,000		7,586,317		9,268,000		1.17	%	B/E
											9,643,244		11,324,927		1.43	%
Beverage Manufacturing
Carolina Beverage Group, LLC	Secured Notes	Fixed		10.625%		-	8/1/2018	$	7,780,000		7,780,000		8,207,900		1.04	%	E

Business Support Services
STG-Fairway Acquisitions, Inc.	Second Lien Term Loan	LIBOR (Q)		9.25%		1.25%	8/28/2019	$	14,643,455		13,944,123		14,929,002		1.89	%

Chemical Manufacturing
Archroma	Term Loan B	LIBOR (Q)		8.25%		1.25%	9/30/2018	$	17,456,250		17,107,125		17,401,699		2.20	%

Communications Equipment Manufacturing
Globecomm Systems Inc.	First Lien Term Loan	LIBOR (Q)		7.625%		1.25%	12/11/2018	$	15,000,000		14,850,000		15,097,500		1.91	%	B

Computer Equipment Manufacturing
ELO Touch Solutions, Inc.	Second Lien Term Loan	LIBOR (Q)		10.50%		1.50%	12/1/2018	$	10,000,000		9,666,672		9,100,000		1.15	%

Converted Paper Products Manufacturing
Ranpak Corp.	Second Lien Term Loan	LIBOR (Q)		7.25%		1.25%	4/23/2020	$	3,469,573		3,434,877		3,573,660		0.45	%

Computer Systems Design and Related Services
Blue Coat Systems	First Lien Revolver	LIBOR (Q)		3.50%		1.00%	5/31/2018	$	4,500,000		3,540,000		4,060,800		0.51	%	L
Blue Coat Systems	Second Lien Term Loan	LIBOR (Q)		8.50%		1.00%	6/28/2020	$	15,000,000		14,878,125		15,300,000		1.94	%
OnX Enterprise Solutions, Ltd.	First Lien Term Loan	LIBOR (Q)		7.00%		-	9/3/2018	$	10,640,000		10,483,300		10,709,160		1.36	%
OnX USA, LLC	First Lien Term Loan	LIBOR (Q)		7.00%		-	9/3/2018	$	5,320,000		5,244,790		5,354,580		0.68	%
Websense, Inc.	Second Lien Term Loan	LIBOR (Q)		7.25%		1.00%	12/27/2020	$	7,200,000		7,164,000		7,218,000		0.91	%
											41,310,215		42,642,540		5.40	%
Data Processing, Hosting, and Related Services
The Telx Group, Inc.	Senior Unsecured Notes	Fixed		10% Cash + 2% PIK		-	9/26/2019	$	7,098,916		6,960,435		7,631,335		0.97	%	E
Panda Sherman Power, LLC	First Lien Term Loan	LIBOR (Q)		7.50%		1.50%	9/14/2018	$	11,070,172		10,932,474		11,402,277		1.44	%
Panda Temple Power II, LLC	First Lien Term Loan	LIBOR (Q)		6.00%		1.25%	4/3/2019	$	5,892,970		5,834,041		6,069,759		0.77	%
											16,766,515		17,472,036		2.21	%
Electrical Equipment and Component Manufacturing
Palladium Energy, Inc.	First Lien Term Loan	LIBOR (Q)		9.00%		1.00%	12/26/2027	$	16,500,317		16,225,541		16,426,066		2.08	%

Fabricated Metal Product Manufacturing
Constellation Enterprises, LLC	First Lien Notes	Fixed		10.625%		-	2/1/2016	$	12,500,000		12,322,875		10,875,000		1.38	%	E/G

Financial Investment Activities
Marsico Capital Management	First Lien Term Loan	LIBOR (M)		5.00%		-	12/31/2022	$	10,637,623		13,394,183		3,882,732		0.49	%	K

Freight Transportation Arrangement
Livingston International, Inc. (Canada)	Second Lien Term Loan	LIBOR (Q)		7.75%		1.25%	4/18/2020	$	3,665,217		3,597,620		3,756,848		0.48	%	J

Full-Service Restaurants
RM Holdco, LLC	Subordinated Convertible Term Loan	Fixed		1.12% PIK		-	3/21/2018	$	5,164,796		5,164,796		2,197,621		0.28	%	B
RM OpCo, LLC	Convertible Second Lien Term Loan Tranche B-1	Fixed		12% Cash + 7% PIK		-	3/21/2016	$	1,370,199		1,339,883		1,370,199		0.17	%	B
RM OpCo, LLC	First Lien Term Loan Tranche A	Fixed		11.00%		-	3/21/2016	$	3,626,947		3,626,947		3,626,947		0.46	%	B
RM OpCo, LLC	Second Lien Term Loan Tranche B	Fixed		12% Cash + 7% PIK		-	3/21/2016	$	6,825,328		6,825,328		6,825,328		0.86	%	B
RM OpCo, LLC	Second Lien Term Loan Tranche B-1	Fixed		12% Cash + 7% PIK		-	3/21/2016	$	2,150,088		2,109,019		2,150,088		0.27	%	B
											19,065,973		16,170,183		2.04	%

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Continued)

December 31, 2013

Showing Percentage of Total Cash and Investments of the Partnership

														% of
Issuer	Instrument	Ref	Spread		Floor		Maturity	Principal		Cost		Value		Portfolio			Notes

Debt Investments (continued)
Gaming Industries
AP Gaming I, LLC	First Lien Term Loan B	LIBOR (Q)		8.25%		1.00%	12/20/2020	$	15,000,000	$	14,550,000	$	14,737,500		1.87	%

Grocery Stores
Bashas, Inc.	First Lien FILO Term Loan	LIBOR (M)		9.35%		1.50%	12/28/2015	$	14,843,788		14,802,168		15,066,445		1.91	%

Inland Water Transportation
US Shipping Corp	First Lien Term Loan B	LIBOR (Q)		7.75%		1.25%	4/30/2018	$	12,603,333		12,477,300		12,965,679		1.64	%

Insurance Related Activities
Confie Seguros Holding II Co.	Second Lien Term Loan	LIBOR (Q)		9.00%		1.25%	5/8/2019	$	6,341,809		6,245,733		6,391,370		0.81	%

Merchant Wholesalers
Envision Acquisition Company, LLC	Second Lien Term Loan	LIBOR (Q)		8.75%		1.00%	11/4/2021	$	9,079,011		8,897,430		9,192,498		1.16	%

Metal Ore Mining
St Barbara Ltd. (Australia)	First Priority Senior Secured Notes	Fixed		8.875%		-	4/15/2018	$	7,359,000		7,326,651		6,144,765		0.78	%	E

Motion Picture and Video Industries
CORE Entertainment, Inc.	First Lien Term Loan	Fixed		9.00%		-	6/21/2017	$	9,462,231		9,381,116		8,610,631		1.09	%
CORE Entertainment, Inc.	Second Lien Term Loan	Fixed		13.50%		-	6/21/2018	$	7,569,785		7,502,054		6,858,225		0.88	%
											16,883,170		15,468,856		1.97	%
Newspaper, Periodical, Book, and Directory Publishers
Hanley-Wood, LLC	First Lien FILO Term Loan	LIBOR (Q)		6.75%		1.25%	7/15/2018	$	16,707,600		16,707,600		16,699,246		2.13	%
MediMedia USA, Inc.	First Lien Revolver	LIBOR (M)		6.75%		-	5/20/2018	$	4,960,000		3,797,500		4,523,908		0.57	%
MediMedia USA, Inc.	First Lien Term Loan	LIBOR (M)		6.75%		1.25%	11/20/2018	$	9,701,250		9,433,029		9,458,719		1.20	%
											29,938,129		30,681,873		3.90	%
Nondepository Credit Intermediation
Caribbean Financial Group (Cayman Islands)	Senior Secured Notes	Fixed		11.50%		-	11/15/2019	$	10,000,000		9,824,072		10,700,000		1.35	%	E
Trade Finance Funding I, Ltd. (Cayman Islands)	Secured Class B Notes	Fixed		10.75%		-	11/13/2018	$	15,000,000		15,000,000		14,962,500		1.90	%	E/J
											24,824,072		25,662,500		3.25	%
Nonresidential Building Construction
NCM Group Holdings, LLC	First Lien Term Loan	LIBOR (Q)		11.50%		1.00%	8/29/2018	$	10,000,000		9,620,619		9,875,000		1.25	%

Nonscheduled Air Transportation
One Sky Flight, LLC	Second Lien Term Loan	Fixed		12% Cash + 3% PIK		-	5/4/2019	$	18,200,000		16,929,086		17,708,600		2.24	%

Oil and Gas Extraction
Willbros Group, Inc.	First Lien Term Loan	LIBOR (Q)		9.75%		1.25%	8/7/2019	$	15,426,118		15,051,713		15,657,510		1.98	%

Other Telecommunications
Securus Technologies, Inc.	Second Lien Term Loan	LIBOR (Q)		7.75%		1.25%	4/30/2021	$	14,000,000		13,860,000		13,925,660		1.76	%

Petroleum and Coal Products Manufacturing
Boomerang Tube, LLC	Second Lien Term Loan	LIBOR (Q)		9.50%		1.50%	10/11/2017	$	7,749,023		7,563,978		7,477,807		0.95	%

Plastics Products Manufacturing
Iracore International, Inc.	Senior Secured Notes	Fixed		9.50%		-	6/1/2018	$	13,600,000		13,600,000		14,426,622		1.83	%	E

Professional, Scientific, and Technical Services
Connolly, LLC	Second Lien Term Loan	LIBOR (Q)		9.25%		1.25%	7/15/2019	$	12,000,000		11,829,534		12,270,000		1.55	%
ConvergeOne Holdings	First Lien Term Loan	LIBOR (Q)		8.00%		1.25%	5/8/2019	$	12,654,643		12,464,823		12,570,236		1.59	%
											24,294,357		24,840,236		3.14	%
Promoters of Performing Arts, Sports, and Similar Events
Stadium Management Group	Second Lien Term Loan	LIBOR (M)		9.50%		1.25%	12/7/2018	$	11,000,000		10,817,390		11,055,000		1.40	%

Radio and Television Broadcasting
SiTV, Inc.	First Lien Term Loan	LIBOR (Q)		6% Cash + 4% PIK		2.00%	8/3/2016	$	6,995,124		6,648,634		6,774,778		0.86	%
The Tennis Channel, Inc.	First Lien Term Loan	LIBOR (Q)		8.50%		-	5/29/2017	$	17,589,459		17,134,705		17,615,843		2.23	%
											23,783,339		24,390,621		3.09	%
Retail
Kenneth Cole Productions, Inc.	First Lien FILO Term Loan	LIBOR (M)		10.40%		1.00%	9/25/2017	$	11,272,727		11,051,496		11,329,090		1.44	%
Shopzilla, Inc.	Second Lien Term Loan	LIBOR (Q)		9.50%		-	3/31/2016	$	6,710,057		6,525,027		6,683,216		0.85	%
											17,576,523		18,012,306		2.29	%
Satellite Telecommunications
Avanti Communications Group, PLC (United Kingdom)	Senior Secured Notes	Fixed		10.00%		-	10/1/2019	$	9,914,000		9,914,000		10,335,345		1.31	%	E/H/J

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Continued)

December 31, 2013

Showing Percentage of Total Cash and Investments of the Partnership

																% of
Issuer	Instrument	Ref	Spread		Floor		Maturity	Principal		Cost			Value			Portfolio			Notes

Debt Investments (continued)
Scheduled Air Transportation
Aircraft Leased to Delta Air Lines, Inc.
N913DL	Aircraft Secured Mortgage	Fixed		8.00%		-	3/15/2017	$	289,048	$	289,048		$	296,820			0.04	%	F
N918DL	Aircraft Secured Mortgage	Fixed		8.00%		-	8/15/2018	$	388,001		388,001			397,290			0.05	%	F
N954DL	Aircraft Secured Mortgage	Fixed		8.00%		-	3/20/2019	$	514,375		514,375			524,620			0.07	%	F
N955DL	Aircraft Secured Mortgage	Fixed		8.00%		-	6/20/2019	$	533,283		533,283			543,320			0.07	%	F
N956DL	Aircraft Secured Mortgage	Fixed		8.00%		-	5/20/2019	$	532,275		532,275			542,640			0.07	%	F
N957DL	Aircraft Secured Mortgage	Fixed		8.00%		-	6/20/2019	$	537,947		537,947			548,250			0.07	%	F
N959DL	Aircraft Secured Mortgage	Fixed		8.00%		-	7/20/2019	$	543,573		543,573			553,520			0.07	%	F
N960DL	Aircraft Secured Mortgage	Fixed		8.00%		-	10/20/2019	$	564,855		564,855			574,430			0.07	%	F
N961DL	Aircraft Secured Mortgage	Fixed		8.00%		-	8/20/2019	$	558,427		558,427			568,310			0.07	%	F
N976DL	Aircraft Secured Mortgage	Fixed		8.00%		-	2/15/2018	$	394,360		394,360			404,600			0.05	%	F
Aircraft Leased to United Airlines, Inc.
N510UA	Aircraft Secured Mortgage	Fixed		20.00%		-	10/26/2016	$	328,848		328,848			404,605			0.05	%	B
N512UA	Aircraft Secured Mortgage	Fixed		20.00%		-	10/26/2016	$	334,535		334,535			414,010			0.05	%	B
N536UA	Aircraft Secured Mortgage	Fixed		16.00%		-	9/29/2014	$	108,845		108,845			114,000			0.01	%	B
N545UA	Aircraft Secured Mortgage	Fixed		16.00%		-	8/29/2015	$	249,695		249,695			275,405			0.03	%	B
N585UA	Aircraft Secured Mortgage	Fixed		20.00%		-	10/25/2016	$	392,794		392,794			486,115			0.06	%	B
N659UA	Aircraft Secured Mortgage	Fixed		12.00%		-	2/28/2016	$	2,708,150		2,708,150			2,948,986			0.37	%	F
N661UA	Aircraft Secured Mortgage	Fixed		12.00%		-	5/4/2016	$	2,880,186		2,880,186			3,171,026			0.40	%	F
											11,859,197			12,767,947			1.60	%
Scientific Research and Development Services
BPA Laboratories, Inc.	Senior Secured Notes	Fixed		12.25%		-	4/1/2017	$	17,200,000		16,536,295			17,630,000			2.23	%	E

