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|INDEPENDENT AUDITORS REPORT
PDL, Inc. and Associates,Limited Copartnership
We have audited the accompanying balance sheets of PDL, Inc. and Associates, Limited Copartnership
(the Partnership) as of December 31, 2003 and 2002, and the related statements of operations
and partners deficiency and of cash flows for each of the three years in the period ended December
31, 2003. These financial statements are the responsibility of the Partnerships management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America. 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, such financial statements present fairly, in all material respects, the financial position
of the Partnership at December 31, 2003 and 2002, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Stamford, ConnecticutMarch 23, 2004
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|



|PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP
|-----------------------------------------------
|                                               
|BALANCE SHEETS
DECEMBER 31, 2003 AND 2002      
|                                               

|                                                                 |  |   |             |   |  
|---------------------------------------------------------------- |  | - | ----------- | - | -
|
|                                                                 |  |   |             |   |  
|CASH AND CASH EQUIVALENTS                                        |  | $ | 1,097,648   |   | $
|                                                                 |  |  
|                                                                 |  |   |             |   |  
|ACCOUNTS RECEIVABLE - Net of valuation allowance of $61,429      |  |   | 55,638      |   |  
|                                                                 |  |  
|in 2003 and $77,930 in 2002                                      |  |   |             |   |  
|                                                                 |  |   |             |   |  
|PROPERTY - Net of accumulated depreciation of $3,619,297 in 2003 |  |   | 4,295,672   |   |  
|and $3,308,503 in 2002                                           |  |   |             |   |  
|                                                                 |  |   |             |   |  
|CASH IN ESCROW                                                   |  |   | 621,367     |   |  
|                                                                 |  |  
|                                                                 |  |   |             |   |  
|PREPAID EXPENSES                                                 |  |   | 122,627     |   |  
|                                                                 |  |  
|                                                                 |  |   |             |   |  
|DEFERRED MORTGAGE COSTS - Net of accumulated                     |  |   |             |   |  
|amortization of $211,263                                         |  |   | 226,295     |   |  
|                                                                 |  |   |             |   |  
|                                                                 |  |   |             |   |  
|TOTAL                                                            |  | $ | 6,419,247   |   | $
|                                                                 |  |  
|                                                                 |  |  
|                                                                 |  |  
|                                                                 |  |   |             |   |  
|LIABILITIES AND PARTNERS DEFICIENCY                             |  |   |             |   |  
|                                                                 |  |   |             |   |  
|ACCOUNTS PAYABLE                                                 |  | $ | 115,367     |   | $
|                                                                 |  |   |             |   |  
|ACCRUED EXPENSES                                                 |  |   | 322,260     |   |  
|                                                                 |  |  
|                                                                 |  |   |             |   |  
|OTHER LIABILITIES                                                |  |   | 314,039     |   |  
|                                                                 |  |  
|                                                                 |  |   |             |   |  
|MORTGAGE PAYABLE                                                 |  |   | 16,531,798  |   |  
|                                                                 |  |   |             |   |  
|                                                                 |  |   |             |   |  
|Total liabilities                                                |  |   | 17,283,464  |   |  
|                                                                 |  |   |             |   |  
|PARTNERS DEFICIENCY                                             |  |   | (10,864,217 | ) |  
|                                                                 |  |   |             |   |  
|                                                                 |  |   |             |   |  
|TOTAL                                                            |  | $ | 6,419,247   |   | $
|                                                                 |  |   |             |   |  
|                                                                 | 
|See notes to financial statements.                               | 

|- 2 -
|-----



|PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP                                               
|----------------------------------------------------------------------------------------------
|                                                                                              
|STATEMENTS OF OPERATIONS AND PARTNERS DEFICIENCY
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
|                                                                                              

