U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

For the fiscal year ended December 31, 1999           Commission File No. 0-1322

                           KNICKERBOCKER VILLAGE, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

             NEW YORK                                        13-0924285
--------------------------------------------              ------------------
State or other jurisdiction of incorporation              (I.R.S. Employer
or organization)                                          Identification No.)

10 Monroe Street, New York, New York                          10002
----------------------------------------                  -------------
(Address of principal Executive Offices)                     Zip Code

Registrant's Telephone Number, including Area Code: (212) 227-0955

Securities registered pursuant to Section 12(b) of the Act:

                                                          Name of each exchange
Title of each class                                       on which registered
-------------------                                       ---------------------

       NONE                                                     NONE

Securities registered pursuant to Section 12(g) of the Act:

                 Limited Dividend Capital Stock, Par Value $2.15
--------------------------------------------------------------------------------
                                (Title of class)

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B and will not be contained to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB
|_|.

      Check 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 (or for such shorter periods that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.

                          Yes  |X|    No  |_|
<PAGE>

      State Registrant's revenues for its most recent fiscal year:
$10,620,000.00

      State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 28, 2000. Approximately $16,000
which is based on par value of the voting stock. No active trading market exists
for the Registrant's Capital Stock.

      Indicate the number of shares outstanding of each of the Issuer's classes
of Common Stock, as of February 28, 2000.

      Capital Stock, $2.15 par value - 147,464 Shares

DOCUMENTS INCORPORATED BY REFERENCE - NONE

Transitional Small Business Disclosure Format:

                               Yes |_|         No   |X|


                                        2
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.

                       INDEX TO FORM 10-KSB - PARTS I - IV

                                                                        PAGE NO.
                                                                        --------
PART I -

         Item 1.  DESCRIPTION OF BUSINESS...............................5-9

         Item 2.  DESCRIPTION OF PROPERTIES.............................10-11

         Item 3.  LEGAL PROCEEDINGS.....................................11

         Item 4.  SUBMISSION OF MATTERS TO A VOTE
                  OF SECURITY HOLDERS...................................11

PART II -

         Item 5.  MARKET FOR THE REGISTRANT'S
                  COMMON EQUITY AND RELATED
                  STOCKHOLDER MATTERS...................................12

         Item 6.  MANAGEMENT'S DISCUSSION AND
                  ANALYSIS OR PLAN OF OPERATION.........................12-16

         Item 7.  FINANCIAL STATEMENTS..................................16

         Item 8.  CHANGES IN AND DISAGREEMENTS WITH
                  ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURE..................................16

PART  III -

         Item 9.  DIRECTORS, EXECUTIVE OFFICERS,
                  PROMOTERS AND CONTROL PERSONS;
                  COMPLIANCE WITH 16(a) OF
                  THE EXCHANGE ACT......................................17-18


                                        3
<PAGE>

                                                                        Page No.
                                                                        --------

         Item 10. EXECUTIVE COMPENSATION................................18

         Item 11. SECURITY OWNERSHIP OF CERTAIN
                  BENEFICIAL OWNERS AND
                  MANAGEMENT............................................18-19

         Item 12. CERTAIN RELATIONSHIPS AND
                  RELATED TRANSACTIONS..................................19

PART IV -

         Item 13. EXHIBITS AND REPORTS ON
                  FORM 8-K..............................................19


                                        4
<PAGE>

                                     PART I

ITEM 1 DESCRIPTION OF BUSINESS

The Registrant is a "limited dividend housing corporation" created and formed
under the New York Private Housing Law on September 5, 1933. The Registrant owns
a housing development located at the corners of Monroe, Market, Catherine and
Cherry Streets in Manhattan, New York. The properties are managed by Cherry
Green Property Corp., the Managing Agent, and is subject to the supervision of
the New York State Division of Housing and Community Renewal ("DHCR"), which
must approve all management fees and rent increases and contracts in excess of
$30,000. (See "Item 12-Certain Relationships and Related Transactions").
Dividends to stockholders are limited by law to six percent (6.0%) of par value
on a cumulative basis. The Registrant has not paid any dividends since 1968. As
a result, the cumulative dividends unpaid through December 31, 1999, amounted to
approximately $590,000 or approximately $4.00 per share. (See Note 6 of Notes to
Financial Statements). No dividends were declared or paid during 1999 or 1998.
In the event of liquidation, stockholders cannot receive more than the
cumulative unpaid dividends, plus the amount of their original investment. Any
surplus in excess of such amounts reverts to public authorities.

The Registrant's properties are managed by Cherry Green Property Corp., pursuant
to a Management Contract approved by the DHCR. Cherry Green Property Corp. is a
real estate management company, which manages and administers real estate.
Cherry Green Property Corp. is the record and beneficial owner of over
ninety-five percent (95.0%) of the Registrant's outstanding shares. During 1999,
the Registrant paid Cherry Green Property Corp. a management fee approved by the
DHCR in the amount of approximately $966,000 compared to approximately $977,000
paid in 1998. (See Exhibit 10.1 annexed hereto and Note 8 of Notes to Financial
Statements.) The Registrant employs fifty-four (54) persons, all of whom are
full-time employees.

In December 1998, the Company received a two step rent increase, which was
approved by the DHCR. The first increase of approximately 3.3% became effective
February 1, 1999. The second increase will be deferred by the Company from
February 1, 2000 to April 1, 2000. Accordingly, net rental income in 1999
increased by approximately $380,000 or approximately four percent (4%) over 1998
amounts, primarily due to the two step rent increase referred to above and
corresponding increases in surcharges and other charges to tenants. Other income
in 1999, increased by approximately $71,000 or approximately six hundred thirty
three percent (633%) primarily due to real estate tax refunds receivable from
the City of New York, which resulted from a reduction in the assessed valuation
of the Company's properties for the fiscal year ended June 30, 1999. Operating
expenses for 1999 increased by approximately $346,000 or approximately four
percent (4%), due to increases in wages and related costs, utilities,
maintenance, repairs and decorating and miscellaneous operating and general
expenses, offset by decreases in real estate taxes, mortgage and other interest,
management and administrative fee, and the provision for doubtful accounts.
Wages and related costs