Semiconductor and Other Electronic Component Manufacturing
Isola USA Corporation	Senior Secured Term Loan B	LIBOR (Q)		8.25%		1.00%	11/29/2018	$	14,583,333		14,366,560			14,729,167			1.87	%

BlackLine Systems, Inc.	First Lien Term Loan	LIBOR (Q)		0.4% Cash + 7.6% PIK		1.50%	9/25/2018	$	12,579,747		11,811,044			12,183,485			1.56	%
Coreone Technologies, LLC	First Lien Term Loan	LIBOR (Q)		3.75% Cash +5% PIK		1.00%	9/14/2018	$	13,556,801		13,243,533			13,455,125			1.72	%
Deltek, Inc.	Second Lien Term Loan	LIBOR (Q)		8.75%		1.25%	10/10/2019	$	15,000,000		14,805,253			15,300,000			1.94	%
Edmentum, Inc.	Second Lien Term Loan	LIBOR (Q)		9.75%		1.50%	5/17/2019	$	15,000,000		14,748,486			15,112,500			1.91	%
											54,608,316			56,051,110			7.13	%

Specialty Hospitals
UBC Healthcare Analytics, Inc.	First Lien Term Loan	LIBOR (Q)		9.00%		1.00%	7/1/2018	$	5,526,021		5,498,391			5,559,177			0.70	%
Vantage Oncology, LLC	Senior Secured Notes	Fixed		9.50%		-	6/15/2017	$	5,000,000		5,000,000			5,137,500			0.65	%	E
											10,498,391			10,696,677			1.35	%
Structured Note Funds
Magnolia Finance V plc (Cayman Islands)	Asset-Backed Credit Linked Notes	Fixed		13.125%		-	8/2/2021	$	15,000,000		15,000,000			15,000,000			1.90	%	E/J

Textile Furnishings Mills
Lexmark Carpet Mills, Inc.	First Lien Term Loan	LIBOR (Q)		10.00%		1.00%	9/30/2018	$	16,351,467		15,942,680			16,392,346			2.08	%

Wired Telecommunications Carriers
Integra Telecom Holdings, Inc.	Second Lien Term Loan	LIBOR (Q)		8.50%		1.25%	2/22/2020	$	15,000,000		14,701,027			15,459,375			1.96	%


Wireless Telecommunications Carriers
Alpheus Communications, LLC	First Lien Delayed FILO Term Loan	LIBOR (Q)		6.92%		1.00%	5/31/2018	$	–		(11,183	)		(8,437	)		-		M
Alpheus Communications, LLC	First Lien FILO Term Loan	LIBOR (Q)		6.92%		1.00%	5/31/2018	$	8,248,124		8,166,127			8,186,263			1.04	%
Globalive Wireless Management Corp. (Canada)	First Lien Term Loan	LIBOR (Q)		10.90%		-	4/30/2014	$	3,037,292		2,933,872			3,067,665			0.39	%	J
Gogo, LLC	First Lien Term Loan	LIBOR (Q)		9.75%		1.50%	6/21/2017	$	19,587,428		18,707,700			21,252,360			2.69	%
											29,796,516			32,497,851			4.12	%

Total Debt Investments											720,651,321			726,514,593			92.05	%

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Continued)

December 31, 2013

Showing Percentage of Total Cash and Investments of the Partnership

												% of
Issuer	Instrument	Ref	Spread	Floor	Maturity	Shares		Cost		Value		Portfolio			Notes

Equity Securities
Architectural, Engineering, and Related Services
ESP Holdings, Inc.	Cumulative Preffered 15%						20,297	$	2,249,930	$	3,947,862		0.51	%	B/C/E
ESP Holdings, Inc., Common Stock	Common Stock						88,670		9,311,782		2,856,346		0.36	%	B/C/E
									11,561,712		6,804,208		0.87	%

Business Support Services
STG-Fairway Holdings	Class A Units						841,479		1,174,225		1,722,508		0.22	%	C/E
Wasserstein Cosmos Co-Invest, L.P.	Limited Partnership Units						5,000,000		5,000,000		5,000,000		0.64	%	B/C/E
									6,174,225		6,722,508		0.86	%

Data Processing, Hosting, and Related Services
Anacomp, Inc.	Class A Common Stock						1,255,527		26,711,048		1,004,422		0.13	%	B/C/E

Depository Credit Intermediation
Doral Financial Corporation	Common Stock						53,890		11,699,417		843,913		0.11	%	C/L

Financial Investment Activities
Marsico Holdings, LLC	Common Interest Units						168,698		172,694		4,302		-		C/E/K

Full-Service Restaurants
RM Holdco, LLC	Membership Units						13,161,000		2,010,777		-		-		B/C/E

Machine Shops; Turned Product; and Screw, Nut, and Bolt Manufacturing
Precision Holdings, LLC	Class C Membership Interests						33		-		41,645		0.01	%	C/E

Nonmetallic Mineral Mining and Quarrying
EPMC HoldCo, LLC	Membership Units						1,312,720		-		1,562,137		0.20	%	B/E

Nonscheduled Air Transportation
Flight Options Holdings I, Inc.	Warrants to Purchase Common Stock						1,843		1,274,000		1,268,904		0.16	%	C/E

Radio and Television Broadcasting
SiTV, Inc.	Warrants to Purchase Common Stock						233,470		300,322		354,874		0.04	%	C/E

Retail
Shop Holding, LLC	Class A Unit						490,037		462,576		532,919		0.07	%	C/E
Shop Holding, LLC	Warrants to Purchase Class A Unit						326,691		-		38,258		-		C/E
									462,576		571,177		0.07	%
Scheduled Air Transportation
Aircraft Leased to Delta Air Lines, Inc.
N913DL	Trust Beneficial Interests						727		97,376		125,970		0.02	%	E/F
N918DL	Trust Beneficial Interests						623		109,938		142,970		0.02	%	E/F
N954DL	Trust Beneficial Interests						591		133,027		68,000		0.01	%	E/F
N955DL	Trust Beneficial Interests						576		133,868		113,560		0.01	%	E/F
N956DL	Trust Beneficial Interests						580		133,907		108,800		0.01	%	E/F
N957DL	Trust Beneficial Interests						576		134,785		109,650		0.01	%	E/F
N959DL	Trust Beneficial Interests						573		135,658		110,500		0.01	%	E/F
N960DL	Trust Beneficial Interests						563		139,173		109,650		0.01	%	E/F
N961DL	Trust Beneficial Interests						570		138,350		103,870		0.01	%	E/F
N976DL	Trust Beneficial Interests						654		113,413		103,033		0.01	%	E/F
Aircraft Leased to United Airlines, Inc.
N510UA	Trust Beneficial Interests						54		197,409		465,625		0.06	%	B/E
N512UA	Trust Beneficial Interests						53		193,046		458,277		0.06	%	B/E
N536UA	Trust Beneficial Interests						81		396,289		656,766		0.08	%	B/E
N545UA	Trust Beneficial Interests						67		348,071		641,840		0.08	%	B/E
N585UA	Trust Beneficial Interests						53		214,737		571,706		0.07	%	B/E
United N659UA-767, LLC (N659UA)	Trust Beneficial Interests						412		2,097,640		2,840,323		0.36	%	E/F
United N661UA-767, LLC (N661UA)	Trust Beneficial Interests						400		2,066,062		2,852,677		0.36	%	E/F
									6,782,749		9,583,217		1.19	%

Resin, Synthetic Rubber, and Artificial Synthetic Fibers and Filaments Manufacturing
KAGY Holding Company, Inc.	Series A Prefereed Stock						9,778		1,091,200		662,134		0.08	%	B/C/E

Semiconductor and Other Electronic Component Manufacturing
AIP/IS Holdings, LLC	Membership Units						352		-		229,504		0.03	%	C/E

Software Publishers
SLS Breeze Intermediate Holdings, Inc.	Warrants to Purchase Common Stock						1,232,731		522,678		561,632		0.07	%	C/E

Wired Telecommunications Carriers
Integra Telecom, Inc.	Common Stock						1,274,522		8,433,884		5,583,686		0.72	%	C/E
Integra Telecom, Inc.	Warrants						346,939		19,920		194,050		0.02	%	C/E
V Telecom Investment S.C.A (Luxembourg)	Common Shares						1,393		3,236,256		3,756,053		0.48	%	C/D/E/J
									11,690,060		9,533,789		1.22	%

Total Equity Securities									80,453,458		39,748,366		5.04	%

Total Investments									801,104,779		766,262,959

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statement of Investments (Continued)

December 31, 2013

Showing Percentage of Total Cash and Investments of the Partnership

												% of
Issuer	Instrument	Ref	Spread		Floor		Maturity	Shares	Cost	Value		Portfolio			Notes

Cash and Cash Equivalents
Wells Fargo & Company	Overnight Repurchase Agreement	Fixed		0.09%		-	1/2/2014			$	10,501,688		1.33	%
Union Bank of California	Commercial Paper	Fixed		0.10%		-	1/2/2014				8,499,976		1.07	%
Cash Denominated in Foreign Currencies											121,389		0.02	%
Cash Held on Account at Various Institutions											3,861,129		0.49	%
Cash and Cash Equivalents											22,984,182		2.91	%

Total Cash and Investments										$	789,247,141		100.00	%	I

Notes to Consolidated Statement of Investments:

(A)

(B)

(C)

Non-income producing security.

(D)

Principal amount denominated in foreign currency. Amortized cost and fair value converted from foreign currency to US dollars. (See Note 2)

(E)

Restricted security. (See Note 2)

(F)

(G)

Investment has been segregated to collateralize certain unfunded commitments.

(H)

$2,000,000 principal amount of this investment has been segregated to collateralize certain unfunded commitments.

(I)

All cash and investments, except those referenced in Notes G and H above, are pledged as collateral under the Revolving Facilities as described in Note 4 to the Consolidated Financial Statements.

(J)

Non-U.S. company or principal place of business outside the U.S. and as a result is not qualifying asset under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Company's total assets.

(K)

Excepted from the definition of investment company under Section 3(c) of the Investment Company Act and as a result is not qualifying under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership 's total assets.

(L)

Publicly traded company with a market capitalization greater than $250 million and as a result is not qualifying under Section 55(a) of the Investment Company Act. Under the Investment Company Act, the Partnership may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of the Partnership 's total assets.

(M)

Negative balances relate to an unfunded commitment that was acquired at a discount.

LIBOR or EURIBOR resets monthly (M), quarterly (Q), or semiannually (S).

Aggregate acquisitions and aggregate dispositions of investments, other than government securities, totaled $471,087,319, and $235,641,665, respectively for the year ended December 31, 2013. Aggregate acquisitions includes investment assets received as payment in kind. Aggregate dispositions includes principal paydowns on and maturities of debt investments. The total value of restricted securities and bank debt as of December 31, 2013 was $765,419,046, or 97.0% of total cash and investments of the Partnership.

