Jacobs &Schwartz EXHIBIT C. Board of Directors CLINTON HILL APTS. OWNERS CORP. Independent Auditor's Report

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1 EXHIBIT C Jacobs &Schwartz 100 Jericho Quadrangle, Jericho, N.Y (516) fax (516) Board of Directors Independent Auditor's Report We have audited the accompanying balance sheet of as of March 31,2007 and the comparative condensed balance sheets as of March 31,2007 and 2006, and the related statements of operations and cash flows for the years then ended. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Audits include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Audits also include assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of as of March 31,2007 and 2006, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The supporting data included in the report (shown on pages 2a, 2b, 4, 5, 7, 8 and 8a) are presented for the purposes ofadditional analysis and are not a required part ofthe financial statements of Such information, except for the portion marked "unaudited", on which we express no opinion, has been subjected to our auditing procedures applied in the audits of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole. As discussed in Note 5, the Corporation has not estimated the remaining lives and replacement costs of the common property and, therefore, has not presented the estimates of future costs of major repairs and replacements that the American Institute of Certified Public Accountants has determined are required to supplement. although not required to be a part of, the basic financial statements. COBS & SCHWARTZ ertified Public Accountants May 31,2007

2 Jacobs & Schwartz 100 Jericho Quadrangle. Jericho, NY (516) fax (516) Board of Directors Independent Auditor's Report We have audited the accompanying balance sheet of as of March 31,2007 and the comparative condensed balance sheets as of March 31,2007 and and the related statements of operations and cash flows for the years then ended. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Audits include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Audits also include assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of as of March 31 J 2007 and 2006, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The supporting data included in the report (shown on pages 2a, 2b, 4, 5, 7, 8 and 8a) are presented for the purposes of additional analysis and are not a required part of the financial statements of Such information, except for the portion marked "unaudited", on which we express no opinion, has been subjected to our auditing procedures applied in the audits of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole. As discussed in Note 5, the Corporation has not estimated the remaining lives and replacement costs of the common property and, therefore, has not presented the estimates of future costs of major repairs and replacements that the American Institute of Certified Public Accountants has determined are required to supplement, although not required to be a part of, the basic financial statements. COBS & SCHWARTZ ertified Public Accountants May 31,2007

3 CURRENT ASSETS cash and cash equivalents: HSBC Bank operating account Salomon smith Barney money fund JP Morgan Funds MLPF&S union benefits escrow MLPF&S - scrie escrow MLPF&S - water meter escrow petty cash fund Tenants' accounts receivable Less:Allowance for doubtful accounts Mortgage escrow account Laundry income receivable Electric income receivable Lease security deposits prepaid expenses: Fuel inventory unexpired insurance Prepaid real estate tax prepaid water and sewer rent BALANCE SHEET March 31, 2007 ASSETS S 447, , , , , ,416 2, ,431 (88,146) 47, , ,938 19,120 S 1,564, , ,847 13, ,100 61, ,118 TOTAL CURRENT ASSETS 2,936,307 FUNDS Replacement Reserve Reserve for Improvements FIXED ASSETS Land Building Building improvements Building equipment TOTAL FIXED ASSETS cost S 1,909,993 22,964,238 20,545, ,685 S 45,808,488 Accumulated Depreciation (22,964,238) (6,122,218) (107(390) (29,193,846) Book value 1,909,993 14,423, , ,325 1,603,737 16,614,642 OTHER ASSETS unamortized mortgage financing costs Security deposit 430,420 4, ,420 TOTAL ASSETS $ 21,855,431 See accompanying notes to financial statements. page 1 Jacobs & Schwartz ~~_r_t}!i_~~ r?~_t?i_i~_ accountants

4 BALANCE SHEET March 31, 2007 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued expenses contracts pavable stockholders' abatement pavable Accrued interest payable prepaid maintenance charges security deposits payable Amortization due Within one year $ 724, , , ,200 13,862 20, ,600 TOTAL CURRENT LIABILITIES $ 1,915,912 LONG-TERM LIABILITIES Mortgage pavable.. GMAC Less: Amortization due within one year TOTAL LONG-TERM LIABILITIES 15,225,651 15,225, ,600 14,943,051 TOTAL LIABILITIES 16,858,963 5 Toe K H 0 L D E R S' E QUI T Y capital stock.. Common 134,562 shares auth,orized and $ 1.00 par value paid-in capital re:excess of par value capital contribution re: mortgage amortization and capital improvements Accumulated deficit- beginning Net income or <loss) for period Portion appropriated for reduction of mortgage and/or capital improvements Accumulated deficit.. end LeSS:Treasury stock-4,044 cost $(25,116,160) 313,773 (258,354) 134,562 21,905,465 8,194,295 (25,060,741) 5,173,581 (177,113) TOTAL STOCKHOLDERS' EQUITY 4,996,468 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY S 21,855,431 see accompanying notes to financial statements. Page 1 a Jacobs &Schwartz