                                        5
<PAGE>

increased by approximately $65,000 or approximately three percent (3%) in 1999
as compared to 1998. The increase was attributable to an increase in wages and
related payroll taxes of approximately $52,000 primarily due to increases in
union wage rates, and an increase in employee benefits of approximately $12,000
primarily due to increases in union pension rates. Utilities increased by
approximately $221,000 or approximately fourteen percent (14%), primarily due
higher crude oil prices in 1999 which increased fuel oil and gas expenses by
approximately $53,000, increases in water charges of approximately $25,000 and
increases in electricity expense of approximately $143,000. The increase in
electricity expense was primarily due to a refund of $128,000 received from Con
Edison, which reduced the 1998 expense. Maintenance, repairs and decorating
increased by approximately $65,000 or approximately five percent (5 %) in 1999
as compared to 1998. This increase was attributable to increases in heating,
plumbing, supplies and grounds expenses of approximately $163,000 offset by
decreases in elevator maintenance, rubbish removal, compactor maintenance,
painting and structural expense of approximately $98,000. The increase in
plumbing was primarily attributable to repairs of the building's sanitary and
storm sewers of approximately $61,000. Miscellaneous operating and general
expenses increased by approximately $125,000 or approximately eight percent (8%)
in 1999 as compared to 1998, primarily due to increases in legal fees of
approximately $77,000, security expenses of approximately $42,000 and insurance
expense of approximately $37,000, offset by decreases in accounting and
consulting fees of approximately $21,000. The increase in legal fees was
primarily attributable to fees incurred in connection with obtaining a reduction
in real estate taxes for the fiscal years ended June 30, 1999 and 2000. Real
estate taxes decreased by approximately $113,000 or approximately thirteen
percent (13%) in 1999 as compared to 1998, primarily due to reductions in the
assessed valuation of the Company's properties for the fiscal years ended June
30, 1999 and 2000. Mortgage and other interest decreased by approximately $5,000
or approximately one percent (1%), primarily due to a lower principal balance in
1999 as compared to 1998. Management and administration fees decreased by
approximately $11,000 or approximately one percent (1%), primarily due to the
receipt of management agent financial awards of approximately $50,000 in 1998.
This reduction was offset by increases in the management and administration fees
of approximately $29,000 and increases in commercial leasing and rental fees of
approximately $10,000, which were all approved by the DHCR (See Note 8 to the
financial statements, Page F-11). The provision for doubtful accounts decreased
by approximately $8,000 or approximately thirty eight percent (38%) in 1999 as
compared to 1998, primarily due to improved collectability of accounts
receivable. The provision for income taxes increased by approximately $37,000 or
approximately twenty two percent (22%), primarily due to an increase in income
before income taxes and changes in the Registrant's valuation allowance (See
Note 7 to the financial statements, Pages F-10 and F-11).

In 1996, the Registrant received a two step rent increase. The first increase of
approximately 5.5% was effective June 1, 1996 and the second increase of
approximately 5.3% was effective June 1, 1997. Accordingly, net rental income in
1998 increased by approximately $128,000 or approximately one percent (1%) over
1997 amounts, primarily due to the two step rent increase referred to above,
partially offset by decreases in surcharges and commercial rental income. Other
income in 1998 increased by approximately $2,000 or


                                        6
<PAGE>

approximately seventeen percent (17%) from 1997 amounts primarily due to higher
reserve fund balances during 1998. Operating expenses for 1998 increased by
approximately $43,000 or approximately one percent (1%) due to increases in
wages and related costs, maintenance, repairs and decorating, management and
administration fee and miscellaneous operations and general expenses offset by
decreases in utilities, depreciation and amortization and mortgage and other
interest expense. Wages and related costs increased by approximately $74,000 or
approximately three percent (3%) in 1998 as compared to 1997. The increase was
attributable to an increase in wages and related payroll taxes of approximately
$69,000 primarily due to increases in union wage rates, and an increase in
employee benefits of approximately $5,000 primarily due to increases in related
payroll taxes. Maintenance, repairs and decorating increased by approximately
$137,000 or approximately twelve percent (12%). The increase was primarily
attributable to increases in repairs to the parapet walls of approximately
$150,000 and electrical and supplies expenses of approximately $72,000, offset
primarily by a decrease in painting expense of approximately $85,000, due to
lower demands in painting jobs compared to 1997. Management and administration
fee increased by approximately $32,000 or approximately three percent (3%) in
1998 compared to 1997, primarily due to increases in the management fee, which
were approved by the DHCR of 2.44% effective July 31, 1997 and 5.5% effective
July 1, 1998. (See Note 8 to the financial statements, Page F-11). Miscellaneous
operating and general expenses increased by approximately $112,000 or
approximately eight percent (8%), primarily due to increases in security costs
of approximately $76,000 and consulting fees of approximately $87,000 incurred
pertaining to rebates received from Con Edison for erroneous billings. These
increases were offset by decreases in professional fees of approximately $8,000
and insurance expense of approximately $43,000. Utilities decreased by
approximately $254,000 or approximately thirteen percent (13%) in 1998 as
compared to 1997, primarily due to a decrease in electricity expense of $103,000
attributable to rebates from Con Edison, a decrease in oil expense of
approximately $123,000 due to lower oil prices and a milder winter and a
decrease in water and sewer expense compared to 1997 of approximately $31,000
due primarily to the switch from standard billings to meter readings. This
decrease was offset by an increase in gas heating of approximately $3,000.
Depreciation and amortization decreased by approximately $20,000 or
approximately four percent (4%) due to the use of accelerated depreciation
methods and the fact that the majority of the fixed assets are in the latter
part of their useful lives. Mortgage and other interest decreased by
approximately $11,000 or approximately two percent (2%), primarily due to the
refinancing of the Company's mortgage debt. (See Note 4 to the financial
statements Page F-9). The provision for doubtful accounts decreased by
approximately $30,000 or approximately fifty seven percent (57%) in 1998 as
compared to 1997, primarily due to improved collections on accounts receivable.
The provision for income taxes increased by approximately $134,000, primarily
due to an increase in income before taxes and changes in the Registrant's
valuation allowance (See Note 7 to the financial statements, Pages F-10 and
F-11).

            RE-FINANCE OF MORTGAGE

On January 31, 1997 (the "Closing Date"), Registrant entered into a
Consolidation, Modification and Extension Agreement, (the "Loan Agreement"),
with The Greater New York Savings Bank now known as


                                        7
<PAGE>

Astoria Federal Savings Bank (the "Bank" or "Mortgage Lender") (capitalized
terms not otherwise defined herein are used herein as set forth in the Loan
Agreement) relating to a loan in the principal amount of $6,300,000 (the "Loan
Amount"), with a ten (10) year term, (with a five year option to extend the loan
as described below) with interest at eight and one-half percent (8 1/2%) per
annum. At the time of closing, the principal balance due on the existing
mortgage was $5,994,529.72. The mortgage increase of $305,470.28 was evidenced
by the "Gap" Mortgage and "Gap" Note. The current monthly principal and interest
under the Note is $50,729.32, with a monthly escrow for taxes of $71,270.34 and
the total monthly payment is $121,999.86. The Loan Agreement provides that the
Loan Amount will be repaid at the aforesaid interest rate in equal monthly
installments sufficient to repay the Loan Amount in twenty-five (25) years. The
Loan Agreement has been approved by the DHCR. Principal payments due on the
Mortgage for the next two (2) years are approximately: $97,000 (2000); and
$105,000 (2001). As a result of the refinancing, annual payments of principal
and interest due the Bank, will be reduced by approximately $155,000 per annum.
Prepayment may be made by the Registrant with thirty (30) days prior written
notice to the Bank with a prepayment penalty of: 5% of the outstanding principal
balance if prepaid during the first, second or third year of the initial term or
the first year of any extended term; 4% of the outstanding principal balance if
prepaid during the fourth, fifth or sixth year of the initial term or the second
year of any extended term; 3% of the outstanding principal balance if prepaid
during the seventh or eighth year of the initial term or the third year of any
extended term; 2% of the outstanding principal balance if prepaid during the
ninth year of the initial term or the fourth year of any extended term; 1% of
the outstanding principal balance if prepaid during the first six months of the
tenth year of the initial term or the first six months of the fifth year of any
extended term; and there shall be no prepayment penalty during the last six
months of the tenth year of the initial term or the last six months of the fifth
year of any extended term.