Options and Swaps at December 31, 2013 were as follows:

Investment	Notional Amount		Fair Value

Interest Rate Cap, 4%, expires 5/15/2016	$	25,000,000	$	14,139
Euro/US Dollar Cross-Currency Basis Swap, Pay Euros/Receive USD, Expires 3/31/17	$	4,289,019	$	(331,183	)

See accompanying notes

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statements of Operations (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Investment income
Interest income:
Companies less than 5% owned	$	24,699,976		$	14,257,066		$	65,174,101		$	41,745,035
Companies 5% to 25% owned		1,728,834			1,938,950			4,423,013			4,035,115
Companies more than 25% owned		214,091			293,711			706,553			936,296
Dividend income:
Companies 5% to 25% owned		-			-			1,968,748			-
Other income:
Companies less than 5% owned		210,622			529,011			1,164,938			1,105,959
Companies 5% to 25% owned		74,038			85,983			282,581			305,739
Companies more than 25% owned		262,905			183,650			726,477			495,165
Total investment income		27,190,466			17,288,371			74,446,411			48,623,309

Operating expenses
Management and advisory fees		3,513,238			2,205,517			9,504,317			6,110,550
Interest expense		1,027,640			340,711			2,252,933			663,820
Administrative expenses		392,794			256,806			1,029,069			592,422
Amortization of deferred debt issuance costs		375,316			218,764			1,151,598			470,242
Commitment fees		243,147			85,749			650,209			146,843
Legal fees, professional fees and due diligence expenses		167,646			145,960			542,232			226,718
Director fees		58,930			50,986			171,289			147,045
Insurance expense		56,000			36,694			135,276			89,261
Custody fees		53,494			44,901			163,400			102,802
Other operating expenses		169,329			92,266			361,892			235,142
Total operating expenses		6,057,534			3,478,354			15,962,215			8,784,845

Net investment income		21,132,932			13,810,017			58,484,196			39,838,464

Net realized and unrealized gain (loss) on investments and foreign currency
Net realized gain (loss):
Investments in companies less than 5% owned		544,212			804,482			(5,317,388	)		(2,773,020	)
Investments in companies 5% to 25% owned		383,670			-			383,670			-
Net realized gain (loss)		927,882			804,482			(4,933,718	)		(2,773,020	)

Net change in net unrealized appreciation/depreciation		(5,433,060	)		2,132,565			2,596,620			8,723,819
Net realized and unrealized gain (loss)		(4,505,178	)		2,937,047			(2,337,098	)		5,950,799

Dividends on Series A preferred equity facility		(357,451	)		(364,043	)		(1,083,263	)		(1,131,014	)
Net change in accumulated dividends on Series A preferred equity facility		(4,718	)		(23,939	)		5,394			(7,928	)
Net increase in net assets applicable to common limited and general partners resulting from operations	$	16,265,585		$	16,359,082		$	55,069,229		$	44,650,321

See accompanying notes.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statements of Changes in Net Assets

	Nine Months Ended September 30, 2014 (Unaudited)
				Common
				Limited			General
	Total			Partner			Partner
Net assets applicable to common limited and general partners, beginning of year	$	552,263,625		$	551,095,042		$	1,168,583

Contributions from common limited partner		208,582,388			208,582,388			-

Net investment income		58,484,196			47,400,784			11,083,412
Net realized loss		(4,933,718	)		(3,946,974	)		(986,744	)
Net change in unrealized appreciation/depreciation		2,596,620			2,077,296			519,324
Dividends paid on preferred equity facility		(1,083,263	)		(866,610	)		(216,653	)
Net change in accumulated dividends on preferred equity facility		5,394			4,315			1,079
Net increase in net assets applicable to common limited and general partners resulting from operations		55,069,229			44,668,811			10,400,418

Distributions to common limited and general partners from:
Net investment income		(56,525,309	)		(45,657,472	)		(10,867,837	)

Net assets applicable to common limited and general partners, end of period (including accumulated net investment income of $27,731,167, $27,380,652 and $350,515, respectively)	$	759,389,933		$	758,688,769		$	701,164

	Year Ended December 31, 2013
				Common
				Limited			General
	Total			Partner			Partner
Net assets applicable to common limited and general partners, beginning of year	$	317,209,574		$	317,209,574		$	-

Contributions from common limited partner		225,201,350			225,201,350			-

Net investment income		56,340,223			45,474,169			10,866,054
Net realized loss		(47,384,746	)		(37,907,797	)		(9,476,949	)
Net change in unrealized appreciation/depreciation		56,456,107			45,164,886			11,291,221
Dividends paid on preferred equity facility		(1,516,585	)		(1,213,268	)		(303,317	)
Net change in accumulated dividends on preferred equity facility		22,033			17,626			4,407
Net increase in net assets applicable to common limited and general partners resulting from operations		63,917,032			51,535,616			12,381,416

Distributions to common limited and general partners from:
Net investment income		(53,418,640	)		(42,851,498	)		(10,567,142	)
Realized gains		(645,691	)		-			(645,691	)
Net assets applicable to common limited and general partners, end of period (including accumulated net investment income of $26,850,149, $26,499,634 and $350,515, respectively)	$	552,263,625		$	551,095,042		$	1,168,583

See accompanying notes.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended September 30,
	2014			2013

Operating activities
Net increase in net assets applicable to common shareholders resulting from operations	$	55,069,229		$	44,650,321
Adjustments to reconcile net increase in net assets applicable to common shareholders resulting from operations to net cash used in operating activities:
Net realized loss		4,933,718			2,773,020
Net change in unrealized appreciation/depreciation of investments		(2,614,461	)		(8,675,023	)
Dividends paid on Series A preferred equity facility		1,083,263			1,131,014
Net change in accumulated dividends on Series A preferred equity facility		(5,394	)		7,928
Accretion of original issue discount on investments		(3,044,889	)		(1,703,018	)
Net accretion of market discount/premium		(1,152,021	)		(674,077	)
Interest and dividend income paid in kind		(4,366,287	)		(1,248,459	)
Amortization of deferred debt issuance costs		1,151,598			470,242
Changes in assets and liabilities:
Purchases of investment securities		(481,674,735	)		(353,293,497	)
Proceeds from sales, maturities and paydowns of investments		177,994,806			176,516,172
Increase in accrued interest income - companies less than 5% owned		(3,394,734	)		(2,346,218	)
Increase in accrued interest income - companies 5% to 25% owned		(235,265	)		(321,152	)
Decrease in accrued interest income - companies more than 25% owned		9,790			8,749
Decrease in receivable for investments sold		3,605,964			6,439,614
Increase in prepaid expenses and other assets		(871,593	)		(343,025	)
Increase (decrease) in payable for investments purchased		(13,456,911	)		15,103,635
Increase (decrease) in payable to the Investment Manager		(4,766	)		121,709
Increase in payable to parent		101,872			-
Increase in interest payable		394,868			170,674
Increase in accrued expenses and other liabilities		209,489			234,692
Net cash used in operating activities		(266,266,459	)		(120,976,699	)

Financing activities
Borrowings		411,500,000			191,000,000
Repayments of debt		(293,000,000	)		(115,000,000	)
Payments of debt issuance costs		(2,496,168	)		(3,058,502	)
Dividends paid on Series A preferred equity facility		(1,083,263	)		(1,131,014	)
Dividends paid to common limited partner		(45,657,472	)		(29,917,788	)
Distributions of incentive allocation to the General Partner		(10,419,133	)		(5,199,777	)
Contributions from the common limited partner		208,582,388			78,815,250
Net cash provided by financing activities		267,426,352			115,508,169

Net increase (decrease) in cash and cash equivalents		1,159,893			(5,468,530	)
Cash and cash equivalents at beginning of period		22,984,182			18,035,189
Cash and cash equivalents at end of period	$	24,144,075		$	12,566,659

Supplemental cash flow information
Interest payments	$	1,858,065		$	493,146

See accompanying notes

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited)

September 30, 2014

1. Organization and Nature of Operations

Special Value Continuation Partners, LP (the “Partnership”) a Delaware limited partnership, commenced operations on July 31, 2006 as an externally managed, closed-end, non-diversified management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). On April 2, 2012, the Partnership elected to be treated as a business development company (“BDC”) under the 1940 Act (the “Conversion”). The Partnership’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection.

Investment operations are conducted either directly in the Partnership or in one of the Partnership’s wholly owned subsidiaries, TCPC Funding I, LLC, a Delaware limited liability company (“TCPC Funding”) and TCPC SBIC, LP, a Delaware limited partnership (the “SBIC”). The SBIC was organized in June 2013, and on April 22, 2014, received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958. The Partnership, TCPC Funding, and the SBIC invest primarily in the debt of middle-market companies, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, the Partnership, TCPC Funding, and the SBIC may make equity investments directly. The Partnership, TCPC Funding, and the SBIC have elected to be treated as partnerships for U.S. federal income tax purposes. TCP Capital Corp. (“TCPC”) owns the entire common limited partner interest in the Partnership. TCPC has also elected to be treated as a business development company under the 1940 Act.

The general partner of the Partnership is SVOF/MM, LLC, which also serves as the administrator of TCPC and the Partnership (the “Administrator” or the “General Partner”). The managing member of the General Partner is Tennenbaum Capital Partners, LLC, which serves as the Investment Manager to TCPC, the Partnership, TCPC Funding and the SBIC. Most of the equity interests in the General Partner are owned directly or indirectly by the Investment Manager and its employees.

Partnership management consists of the General Partner and the Board of Directors. The General Partner directs and executes the day-to-day operations of the Partnership subject to oversight from the Board of Directors, which performs certain functions required by the 1940 Act. The Board of Directors has delegated investment management of the Partnership’s assets to the Investment Manager. The Board of Directors consists of five persons, three of whom are independent. If the Partnership has preferred limited partner interests outstanding, as it currently does, the holders of the preferred limited partner interests voting separately as a class are entitled to elect two of the Directors. The remaining directors will be subject to election by holders of the common limited partner interests and preferred limited partner interests voting together as a single class.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements of the Partnership include the accounts of the Partnership, TCPC Funding and the SBIC and 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 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 and differences could be material.

Investment Valuation

Management values investments at fair value based upon the principles and methods of valuation set forth in policies adopted by the Board of Directors and in conformity with procedures set forth in the Revolving Facilities and the statement of preferences for the Preferred Interests, as defined in Note 4, below. 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.

All investments are valued at least quarterly based on affirmative pricing or quotations from independent third-party sources, with the exception of investments priced directly by the Investment Manager which together comprise, in total, less than 5% of the capitalization of the Partnership. 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 using prices provided 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 using affirmative valuations performed by independent valuation services or, for investments aggregating less than 5% of the total capitalization of the Partnership, directly by the Investment Manager.

Fair valuations of investments are determined under our documented valuation policy that has been reviewed and approved by the Board of Directors, and are subject to their approval in good faith. Generally, to increase objectivity in valuing 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

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies (continued)

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 Partnership’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 value 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.

Unobservable inputs used in the fair value measurement of Level 3 investments as of September 30, 2014 included the following:

Asset Type	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Avg.)
Bank Debt	$	508,251,512	Market rate approach	Market yields	3.8% - 18.9% (11.2%)
		213,520,856	Market quotations	Indicative bid/ask quotes	1 - 3 (1)
		14,692,216	Market comparable companies	Revenue multiples	0.4x (0.4x)
		2,298,418	Market comparable companies	EBITDA multiples	7.8x (7.8x)
Other Corporate Debt		65,899	Market rate approach	Market yields	19.0% (19.0%)
		43,816,750	Market quotations	Indicative bid/ask quotes	1 (1)
		12,969,876	Market comparable companies	EBITDA multiples	7.8x – 10.5x (8.7x)
Equity		7,902,239	Market rate approach	Market yields	13.0% - 18.0% (13.7 %)
		5,648,331	Market quotations	Indicative bid/ask quotes	1 - 2 (1)
		878,869	Market comparable companies	Revenue multiples	0.4x - 1.1x (1.1x)
		18,864,816	Market comparable companies	EBITDA multiples	4.6x – 7.0x (6.3x)

Generally, a change in an unobservable input may result in a change to the value of an investment as follows:

Input	Impact to Value if Input Increases	Impact to Value if Input Decreases
Market yields	Decrease	Increase
Revenue multiples	Increase	Decrease
EBITDA multiples	Increase	Decrease

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies (continued)

Investments 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.

At September 30, 2014, the Partnership’s investments 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	$	-	$	-	$	357,828
2	Other observable market inputs ^*		175,519,217		70,010,500		-
3	Independent third-party pricing sources that employ
	significant unobservable inputs		738,763,002		52,520,425		32,003,559
3	Investment Manager valuations with significant
	unobservable inputs		-		4,332,100		1,290,696
Total		$	914,282,219	$	126,863,025	$	33,652,083

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

Changes in investments categorized as Level 3 during the nine months ended September 30, 2014 were as follows:

	Independent Third-Party Valuation
	Bank Debt			Other Corporate Debt			Equity Securities
Beginning balance	$	515,953,643		$	53,334,634		$	36,066,746
Net realized and unrealized gains (losses)		47,146			(14,913	)		(1,335,910	)
Acquisitions		424,280,318			174,943			5,882,955
Dispositions		(115,964,311	)		(22,549,239	)		(10,046,998	)
Transfers out of Level 3 ^†		(89,614,594	)		-			-
Transfers into Level 3 ^‡		4,060,800			21,575,000			-
Reclassifications within Level 3 ^§		-			-			1,436,766
Ending balance	$	738,763,002		$	52,520,425		$	32,003,559
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)	$	1,089,298		$	1,005,398		$	(1,075,632	)

^† Comprised of nine investments that transferred to Level 2 due to increased observable market activity.

^‡ Comprised of two investments that transferred from Level 2 due to reduced trading volumes.

^§ Comprised of two investments that reclassified from Investment Manager Valuation and one that reclassified to Investment Manager Valuation.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies (continued)

	Investment Manager Valuation
	Bank Debt			Other Corporate Debt			Equity Securities
Beginning balance	$	4,060,800		$	7,631,335		$	2,837,707
Net realized and unrealized losses		-			(504,281	)		(313,703	)
Acquisitions		-			4,303,962			230,937
Dispositions		(4,060,800	)		(7,098,916	)		(27,479	)
Reclassifications within Level 3 ^**		-			-			(1,436,766	)
Ending balance	$	-		$	4,332,100		$	1,290,696
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)	$	-		$	166,619		$	(341,183	)

^** Comprised of two investments that reclassified to Independent Third-Party Valuation and one that reclassified from Independent Third-Party Valuation.

There were no transfers between Level 1 and 2 during the nine months ended September 30, 2014.