5 .. COMPARATIVE CONDENSED BALANCE SHEET March 31, 2007 and March 31, /31/07 03/31/06 ASSETS Current Assets casn and cash equivalents S 1,564,748 Tenants' accounts receivable 288,285 other receivables 205,310 Mortgage escrow fund 153,847 prepaid expenses 724,118 TOTAL CURRENT ASSETS 2,936,307 Funds 1,870,062 Fixed assets - net of depreciation 16,614,642 other assets 434,420 TOTAL ASSETS $ 21,855,431 S 1,188, , ,640 87, ,500 2,541,680 1,932,999 14,746, ,020 $19,677,297 LIABILITIES current Liabilities Accounts payable and accrued expenses $ 1,633,312 other current liabilities 282,600 TOTAL CURRENT LIABILITIES 1,915,912 Long-Term Liabilities 14,943,051 TOTAL LIABILITIES 16,858,963 S 1,273, ,400 1,531,896 15,225,605 16,757,501 STOCKHOLDERS' EQUITY capital stock 134,562 paid-in capital 21,905,465 capital contribution 8,194,296 Treasu ry stock (177,113) Accumulated deficit (25,060,741) TOTAL STOCKHOLDERS' EQUITY 4,996,468 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 21,855, ,562 20,571,113 7,935,942 (605,660) (25,116,161) 2,919,796 $19,677,297 See accompanying notes to financial statenlents. Page 2 Jacobs &Schwartz

6 CLINTON HILL APTS~ OWNERS CORP. March 31, 2007 REPLACEMENT RESERVE FUND Opening balance $ 132,759 Current requirement Contributions held by GMAC Interest income 132,000 1,566 Less: 266,325 REQUIRED BALANCE S 266,325 consisting of:,replacement reserve fund REQUIRED BALANCE S 266,325 S 266,325 See accompanying notes to financial statements. Page 2 a Jacobs &Schwar ~

7 March 31,2007 RESERVE FOR IMPROVEMENTS opening balance Add: Interest on invested funds Transfer from improvement account Transfer from storage income Transfer from flip fees Less: BALANCE Net transfers for building improvements 57, ,220 49, ,649 1,808,780 S 1,800,241 1,612,276 3,412,517 1,808,780 $ 1,603,737 consisting of: BALANCE citibank local law 10 account MLPF&S - improvement account MLPF&S - storage account MLPF&S - flip tax account 31, , ,241 1,038,928 $ 1,603,737 See accompanying notes to financial statements. page 2b Jacobs & Schwartz certified public ac_cquntonts

8 COMPARATIVE STATEMENT OF OPERATIONS For the Twelve Months Ended March 31, 2007 and March 31, /31/07 03/31/06 INCOME RENTAL INCOME Maintenance charges $ 9,175,922 $ 8,757,561 Less: real estate tax abatements (257,995) (238,901) special heating assessment 130, ,365 Rental apartment income 237, ,130 Commercial rent 297, ,671 Garage rent 70,434 70,352 Electric submeter income 918,784 1,067,878 TOTAL RENTAL INCOME 10,572,059 10,437,056 OTHER INCOME Interest income 135, ,928 Laundry 73,548 80,159 storage 49,753 38,478 Late charges 35,665 29,813 sublet fees 43,211 40,493 Transfer fees 752, ,148 Miscellaneous income 1,000 TOTAL OTHER INCOME 1,090,083 1,196,019 TOTAL INCOME 11,662,142 11,633,075 COST OF OPERATIONS Administrative exp~nses 501, ,650 operating expenses 5,717,272 5,793,905 Maintenance expenses 1,074, ,822 Taxes and insurance 1,986,988 1,999,498 Financial expenses 1,381,076 1,403,433 TOTAL COST OF OPERATIONS 10,661,869 10,630,308 Income Before Non Cash Expenses 1,000,273 1,002,767 NON CASH EXPENSES Depreciation and amortization 686, ,665 NET INCOME OR (LOSS) $ 313,773 S 406,102 See accompanying notes to financial statements. page 3 Jacobs &Schwartz