At Registrant's option, Registrant may extend the Maturity Date to a date which
is five (5) years from the Maturity Date, subject to the following terms and
conditions:

            (a) Registrant shall give the Mortgage Lender written notice not
            less than sixty (60) days or greater than six (6) months prior to
            the Maturity Date;

            (b) Registrant shall not be in default in its obligations under any
            of the documents evidencing the Mortgage on the date the Registrant
            exercises its option to extend the Maturity Date and on the Maturity
            Date;

            (c) Registrant shall pay to the Mortgage Lender an "Extension Fee"
            equal to one-half (1/2%) percent of the outstanding principal
            balance of the Mortgage;

            (d) During the extended term, Registrant shall repay the principal
            balance of the Mortgage outstanding on the Maturity Date with
            interest at the Extended Term Interest Rate (as hereinafter
            defined), in equal monthly installments sufficient to repay such
            principal balance in fifteen (15) years. The term "Extended Term
            Interest Rate" means a rate that is one hundred seventy-five (175)
            basis points (1.75%)


                                        8
<PAGE>

            over the average yield on actively traded United States Treasury
            securities adjusted to a constant maturity of five (5) years. The
            Extended Term Interest Rate shall be effective on the Maturity Date
            and determined on a date which is three (3) days before the Maturity
            Date. In no instance however, shall the Extended Term Interest Rate
            be less than the Interest Rate.

            (e) The outstanding principal amount of the Mortgage on the Maturity
            Date shall not exceed seventy-five percent (75%) of the combined
            appraised value of the subject Property as based on an appraisal of
            such Property, which value will be determined by the Mortgage Lender
            in its sole and absolute discretion and which appraisal shall be
            prepared by the Mortgage Lender's appraisers at Registrant's sole
            cost and expense.

            (f) The combined actual net operating income of the subject Property
            shall exceed the debt service by 1.25 times as determined by the
            Mortgage Lender in its sole and absolute discretion. Debt service
            coverage shall be calculated for the twelve (12) calendar month
            period ending immediately preceding the date the required extension
            notice is delivered to the Mortgage Lender and shall be based on the
            outstanding principal balance amount of the Loan on the Maturity
            Date and the Extended Term Interest Rate.

            (g) To the extent that the Registrant is prohibited from extending
            the term of the Mortgage solely due to its failure to satisfy both
            requirements (e) and (f) immediately above, the Registrant may repay
            principal to the Mortgage Lender in a sufficient amount, as
            determined by the Mortgage Lender, so as to enable Registrant to
            satisfy requirements (e) and (f) above based on the reduced
            principal amount outstanding after such payments are made.


                                        9
<PAGE>

ITEM 2 DESCRIPTION OF PROPERTIES

The Registrant's property consists of twelve (12) apartment buildings, eleven
(11) of which are twelve (12) stories high and one which is ten (10) stories
high, constructed in 1934 at Monroe and Catherine Streets in New York City and
consisting of approximately 6,000 rooms in approximately 1,600 apartments with
commercial stores on the ground floor of some of the buildings. The Registrant
believes that such premises are in satisfactory condition and are suitable for
use as residential dwellings and commercial units, as applicable. The buildings,
land and boiler are subject to a mortgage in the principal amount of
approximately $6,066,000 owing at December 31, 1999. (See Item 1 above and Note
4 to Financial Statements.)

Management believes that the Registrant's properties are adequately covered by
insurance.

The Registrant's residential properties have an occupancy rate of approximately
ninety-nine (99%) percent. No tenant occupies ten (10%) percent or more of the
rentable square footage of the properties. The Registrant's properties are
principally used for rental of residential apartments for low to middle income
families. The Registrant has approximately $819,000 in monthly revenue from
residential space, with an average effective annual rental per room of
approximately $135.00 for the year ended December 31, 1999. The average
apartment is three and one-half (3 1/2) rooms. Annual revenues from residential
leases was approximately $9,830,000 for the year ended December 31, 1999.
Residential leases of which there are approximately sixteen hundred (1600), are
generally renewed, subject to the terms of the applicable leases and compliance
by the tenants with same. The total annual rental income on fifteen (15)
commercial leases for the year ended December 31, 1999, was approximately
$299,000. Accordingly, gross annual revenue for 1999 from residential leases was
ninety three percent (93%) compared to three percent (3%) of gross annual
revenue from commercial leases.

Real estate taxes on the Registrant's properties were approximately $707,000,
for the year ended December 31, 1999. The tax rate for the 1999 tax year was
approximately eleven percent (11%).


                                       10
<PAGE>

The Registrant's estimated replacement, repairs and renovation budget and status
of projects for January 1, 1999 to December 31, 1999 ("1999 Projects") and
January 1, 2000 to December 31, 2000 ("2000 Projects") are as follows:

                   1999 PROJECTS                APPROXIMATE COST
                   -------------                ----------------

                   Terrace/Waterproofing             $404,000
                   Asbestos Abatement                 402,000
                   Asbestos Abatement Air
                   Monitoring and Consulting
                   Expenses                            40,000
                   Handicap Entrances                  28,000
                   Elevator Consulting                  6,000
                   Walk-In Cooler                      80,000
                   New Sanitation Containers           11,000

                                                   -----------
                                                TOTAL:$971,000.00

                   2000 PROJECTS                  APPROXIMATE COST
                   -------------                  ----------------

                   Architect/Engineering Fees           60,000
                   Handicap Entrances                  100,000
                   Asbestos Abatement                  150,000
                   Phase 1 Plumbing Replacement        443,000
                   Appliance Reimbursement             120,000
                   Waterproofing                       100,000

                                                   ------------
                                               TOTAL: $973,000.00

The above estimates are for informational purposes only, and include accrual
amounts. The actual costs of such projects may differ. The costs of additional
asbestos abatement or lead paint remediation, if necessary, at the Registrant's
properties can not be determined at this time. The cost of these projects are
funded from operations, and the money is deposited in an escrow account which is
supposed to be funded monthly in an amount of approximately $76,000.

ITEM 3 LEGAL PROCEEDINGS

            None.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

            None.


                                       11
<PAGE>

                                     PART II

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON
       EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Limited Dividend Capital Stock, par value $2.15 ("Capital Stock"),
is traded over-the-counter. No established trading market exists with respect to
such stock since approximately 140,242 shares (approximately 95%) of the 147,464
shares outstanding are owned by Cherry Green Property Corp. Since 1971, no bid
and asked prices have been reported by the National Quotation Bureau, Inc.

No dividends have been paid since 1968. The holders of Capital Stock cannot, at
any time, receive repayment of their investment in excess of the par value of
the stock, together with cumulative unpaid dividends at the rate of 6.0% of par
value ($2.15 per share) per annum (without interest). Dividends amounting to
$19,023 were declared during 1979, but were not paid as of December 31, 1999. No
dividends were declared or paid in 1999 or 1998. Cumulative dividends unpaid as
of December 31, 1999 and December 31, 1998 amounted to approximately $590,000
and $571,000 (approximately $4.00 and $3.87 per share), respectively. (See Note
6 of Notes to Financial Statements.)

There are approximately 340 holders of record of the Registrant's Capital Stock
as of March 1, 2000.

ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS
       OR PLAN OF OPERATIONS

a).Liquidity - As of December 31, 1999, the Registrant had a working capital
deficiency of approximately $581,000. At December 31, 1998, the Registrant had a
working capital deficiency of approximately $282,000. The working capital
deficiency at December 31, 1999 includes a liability for capital improvements
and maintenance expenses of approximately $237,000, which will be funded in 2000
by the Company's funds for replacement reserves. In December 1998, the Company
received a two step rent increase, which was approved by the DHCR. The first
increase of approximately 3.3% was effective February 1, 1999. The second
increase of approximately 3.2% will be deferred by the Company from February 1,
2000 to April 1, 2000. (See Note 11 to the financial statements, Page F-12).
Subject to unforeseen circumstances, the two step rent increase effective
February 1, 1999 and April 1, 2000, will increase the future liquidity of the
Registrant.

Capital Resources - The Registrant has set aside funds for capital improvements
and repairs amounting to approximately $360,000 and $157,000 as of December 31,
1999 and 1998. (See Note 3 to the financial statements, Page F-9).

Results of Operations - In December 1998, the Company received a two step rent
increase, which was approved by the DHCR. The first increase of approximately
3.3% became effective February 1, 1999. The second increase will be deferred by
the Company from February 1, 2000 to April 1, 2000. Accordingly, net rental
income in 1999 increased by approximately $380,000 or approximately four percent
(4%) over 1998


                                       12
<PAGE>

amounts, primarily due to the two step rent increase referred to above and
corresponding increases in surcharges and other charges to tenants. Other income
in 1999, increased by approximately $71,000 or approximately six hundred thirty
three percent (633%) primarily due to real estate tax refunds receivable from
the City of New York, which resulted from a reduction in the assessed valuation
of the Company's properties for the fiscal year ended June 30, 1999. Operating
expenses for 1999 increased by approximately $346,000 or approximately four
percent (4%), due to increases in wages and related costs, utilities,
maintenance, repairs and decorating and miscellaneous operating and general
expenses, offset by decreases in real estate taxes, mortgage and other interest,
management and administrative fee, and the provision for doubtful accounts.
Wages and related costs increased by approximately $65,000 or approximately
three percent (3%) in 1999 as compared to 1998. The increase was attributable to
an increase in wages and related payroll taxes of approximately $52,000
primarily due to increases in union wage rates, and an increase in employee
benefits of approximately $12,000 primarily due to increases in union pension
rates. Utilities increased by approximately $221,000 or approximately fourteen
percent (14%), primarily due higher crude oil prices in 1999 which increased
fuel oil and gas expenses by approximately $53,000, increases in water charges
of approximately $25,000 and increases in electricity expense of approximately
$143,000. The increase in electricity expense was primarily due to a refund of
$128,000 received from Con Edison, which reduced the 1998 expense. Maintenance,
repairs and decorating increased by approximately $65,000 or approximately five
percent (5 %) in 1999 as compared to 1998. This increase was attributable to
increases in heating, plumbing, supplies and grounds expenses of approximately
$163,000 offset by decreases in elevator maintenance, rubbish removal, compactor
maintenance, painting and structural expense of approximately $98,000. The
increase in plumbing was primarily attributable to repairs of the building's
sanitary and storm sewers of approximately $61,000. Miscellaneous operating and
general expenses increased by approximately $125,000 or approximately eight
percent (8%) in 1999 as compared to 1998, primarily due to increases in legal
fees of approximately $77,000, security expenses of approximately $42,000 and
insurance expense of approximately $37,000, offset by decreases in accounting
and consulting fees of approximately $21,000. The increase in legal fees was
primarily attributable to fees incurred in connection with obtaining a reduction
in real estate taxes for the fiscal years ended June 30, 1999 and 2000. Real
estate taxes decreased by approximately $113,000 or approximately thirteen
percent (13%) in 1999 as compared to 1998, primarily due to reductions in the
assessed valuation of the Company's properties for the fiscal years ended June
30, 1999 and 2000. Mortgage and other interest decreased by approximately $5,000
or approximately one percent (1%), primarily due to a lower principal balance in
1999 as compared to 1998. Management and administration fees decreased by
approximately $11,000 or approximately one percent (1%), primarily due to the
receipt of management agent financial awards of approximately $50,000 in 1998.
This reduction was offset by increases in the management and administration fees
of approximately $29,000 and increases in commercial leasing and rental fees of
approximately $10,000, which were all approved by the DHCR (See Note 8 to the
financial statements, Page F-11). The provision for doubtful accounts decreased
by approximately $8,000 or approximately thirty eight percent (38%) in 1999 as
compared to 1998, primarily due to improved collectibility of accounts
receivable. The provision for income taxes increased by


                                       13
<PAGE>

approximately $37,000 or approximately twenty two percent (22%), primarily due
to an increase in income before income taxes and changes in the Registrant's
valuation allowance (See Note 7 to the financial statements, Pages F-10 and
F-11).

In 1996, the Registrant received a two step rent increase. The first increase of
approximately 5.5% was effective June 1, 1996 and the second increase of
approximately 5.3% was effective June 1, 1997. Accordingly, net rental income in
1998 increased by approximately $128,000 or approximately one percent (1%) over
1997 amounts, primarily due to the two step rent increase referred to above,
partially offset by decreases in surcharges and commercial rental income. Other
income in 1998 increased by approximately $2,000 or approximately seventeen
percent (17%) from 1997 amounts primarily due to higher reserve fund balances
during 1998. Operating expenses for 1998 increased by approximately $43,000 or
approximately one percent (1%) due to increases in wages and related costs,
maintenance, repairs and decorating, management and administration fee and
miscellaneous operations and general expenses offset by decreases in utilities,
depreciation and amortization and mortgage and other interest expense. Wages and
related costs increased by approximately $74,000 or approximately three percent
(3%) in 1998 as compared to 1997. The increase was attributable to an increase
in wages and related payroll taxes of approximately $69,000 primarily due to
increases in union wage rates, and an increase in employee benefits of
approximately $5,000 primarily due to increases in related payroll taxes.
Maintenance, repairs and decorating increased by approximately $137,000 or
approximately twelve percent (12%). The increase was primarily attributable to
increases in repairs to the parapet walls of approximately $150,000 and
electrical and supplies expenses of approximately $72,000, offset primarily by a
decrease in painting expense of approximately $85,000, due to lower demands in
painting jobs compared to 1997. Management and administration fee increased by
approximately $32,000 or approximately three percent (3%) in 1998 compared to
1997, primarily due to increases in the management fee, which were approved by
the DHCR of 2.44% effective July 31, 1997 and 5.5% effective July 1, 1998. (See
Note 8 to the financial statements, Page F-11). Miscellaneous operating and
general expenses increased by approximately $112,000 or approximately eight
percent (8%), primarily due to increases in security costs of approximately
$76,000 and consulting fees of approximately $87,000 incurred pertaining to
rebates received from Con Edison for erroneous billings. These increases were
offset by decreases in professional fees of approximately $8,000 and insurance
expense of approximately $43,000. Utilities decreased by approximately $254,000
or approximately thirteen percent (13%) in 1998 as compared to 1997, primarily
due to a decrease in electricity expense of $103,000 attributable to rebates
from Con Edison, a decrease in oil expense of approximately $123,000 due to
lower oil prices and a milder winter and a decrease in water and sewer expense
compared to 1997 of approximately $31,000 due primarily to the switch from
standard billings to meter readings. This decrease was offset by an increase in
gas heating of approximately $3,000. Depreciation and amortization decreased by
approximately $20,000 or approximately four percent (4%) due to the use of
accelerated depreciation methods and the fact that the majority of the fixed
assets are in the latter part of their useful lives. Mortgage and other interest
decreased by approximately $11,000 or approximately two percent (2%), primarily
due to the refinancing of the Company's mortgage debt. (See Note 4 to the
financial statements


                                       14
<PAGE>

Page F-9). The provision for doubtful accounts decreased by approximately
$30,000 or approximately fifty seven percent (57%) in 1998 as compared to 1997,
primarily due to improved collections on accounts receivable. The provision for
income taxes increased by approximately $134,000, primarily due to an increase
in income before taxes and changes in the Registrant's valuation allowance (See
Note 7 to the financial statements, Pages F-10 and F-11).