At September 30, 2013, the Company’s investments 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	$	-	$	-	$	1,028,216
2	Other observable market inputs ^*		100,098,095		70,698,908		-
3	Independent third-party pricing sources that employ significant unobservable inputs		448,827,207		38,174,605		34,757,266
3	Investment Manager valuations with significant unobservable inputs		-		7,628,686		2,882,504
Total		$	548,925,302	$	116,502,199	$	38,667,986

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

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies (continued)

Changes in investments categorized as Level 3 during the nine months ended September 30, 2013 were as follows:

	Independent Third-Party Valuation
	Bank Debt			Other Corporate Debt			Equity Securities
Beginning balance	$	359,343,326		$	17,171,637		$	32,675,370
Net realized and unrealized gains (losses)		(1,062,389	)		7,520,997			(3,573,701	)
Acquisitions		215,773,748			22,962,665			11,023,992
Dispositions		(100,185,011	)		(15,172,634	)		(3,215,534	)
Transfers out of Level 3 ^†		(58,651,283	)		(10,300,000	)		-
Transfers into Level 3 ^‡		33,608,816			15,991,940			-
Reclassifications within Level 3 ^§		-			-			(2,152,861	)
Ending balance	$	448,827,207		$	38,174,605		$	34,757,266
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)	$	(740,697	)	$	1,570,023		$	(2,724,223	)

^† Comprised of nine investments that transferred to Level 2 due to increased observable market activity.

^‡ Comprised of five investments that transferred from Level 2 due to reduced trading volumes.

^§ Comprised of one investment that was reclassified to Investment Manager Valuation.

	Investment Manager Valuation
	Bank Debt		Other Corporate Debt		Equity Securities
Beginning balance	$	-	$	7,167,458	$	1,424,764
Net realized and unrealized gains (losses)		-		356,327		(607,055	)
Acquisitions		-		104,901		-
Dispositions		-		-		(88,066	)
Reclassifications within Level 3 ^§		-		-		2,152,861
Ending balance	$	-	$	7,628,686	$	2,882,504
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)	$	-	$	356,327	$	(607,055	)

^§ Comprised of one investment that was reclassified from Independent Third-Party Valuation.

There were no transfers between Level 1 and 2 during the nine months ended September 30, 2013.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies (continued

Investment Transactions

Investment transactions are recorded 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 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.

Repurchase Agreements

In connection with transactions in repurchase agreements, it is the Partnership’s policy that the 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 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. Foreign currency denominated investments comprised approximately 1.8% and 2.7% of total investments at September 30, 2014 and December 31, 2013, respectively. Such positions were converted at the respective closing rate in effect at September 30, 2014 and December 31, 2013 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.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies (continued)

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 transaction 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.

Derivatives

In order to mitigate certain currency exchange and interest rate risks, the Partnership has entered into certain swap and option transactions. All derivatives are recognized as either assets or liabilities in the Consolidated 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.

The Partnership did not enter into any new derivative transactions during the nine months ended September 30, 2014. At September 30, 2014, the Partnership held an interest rate cap with a notional amount of $25,000,000 and a cross currency basis swap with a notional amount of $4,289,019. Gains and losses from derivatives during the nine months ended September 30, 2014 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

Instrument	Realized Gains (Losses)		Unrealized Gains (Losses)
Cross currency basis swaps	$	-	$	1,402,313
Interest rate cap		-		(12,812	)

During the nine months ended September 30, 2013, TCPC Funding purchased an interest rate cap with a notional amount of $25,000,000 and continued to hold a cross currency basis swap with a notional amount of $6,040,944. Gains and losses from derivatives during the nine months ended September 30, 2013 were included in net realized and unrealized loss on investments in the Consolidated Statement of Operations as follows:

Instrument	Realized Gains (Losses)		Unrealized Gains (Losses)
Cross currency basis swaps	$	-	$	(126,670	)
Interest rate cap				(32,598	)

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies (continued)

Valuations of derivatives held at September 30, 2014 and September 30, 2013 were determined using observable market inputs other than quoted prices in active markets for identical assets and, accordingly, are classified as Level 2 in the GAAP valuation hierarchy.

Debt Issuance Costs

Costs of approximately $3.5 million and $1.5 million were incurred during 2006 and 2013 in connection with placing and extending the Partnership’s revolving credit facility (see Note 4), respectively. Costs of approximately $1.6 million and $1.3 million were incurred during 2013 and 2014 in connection with placing and extending TCPC Funding’s revolving credit facility (see Note 4), respectively. These costs were deferred and are being amortized on a straight-line basis over the estimated life of the respective instruments. The impact of utilizing the straight-line amortization method versus the effective-interest method is not material to the operations of the Partnership.

Revenue Recognition

Interest and dividend income, including income paid in kind, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts, earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income received upon the early repayment of a loan or debt security are included in interest income.

Certain 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 bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. GAAP also requires the collectability of interest to be considered when making accruals. Accordingly, when accounting for purchase discounts, discount accretion income is recognized when it is probable that such amounts will be collected, generally at disposition. When principal payments on a loan are received in an amount in excess of the loan’s amortized cost, the excess principal payments are recorded as interest income.

Income Taxes

The income or loss of the Partnership, TCPC Funding and the SBIC is reported in the respective partners’ income tax returns. Consequently, no income taxes are paid at the partnership level or reflected in the Partnership’s financial statements. In accordance with ASC Topic 740 – Income Taxes, the Partnership recognizes in its consolidated financial statements the effect of a tax position when it is determined that such position is more likely than not, based on the technical merits, to be sustained upon examination. As of September 30, 2014, all tax years of the Partnership, TCPC Funding and the SBIC since January 1, 2010 remain subject to examination by federal tax authorities. No such examinations are currently pending.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

2. Summary of Significant Accounting Policies (continued)

Cost and unrealized appreciation and depreciation of investments (including derivatives) for U.S. federal income tax purposes at September 30, 2014 were as follows:

Unrealized appreciation	$	32,760,177
Unrealized depreciation		(65,356,343	)
Net unrealized depreciation		(32,596,166	)

Cost	$	1,108,465,950

3. Management Fees, Incentive Compensation and Other Expenses

The Partnership’s management fee is calculated at an annual rate of 1.5% of total assets (excluding cash and cash equivalents) of TCPC on a consolidated basis as of the beginning of each quarter and is payable to the Investment Manager quarterly in arrears.

Incentive compensation is only paid to the extent that TCPC’s total performance exceeds a cumulative 8% annual return since January 1, 2013 (the “Total Return Hurdle”). The incentive compensation equals 20% of net investment income (reduced by preferred dividends) and 20% of net realized gains (reduced by any net unrealized losses), subject to the Total Return Hurdle. The incentive compensation is payable quarterly in arrears as an allocation and distribution to the General Partner and is calculated as the difference between cumulative incentive compensation earned since January 1, 2013 and cumulative incentive compensation paid since January 1, 2013. A reserve for incentive compensation is allocated to the account of the General Partner based on the amount of additional incentive compensation that would have been distributable to the General Partner assuming a hypothetical liquidation of TCPC and the Partnership at net asset value on the balance sheet date. At September 30, 2014, the General Partner’s equity interest in the Partnership was comprised entirely of a reserve amount of $701,164 as reflected in the Consolidated Statement of Changes in Net Assets.

The Partnership bears all expenses incurred in connection with its business, 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.

4. Leverage

Leverage is comprised of amounts outstanding under senior secured revolving credit facilities issued by the Partnership (the “Partnership Facility”) and TCPC Funding (the “TCPC Funding Facility,” and, together with the Partnership Facility, the “Revolving Facilities”), debentures guaranteed by the SBA (the “SBA Debentures”), and amounts outstanding under a preferred leverage facility issued by the Partnership (the “Preferred Interests”), as follows:

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

4. Leverage (continued)

	September 30, 2014		December 31, 2013
Partnership Facility	$	45,000,000	$	45,000,000
TCPC Funding Facility		150,000,000		50,000,000
SBA Debentures		18,500,00		-
Total Debt	$	213,500,000	$	95,000,000

Preferred Interests		134,000,000		134,000,000
Total Leverage	$	347,500,000	$	229,000,000

The combined weighted-average interest and dividend rates on total leverage outstanding at September 30, 2014 and December 31, 2013 were 2.09 % and 1.38%, respectively.

Amounts outstanding under the Revolving Facilities and the SBA Debentures are carried at cost in the Statement of Assets and Liabilities. As of September 30, 2014, the estimated fair value of the TCPC Funding Facility and the SBA Debentures approximated its carrying value, and the Partnership Facility had an estimated fair value of $44,314,383. The estimated fair values of the Revolving Facilities and the SBA Debentures are determined by discounting projected remaining payments using market interest rates for our borrowings and entities with similar credit risks at the measurement date. At September 30, 2014, the Revolving Facilities and the SBA Debentures would be deemed to be Level 3 in the GAAP valuation hierarchy.

Partnership Facility

The Partnership Facility provides for amounts to be drawn up to $116 million, subject to certain collateral and other restrictions. The Partnership Facility matures on July 31, 2016. Most of the cash and investments held directly by the Partnership, as well as the net assets of TCPC Funding and the SBIC, are included in the collateral for the facility.

Advances under the Partnership Facility through July 31, 2014 bore interest at an annual rate equal to 0.44% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). Advances under the Partnership Facility for periods from July 31, 2014 through the maturity date of the facility bear interest at an annual rate equal to 2.5% plus either LIBOR or the lender’s cost of funds (subject to a cap of LIBOR plus 20 basis points). In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.20% per annum on the unused portion of the facility, or 0.25% per annum when less than $46.4 million in borrowings are outstanding. The 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, 2014, the Partnership was in full compliance with such covenants.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

4. Leverage (continued)

SBA Debentures

As of September 30, 2014 the SBIC is able to issue up to $75 million in SBA Debentures, subject to funded regulatory capital and other customary regulatory requirements. As of September 30, 2014, the Partnership had committed $75 million of regulatory capital to the SBIC, $23 million of which had been funded. SBA Debentures are non-recourse and may be prepaid at any time without penalty. The interest rate on SBA Debentures is fixed at the time of issuance at a market-driven spread over 10-year U.S. Treasury Notes.

SBA Debentures as of September 30, 2014 were as follows:

Issuance Date		Maturity		Debenture Amount				Fixed Interest Rate				SBA Annual Charge
September 24, 2014		September 1, 2024		$	18,500,000				3.015	%			0.355	%

TCPC Funding Facility

The TCPC Funding Facility, issued on May 15, 2013, provides for amounts to be drawn up to $200 million, subject to certain collateral and other restrictions. The TCPC Funding Facility matures on May 15, 2017, subject to extension by the lender at the request of TCPC Funding. The facility contains an accordion feature which allows for expansion of the facility up to $250 million subject to consent from the lender and other customary conditions. The cash and investments of TCPC Funding are included in the collateral for the facility.

As of September 30, 2014, borrowings under the TCPC Funding Facility bore interest at a rate of LIBOR plus 2.50% per annum. In addition to amounts due on outstanding debt, the facility accrues commitment fees of 0.75% per annum on the unused portion of the facility, or 1.00% per annum when the unused portion is greater than 33% of the total facility. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should TCPC Funding fail to satisfy certain financial or other covenants. As of September 30, 2014, TCPC Funding was in full compliance with such covenants.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

4. Leverage (continued)

Preferred Interests

At September 30, 2014, the Preferred Interests were comprised of 6,700 Series A preferred limited partner interests issued and outstanding with a liquidation preference of $20,000 per interest. The Preferred Interests accrue dividends at an annual rate equal to 0.85% plus either LIBOR or the interestholder’s cost of funds (subject to a cap of LIBOR plus 20 basis points). The Preferred Interests 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 Preferred Interests 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 Preferred Interests or a failure by the Partnership to maintain sufficient asset coverage as required by the 1940 Act. As of September 30, 2014, the Partnership was in full compliance with such requirements.

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

The Partnership, TCPC Funding and the SBIC conduct 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 San Francisco area.

In the normal course of business, investment activities involve executions, settlement and financing of various transactions resulting in receivables from, and payables to, brokers, dealers and the custodian. These activities may expose 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 Partnership, TCPC Funding and the SBIC enter into contracts that contain a variety of indemnifications, and are engaged from time to time in various legal actions. The maximum exposure under these arrangements and activities is unknown. However, management expects the risk of material loss to be remote.

The Consolidated Statement of Investments includes certain revolving loan facilities and other commitments held by the Partnership with unfunded balances at September 30, 2014 as follows:

Revolving Loan Facilities	$	20,517,102
Delayed Draw Loans and Notes		25,652,366
Letters of Credit		9,379,246
Total Unfunded Commitments	$	55,548,714

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

6. Related Parties

TCPC, the Partnership, TCPC Funding, the SBIC, 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 TCPC which are reimbursable through deductions from distributions to TCPC. At September 30, 2014, no such amounts were outstanding. From time to time, the Investment Manager advances payments to third parties on behalf of the Partnership and receives reimbursement from the Partnership. At September 30, 2014, amounts reimbursable to the Investment Manager totaled $282,605, as reflected in the Consolidated Statement of Assets and Liabilities.

Pursuant to an administration agreement between the Administrator and the Partnership (the “Administration Agreement”), the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to the Partnership, as well as costs and expenses incurred by the Administrator or its affiliates relating to any administrative, operating, or other non-investment advisory services provided by the Administrator or its affiliates to the Partnership. For the nine months ended September 30, 2014, expenses allocated pursuant to the Administration Agreements totaled $1,002,418. The Administrator waived reimbursement of all administrative expenses prior to January 1, 2013.

7. Distributions

The Partnership’s distributions are recorded on the record date. The timing of distributions is determined by the General Partner, which has provided the Investment Manager with certain criteria for such distributions.