9 For the Twelve Months Ended March 31, 2007 and March 31, /31/07 03/31/06 SCHEDULE OF ADMINISTRATIVE EXPENSE Management fee Legal Accounting Office and administrative S 378,555 21,880 27,500 73,941 $ 361,210 42,472 25, ,868 TOTAL ADMINISTRATIVE EXPENSES S 501,876 S 529,650 SCHEDULE OF OPERATINC EXPENSES Fuel and gas heating Electricity Gas payroll Union welfare and pension water and sewer rent water and sewer rent prior period security services S 1,123, , ,645 1,672, , ,022 58, ,307 $ 1,453,615 1,262, ,445 1,668, , , ,511 TOTAL OPERATINC EXPENSES S 5,717,272 S 5,793,905 SCHEDULE OF MAINTENANCE EXPENSES Exterminating Uniforms Maintenance supplies Repairs and maintenance Elevator maintenance Plumbing repairs Boller repairs ConSUltant fees paintlng,plastering & flooring repair Landscaping Tenant charges $ 15,361 19, , , ,161 45, ,245 35,638 86,938 41,532 (20,849) $ 15,352 19, , , ,521 43, ,283 58,421 88,148 32,875 (24,262) TOTAL MAINTENANCE EXPENSES $ 1,074,657 $ 903,822 See accompanying notes to financial statements. Page 4 Jacobs &Schwartz

10 SCHEDULE OF TAXES AND INSURANCE,. For the Twelve Months Ended March 31, 2007 and March 31, /31/07 03/31/06 New York City real estate tax $ 1,627,168 S 1,638,447 Less: real estate tax abatements (257,995) ) NYC tunnel charge 8,242 7,977 NYS and NYC corporation taxes 21,241 19,280 payroll taxes 131, ,300 Insurance 456, ,395 TOTAL TAXES AND INSURANCE S 1,986,988 S 1,999,498 SCHEDULE OF FINANCIAL EXPENSES Interest on mortgage $ 1,381,076 $ 1,403,433 TOTAL FINANCIAL EXPENSES $ 1,381,076 S 1,403,433 SCHEDULE OF DEPRECIATION AND AMORTIZATION Depreciation expense-bldg. improvements S 617,878 S 550,985 Depreciation expense-bldg. equipment 47,022 24,080 AmortizatIon of mortgage financing cost 21,600 21,600 TOTAL DEPRECIATION & AMORTIZATION S 686,500 S 596,665 see accompanying notes to financial statements. page 5 Jacobs & Schwartz

11 COMPARATIVE STATEMENT OF CASH FLOWS For the Twelve Months Ended March 31,2007 and March 31, /31/07 03/31/06 CASH FLOWS FROM OPERATINC ACTIVITIES Net income or <loss) S 313,773 $ 406,102 Noncash items Included in net income: Depreciation and amortization 686, ,665 Changes in: Tenants' accounts receivable other receivables Mortgage escrow account prepaid expenses Accounts payable and accrued expenses Total adjustments 71,466 (61,670) (66,283) 38, ,816 1,028,211 (172,973) (59,734) 48,360 (122,342) 263, ,394 NET CASH PROVIDED BY (USED BY) OPERATINO ACTIVITIES 1,341, ,496 CASH FLOWS FROM INVESTINC ACTIVITIES capital improvements Acquisition-treasury stock <apartments) Net proceeds from sale of apartments (2,532,944) 1,762,900 (1,967,018) (623,547) 761,854 NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES (770,044) (1,828,711) CASH FLOWS FROM FINANCING ACTIVITIES Mortgage principal repayment (258,354) (236,197) NET CASH PROVIDED BY (USED BY) FINANCING ACTIVITIES (258,354) (236,197) NET INCREASE (DECREASE) IN CASH CASH AND CASH EQUIVALENTS BEGINNING OF YEAR CASH AND CASH EQUIVALENTS END OF YEAR supplemental disclosure of cash flow information cash paid-mortgage interest Cash paid-income taxes 313,586 3,121,224 S 3,434,810 S 1,383,076 21,341 (1,105,413) 4,226,637 S 3,121,224 S 1,405,233 19,180 see accompanying notes to financial statements. page 6 Jacobs &Schwartz _~~~_t_i!_i_~_~ R~_t;>JJf_~~~9J.JJ)j-OJJj_s- --