      As of December 31, 1999, the Registrant had a working capital deficiency
of approximately $581,000. At December 31, 1998, the Registrant had a working
capital deficiency of approximately $282,000. The working capital deficiency at
December 31, 1999 includes a liability for capital improvements and maintenance
expenses of approximately $237,000, which will be funded in Fiscal 2000 by the
Company's funds for replacement reserves. In 1998, the Company received a two
step rent increase, which was approved by the DHCR. The first increase of
approximately 3.3% will became effective February 1, 1999. The second increase
of approximately 3.2% will be deferred by the Company from February 1, 2000 to
April 1, 2000. (See Note 11 to the financial statements, Page F-12). Subject to
unforeseen circumstances, the two step rent increase effective February 1, 1999
and April 1, 2000, will increase the future liquidity of the Registrant.

Year 2000

The Year 2000 problem is the inability of a significant amount of the world's
computers, software applications and embedded semiconductor chips to cope with
the change of the year from 1999 to 2000. As a result of this problem, systems
could fail to operate or fail to produce correct results at the start of the
21st century.

The Company has surveyed its building systems and does not anticipate any
material cost relating to any required modifications, upgrades, or replacements
of either the operational systems, or facilities systems and equipment of the
Company. Accordingly, the Company does believe that it needs to develop
contingency plans, to identify and correct Year 2000 problems affecting its
operational systems and facilities systems and equipment are not effective.

Disclaimer

The discussion of the Company's efforts, and management's expectations relating
to Year 2000 compliance are forward-looking statements. The Company's ability to
achieve Year 2000 compliance and the level of incremental costs associated
therewith, could be adversely impacted by, among other things, the availability
and cost of programming and testing resources, vendors' ability to modify
proprietary software, and unanticipated problems identified in the ongoing
compliance review.

ITEM 7 FINANCIAL STATEMENTS

            Information required by this Item is attached to this Report as
            pages F-1 through F-12 following Part IV, Item 13.


                                       15
<PAGE>

ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
       ON ACCOUNTING AND FINANCIAL DISCLOSURE

            None.

                                    PART III

ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
       COMPLIANCE WITH SECTION 16(a)OF THE EXCHANGE ACT

                              Position with     Held   Principal
Name                   Age    Registrant        Since  Occupation
----                   ---    ----------        -----  ----------

Irene Pletka (1)(2)    58     President and     1977   Commercial Photographer
                              Director

Peter Pletka (1)(2)    62     Vice President    1992   Physician

Howard Kestenberg      43     Director          1992   Real Estate Entrepreneur
(3)

Robert Gershon         63     Director, Vice    1977   Principal in the firm of
(2) (4)                       President and            Carl Gershon & Co., a
                              Treasurer                Real Estate Brokerage.

Melvin Gershon         57     Director and      1977   Principal in the firm
(2) (4)                       Secretary                of Carl Gershon & Co.

Loretta Jefferson      57     Director          1998   Housing Management
                                                       Representative, New York
                                                       State Division of Housing
                                                       and Community Renewal.

------------------------------
(1)   Dr. Peter Pletka and Mrs. Irene Pletka are husband and wife.
(2)   Irene Pletka, Dr. Peter Pletka, Robert Gershon and Melvin Gershon are all
      shareholders, officers and directors of Cherry Green Property Corp. (See
      Item 11-Security Ownership of Certain Beneficial Owners and Management and
      Item 12-Certain Relationships and Related Transaction).
(3)   Mr. Kestenberg is a shareholder of Cherry Green Property Corp. (See Item
      11-Security Ownership of Certain Beneficial Owners and Management and Item
      12-Certain Relationships and Related Transaction).
(4)   Mr. Melvin Gershon and Mr. Robert Gershon are brothers.

      The respective terms of the officers and directors of the Registrant will
      continue until the next Annual Meeting of Shareholders or until their
      successors have been elected and qualified in accordance with the
      Registrant's By-laws.

            Compliance with Section 16(a) of the Securities Exchange Act of 1934

            Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
            Act") requires the Company's directors and executive officers, and
            persons who own more than ten percent (10%) of a registered class of
            the Company's equity securities, to file with


                                       16
<PAGE>

            the Securities and Exchange Commission ("SEC") and each national
            securities exchange on which the equity securities of the Company is
            registered, initial reports of ownership and reports of changes in
            ownership of common stock and other equity securities of the
            Company. Officers, directors and greater than ten percent
            shareholders are required by SEC regulation to furnish the Company
            with copies of all Section 16(a) forms they file.

            Management believes that Cherry Green Property Corp. has made all
            requisite filings of Form 3, 4 and 5 required to be filed under
            16(a) of the Exchange Act relating to the Registrant during the two
            (2) fiscal years ended December 31, 1999 and 1998, respectively.

ITEM 10 EXECUTIVE COMPENSATION

            During the year ended December 31, 1999, no officer or director of
            the Registrant received any compensation from the Registrant for his
            or her services. The Registrant did not grant or award stock
            options, stock appreciation rights or long-term incentive plans to
            any of its executive officers in the last fiscal year. The
            Registrant does not presently maintain a pension plan or other
            retirement plan for its named executive officers.

            The housing complex owned by the Registrant is managed by Cherry
            Green Property Corp., pursuant to a management contract approved by
            the DHCR. Cherry Green was granted increases in its management fee
            of 5.5% and 1.4%, effective July 1, 1998 and July 1, 1999,
            respectively, pursuant to a Contract for Managing Agents Extension
            Agreement, approved by the DHCR on September 22, 1999. (See Exhibit
            10.1 annexed hereto.) Such fee is reviewed and adjusted annually
            effective July 1 of each year, by the DHCR. Cherry Green Property
            Corp. owns over 95.0% of the Registrant's Capital Stock. Several
            officers and directors of Cherry Green Property Corp. are officers
            and directors of the Registrant. (See Item 9 herein). During 1999,
            the Registrant paid Cherry Green Property Corp. a management and
            administrative fee of approximately $966,000. Such fee was approved
            by the DHCR. (See Items 1, 9, 11 and 12 and Note 8 of Notes to
            Financial Statements.)


                                       17
<PAGE>

ITEM 11 SECURITY OWNERSHIP OF CERTAIN
        BENEFICIAL OWNERS AND MANAGEMENT.