8. Subsequent Events

On November 5, 2014, the aggregate principal commitment on the TCPC Funding Facility increased to $250 million and the facility’s accordion feature expanded to $300 million.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Notes to Consolidated Financial Statements (Unaudited) (Continued)

September 30, 2014

9. Financial Highlights

The financial highlights with respect to the common limited partner are as follows:

	Nine Months Ended
	September 30, 2014

Return on invested assets ^{(1), (2)}		8.2	%

Gross return to common limited partner ⁽¹⁾		9.5	%
Less: General Partner incentive allocation ⁽¹⁾		(1.9	%)
Return to common limited partner ^{(1), (3)}		7.6	%

Ratios to average common equity: ^{(4), (5)}
Net investment income		9.6	%
Expenses		3.4	%
Expenses and General Partner allocation		5.1	%

Ending net assets attributable to common limited partner	$	758,688,769
Portfolio turnover rate ⁽¹⁾		20.2	%
Weighted-average debt outstanding	$	138,549,451
Weighted-average interest rate on debt		2.2	%

⁽¹⁾	Not annualized.

⁽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 Partnership expenses, including financing costs and management fees) are calculated on a monthly geometrically linked, time-weighted basis.

⁽⁴⁾	Net investment income and expenses annualized. General Partner allocation not annualized.

⁽⁵⁾	These ratios include interest expense but do not reflect the effect of dividends on the preferred equity facility.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

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

Nine Months Ended September 30, 2014

Security	Acquisitions		Dispositions ⁽²⁾			Dividends or Interest ⁽³⁾
AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16	$	241,491	$	-		$	194,666
AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16		-		-			764,610
Anacomp, Inc., Class A Common Stock		-		-			-
EPMC HoldCo, LLC, Membership Units		-		(969,969	)		-
ESP Holdings, Inc., Cumulative Preferred 15%		-		(2,489,100	)		1,968,748
ESP Holdings, Inc., Common Stock		-		(3,481,696	)		289,315
ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19		-		(7,959,369	)		205,175
Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18		-		(112,500	)		1,007,054
KAGY Holding Company, Inc., Series A Preferred Stock		-		-			-
N510UA Aircraft Secured Mortgage, 20%, due 10/26/16		-		(72,713	)		44,412
N512UA Aircraft Secured Mortgage, 20%, due 10/26/16		-		(71,150	)		17,362
N536UA Aircraft Secured Mortgage, 16%, due 9/29/14		-		(108,844	)		4,678
N545UA Aircraft Secured Mortgage, 16%, due 8/29/15		-		(110,472	)		23,416
N585UA Aircraft Secured Mortgage, 20%, due 10/25/16		-		(392,795	)		27,571
N659UA Aircraft Secured Mortgage, 12%, due 2/28/16		-		(831,783	)		210,182
N661UA Aircraft Secured Mortgage, 12%, due 5/4/16		-		(806,660	)		220,226
N510UA Equipment Trust Beneficial Interests		72,713		(26,934	)		66,191
N512UA Equipment Trust Beneficial Interests		71,150		(26,493	)		93,674
N536UA Equipment Trust Beneficial Interests		80,397		(467,756	)		40,259
N545UA Equipment Trust Beneficial Interests		110,472		(35,652	)		83,596
N585UA Equipment Trust Beneficial Interests		92,583		(536,863	)		31,098
N913DL Aircraft Secured Mortgage, 8%, due 3/15/17		-		(62,325	)		15,477
N918DL Aircraft Secured Mortgage, 8%, due 8/15/18		-		(55,171	)		21,629
N954DL Aircraft Secured Mortgage, 8%, due 3/20/19		-		(63,383	)		29,035
N955DL Aircraft Secured Mortgage, 8%, due 6/20/19		-		(60,971	)		30,241
N956DL Aircraft Secured Mortgage, 8%, due 5/20/19		-		(61,985	)		30,151
N957DL Aircraft Secured Mortgage, 8%, due 6/20/19		-		(61,503	)		30,504
N959DL Aircraft Secured Mortgage, 8%, due 7/20/19		-		(61,027	)		30,855
N960DL Aircraft Secured Mortgage, 8%, due 10/20/19		-		(60,127	)		32,159
N961DL Aircraft Secured Mortgage, 8%, due 8/20/19		-		(61,580	)		31,732
N976DL Aircraft Secured Mortgage, 8%, due 2/15/18		-		(64,044	)		21,745
N913DL Equipment Trust Beneficial Interests		62,325		(70,524	)		13,226
N918DL Equipment Trust Beneficial Interests		55,171		(67,002	)		10,621
N954DL Equipment Trust Beneficial Interests		63,383		(80,814	)		9,947
N955DL Equipment Trust Beneficial Interests		60,971		(79,827	)		9,272
N956DL Equipment Trust Beneficial Interests		61,985		(80,928	)		9,305
N957DL Equipment Trust Beneficial Interests		61,503		(80,592	)		9,124
N959DL Equipment Trust Beneficial Interests		61,027		(80,262	)		8,949
N960DL Equipment Trust Beneficial Interests		60,127		(80,007	)		8,292
N961DL Equipment Trust Beneficial Interests		61,580		(81,411	)		8,497
N976DL Equipment Trust Beneficial Interests		64,044		(76,920	)		9,600
RM Holdco, LLC, Membership Units		-		-			-
RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18		-		-			43,866
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16		278,599		(142,450	)		310,334
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16		974,966		-			1,056,044
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16		318,343		-			344,447
RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16		204,002		-			220,664
United N659UA-767, LLC (N659UA)		831,783		(506,034	)		318,023
United N661UA-767, LLC (N661UA)		806,660		(497,274	)		315,057
Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units		-		-			-

Notes to Schedule of Changes in Investments in Affiliates:

⁽¹⁾	The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Partnership of 5% or more of the issuers' voting securities.

⁽²⁾	Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

⁽³⁾	Also includes fee and lease income as applicable.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Schedule of Changes in Investments in Affiliates ⁽¹⁾

Year Ended December 31, 2013

Security	Acquisitions		Dispositions ⁽²⁾			Dividends or Interest ⁽³⁾

AGY Holding Corp., Senior Secured Term Loan, 12%, due 9/15/16	$	2,056,927	$	-		$	128,215
AGY Holding Corporation, Senior Secured 2nd Lien Notes, 11%, due 11/15/16		7,586,317		-			640,007
Anacomp, Inc., Class A Common Stock		-		-			-
EPMC HoldCo, LLC, Membership Units		-		(1,481,930	)		-
ESP Holdings, Inc., Cumulative Preferred 15%		-		-			-
ESP Holdings, Inc., Common Stock		-		-			32,627
ESP Holdings, Inc., Junior Unsecured Subordinated Promissory Notes, 6% Cash + 10% PIK, due 12/31/19		749,529		-			1,199,575
Globecomm Systems Inc., Senior Secured 1st Lien Term Loan, LIBOR + 7.625%, 1.25% LIBOR Floor, due 12/11/18		14,850,000		-			83,281
International Wire Group Holdings, Inc., Senior Secured Notes, 8.5%, due 10/15/17		-		(15,759,750	)		443,715
KAGY Holding Company, Inc., Series A Preferred Stock		8,096,057		(1,644	)		-
N510UA Aircraft Secured Mortgage, 20%, due 10/26/16		-		(81,562	)		74,646
N512UA Aircraft Secured Mortgage, 20%, due 10/26/16		-		(79,808	)		75,593
N536UA Aircraft Secured Mortgage, 16%, due 9/29/14		-		(143,097	)		29,100
N545UA Aircraft Secured Mortgage, 16%, due 8/29/15		-		(128,230	)		50,422
N585UA Aircraft Secured Mortgage, 20%, due 10/25/16		-		(93,707	)		88,705
N659UA Aircraft Secured Mortgage, 12%, due 2/28/16		-		(999,280	)		390,117
N661UA Aircraft Secured Mortgage, 12%, due 5/4/16		-		(969,098	)		401,041
N510UA Equipment Trust Beneficial Interests		81,562		(35,912	)		72,866
N512UA Equipment Trust Beneficial Interests		79,808		(35,323	)		72,497
N536UA Equipment Trust Beneficial Interests		143,097		(45,201	)		104,929
N545UA Equipment Trust Beneficial Interests		128,359		(47,536	)		92,525
N585UA Equipment Trust Beneficial Interests		93,707		(46,776	)		80,203
N913DL Aircraft Secured Mortgage, 8%, due 3/15/17		-		(77,509	)		26,248
N918DL Aircraft Secured Mortgage, 8%, due 8/15/18		-		(68,612	)		33,806
N954DL Aircraft Secured Mortgage, 8%, due 3/20/19		-		(78,825	)		44,415
N955DL Aircraft Secured Mortgage, 8%, due 6/20/19		-		(75,824	)		45,803
N956DL Aircraft Secured Mortgage, 8%, due 5/20/19		-		(77,085	)		45,775
N957DL Aircraft Secured Mortgage, 8%, due 6/20/19		-		(76,487	)		46,204
N959DL Aircraft Secured Mortgage, 8%, due 7/20/19		-		(75,896	)		46,629
N960DL Aircraft Secured Mortgage, 8%, due 10/20/19		-		(74,776	)		48,285
N961DL Aircraft Secured Mortgage, 8%, due 8/20/19		-		(76,582	)		47,846
N976DL Aircraft Secured Mortgage, 8%, due 2/15/18		-		(79,647	)		34,759
N913DL Equipment Trust Beneficial Interests		77,509		(94,032	)		12,045
N918DL Equipment Trust Beneficial Interests		68,612		(89,338	)		9,213
N954DL Equipment Trust Beneficial Interests		78,825		(107,751	)		7,578
N955DL Equipment Trust Beneficial Interests		75,824		(106,437	)		6,891
N956DL Equipment Trust Beneficial Interests		77,085		(107,904	)		6,845
N957DL Equipment Trust Beneficial Interests		76,487		(107,457	)		6,648
N959DL Equipment Trust Beneficial Interests		75,896		(107,015	)		6,456
N960DL Equipment Trust Beneficial Interests		74,776		(106,678	)		5,662
N961DL Equipment Trust Beneficial Interests		76,582		(108,546	)		5,805
N967DL Equipment Trust Beneficial Interests		79,647		(102,560	)		7,056
RM Holdco, LLC, Membership Units		-		-			-
RM Holdco, LLC, Subordinated Convertible Term Loan, 1.12% PIK, due 3/21/18		57,991		-			57,992
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche A, 11%, due 3/19/16		16,974		(149,183	)		413,430
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B, 12% Cash + 7% PIK, due 3/19/16		567,205		-			1,258,016
RM OpCo, LLC, Senior Secured 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/19/16		186,901		-			410,004
RM OpCo, LLC, Convertible 1st Lien Term Loan Tranche B-1, 12% Cash + 7% PIK, due 3/21/16		1,339,883		-			182,711
United N659UA-767, LLC (N659UA)		999,280		(674,714	)		316,842
United N661UA-767, LLC (N661UA)		969,098		(663,034	)		313,627
Wasserstein Cosmos Co-Invest, L.P., Limited Partnership Units		5,000,000		-			-

Notes to Schedule of Changes in Investments in Affiliates:

⁽¹⁾	The issuers of the securities listed on this schedule are considered affiliates under the Investment Company Act of 1940 due to the ownership by the Partnership of 5% or more of the issuers' voting securities.

⁽²⁾	Dispositions include sales, paydowns, mortgage amortizations, and aircraft depreciation.

⁽³⁾	Also includes fee and lease income as applicable.