12 ANALYSIS OF CHANGE IN WORKING CAPITAL For the Twelve Months Ended March 31, /01/06 03/31/07 Current assets S 2,541,681 $ 2,936,307 current liabilities excluding amortization due within 1 year 1,273,499 1,633,312 ADJUSTED WORKINC CAPITAL $ 1,268,182 $ 1,302,995 INCREASE(OECREASEl IN ADJUSTED WORKINC CAPITAL $ 34,813 SUMMARY: Increase(Oecrease) in working capital from operations <page 8) Increase<Oecrease> in working capital from adjustment of prior year expenses Increase<oecrease) in working capital from expenditure re:capital improvements Increase<oecrease) in working capital from disbursements from fund Increase<oecrease) in working capital from net proceeds from apartment sales Increase<Decrease> in working capital from transfer to replacement reserve Increase(Oecrease) in working capital from transfer to reserve fund S 10,297 (58,000) (2,532,944) 1,808,780 1,762,900 (132,000) (824,220) INCREASE(DECREASE) IN ADJUSTED WORKING CAPITAL S 34,813 see accompanying notes to financial statements. Page 7 Jacobs &Schwartz

13 Working Capital Flow statement of Income and Expenditures For the Twelve Months Ended March 31, 2007 TWELVE MONTHS ENDED PRIOR YEAR 03/31/07 03/31/06 Budget Actual Actual (Unaudited) NEXT YEAR Budget (Unaudited) INCOME Maintenance charges S 9,165,800 S 9,175,922 $ 8,757,561 special heating assessment 261, , ,365 Rental apartment income 320, , ,130 commercial rent 276, , ,671 Garage rent 70,000 70,434 70,352 Electric submeter income 1,143, ,784 1,067,878 Interest income 135, ,928 Laundry 70,000 73,548 80,159 storage 48,000 49,753 38,478 sublet fees 65,000 43,211 40,493 Transfer fees 752, ,148 Miscellaneous income 70,000 35,665 30,813 TOTAL INCOME 11,489,700 11,920,137 11,871,976 TOTAL EXPENDITURES 11,447,000 11,909,840 11,861,884 $ 9,780, , ,900 73, , ,000 50,000 50,000 70,000 11,632,700 11,631,500 SURPLUS OR (DEFICIT) 42,700 10,297 10,092 1,200 See accompanying notes to financial statements. page 8 Jacobs &Schwartz _~_~!_!!!_~~9 ~_t?_llg g_~~_qwdj~lnt_s

14 Working capital Flow statement of Income and Expenditures For the Twelve Months Ended March 31, 2007 TWELVE MONTHS ENDED PRIOR YEAR NEXT YEAR 03/31/07 03/31/06 Budget Actual Actual Budget (Unaudited) (Unaudited) EXPENDITURES Administrative Management fee S 379,400 S 378, ,210 S 384,000 Legal 115,000 21,880 42, ,000 Accounting 25,000 27,500 25,100 27,000 Office and administrative expenses 120,000 73, , ,000 operating Fuel 1,050,000 1,123,425 1,453,615 1,045,000 Electricity 1,247, ,120 1,262,231 1,027,700 Gas 310, , , ,000 Payroll 1,783,800 1,672,956 1,668,305 1,809,600 Union welfare and pension 501, , , ,400 water and sewer rent 460, , , ,000 security services 564, , , ,400 Maintenance Repairs and maintenance (see page 4) 807,500 1,074, , ,000 Taxes and Insurance New York City real estate tax 1,700,000 1,627,168 1,638,447 1,930,000 NYC tunnel charge 8,000 8,242 7,977 10,000 NYS and NYC corporation taxes 20,000 21,241 19,280 20,000 payroll taxes 152, , , ,600 Insurance 429, , , ,800 Financial Interest and amortization 1,641,400 1,639,430 1,639,630 1,639,000 provision-reserve funds 132, , ,478 50,000 TOTAL EXPENDITURES S11,447,000 S11,909,840 S11,861,884 S11,631,500 See accompanying notes to financial statements. page 8 a Jacobs & Schwartz