            (a)   Security Ownership of Certain Beneficial Owners. Following is
                  a list of those persons known by the Registrant to be the
                  beneficial owners of more than 5% of the outstanding Capital
                  Stock of the Registrant as of December 31, 1999:

                    Name and Address       Amount and Nature          Percent of
Title of Class      of Beneficial Owner    of Beneficial Ownership    Class
--------------      -------------------    -----------------------    -----

Limited Dividend    Cherry Green           140,242 Shares of          95%
Capital Stock,      Property Corp.         Record and Beneficial
(par value $2.15)   11 Monroe Street       Ownership
                    New York, NY

            (b)   Security Ownership of Management

                  As of December 31, 1999, no Directors or Officers owned any
                  shares of the Registrant's Limited Dividend Capital Stock,
                  $2.15 par value. However, the following Officers and Directors
                  of the Registrant own of record and beneficially that
                  percentage of Common Stock of Cherry Green Property Corp. as
                  set forth below:

                                                     Percent Owned of Cherry
Name                 Position with Registrant        Green Property Corp.
----                 ------------------------        --------------------

Irene Pletka (1)     Director and President                53.3

Peter Pletka (1)     Vice President                        53.3

Howard Kestenberg    Director                              18.3

Robert Gershon (2)   Director, Vice President               9.6
                     and Treasurer

Melvin Gershon (2)   Director and Secretary                 6.3

------------------------------
(1)   Such shares of Cherry Green Property Corp. are owned collectively by Dr.
      and Mrs. Pletka.

(2)   Robert Gershon and Melvin Gershon are brothers.

            (c)   Change in control.

                  There are no known arrangements, the application of which may
                  at a subsequent date result in a change in control of the
                  Registrant.


                                       18
<PAGE>

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            The Registrant is managed by Cherry Green Property Corp., the owner
            of over 95% of the Registrant's outstanding Capital Stock. Several
            officers and directors of the Registrant are shareholders, officers
            and directors of Cherry Green Property Corp. (See Items 1, 9, 10 and
            11 herein). During 1999, the Registrant paid Cherry Green Property
            Corp. a management and administrative fee of approximately $966,000.
            Such fee was approved by the DHCR pursuant to a contract, with
            increases effective July 1, 1998 and July 1, 1999. (See Exhibit 10.1
            annexed hereto) (See Note 8 of Notes to Financial Statements).

                                     PART IV

ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K

            (a)   The list of Financial Statements and Notes required by Item 7
                  and by Item 13(a) are set forth on pages F-1 through F-12
                  attached hereto.

            (b)   Reports on Form 8-K:

                  None.

            (c)   Exhibits:

                  10.1 - Contract for Managing Agent Extension Agreement, dated
                  as of July 1, 1999, by and between Knickerbocker Village, Inc.
                  and Cherry Green Property Corp. and approved by the New York
                  State Division of Housing and Community Renewal on September
                  22, 1999.


                                       19
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.

                          INDEX TO FINANCIAL STATEMENTS

Independent Auditors' Report                                        F-2

Balance Sheets                                                      F-3 to F-4

Statements of Net Income, Comprehensive Income
and Retained Earnings, Years Ended December 31, 1999 and 1998       F-5

Statements of Cash Flows,
 Years Ended December 31, 1999 and 1998                             F-6

Notes to Financial Statements                                       F-7 to F-12
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors
Knickerbocker Village, Inc.
10 Monroe Street
New York, New York  10002

We have audited the accompanying balance sheets of Knickerbocker Village, Inc.,
as of December 31, 1999 and 1998, and the related statements of net income,
comprehensive income and retained earnings and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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 Knickerbocker Village, Inc., as
of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.


March 21, 2000                           Held, Kranzler, McCosker & Pulice, LLP


                                      F-2
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 1999 AND 1998

                                                         1999           1998
                                                      -----------    -----------
                     Assets

Current Assets:
    Cash and cash equivalents                         $   517,751    $    92,956
    Accounts receivable (less allowance for
    doubtful accounts of $308,000 in 1999
     and $301,000 in 1998)                                119,174        142,485
    Interest and other receivables                        185,176        164,051
    Prepaid expenses and other current assets           1,308,751      1,676,790
    Deferred tax asset, net                                72,000         71,000
                                                      -----------    -----------
             Total Current Assets                       2,202,852      2,147,282
                                                      -----------    -----------

Special Funds And Deposits:
    Funds for replacements, painting
     and decorating                                       359,880        157,593
    Tenants' security deposits - contra                   669,628        671,366
                                                      -----------    -----------
             Total Special Funds and Deposits           1,029,508        828,959
                                                      -----------    -----------

Fixed Assets:
Land                                                    3,273,281      3,273,281
Buildings and Building Equipment                       16,830,575     16,289,745
                                                      -----------    -----------
                                                       20,103,856     19,563,026
    Less: Accumulated depreciation                     12,495,670     11,964,330
                                                      -----------    -----------
             Net Fixed Assets                           7,608,186      7,598,696
                                                      -----------    -----------

Other Assets:
    Deferred tax asset, net                               288,000        249,000
    Other assets                                          100,932        113,731
                                                      -----------    -----------
                                                          388,932        362,731
                                                      -----------    -----------

                      Total Assets                    $11,229,478    $10,937,668
                                                      ===========    ===========

The accompanying notes are an integral part of the financial statements.


                                      F-3
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 1999 AND 1998

                                                          1999          1998
                                                       -----------   -----------
       Liabilities and Stockholders' Equity

Current Liabilities:
    Accounts payable and accrued expenses              $ 2,633,849   $ 2,269,509
    Unearned rental income                                  24,167        27,497
    Dividends payable                                       19,023        19,023
    Income tax payable                                       5,600        15,576
    Current portion of long-term debt                       96,835        88,971
    Current portion of capital lease obligation              4,419         8,406
                                                       -----------   -----------
             Total Current Liabilities                   2,783,893     2,428,982

Tenants' Security Deposits - Contra                        669,628       671,366
Other Liabilities                                                0       170,707
Long-Term Debt, less current portion                     5,969,424     6,066,258
Capital Lease Obligation, less current portion                   0         4,718
                                                       -----------   -----------

             Total Liabilities                           9,422,945     9,342,031
                                                       -----------   -----------

Commitments and Contingencies
Stockholders' Equity:
Limited dividend capital stock,
par value $2.15 per share,
Authorized - 348,837 shares;
issued and outstanding - 147,464                           317,048       317,048
    Retained earnings                                    1,489,485     1,278,589
                                                       -----------   -----------

             Total Stockholders' Equity                  1,806,533     1,595,637
                                                       -----------   -----------

        Total Liabilities and Stockholders' Equity     $11,229,478   $10,937,668
                                                       ===========   ===========

The accompanying notes are an integral part of the financial statements.


                                      F-4
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
      STATEMENTS OF NET INCOME, COMPREHENSIVE INCOME AND RETAINED EARNINGS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

                                                          1999          1998
                                                       -----------   -----------
Revenues:
    Rentals                                            $10,537,414   $10,157,928
    Other income                                            82,200        11,206
                                                       -----------   -----------
                                                        10,619,614    10,169,134
                                                       -----------   -----------
Expenses:
    Wages and related costs                              2,489,177     2,424,172
    Real estate taxes                                      707,436       820,053
    Utilities                                            1,853,269     1,631,750
    Maintenance, repairs and decorating                  1,366,523     1,301,089
    Depreciation and amortization                          545,280       546,872
    Mortgage and other interest                            539,711       544,394
    Management and administrative fee                      965,901       977,223
    Bad debt                                                13,729        22,140
    Miscellaneous operating and general expenses         1,724,692     1,591,497
                                                       -----------   -----------

                                                        10,205,718     9,859,190
                                                       -----------   -----------

Income before income taxes                                 413,896       309,944

Provision for income taxes                                 203,000       166,000
                                                       -----------   -----------

Net income and comprehensive income                        210,896       143,944

Retained earnings at beginning of the year               1,278,589     1,134,645
                                                       -----------   -----------

Retained earnings at end of the year                   $ 1,489,485   $ 1,278,589
                                                       ===========   ===========

Earnings per share                                     $      1.43   $      0.98
                                                       ===========   ===========

The accompanying notes are an integral part of the financial statements.