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers (Unaudited)

September 30, 2014

Investment		Acquisition Date

Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19		9/26/13
BlackLine Intermediate, Inc., Warrants to Purchase Common Stock		9/25/13
BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17		3/5/12
Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19		10/19/12
Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18		7/26/13
Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16		1/20/11
Findly Talent, LLC, Membership Units		1/1/14
Flight Options Holdings I, Inc., Warrants to Purchase Common Stock		12/4/13
Hunt Companies, Inc., Senior Secured Notes, 9.625%, due 3/1/21		2/25/14
Ichor Systems Holdings, LLC, Membership Units		Var. 2009 & 2010
Integra Telecom, Inc., Common Stock		11/19/09
Integra Telecom, Inc., Warrants		11/19/09
Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18		5/8/13
Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21		8/1/13
Marsico Holdings, LLC Common Interest Units		9/10/12
Precision Holdings, LLC, Class C Membership Interests		Var. 2010 & 2011
Rightside Group, Ltd, Warrants		8/6/14
Shop Holdings, LLC, Convertible Promissory Note, 5%, due 8/5/15		2/5/14
Shop Holding, LLC, Class A Units		6/2/11
Shop Holding, LLC, Warrants to Purchase Class A Units		6/2/11
SiTV, Inc., Senior Secured Notes, 10.375%, due 7/1/19		6/18/14
SiTV, Inc., Warrants to Purchase Common Stock		8/3/12
Soraa, Inc., Warrants to Purchase Common Stock		8/29/14
STG-Fairway Holdings, LLC, Class A Units		12/30/10
The Telx Group, Inc., Senior Notes, 13.5% PIK, due 7/9/21		4/9/14
Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18		11/13/13
V Telecom Investment S.C.A, Common Shares		11/9/12

Special Value Continuation Partners, LP

(A Delaware Limited Partnership)

Consolidated Schedule of Restricted Securities of Unaffiliated Issuers

December 31, 2013

Investment		Acquisition Date

AIP/IS Holdings, LLC, Membership Units		Var. 2009 & 2010
Avanti Communications Group, PLC, Senior Secured Notes, 10%, due 10/1/19		9/26/13
BPA Laboratories, Inc., Senior Secured Notes, 12.25%, due 4/1/17		3/5/12
Caribbean Financial Group, Senior Secured Notes, 11.5%, due 11/15/19		10/19/12
Carolina Beverage Group, LLC, Secured Notes, 10.625%, due 8/1/18		7/26/13
Constellation Enterprises, LLC, Senior Secured 1st Lien Notes, 10.625%, due 2/1/16		1/20/11
Flight Options Holdings I, Inc., Warrants to Purchase Common Stock		12/4/13
Integra Telecom, Inc., Common Stock		11/19/09
Integra Telecom, Inc., Warrants		11/19/09
Iracore International, Inc., Senior Secured Notes, 9.5%, due 6/1/18		5/8/13
Magnolia Finance V plc, Asset-Backed Credit Linked Notes, 13.125%, due 8/2/21		8/1/13
Marsico Holdings, LLC Common Interest Units		9/10/12
Precision Holdings, LLC, Class C Membership Interests		Var. 2010 & 2011
Shop Holding, LLC, Class A Units		6/2/11
Shop Holding, LLC, Warrants to Purchase Class A Units		6/2/11
SiTV, Inc., Warrants to Purchase Common Stock		8/3/12
SLS Breeze Intermediate Holdings, Inc., Warrants to Purchase Common Stock		9/25/13
St Barbara Ltd., 1st Priority Senior Secured Notes, 8.875%, due 4/15/18		3/22/13
STG-Fairway Holdings, LLC, Class A Units		12/30/10
The Telx Group, Inc., Senior Unsecured Notes, 10% Cash + 2% PIK, due 9/26/19		9/26/11
Trade Finance Funding I, Ltd., Secured Class B Notes, 10.75%, due 11/13/18		11/13/13
V Telecom Investment S.C.A, Common Shares		11/9/12
Vantage Oncology, LLC, Senior Secured Notes, 9.5%, due 6/15/17		6/6/13

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

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. Some of the statements in this report (including in the following discussion) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future events or the future performance or financial condition of Special Value Continuation Partners, LP. (the “Partnership,” “we,” “us,” or “our”). The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

our, or our portfolio companies’, future business, operations, operating results or prospects;

the return or impact of current and future investments;

the impact of a protracted decline in the liquidity of credit markets on our business;

the impact of fluctuations in interest rates on our business;

the impact of changes in laws or regulations governing our operations or the operations of our portfolio companies;

our contractual arrangements and relationships with third parties;

the general economy and its impact on the industries in which we invest;

the financial condition of and ability of our current and prospective portfolio companies to achieve their objectives;

our expected financings and investments;

the adequacy of our financing resources and working capital;

the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments;

the timing of cash flows, if any, from the operations of our portfolio companies;

the timing, form and amount of any dividend distributions; and

our ability to maintain our qualification as a regulated investment company and as a business development company.

We use words such as “anticipate,” “believe,” “expect,” “intend,” “will,” “should,” “could,” “may,” “plan” and similar words to identify forward-looking statements. The forward looking statements contained in this annual report involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth as “Risk Factors” in this report.

We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.

Overview

The Partnership is a Delaware limited partnership formed on July 31, 2006 and is an externally managed, closed-end, non-diversified management investment company. On April 2, 2012, we elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Conversion”). The Partnership’s investment objective is to seek to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. The Partnership invests primarily in the debt of middle-market companies and small businesses, including senior secured loans, junior loans, mezzanine debt and bonds, either directly or in one of its wholly-owned subsidiaries, TCPC Funding I, LLC (“TCPC Funding”) and TCPC SBIC, LP (the “SBIC”). Such investments may include an equity component, and, to a lesser extent, the Partnership may make equity investments directly. TCP Capital Corp. (“TCPC”) owns 100% of the common limited partner interests of the Partnership. TCPC has also elected to be treated as a BDC under the 1940 Act. The General Partner of the Partnership is SVOF/MM, LLC (“SVOF/MM”), which also serves as the administrator (“Administrator”) of TCPC and the Partnership. The managing member of SVOF/MM is Tennenbaum Capital Partners, LLC (the “Advisor”), which serves as the investment manager to both TCPC and the Partnership. Most of the equity interests in the General Partner are owned directly or indirectly by the Advisor and its employees. The Partnership has elected to be treated as a partnership for U.S. federal income tax purposes.

The SBIC was organized as a Delaware limited partnership in June 2013. On April 22, 2014, the SBIC received a license from the United States Small Business Administration (the “SBA”) to operate as a small business investment company under the provisions of Section 301(c) of the Small Business Investment Act of 1958.

Our leverage program is comprised of $116 million in available debt under a senior secured revolving credit facility issued by the Partnership (the “Partnership Facility”), $200 million in available debt under a senior secured revolving credit facility issued by TCPC Funding (the “TCPC Funding Facility,” and, together with the Partnership Facility, the “Revolving Facilities”), $75 million in committed leverage from the SBA (the “SBA Program”), and $134 million of outstanding preferred limited partner interests in the Partnership (the “Preferred Interests,” and, together with the Revolving Facilities and the SBA Program, the “Leverage Program”).

Investments

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity, the general economic environment and the competitive environment for the types of investments we make.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities and indebtedness of private U.S. companies, public U.S. operating companies whose securities are not listed on a national securities exchange or registered under the Securities Exchange Act of 1934, as amended, public domestic operating companies having a market capitalization of less than $250 million, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We are also permitted to make certain follow-on investments in companies that were eligible portfolio companies at the time of initial investment but that no longer meet the definition. As of September 30, 2014, 88.3% of our total assets were invested in qualifying assets.

Revenues

We generate revenues primarily in the form of interest on the debt we hold. We also generate revenue from dividends on our equity interests and capital gains on the sale of warrants and other debt or equity interests that we acquire. Our investments in fixed income instruments generally have an expected maturity of three to five years, although we have no lower or upper constraint on maturity. Interest on our debt investments is generally payable quarterly or semi-annually. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments and preferred stock investments may defer payments of cash interest or dividends or PIK. Any outstanding principal amount of our debt investments and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of prepayment fees, commitment, origination, structuring or due diligence fees, fees for providing significant managerial assistance, consulting fees and other investment related income.

Expenses

Our primary operating expenses include the payment of a base management fee and, depending on our operating results, incentive compensation, expenses reimbursable under the management agreement, administration fees and the allocable portion of overhead under the administration agreement. The base management fee and incentive compensation remunerates the Advisor for work in identifying, evaluating, negotiating, closing and monitoring our investments. Our administration agreement with SVOF/MM, LLC (the “Administrator”) provides that the Administrator may be reimbursed for costs and expenses incurred by the Administrator for office space rental, office equipment and utilities allocable to us under the administration agreement, as well as any costs and expenses incurred by the Administrator or its affiliates relating to any non-investment advisory, administrative or operating services provided by the Administrator or its affiliates to us. We also bear all other costs and expenses of our operations and transactions, which may include those relating to:

our organization;

calculating our net asset value (including the cost and expenses of any independent valuation firms);

interest payable on debt, if any, incurred to finance our investments;

the base management fee and any incentive compensation;

dividends and distributions on our preferred shares, if any;

administration fees payable under the administration agreement;

fees payable to third parties relating to, or associated with, making investments;

transfer agent and custodial fees;

registration fees;

director fees and expenses;

costs of preparing and filing reports or other documents with the SEC;

costs of any reports, proxy statements or other notices to our common limited partner, including printing costs;

our fidelity bond;

directors and officers/errors and omissions liability insurance, and any other insurance premiums;

indemnification payments;

direct costs and expenses of administration, including audit and legal costs; and

all other expenses reasonably incurred by us and the Administrator in connection with administering our business, such as the allocable portion of overhead under the administration agreement, including rent and other allocable portions of the cost of certain of our officers and their respective staffs.

The investment management agreement provides that the base management fee be calculated at an annual rate of 1.5% of our total assets (excluding cash and cash equivalents) payable quarterly in arrears. For purposes of calculating the base management fee, “total assets” is determined without deduction for any borrowings or other liabilities. The base management fee is calculated based on the value of our total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter.

Additionally, the investment management agreement and the Amended and Restated Limited Partnership Agreement provide that the Advisor or its affiliates may be entitled to incentive compensation under certain circumstances. The incentive compensation equals the sum of (1) 20% of all of the ordinary income of TCPC since January 1, 2013 and (2) 20% of all net realized capital gains (net of any net unrealized capital depreciation) since January 1, 2013, with each component being subject to a total return requirement of 8% of TCPC’s contributed common equity annually. The incentive compensation is payable to the General Partner by the Partnership pursuant to the Amended and Restated Limited Partnership Agreement. The determination of incentive compensation is subject to limitations under the 1940 Act and the Advisers Act.

Critical accounting policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. Management considers the following critical accounting policies important to understanding the financial statements. In addition to the discussion below, our critical accounting policies are further described in the notes to our financial statements.

Valuation of portfolio investments

We value our portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by our board of directors. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (i) are independent of us, (ii) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary), (iii) are able to transact for the asset, and (iv) are willing to transact for the asset or liability (that is, they are motivated but not forced or otherwise compelled to do so).

Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. We generally obtain market quotations from recognized exchanges, market quotation systems, independent pricing services or one or more broker-dealers or market makers. However, short term debt investments with remaining maturities within 90 days are generally valued at amortized cost, which approximates fair value. Debt and equity securities for which market quotations are not readily available, which is the case for many of our investments, or for which market quotations are deemed not to represent fair value, are valued at fair value using a consistently applied valuation process in accordance with our documented valuation policy that has been reviewed and approved by our board of directors, who also approve in good faith the valuation of such securities as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may have differing impacts on the market quotations used to value some of our investments than on the fair values of our investments for which market quotations are not readily available. Market quotations may be deemed not to represent fair value in certain circumstances where we believe that facts and circumstances applicable to an issuer, a seller or purchaser, or the market for a particular security cause current market quotations to not reflect the fair value of the security. Examples of these events could include cases where a security trades infrequently causing a quoted purchase or sale price to become stale, where there is a “forced” sale by a distressed seller, where market quotations vary substantially among market makers, or where there is a wide bid-ask spread or significant increase in the bid-ask spread.

The valuation process adopted by our board of directors with respect to investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value is as follows:

The investment professionals of the Advisor provide recent portfolio company financial statements and other reporting materials to independent valuation firms approved by our board of directors.

Such firms evaluate this information along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented and discussed with senior management of the Advisor.

The fair value of smaller investments comprising in the aggregate less than 5% of our total capitalization may be determined by the Advisor in good faith in accordance with our valuation policy without the employment of an independent valuation firm.

The audit committee of the board of directors discusses the valuations, and the board of directors approves the fair value of the investments in our portfolio in good faith based on the input of the Advisor, the respective independent valuation firms (to the extent applicable) and the audit committee of the board of directors.

Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). 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 we may take into account in determining the fair value of our investments include, as relevant and among other factors: 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, merger and acquisition comparables, our principal market (as the reporting entity) and enterprise values.

When valuing all of our investments, we strive to maximize the use of observable inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances.

Our investments may be categorized based on the types of inputs used in their valuation. 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. Investments are classified by GAAP into the three broad levels as follows:

Level 1 — Investments valued using unadjusted quoted prices in active markets for identical assets.

Level 2 — Investments valued using other unadjusted observable market inputs, e.g. quoted prices in markets that are not active or quotes for comparable instruments.

Level 3 — Investments that are valued using quotes and other observable market data to the extent available, but which also take into consideration one or more unobservable inputs that are significant to the valuation taken as a whole.

As of September 30, 2014, 0.1% of our investments were categorized as Level 1, 22.8% were categorized as Level 2, 76.6% were Level 3 investments valued based on valuations by independent third party sources, and 0.5% were Level 3 investments valued based on valuations by the Advisor.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the financial statements.

Revenue recognition

Interest and dividend income, including income paid in kind, is recorded on an accrual basis to the extent that such amounts are determined to be collectible. Origination, structuring, closing, commitment and other upfront fees earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, are recognized as earned. Prepayment fees and similar income received upon the early repayment of a loan or debt security are included in interest income.

Certain of our 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 bonds, municipal bonds and treasury bonds be amortized using the effective-interest or constant-yield method. GAAP also requires that we consider the collectability of interest when making accruals. Accordingly, when accounting for purchase discounts, we recognize discount accretion income when it is probable that such amounts will be collected.

Net realized gains or losses and net change in unrealized appreciation or depreciation

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the specific identification method. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Portfolio and investment activity

During the three months ended September 30, 2014, we invested approximately $207.0 million, comprised of new investments in 10 new and 4 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 98.5% were in senior secured debt comprised of senior loans ($203.9 million, or 98.5% of the total). The remaining $3.0 million (1.5% of the total) were comprised of two equity investments and PIK payments received on investments in unsecured debt. Additionally, we received approximately $22.6 million in proceeds from sales or repayments of investments during the three months ended September 30, 2014.