15 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2007 NOTE 1 - NATURE OF BUSINESS Clinton Hill Apts. Owners Corp. is a cooperative housing corporation. The Corporation was formed for the purpose of providing residences for its shareholders by leasing to them, under proprietary leases, apartments in the building owned by the Corporation. On April 24, 1984, the Corporation acquired the land, building and improvements in a cooperative conversion. The Corporation comprises 1,213 apartments in twelve buildings and six commercial stores. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) The Board of Directors elected to change from a December 31 calendar year to a March 31 fiscal year accounting period effective January 31, b) The basis of the land and building to the Corporation is the value attributable to the Sponsors adjusted cost basis at the time the property was transferred to the Apartment Corporation, pursuant to Section 351 of the Internal Revenue Code. Building improvements are carried at cost. Depreciation on the building, building improvements and equipment are being charged to operations on a straight-line method over the estimated useful life of 19 years, 27.5 years and 12 years, respectively. c) Repairs, maintenance and recurring replacements are charged to income as inc~rred. Replacements which improve or extend the useful lives of properties are capitalized. d) Maintenance charges and special assessments, if any, to shareholders for proprietary rentals are intended to cover operating expenses of the building, as well as to provide funds for building improvements and amortization of the mortgage debt. The Corporation retains excess operating funds, if any, at the end of the operating year, for use in future operating periods. Pursuant to the Corporation's governing documents, the portion of the maintenance charges and special assessments, if any, that is applied to building improvements and the amortization of the mortgage is added to the shareholders' equity as capital contributions. e) The allowance for uncollectible maintenance and late charges in the amount of $88,146 has been reflected in the financial statements based on management's evaluation of the collectibility of the outstanding charges from tenant-stockholders. This amount represents the accumulated allowance since the inception of the cooperative conversion. Legal action has been commenced against various shareholders who are in substantial arrears. However, in certain cases where shares are repossessed it may not be possible to collect all maintenance arrears and late charges. Page 9 Jacobs &Schwartz

16 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2007 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) f) Amortization of deferred financing costs is being charged to operations on the straightline, method over the remaining life of the related mortgage. g) The Corporation has entered into lease agreements with various commercial tenants with lease terms ranging from five (5) to ten (10) years. The leases provide for annual rentals aggregating approximately $313,000 with increases based on the terms of the related leases. h) For the purpose of the Statement of Cash Flows, the Corporation considers all highly liquid investments readily convertible into cash with an initial maturity of three months or less to be cash equivalents. i) The financial statements have been prepared in accordance with U.S. generally accepted accounting principles on the accrual basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 3 FIRST MORTGAGE PAYABLE In 1997, the Corporation refinanced its mortgage loans with GMAC Commercial Mortgage Corporation. The new mortgage was in the amount of $17,000,000. The mortgage loan agreement requires constant monthly payments of $147,945, applied to interest at the rate of 9.0% per annum and the balance to the repayment of principal. The mortgage is self-liquidating and matures in thirty (30) years on April 1, The mortgage is collateralized by the property owned by the Corporation. The mortgage terms required, among other provisions, that from the proceeds of the refinancing, the Corporation deposit the sum of $4,336,600 in a Repair Escrow account with the lender. These funds were used for asbestos abatement, paving, pointing, boiler repairs, roof work, elevator work, Local Law #10 work, electrical wiring and other repairs as required by the agreement. As of March 31,2007, all funds had been disbursed from the repair escrow account and the account has been closed. Page 10 Jacobs & Schwartz

17 NOTES TO FINANCIAL STATEMENTS MARCH 31, 2007 NOTE 3 FIRST MORTGAGE PAYABLE (continued) The Corporation was also required to establish a replacement reserve escrow account with the lender and was required to deposit $15,262 into the account on a monthly basis. As of April 1, 2002, the required contribution has been modified and is based upon the sale of apartments owned by the Corporation. A contribution of $176,000 per year is based upon sales proceeds from eight (8) apartments at $22,000 per apartment. The funds are to be used to fund the replacement of the Corporation's personal property. As of MARCH 31, 2007, the balance in the escrow account was $177,361 (see page 2a). The Corporation is also required to escrow $132,444 per month with the lender for the payment of real estate taxes and property insurance. Principal payments on the mortgages required to be made for each of the next five years, and thereafter, are approximately as follows: Year ending March 31: 2008 $ 282, , , , ,500 Thereafter Total $ NOTE 4 HOLDERS OF UNSOLD SHARES EQUITY AND MAINTENANCE The Sponsor and other holders of unsold shares held 337 apartments representing 37,057 shares of common stock in the cooperative as of March 31, This represents an interest of approximately 28% of the outstanding common stock. Monthly maintenance received from the holders of unsold shares applicable to these shares was approximately $215,000. NOTE 5 FUTURE MAJOR REPAIRS AND REPLACEMENTS The Corporation's governing documents do not require the accumulation of funds to finance estimated future major repairs and replacements. Page 11 Jacobs &Schwartz