                                      F-5
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                   1999           1998
                                                                -----------    -----------
<S>                                                             <C>            <C>
Cash flows from operating activities:
   Net income                                                   $   210,896    $   143,944
   Adjustments to reconcile net income to net
    cash provided by operating activities:
    Depreciation and amortization                                   545,280        546,872
    Provision for bad debts                                          13,729         22,140
    Deferred income taxes                                           (40,000)       (51,000)
    Changes in assets (increase) decrease:
      Accounts receivable                                             9,582         34,299
      Interest and other assets                                     (21,125)      (129,450)
      Prepaid expenses                                              368,039       (297,873)
      Other assets                                                   (1,142)             0
    Changes in liabilities increase (decrease):
      Accounts payable and accrued expenses                         354,364        514,376
      Unearned rental income                                         (3,329)         2,375
      Other liabilities                                            (170,707)       (80,607)
                                                                -----------    -----------
    Net cash provided by operating activities                     1,265,587        705,076
                                                                -----------    -----------

Cash Flows From Investing Activities:
    Interest earned on reserve fund investments                      (6,868)        (4,849)
    Capital expenditures                                           (540,830)      (540,810)
    Contributions of cash from operations to replacement fund      (977,190)      (740,000)
    Reimbursement of expenditures paid by housing company
      from replacement fund                                         781,771        761,212
                                                                -----------    -----------
    Net cash used in investing activities                          (743,117)      (524,447)
                                                                -----------    -----------

Cash flows from financing activities:
    Payments on long-term debt                                      (88,970)       (81,745)
    Payments on capital lease obligation                             (8,705)        (8,407)
                                                                -----------    -----------
    Net cash used in financing activities                           (97,675)       (90,152)
                                                                -----------    -----------

Net increase in cash                                                424,795         90,477
Cash at beginning of year                                            92,956          2,479
                                                                -----------    -----------
Cash at end of year                                             $   517,751    $    92,956
                                                                ===========    ===========

Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
    Interest                                                    $   540,000    $   544,000
                                                                ===========    ===========
    Income taxes                                                $   248,000    $   200,000
                                                                ===========    ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                      F-6
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

NOTE 1 - CORPORATE ORGANIZATION

            Knickerbocker Village, Inc. (the "Company"), is a public, limited
            dividend housing company formed pursuant to the Housing Laws of the
            State of New York, on September 5, 1933. The Company is regulated by
            the Division of Housing and Community Renewal ("DHCR"), a New York
            State regulatory agency. The Company is located in lower Manhattan
            and operates approximately 1,600 rental units ranging in size from
            studios through three bedroom apartments. The Company requires one
            (1) month's rent as a security deposit on all apartments.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            REVENUE RECOGNITION

            The Company recognizes revenue in the accounting period that
            corresponds to the month for which rental income is billed. Rents
            received but not recognized as revenue as of December 31, are
            recorded as unearned rental income.

            CASH AND CASH EQUIVALENTS

            For the purposes of the statements of cash flows, the Company
            considers all highly liquid debt instruments purchases with a
            maturity of three months or less to be cash equivalents.

            ALLOWANCE FOR DOUBTFUL ACCOUNTS

            Bad debts are provided for on the allowance method based on
            historical experience and management's evaluation of outstanding
            rents receivable.

            FIXED ASSETS

            Fixed assets consist primarily of building improvements and
            equipment and are recorded at cost. Depreciation is provided for
            financial statement purposes on the straight-line method, over the
            estimated useful lives of the fixed asset, which range from 5 to 30
            years. For federal income tax purposes, depreciation is provided for
            on the straight-line and accelerated methods.

            Expenditures for maintenance and repairs are charged to operations
            as incurred. Upon sale or retirement of property, the cost and
            accumulated depreciation are removed from the respective accounts
            and any gain or loss is reflected in operations for the year.
            Depreciation expense was approximately $531,000 and $533,000 for the
            years ended December 31, 1999 and 1998, respectively.


                                      F-7
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

            INCOME TAXES

            Deferred tax assets and liabilities reflect the tax consequences on
            future years of differences between the tax bases of assets and
            liabilities, and their financial reporting amounts, using enacted
            tax rates in effect for the year in which the differences are
            expected to reverse.

            CONCENTRATION OF CREDIT RISK

            The Company places its cash and investments for its Replacement Fund
            (See Note 3) with a high quality credit institution. At times such
            investments may be in excess of FDIC insured limits.

            ESTIMATES

            The preparation of financial statements in conformity with 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.

            RECLASSIFICATIONS

            Certain prior year balances have been reclassified to conform with
            current year classifications.

            FAIR VALUE OF FINANCIAL INSTRUMENTS

            The following methods and assumptions were used to estimate the fair
            value of each class of financial instruments:

            1.    Cash and cash equivalents - The carrying amounts approximate
                  fair value because of the short maturity of these instruments.

            2.    Receivables - The carrying amount approximates fair value
                  because of the short maturity of these instruments.

            3.    Debt - The carrying amounts approximate fair value based on
                  borrowing rates currently available to the Company for bank
                  loans with similar terms.


                                      F-8
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

            IMPAIRMENT OF LONG-LIVED ASSETS

            In accordance with SFAS No. 121, "Accounting For the Impairment of
            Long-Lived Assets and For Long-Lived Assets To Be Disposed Of", the
            Company reviews it long-lived assets, including property and
            equipment, and intangible assets for impairment whenever events or
            changes in circumstances indicate that the carrying amount of the
            assets may not be fully recoverable. To determine recoverability of
            its long-lived assets, the Company evaluates the probability that
            future undiscounted net cash flows will be less than the carrying
            amount of the assets. Impairment costs, if any, are measured by
            comparing the carrying amount of the related assets to their fair
            value.

            COMPREHENSIVE INCOME

            The company adopted SFAS No. 130, "Reporting Comprehensive Income"
            in 1998 for the years ended December 31, 1998 and 1997. There are no
            items of other comprehensive income as defined in the pronouncement.

NOTE 3 - REPLACEMENT, PAINTING AND DECORATING FUNDS

            Maintenance of these funds is requested by the Commissioner of
            Housing and Community Renewal of the State of New York. These funds
            were comprised of the following at December 31, 1999 and 1998:

                                            1999            1999
                                         ---------       ---------
            Cash                         $ 359,880       $ 157,593
                                         =========       =========

NOTE 4 - LONG-TERM DEBT

            On January 31, 1997, the Company entered into an extension and
            modification agreement with The Greater New York Savings Bank, now
            known as Astoria Federal Savings Bank (the "Bank") for the principal
            amount of $6,300,000. The mortgage is payable in monthly
            installments of $50,729, inclusive of interest at the rate of 8 1/2%
            per annum, and is due on February 1, 2007. On the maturity date, the
            Company may pay the remaining principal balance, or extend the term
            of the mortgage for an additional five (5) years. The mortgage is
            collateralized by land, buildings and boilers. The aggregate
            maturities for long-term debt for the five years after December 31,
            1999 are approximately $97,000, (2000); $105,000, (2001); $115,000,
            (2002); $125,000 (2003); and $136,000,(2004); $5,488,000,
            (thereafter).