During the nine months ended September 30, 2014, we invested approximately $486.0 million, comprised of new investments in 27 new and 12 existing portfolio companies, as well as draws made on existing commitments and PIK received on prior investments. Of these investments, 99.3% were in senior secured debt comprised of senior loans ($446.7 million, or 91.9% of the total) and senior secured notes ($36.0 million, or 7.4% of the total). The remaining $3.4 million (0.7% of the total) were comprised of four equity investments and PIK payments received on investments in unsecured debt. Additionally, we received approximately $178.0 million in proceeds from sales or repayments of investments during the nine months ended September 30, 2014.

At September 30, 2014, our investment portfolio of $1,074.8 million (at fair value) consisted of 82 portfolio companies and was invested 97% in debt investments, of which 100.0% was in senior secured debt. In aggregate, our investment portfolio was invested 83% in senior secured loans, 14% in senior secured notes, and 3% in equity investments. Our average portfolio company investment at fair value was approximately $13.1 million. Our largest portfolio company investment by value was approximately $31.0 million and our five largest portfolio company investments by value comprised approximately 13% of our portfolio at September 30, 2014. At December 31, 2013, our investment portfolio of $766.3 million (at fair value) consisted of 67 portfolio companies and was invested 95% in debt investments, of which 98% was in senior secured debt and 2% in unsecured or subordinated debt. In aggregate, our investment portfolio was invested 76% in senior secured loans, 17% in senior secured notes, 2% in unsecured or subordinated debt, and 5% in equity investments. Our average portfolio company investment at fair value was approximately $11.4 million. Our largest portfolio company investment by value was approximately $21.3 million and our five largest portfolio company investments by value comprised approximately 13% of our portfolio at December 31, 2013.

The industry composition of our portfolio at fair value at September 30, 2014 was as follows:

	Percent of Total
Industry	Investments
Software Publishers		11.7	%
Computer Systems Design and Related Services		8.7	%
Insurance Carriers		3.9	%
Oil and Gas Extraction		3.6	%
Scheduled Air Transportation		3.3	%
Grocery Stores		3.1	%
Wired Telecommunications Carriers		3.0	%
Newspaper, Periodical, Book, and Directory Publishers		2.7	%
Data Processing, Hosting, and Related Services		2.7	%
Wireless Telecommunications		2.4	%
Nondepository Credit Intermediation		2.4	%
Radio and Television Broadcasting		2.4	%
Utility System Construction		2.3	%
Basic Chemical Manufacturing		2.3	%
Nonscheduled Air Transportation		2.1	%
Semiconductor and Other Electronic Component Manufacturing		2.0	%
General Medical and Surgical Hospitals		2.0	%
Chemical Manufacturing		1.9	%
Other Information Services		1.8	%
Communications Equipment Manufacturing		1.8	%
Scientific Research and Development Services		1.7	%
Gaming Industries		1.7	%
Retail		1.7	%
Business Support Services		1.6	%
Activities Related to Real Estate		1.5	%
Electrical Equipment and Component Manufacturing		1.5	%
Advertising, Public Relations, and Related Services		1.5	%
Textile Furnishings Mills		1.5	%
Lessors of Nonfinancial Intangible Assets		1.5	%
Structured Note Funds		1.5	%
Motion Picture and Video Industries		1.4	%
Full-Service Restaurants		1.4	%
Cut and Sew Apparel Manufacturing		1.4	%
Other Telecommunications		1.3	%
Lessors of Real Estate		1.3	%
Plastics Products Manufacturing		1.3	%
Electric Power Generation, Transmission and Distribution		1.2	%
Artificial Synthetic Fibers and Filaments Manufacturing		1.1	%
Financial Investment Activities		1.0	%
Other		7.3	%
Total		100.0	%

The weighted average effective yield of the debt securities in our portfolio was 10.7% at September 30, 2014 and 10.9% at December 31, 2013. At September 30, 2014, 79.7% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate, and 20.3% bore interest at fixed rates. The percentage of our floating rate debt investments that bore interest based on an interest rate floor was 86.2% at September 30, 2014. At December 31, 2013, 71.2% of our debt investments bore interest based on floating rates, and 28.8% bore interest at fixed rates. The percentage of our floating rate debt investments that bore interest based on an interest rate floor was 92.1% at December 31, 2013.

Results of operations

Investment income

Investment income totaled $27.2 million and $17.3 million, respectively, for the three months ended September 30, 2014 and 2013, of which $26.6 million and $16.5 million were attributable to interest and fees on our debt investments and $0.6 million and $0.8 million to other income, respectively. The increase in investment income in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 reflects an increase in interest income due to the larger investment portfolio and a higher percentage of the portfolio in income-producing assets in the three months ended September 30, 2014 compared to the three months ended September 30, 2013.

Investment income totaled $74.5 million and $48.6 million, respectively, for the nine months ended September 30, 2014 and 2013, of which $70.3 million and $46.7 million were attributable to interest and fees on our debt investments, $2.0 million and $0.0 million to dividends from equity securities, and $2.2 million and $1.9 million to other income, respectively. The increase in investment income in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 reflects an increase in interest income due to the larger investment portfolio and a higher percentage of the portfolio in income-producing assets in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 and an increase in dividend income and other income.

Expenses

Total operating expenses for the three months ended September 30, 2014 and 2013 were $6.1 million and $3.5 million, respectively, comprised of $3.5 million and $2.2 million in base management fees, $0.2 million and $0.2 million in legal and professional fees, $1.3 million and $0.4 million in interest expense and fees related to the Revolving Facilities, $0.4 million and $0.2 million in amortization of debt issuance costs, and $0.7 million and $0.5 million in other expenses, respectively. The increase in expenses in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 primarily reflects the increase in management fees due to the larger portfolio and the increase in interest expense and other costs related to the increase in available and outstanding debt.

Total operating expenses for the nine months ended September 30, 2014 and 2013 were $16.0 million and $8.8 million, respectively, comprised of $9.5 million and $6.1 million in base management fees, $0.5 million and $0.2 million in legal and professional fees, $2.9 million and $0.8 million in interest expense and fees related to the Revolving Facilities, $1.2 million and $0.5 million in amortization of debt issuance costs, and $1.9 million and $1.2 million in other expenses, respectively. The increase in expenses in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily reflects the increase in management fees due to the larger portfolio and the increase in interest expense and other costs related to the increase in available and outstanding debt.

Net investment income

Net investment income was $21.1 million and $13.8 million, respectively, for the three months ended September 30, 2014 and 2013. The increase in in net investment income in the three months ended September 30, 2014 compared to the three months ended September 30, 2013 primarily reflects the increased interest income in the three months ended September 30, 2014, partially offset by the increase in expenses.

Net investment income was $54.5 million and $39.8 million, respectively, for the nine months ended September 30, 2014 and 2013. The increase in in net investment income in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily reflects the increased interest and dividend income in the nine months ended September 30, 2014, partially offset by the increase in expenses.

Net realized and unrealized gain or loss

Net realized gains for the three months ended September 30, 2014 and 2013 were $0.9 million and $0.8 million, respectively. For the three months ended September 30, 2014 and 2013, the change in net unrealized depreciation was $(5.4) million and $2.1 million, respectively. The change in net unrealized depreciation for the three months ended September 30, 2014 was primarily a result of increases in market yield spreads and a mark down on an investment made prior to our initial public offering. The change in net unrealized depreciation for the three months ended September 30, 2013 was primarily due to the reversal of unrealized depreciation on a taxable recapitalization of a portfolio investment.

Net realized gains (losses) for the nine months ended September 30, 2014 and 2013 were $(4.9) million and $(2.8) million, respectively. The net realized loss during the nine months ended September 30, 2014 was due primarily to the disposition of our investment in ESP Holdings, Inc., an investment made prior to our initial public offering as part of our legacy distressed strategy and which has generated substantial cash interest income. For the nine months ended September 30, 2014 and 2013, the change in net unrealized appreciation was $2.6 million and $8.7 million, respectively. The change in net unrealized depreciation for the nine months ended September 30, 2014 and September 30, 2013 were primarily due to reversals of prior period unrealized depreciation partially offset by mark to market adjustments during the period.

Dividends to preferred limited partners

Dividends on the Preferred Interests for the three months ended September 30, 2014 and 2013 were $0.4 million and $0.4 million, respectively, as average LIBOR rates for the two periods were similar. Dividends on the Preferred Interests for the nine months ended September 30, 2014 and 2013 were $1.1 million and $1.1 million, respectively, as average LIBOR rates for the two periods were similar.

Net increase or decrease in net assets allocable to common limited and general partners resulting from operations

The net increase in net assets resulting from operations was $16.3 million and $16.4 million for the three months ended September 30, 2014 and 2013, respectively. The higher net increase in net assets resulting from operations during the three months ended September 30, 2014 is primarily due to the increase in net investment income, partially offset by the net realized and unrealized loss during the three months ended September 30, 2014 compared to the net realized and unrealized gain during the three months ended September 30, 2013. The net increase in net assets resulting from operations was $55.1 million and $44.7 million for the nine months ended September 30, 2014 and 2013, respectively. The higher net increase in net assets resulting from operations during the nine months ended September 30, 2014 is primarily due to the increase in net investment income.

Liquidity and capital resources

Since our inception, our liquidity and capital resources have been generated primarily through contributions from the common limited partner of the Partnership (which came from the initial private placement of common shares of Special Value Continuation Fund, LLC (TCPC’s predecessor entity) which were subsequently converted to common stock of TCPC), the net proceeds from the initial and secondary public offerings of TCPC, borrowings under on our Leverage Program, and cash flows from operations, including investments sales and repayments and income earned from investments and cash equivalents. The primary uses of cash have been investments in portfolio companies, cash distributions to our equity holders, payments to service our Leverage Program and other general corporate purposes.

Amounts outstanding and available under the combined Leverage Program at September 30, 2014 were as follows:

	Rate	Carrying Value		Available		Total Capacity
Partnership Facility	L+250^*	$	45,000,000	$	71,000,000	$	116,000,000
TCPC Funding Facility	L+250^*		150,000,000		50,000,000		200,000,000
SBA Program	3.015%		18,500,000		56,500,000		75,000,000
Preferred Interests	L+85^*		134,000,000		-		134,000,000
Total Leverage Program		$	347,500,000	$	177,500,000	$	525,000,000

^* Based on either LIBOR or the lender’s cost of funds, subject to certain limitations.

Net cash used in operating activities during the nine months ended September 30, 2014 was $266.3 million. Our primary use of cash in operating activities during this period consisted of the settlement of acquisitions of investments (net of dispositions) of $303.7 million, partially offset by net investment income less preferred dividends and incentive allocation (net of non-cash income and expenses) of approximately $37.4 million.

Net cash provided by financing activities was $267.4 million during the nine months ended September 30, 2014, consisting primarily of $208.6 million in contributions from TCPC resulting from its offering of convertible notes on June 11, 2014 and its follow on offerings , and $118.5 million of net borrowings, reduced by $45.7 million of distributions to TCPC, $10.4 million in distributions of incentive compensation to the General Partner, payment of $2.5 million in debt issuance costs, and $1.1 million in dividends on the Preferred Interests.

At September 30, 2014, we had $24.1 million in cash and cash equivalents.

The Revolving Facilities are secured by substantially all of the assets in our portfolio, including cash and cash equivalents, and are subject to compliance with customary affirmative and negative covenants, including the maintenance of a minimum shareholders’ equity, the maintenance of a ratio of not less than 200% of total assets (less total liabilities other than indebtedness) to the sum of total preferred equity and indebtedness, and restrictions on certain payments and issuance of debt. Unfavorable economic conditions may result in a decrease in the value of our investments, which would affect both the asset coverage ratios and the value of the collateral securing the Revolving Facilities, and may therefore impact our ability to borrow under the Revolving Facilities. In addition to regulatory restrictions that restrict our ability to raise capital, the Leverage Program contains various covenants which, if not complied with, could accelerate repayment of debt or require redemption of the Preferred Interests, thereby materially and adversely affecting our liquidity, financial condition and results of operations. At September 30, 2014, we were in compliance with all financial and operational covenants required by the Leverage Program.

Unfavorable economic conditions, while potentially creating attractive opportunities for us, may decrease liquidity and raise the cost of capital generally, which could limit our ability to renew, extend or replace the Leverage Program on terms as favorable as are currently included therein. If we are unable to renew, extend or replace the Leverage Program upon the various dates of maturity, we expect to have sufficient funds to repay the outstanding balances in full from our net investment income and sales of, and repayments of principal from, our portfolio company investments, as well as from anticipated debt and equity capital raises, among other sources. Unfavorable economic conditions may limit our ability to raise capital or the ability of the companies in which we invest to repay our loans or engage in a liquidity event, such as a sale, recapitalization or initial public offering. The Partnership Facility and the TCPC Funding facility mature in July 2016 and May 2017, respectively, and the Preferred Interests will be subject to mandatory redemption in July 2016. Any inability to renew, extend or replace the Leverage Program could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.