18 NOTES TO FINANCIAL S1ATEMENTS MARCH 31,2007 NOTE 5 FUTURE MAJOR REPAIRS AND REPLACEMENTS The Corporation has not conducted a study to determine the remaining useful lives of the components of common property and estimates of the costs of major repairs and replacements that may be required in the future, nor has the board of directors developed a plan to fund those needs. When funds are required for future major repairs and replacements, the Corporation is authorized to borrow, utilize the reserve escrow accounts (see pages 2a and 2b) or the net proceeds from sale of Cooperative owned apartments, levy special assessments, increase maintenance charges or delay repairs and replacements until funds are available. The effect on future assessments has not been determined at this time. NOTE 6 TREASURY STOCK The Corporation has obtained title to various apartments as a result of legal proceedings against tenant stockholders for non-payment of maintenance charges and at public auctions. The financial statements reflect the related treasury stock valued at a cost of $177,113. This represents the aggregate cost to acquire the apartments. As of March 31, 2007, the Corporation has title to twenty nine (29) apartments. The financial statements also reflect the net sales proceeds of $1,762,900 from six (6) CHAOe owned apartments which was sold through the year ended March 31 J NOTE 7 CAPITAL IMPROVEMENTS Building improvements and purchase of equipment for the year ended March 31, 2007 amount to $2,532,944 and consisted of: Exterior and roof replacement (Including consultant fees) $ 2,228,872 Security equipment 68,944 Hot water equipment 25,550 Sidewalk replacement 13,000 Water tank replacement 37,000 Compactor replacement 7,478 Co-generation system 250,493 Less: various grants (98.393) $ Page 12 Jacobs & Schwartz

19 NOTES TO FINANCIAL 51ATEMENTS MARCH 31, 2007 NOTE 8 CORPORATION TAXES The Corporation is subject to Federal, New York State and New York City income taxes. No provision has been made for Federal income taxes because the Corporation has incurred net operating losses for tax.purposes since the date of inception. New York State Franchise and New York City Corporation taxes are calculated by utilizing special tax rates available to cooperative housing corporations based on the Corporation's capital base. At March 31,2006, the Corporation has approximately $16,873,000 of net operating loss carryforwards. The tax loss carryforwards, if not used against future net taxable income, expires between the years 2008 and It is assumed by Management that the Corporation's benefit from any deferred tax benefits from prior net losses will be immaterial to the financial statements. Consequently, no deferred tax assets have been recognized in the accompanying financial statements. NOTE 9 EMPLOYEE UNION BENEFITS The Corporation's employees are covered by a union sponsored, collectively bargained, multi-employer defined benefit union pension and health and welfare plan. The Corporation's contributions for employee benefits for the year ended March 31, 2007 and 2006 amounted to $537,797 and $432,296. respectively. Under the Employee Retirement Income Security Act of 1974, as amended in 1980, an employer, upon withdrawal from a multi-employer plan, is required to pay its proportionate share of the plan's unfunded vested benefits. Management has indicated that it has no intention of withdrawing from the pension plan. NOTE 10 CONCENTRATION OF CREDIT RISK. Financial instruments that potentially subject the Corporation to concentrations of credit risk consist principally of cash and cash equivalent amounts in financial institutions, which from time to time exceed the Federal depository insurance coverage limit of $100,000. This potential risk is limited by maintaining all balances in high quality financial institutions. Cash and cash equivalents exceeding federally insured limits were approximately $347,100 at March 31,2007. Page 13 Jacobs & Schwa certified public accqunta

20 NOTES TO FINANCIAL STATEMENTS MARCH 31,2007 NOTE 11 CO-GENERATION SYSTEM The Corporation purchased and installed co-generation equipment for the purpose of onsite production of electricity. This new equipment has had a dramatic effect on the efficiency of utility use and consumption at the Cooperative. The cost of the equipment and installation was approximately $2, 150,500. The Cooperative has been able to secure grants in the amount of approximately $1,222,300 from NYSERDA and Clean Air Communities. Page 14 Jacobs & Schwartz c~_~!!f~~_9 p~ pjj_g- _o_ccou ntants

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