|                                          |  |   |             |   |   |            
|----------------------------------------- |  | - | ----------- | - | - | -----------
|
|                                          |  |   |             |   |   |            
|INCOME:                                   |  |   |             |   |   |            
|Rent                                      |  | $ | 4,637,093   |   | $ | 4,304,830  
|Other                                     |  |   | 79,420      |   |   | 96,783     
|                                          |  |   |            
|                                          |  |   |             |   |   |            
|                                          |  |   |             |   |   |            
|Total income                              |  |   | 4,716,513   |   |   | 4,401,613  
|                                          |  |   |            
|                                          |  |   |             |   |   |            
|                                          |  |   |             |   |   |            
|EXPENSES:                                 |  |   |             |   |   |            
|Interest                                  |  |   | 1,244,476   |   |   | 1,259,676  
|Utilities                                 |  |   | 603,340     |   |   | 551,205    
|Depreciation                              |  |   | 310,794     |   |   | 310,924    
|Repairs and maintenance                   |  |   | 313,406     |   |   | 318,069    
|Real estate taxes, other taxes and fees   |  |   | 277,551     |   |   | 263,562    
|Insurance                                 |  |   | 224,777     |   |   | 196,925    
|Management fees                           |  |   | 154,506     |   |   | 130,687    
|Rental expenses, including commissions    |  |   | 72,055      |   |   | 80,787     
|Security services                         |  |   | 72,212      |   |   | 72,270     
|Salaries and wages                        |  |   | 70,472      |   |   | 71,783     
|Amortization of mortgage costs            |  |   | 44,658      |   |   | 42,024     
|Other                                     |  |   | 38,602      |   |   | 36,927     
|Parking                                   |  |   | 23,040      |   |   | 23,040     
|Professional services                     |  |   | 23,005      |   |   | 17,475     
|Provision for bad debtsnet of recoveries |  |   | 24,418      |   |   | 16,752     
|                                          |  |   |            
|                                          |  |   |             |   |   |            
|                                          |  |   |             |   |   |            
|Total expenses                            |  |   | 3,497,312   |   |   | 3,392,106  
|                                          |  |   |            
|                                          |  |   |             |   |   |            
|                                          |  |   |             |   |   |            
|NET INCOME                                |  |   | 1,219,201   |   |   | 1,009,507  
|                                          |  |   |            
|                                          |  |   |             |   |   |            
|PARTNERS DEFICIENCYBeginning of year    |  |   | (10,693,418 | ) |   | (10,732,925
|                                          |  |   |             |   |   |            
|DISTRIBUTIONS                             |  |   | (1,390,000  | ) |   | (970,000   
|                                          |  |   |            
|                                          |  |   |             |   |   |            
|                                          |  |   |             |   |   |            
|PARTNERS DEFICIENCYEnd of year          |  | $ | (10,864,217 | ) | $ | (10,693,418
|                                          |  |   |             |   |   |            
|                                          | 
|See notes to financial statements.        | 

|- 3 -
|-----



|PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP                      
|---------------------------------------------------------------------
|                                                                     
|STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
|                                                                     

|                                                         | 2003 |   | 2002       |   | 2001 |           
|-------------------------------------------------------- | ---- | - | ---------- | - | ---- | ----------
|CASH FLOWS FROM OPERATING ACTIVITIES:                    |      |   |            |   |      |           
|Net income                                               |      | $ | 1,219,201  |   | $    | 1,009,507 
|Adjustments to reconcile net income to net cash provided |      |   |            |   |      |           
|by operating activities:                                 |      |   |            |   |      |           
|Depreciation and amortization                            |      |   | 355,452    |   |      | 352,948   
|Provision for bad debts                                  |      |   | 24,418     |   |      | 16,752    
|Changes in assets and liabilities:                       |      |   |            |   |      |           
|Increase in notes and accounts receivable                |      |   | (8,901     | ) |      | (25,133   
|Decrease (increase) in prepaid expenses                  |      |   | 105,581    |   |      | (125,613  
|Increase in cash in escrow                               |      |   | (45,369    | ) |      | (26,711   
|(Decrease) increase in accounts payable                  |      |   | (6,768     | ) |      | 3,166     
|(Decrease) increase in accrued expenses                  |      |   | (48,726    | ) |      | 6,869     
|Increase (decrease) in other liabilities                 |      |   | 16,814     |   |      | (10,575   
|                                                         |      |   |            |   |      |           
|                                                         |      |   |            |   |      |           
|Net cash provided by operating activities                |      |   | 1,611,702  |   |      | 1,201,210 
|                                                         |      |   |           
|                                                         |      |   |            |   |      |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                    |      |   |            |   |      |           
|Building additions and improvements                      |      |   | (134,616   | ) |      | (125,008  
|                                                         |      |   |           
|                                                         |      |   |            |   |      |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                    |      |   |            |   |      |           
|Mortgage principal payments                              |      |   | (205,771   | ) |      | (190,981  
|Distributions to partners                                |      |   | (1,390,000 | ) |      | (970,000  
|                                                         |      |   |            |   |      |           
|                                                         |      |   |            |   |      |           
|Net cash used in financing activities                    |      |   | (1,595,771 | ) |      | (1,160,981
|                                                         |      |   |           
|                                                         |      |   |            |   |      |           
|NET (DECREASE) INCREASE IN CASH                          |      |   |            |   |      |           
|AND CASH EQUIVALENTS                                     |      |   | (118,685   | ) |      | (84,779   
|                                                         |      |   |            |   |      |           
|CASH AND CASH EQUIVALENTS - Beginning of year            |      |   | 1,216,333  |   |      | 1,301,112 
|                                                         |      |   |           
|                                                         |      |   |            |   |      |           
|                                                         |      |   |            |   |      |           
|CASH AND CASH EQUIVALENTS - End of year                  |      | $ | 1,097,648  |   | $    | 1,216,333 
|                                                         |      |   |           
|                                                         |      |   |            |   |      |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW                     |      |   |            |   |      |           
|INFORMATION:                                             |      |   |            |   |      |           
|                                                         |      |   |            |   |      |           
|CASH PAID FOR INTEREST                                   |      | $ | 1,245,362  |   | $    | 1,260,498 
|                                                         |      |   |            |   |      |           
|                                                         |      |   |           
|                                                         |     
|See notes to financial statements.                       |     