Contractual obligations

In addition to obligations under our Leverage Program, we have entered into several contracts under which we have future commitments. Pursuant to an investment management agreement, the Advisor manages our day-to-day operations and provides investment advisory services to us. Payments under the investment management agreement will be equal to a percentage of the value of our gross assets (excluding cash and cash equivalents) and an incentive compensation, plus reimbursement of certain expenses incurred by the Advisor. Under our administration agreement, the Administrator provides us with administrative services, facilities and personnel. Payments under the administration agreement are equal to an allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations to us, and may include rent and our allocable portion of the cost of certain of our officers and their respective staffs. We are responsible for reimbursing the Advisor for due diligence and negotiation expenses, fees and expenses of custodians, administrators, transfer and distribution agents, counsel and directors, insurance, filings and registrations, proxy expenses, expenses of communications to investors, compliance expenses, interest, taxes, portfolio transaction expenses, costs of responding to regulatory inquiries and reporting to regulatory authorities, costs and expenses of preparing and maintaining our books and records, indemnification, litigation and other extraordinary expenses and such other expenses as are approved by the directors as being reasonably related to our organization, offering, capitalization, operation or administration and any portfolio investments, as applicable. The Advisor is not responsible for any of the foregoing expenses and such services are not investment advisory services under the 1940 Act. Either party may terminate each of the investment management agreement and administration agreement without penalty upon not less than 60 days’ written notice to the other.

Distributions

Distribution to the common limited partner

Our quarterly distributions to our common limited partner are recorded on the ex-dividend date. Distributions are declared considering our estimate of annual taxable income available for distribution and the amount of taxable income carried over from the prior year for distribution in the current year. We do not have a policy to pay distributions at a specific level and expect to continue to distribute substantially all of our taxable income. We cannot assure the common limited partner that it will receive any distributions or distributions at a particular level.

The following table summarizes our distributions to our common limited partner for the nine months ended September 30, 2014 and September 30, 2013:

Date Declared	Total Amount
March 6, 2014	$	13,785,196
May 7, 2014		15,222,656
August 7, 2014		16,649,620
Total for nine months ended September 30, 2014	$	45,657,472

March 7, 2013	$	9,823,476
May 8, 2013		9,988,390
August 8, 2013		10,105,922
Total for nine months ended September 30, 2013	$	29,917,788

Distributions to the General Partner

TCPC’s performance during the nine months ended September 30, 2014 exceeded the total return threshold; accordingly, incentive compensation of $10.9 million and $7.9 million for the nine months ended September 30, 2014 and September 30, 2013 respectively was distributable to the General Partner. We also allocated a reserve amount of $0.5 million and $0.9 million to the account of the General Partner at September 30, 2014 and September 30, 2013 respectively based on the amount of the additional incentive compensation which would have been distributable to the General Partner had TCPC and the Partnership liquidated at net asset value at September 30, 2014 and September 30, 2013 respectively.

Related Parties

We have entered into a number of business relationships with affiliated or related parties, including the following:

	•	Each of the Partnership, TCPC, TCPC Funding and the SBIC has entered into an investment management agreement with the Advisor.

	•	The Administrator provides us with administrative services necessary to conduct our day-to-day operations. For providing these services, facilities and personnel, the Administrator may be reimbursed by us for expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our officers and the Administrator’s administrative staff and providing, at our request and on our behalf, significant managerial assistance to our portfolio companies to which we are required to provide such assistance.

	•	Pursuant to its limited partnership agreement, the general partner of the Partnership is SVOF/MM, LLC. SVOF/MM, LLC is an affiliate of the Advisor and the general partner or managing member of certain other funds managed by the Advisor.

The Advisor and its affiliates, employees and associates currently do and in the future may manage other funds and accounts. The Advisor and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds or accounts. Accordingly, conflicts may arise regarding the allocation of investments or opportunities among us and those accounts. In general, the Advisor will allocate investment opportunities pro rata among us and the other funds and accounts (assuming the investment satisfies the objectives of each) based on the amount of committed capital each then has available. The allocation of certain investment opportunities in private placements is subject to independent director approval pursuant to the terms of the co-investment exemptive order applicable to us. In certain cases, investment opportunities may be made other than on a pro rata basis. For example, we may desire to retain an asset at the same time that one or more other funds or accounts desire to sell it or we may not have additional capital to invest at a time the other funds or accounts do. If the Advisor is unable to manage our investments effectively, we may be unable to achieve our investment objective. In addition, the Advisor may face conflicts in allocating investment opportunities between us and certain other entities that could impact our investment returns. While our ability to enter into transactions with our affiliates is restricted under the 1940 Act, we have received an exemptive order from the SEC permitting certain affiliated investments subject to certain conditions. As a result, we may face conflict of interests and investments made pursuant to the exemptive order conditions which could in certain circumstances affect adversely the price paid or received by us or the availability or size of the position purchased or sold by us.

Recent Developments

From October 1, 2014 through November 5, 2014, the Operating Company has invested approximately $68.8 million in three senior secured loans with a combined effective yield of approximately 10.4%.

On November 5, 2014, the aggregate principal commitment on the TCPC Funding Facility increased to $250 million and the facility’s accordion feature expanded to $300 million.

On November 6, 2014, TCPC’s board of directors declared a fourth quarter regular dividend of $0.36 per share and a special dividend of $0.05 per share. Both dividends are payable on December 31, 2014 to stockholders of record as of the close of business on December 8, 2014.

Item 3: Quantitative and qualitative disclosure about market risk

We are subject to financial market risks, including changes in interest rates. At September 30, 2014, 79.7% of our debt investments bore interest based on floating rates, such as LIBOR, EURIBOR, the Federal Funds Rate or the Prime Rate. The interest rates on such investments generally reset by reference to the current market index after one to six months. At September 30, 2014, the percentage of our floating rate debt investments that bore interest based on an interest rate floor was 86.2%. Floating rate investments subject to a floor generally reset by reference to the current market index after one to six months only if the index exceeds the floor.

Interest rate sensitivity refers to the change in earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. We assess our portfolio companies periodically to determine whether such companies will be able to continue making interest payments in the event that interest rates increase. There can be no assurances that the portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.

Based on our September 30, 2014 balance sheet, the following table shows the annual impact on net income (excluding the related incentive compensation impact) of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:

Basis Point Change	Interest income			Interest Expense			Net Income
Up 300 basis points	$	20,189,336		$	(10,425,000	)	$	9,764,336
Up 200 basis points		11,474,475			(6,950,000	)		4,524,475
Up 100 basis points		3,065,566			(3,475,000	)		(409,434	)
Down 100 basis points		(330,249	)		813,150			482,901
Down 200 basis points		(330,249	)		813,150			482,901
Down 300 basis points		(330,249	)		813,150			482,901

Item 4.

Controls and Procedures

As of the period covered by this report, we, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based on our evaluation, our management, including the chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective in timely alerting management, including the chief executive officer and chief financial officer, of material information about us required to be included in our periodic SEC filings. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, are based upon certain assumptions about the likelihood of future events and can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. There has not been any change in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II – Other Information

Item 1.

Legal Proceedings

Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, as of September 30, 2014, we are currently not a party to any pending material legal proceedings.

Item 1A.

Risk Factors

Except as set forth below, there have been no material changes from the risk factors previously disclosed in our most recent annual report on Form 10-K, as filed with the Securities and Exchange Commission on March 6, 2014.

The SBIC may be unable to make distributions to us that will enable us to meet or maintain RIC status, which could result in the imposition of an entity-level tax.

In order for us to continue to qualify for RIC tax treatment and to minimize corporate-level taxes, we will be required to distribute substantially all of our net ordinary income and net capital gain income, including income from certain of our subsidiaries, which includes the income from the SBIC. We will be partially dependent on the SBIC for cash distributions to enable us to meet the RIC distribution requirements. The SBIC may be limited by the Small Business Investment Act of 1958, and SBA regulations governing SBICs, from making certain distributions to us that may be necessary to enable us to maintain our status as a RIC. We may have to request a waiver of the SBA's restrictions for the SBIC to make certain distributions to maintain our eligibility for RIC status. We cannot assure you that the SBA will grant such a waiver and if the SBIC is unable to obtain a waiver, compliance with the SBA regulations may result in loss of RIC tax treatment and a consequent imposition of an entity-level tax on us.

The SBIC is subject to SBA regulations, and any failure to comply with SBA regulations could have an adverse effect on our operations.

On April 22, 2014, the Operating Company's wholly-owned subsidiary, the SBIC received an SBIC license from the SBA. The SBIC license allows the SBIC to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and other customary procedures. SBA-guaranteed debentures are non-recourse, interest only debentures with interest payable semi-annually and have a ten year maturity. The principal amount of SBA-guaranteed debentures is not required to be paid prior to maturity but may be prepaid at any time without penalty. The interest rate of SBA-guaranteed debentures is fixed on a semi-annual basis at a market-driven spread over U.S. Treasury Notes with 10-year maturities. The SBA, as a creditor, will have a superior claim to the SBIC's assets over our stockholders in the event we liquidate the SBIC or the SBA exercises its remedies under the SBA-guaranteed debentures issued by the SBIC upon an event of default.

Under current SBA regulations, a licensed SBIC can provide capital to those entities that have a tangible net worth not exceeding $18.0 million and an average annual net income after Federal income taxes not exceeding $6.0 million for the two most recent fiscal years. In addition, a licensed SBIC must devote 25.0% of its investment activity to those entities that have a tangible net worth not exceeding $6.0 million and an average annual net income after Federal income taxes not exceeding $2.0 million for the two most recent fiscal years. The SBA regulations also provide alternative size standard criteria to determine eligibility, which depend on the industry in which the business is engaged and are based on factors such as the number of employees and gross sales. The SBA regulations permit licensed SBICs to make long term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services. The SBA also places certain limitations on the financing terms of investments by SBICs in portfolio companies and prohibits SBICs from providing funds for certain purposes or to businesses in a few prohibited industries. Compliance with SBA requirements may cause the SBIC to forego attractive investment opportunities that are not permitted under SBA regulations.

Further, the SBA regulations require that a licensed SBIC be periodically examined and audited by the SBA to determine its compliance with the relevant SBA regulations. The SBA prohibits, without prior SBA approval, a "change of control" of an SBIC or any transfers of the capital stock of a licensed SBIC. If the SBIC fails to comply with applicable SBA regulations, the SBA could, depending on the severity of the violation, limit or prohibit its use of debentures, declare outstanding debentures immediately due and payable, and/or limit it from making new investments. In addition, the SBA can revoke or suspend a license for willful or repeated violation of, or willful or repeated failure to observe, any provision of the Small Business Investment Act of 1958 or any rule or regulation promulgated thereunder. The Advisor, as the SBIC's investment adviser, does not have any prior experience managing an SBIC. Its lack of experience in complying with SBA regulations may hinder its ability to take advantage of the SBIC's access to SBA-guaranteed debentures. Any failure to comply with SBA regulations could have an adverse effect on our operations.

SBA regulations limit the outstanding dollar amount of SBA-guaranteed debentures that may be issued by an SBIC or group of SBICs under common control.

The SBA regulations currently limit the dollar amount of SBA-guaranteed debentures that can be issued by any one SBIC to $150.0 million or to a group of SBICs under common control to $225.0 million. A proposed bill in the U.S. Senate, the Expanding Access to Capital for Entrepreneurial Act, or Senate Bill 511, would increase the total SBIC leverage capacity for affiliated SBIC funds from $225 million to $350 million. However, the ultimate form and likely outcome of such legislation or any similar legislation cannot be predicted.

An SBIC may not borrow an amount in excess of two times (and in certain cases, up to three times) its regulatory capital. As of September 30, 2014, the SBIC had $18.5 million in SBA-guaranteed debentures outstanding. If we reach the maximum dollar amount of SBA-guaranteed debentures permitted, and if we require additional capital, our cost of capital may increase, and there is no assurance that we will be able to obtain additional financing on acceptable terms.

Moreover, the current status of the SBIC as an SBIC does not automatically assure that the SBIC will continue to receive SBA-guaranteed debenture funding. Receipt of SBA leverage funding is dependent upon the SBIC continuing to be in compliance with SBA regulations and policies and available SBA funding. The amount of SBA leverage funding available to SBICs is dependent upon annual Congressional authorizations and in the future may be subject to annual Congressional appropriations. There can be no assurance that there will be sufficient debenture funding available at the times desired by the SBIC.

The debentures guaranteed by the SBA have a maturity of ten years and require semi-annual payments of interest. The SBIC will need to generate sufficient cash flow to make required interest payments on the debentures. If the SBIC is unable to meet its financial obligations under the debentures, the SBA, as a creditor, will have a superior claim to the SBIC's assets over our stockholders in the event we liquidate the SBIC or the SBA exercises its remedies under such debentures as the result of a default by us.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4:

Mine Safety Disclosures.

None.

Item 5:

Other Information.

None.

Item 6:

Exhibits

Number		Description
3.1		Articles of Incorporation of the Registrant ⁽¹⁾
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 *
31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 *
32.1		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

*	Filed herewith.
⁽¹⁾	Incorporated by reference to Exhibit (k)(6) to TCP Capital Corp.’s (formerly Special Value Continuation Fund, LLC) Registration Statement under the Securities Act of 1933, as amended, on Form N-2 (File No. 333-172669), filed on May 13, 2011.
⁽²⁾	Incorporated by reference to Exhibit (k)(7) to TCP Capital Corp.’s Registration Statement under the Securities Act of 1933, as amended, on Form N-2 (File No. 333-172669), filed on May 13, 2011.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

SPECIAL VALUE CONTINUATION PARTNERS, LP

Date: November 6, 2014
	By:	/s/ Howard M. Levkowitz
	Name:	Howard M. Levkowitz
	Title:	Chief Executive Officer

Date: November 6, 2014
	By:	/s/ Paul L. Davis
	Name:	Paul L. Davis
	Title:	Chief Financial Officer

Special Value Continuation Partners, LP - FORM 10-Q - November 6, 2014

Attached files

Special Value Continuation Partners, LP Reports