NOTE 5 - CAPITAL LEASE OBLIGATIONS

            The Company leases certain equipment under long term leases and has
            the option to purchase the equipment at a nominal cost at the
            termination of the leases. Included in building equipment are the
            following assets held under capital leases:

                                                    1999       1998
                                                  -------    -------
            Building Equipment                    $34,961    $34,961
            Less accumulated depreciation          13,104      8,736
                                                  -------    -------
                                                  $21,857    $26,225
                                                  =======    =======


                                      F-9
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

            Future minimum payments for assets under capital leases are as
            follows at December 31, 1999:

            Year Ending December 31 2000                           $  5,577
                                                                   --------

            Total minimum lease payments                              5,577
            Less amounts representing interest                        1,158
                                                                   --------
            Present value of net minimum lease payments            $  4,419
                                                                   ========

NOTE 6 - DIVIDENDS PAYABLE AND CAPITAL STOCK

            The holders of the Company's capital stock cannot at any time
            receive, in repayment of their investment, any sums in excess of the
            par value of the stock together with cumulative dividends at the
            rate of 6% of par value per annum (without interest). Any surplus in
            excess of such amounts upon dissolution reverts to the public
            authorities.

            Cumulative dividends unpaid to December 31, 1999 amounted to
            $589,712 or approximately $4.00 per share and unpaid to December 31,
            1998 amounted to $570,689 or approximately $3.87 per share.
            Dividends amounting to $19,023 were declared during 1979, but were
            not paid as of December 31, 1999. Such dividends were approved by
            the DHCR. No dividends were declared or paid in 1999 or 1998.

NOTE 7 - INCOME TAXES

            The provision for income taxes for the years ended December 31, 1999
            and 1998 consist of the following:

                                                1999        1998
                                             ---------    ---------
            Current Taxes
                   Federal                   $ 189,000    $ 169,000
                   New York City                54,000       48,000
                                             ---------    ---------
                   Total                       243,000      217,000
                                             ---------    ---------

            Deferred Taxes
                   Federal                     (32,000)     (40,000)
                   New York City                (8,000)     (11,000)
                                             ---------    ---------
                   Total                       (40,000)     (51,000)
                                             ---------    ---------

            Provision For Income Taxes       $ 203,000    $ 166,000
                                             =========    =========


                                      F-10
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

            The provision for income taxes differs from amounts computed at
            statutory rates as follows:

                                                       1999       1998
                                                     --------   --------
            Federal income taxes at statutory rate   $141,000   $105,000

            New York City corporation tax -
            net of federal benefit                     54,000     18,000
            Other, net                                  8,000     43,000
                                                     --------   --------
            Total                                    $203,000   $166,000
                                                     ========   ========

            Deferred income taxes reflect the net tax effects of temporary
            differences between the carrying amounts of assets and liabilities
            for financial reporting purposes and the amounts used for income tax
            purposes. At December 31, 1999, and 1998 the net deferred tax assets
            of $360,000 and $320,000, respectively were included in the
            Company's balance sheets as follows.

                                                    1999       1998
                                                  --------   --------
            Deferred tax asset, net - current     $ 72,000   $ 71,000
            Deferred tax asset, net - Long term    288,000    249,000
                                                  --------   --------
            Deferred tax asset, net               $360,000   $320,000
                                                  ========   ========

            Significant components of the Company's net deferred tax asset at
            December 31, 1999 and 1998 are as follows:

                                                    1999         1998
                                                 ---------    ---------
            Tax effects of:
              Accounts receivable                $ 133,000    $ 129,000
              Unearned rental income                10,000       13,000
              Buildings and building equipment     577,000      498,000
                                                 ---------    ---------
            Gross deferred tax asset               720,000      640,000
              Valuation allowance                 (360,000)    (320,000)
                                                 ---------    ---------
            Net deferred tax asset               $ 360,000    $ 320,000
                                                 =========    =========

            Management believes that a valuation allowance is appropriate given
            the current estimates of future taxable income, as well as
            consideration of available tax planning strategies. If the Company
            is unable to generate sufficient taxable income in the future
            through operating results, increases in the valuation allowance will
            be required through a charge to expense. However, if the Company
            achieves profitability to utilize a greater portion of the deferred
            tax asset, the valuation allowance will be reduced through a credit
            to income. The net change in the valuation allowance for the years
            ended December 31, 1999 and 1998 were increases of $40,000 and
            $50,000, respectively.

NOTE 8 - MANAGEMENT FEE

            The management fee, set by DHCR, was paid to Cherry Green Property
            Corp., (Cherry Green), the owner of approximately 95% of the
            outstanding shares of the Company. Such fee is reviewed and may be
            adjusted annually, effective July 1 of each year, by the DHCR.


                                      F-11
<PAGE>

                           KNICKERBOCKER VILLAGE, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

            On October 21, 1998 and September 2, 1999, the DHCR approved
            increases in the management fee of approximately 5.5% effective July
            1, 1998 and approximately 1.4% effective July 1, 1999, respectively.

NOTE 9 - PENSION PLAN

            Certain employees of the Company are covered under a union
            sponsored, multi-employer defined benefit pension plan. This plan is
            not administered by the Company and contributions are determined by
            the union. The Company's contributions for this plan were
            approximately $80,000 and $71,000 for the years ended December 31,
            1999 and 1998 respectively.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

            The company in accordance with the Modification Agreement with its
            Bank dated January 30, 1997 (Note 4), has made a commitment to
            complete asbestos abatement work and lead paint remediation work of
            approximately $425,000. As of December 31, 1999, the commitment has
            been fulfilled. The costs of any additional asbestos abatement or
            lead paint remediation, if necessary, cannot be determined at this
            time.

NOTE 11 - RENTAL INCOME

            During December 1998, the Company received a two step rent increase,
            which was approved by the DHCR. The first increase of approximately
            3.3% was effective February 1, 1999. The second increase of
            approximately 3.2% will be deferred by the Company from February 1,
            2000 to April 1, 2000.

NOTE 12 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

            Prepaid expenses and other current assets in the accompanying
            balance sheets at December 31, 1999 and 1998 are as follows:

                                             1999         1998
                                          ----------   ----------

            Escrow Account                $  348,429   $  589,395
            Prepaid:
              Insurance                      505,029      589,287
              Real Estate Taxes              348,897      386,924
              Supplies                        93,397       95,011
              Interest                             0       16,173
              Expenses - Other                 1,999            0
              Federal Corporation Taxes       11,000            0
                                          ----------   ----------
                   TOTAL                  $1,308,751   $1,676,790
                                          ==========   ==========


                                      F-12
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.

(Registrant): KNICKERBOCKER VILLAGE, INC.:


By (Signature and Title)  :S/ROBERT GERSHON
--------------------------------------------------------------------------------
              ROBERT GERSHON, Director and Treasurer

Dated:  March 27, 2000

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


(Signature and Title) :S/IRENE PLETKA
--------------------------------------------------------------------------------
           IRENE PLETKA, Director and President

Dated:  March 27, 2000


(Signature and Title) :S/PETER PLETKA
--------------------------------------------------------------------------------
            PETER PLETKA, Vice President

Dated:   March 27, 2000


(Signature and Title) :S/MELVIN GERSHON
--------------------------------------------------------------------------------
           MELVIN GERSHON, Director and Secretary

Dated:   March 27, 2000


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