|- 4 -
|-----



|PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
|--------------------------------------------------------------------------------------------------------------------------
|                                                                                                                          
|                                                                                                                          
|1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                             
|                                                                                                                          

| | General- PDL, Inc. and Associates, Limited Copartnership (the Partnership) was formed in June
of 1990. The general partner is PDL, Inc., a wholly-owned subsidiary of Presidential Realty Corporation.
The primary asset of the Partnership is an office building located in Hato Rey, Puerto Rico, known
as Home Mortgage Plaza.                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Income Taxes - No provision has been made for income taxes because, as a partnership, such taxes are the responsibility
of the individual partners.                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Property - Property, principally a building, is stated at cost less accumulated depreciation. Depreciation
is provided on the straight-line method over the estimated useful lives of the assets, generally
ten to thirty-one years. Repairs and maintenance are charged to operations as incurred.                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The Partnership reviews its investment in its property for possible impairment at least annually, and
more frequently if circumstances warrant. Impairment is determined to exist when estimated amounts
recoverable through future operations on an undiscounted basis are below the propertys carrying
value. If the property is determined to be impaired, it would be written down to its estimated fair
value. No impairment exists at December 31, 2003 and 2002.                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Deferred Mortgage Costs - Deferred mortgage costs are amortized over the term of the mortgage using the interest method.                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Use of Estimates  - The preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America 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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Cash and Cash Equivalents - For the purposes of this statement, the Partnership considers liquid investments purchased having
a maturity of three months or less to be cash equivalents.                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Cash in Escrow - Cash in escrow is restricted deposits held by the mortgagee for payments of real estate taxes, insurance,
leasing commissions and replacements for the property.                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Revenue Recognition - The Partnership acts as a lessor under operating leases with rental revenue recognized on a straight-line
basis over the related lease term.                                                                                                                                                                                                                                                                                                                                  

|                   
|-------------------
|2. MORTGAGE PAYABLE
|                   

| | The building is subject to a mortgage payable dated April 1998 with an original principal balance of
$17,500,000. The non-recourse mortgage bears interest at a rate of 7.38% per annum until May 11,
2008, at which time it is the intent of management to repay the outstanding principal balance through
a refinancing of the property. However, the maturity date of the mortgage is May 11, 2028 and if
the mortgage is not repaid in 2008, the interest rate will be increased by 2% and additional repayments
will
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|- 5 -
|-----



| | be required from the surplus cash flows from the operations of the property (after payment of operating
expenses) which will be applied to the outstanding principal amount.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                             
| | Scheduled principal payments on the mortgage payable are as follows:                                                                                                        

|                    | 
|------------------- | 
|2004                | 
|2005                | 
|2006                | 
|2007                | 
|2008 and thereafter | 
|                    | 
|                    | 
|                    | 
|                    | 

|                             
|-----------------------------
|3. RELATED PARTY TRANSACTIONS
|                             

| | Included in the statement of operations and partners deficiency are $15,000, $15,000 and $12,500
of general partner administrative fees for the years ended December 31, 2003, 2002, and 2001, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               
|-------------------------------
|4. MINIMUM FUTURE RENTAL INCOME
|                               

| | The Partnership is the lessor for various commercial tenants under non-cancelable operating leases.
| | ---------------------------------------------------------------------------------------------------
| |                                                                                                    
| | The future non-cancelable lease payments are as follows:                                           

|                    | 
|------------------- | 
|2004                | 
|2005                | 
|2006                | 
|2007                | 
|2008 and thereafter | 
|                    | 
|                    | 
|                    | 
|                    | 

|      
|------
|******

|- 6 -
|-----