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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:QuarterlyFinancialInformationTextBlock-->
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt">
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Note A Interim Period Reporting
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In the opinion of management, the accompanying unaudited condensed financial statements of 60
East 42<sup style="font-size: 85%; vertical-align: text-top">nd</sup> St. Associates L.L.C. (“Registrant”) reflect all adjustments, consisting of
normal recurring accruals, necessary to present fairly the financial position of Registrant as of
June 30, 2011 and its results of operations for the three and six months ended June 30, 2011 and
2010 and cash flows for the six months ended June 30, 2011 and 2010. Information included in the
condensed balance sheet as of December 31, 2010 has been derived from the audited balance sheet
included in Registrant’s Form 10-K for the year ended December 31, 2010 (the “10-K”) previously
filed with the Securities and Exchange Commission (the “SEC”). Pursuant to rules and regulations
of the SEC, certain information and disclosures normally included in financial statements prepared
in accordance with U.S. generally accepted accounting principles have been condensed or omitted
from these financial statements unless significant changes have taken place since the end of the
most recent fiscal year. Accordingly, these unaudited condensed financial statements should be
read in conjunction with the financial statements and notes thereto and the other information
contained in the 10-K. The results of operations for the three and six months ended June 30, 2011
are not necessarily indicative of the results to be expected for any interim period or the full
year.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Reclassification
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Certain prior year balances have been reclassified to conform with the current period presentation.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Note B Organization
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Registrant was originally organized as a partnership on September 25, 1958. On October 1,
1958, Registrant acquired fee title to One Grand Central Place, formerly known as the Lincoln
Building, at the address 60 East 42nd Street, New York, New York (the “Building”) and the land
there under (the “Property”). On November 28, 2001, Registrant converted to a limited liability
company under New York law and is now known as 60 East 42nd St. Associates L.L.C. The conversion
did not change any aspect of the assets and operations of Registrant other than to protect its
participants from liability to third parties. Registrant’s members (“Members”) are Peter L. Malkin
and Anthony E. Malkin (collectively, the “Agents”), each of whom also acts as an agent for holders
of participations (“Participations”) in their respective member interest in Registrant (the
“Participants”). The Members in Registrant hold senior positions at Malkin Holdings LLC (“Malkin
Holdings” or “Supervisor”) (formerly Wien & Malkin LLC), One Grand Central Place, 60 East 42nd
Street, New York, New York, which provides supervisory and other services to Registrant and to
Lessee. See Note E below.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 3 - us-gaap:OperatingLeasesOfLesseeDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Note C Lease
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Registrant does not operate the Property. Registrant leases the Property to Lincoln Building
Associates L.L.C. (“Lessee”) pursuant to an operating lease as modified (the “Lease”), which is
currently set to expire on September 30, 2033. Lessee is a New York limited liability company whose
members consist of, among others, entities for the benefit of members of Peter L. Malkin’s family.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Lease provides that Lessee is required to pay rent to Registrant as follows:
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">(i) annual basic rent (“Basic Rent”) equal to the sum of $24,000 plus the constant annual
mortgage charges on all mortgages. In accordance with the Ninth Lease Modification Agreement dated
November 5, 2009, Basic Rent was increased to cover debt service on a $100,000,000 mortgage. See
Note D. Basic Rent will be increased or decreased upon the refinancing of the mortgages provided
that the aggregate principal balance of all mortgages now or hereafter placed on the Property does
not exceed $100,000,000 plus refinancing costs.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">(ii) additional rent (“Additional Rent”) equal to, on an annual basis, the lesser of (x)
Lessee’s net operating income (as defined) for the lease year ending September 30 or (y) $1,053,800
($87,817 per month) and further additional rent (“Further Additional Rent”) equal to 50% of any
remaining balance of Lessee’s net operating income for such lease year. (Lessee has no obligation
to make any payment of Additional Rent or Further Additional Rent until after Lessee has recouped
any cumulative operating loss accruing from and after September 30, 1977. There is currently no
accumulated operating loss against which to offset payment of Additional Rent or Further Additional
Rent.)
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The Lease also requires an advance against Additional Rent equal to, on an annual basis, the
lesser of (x) Lessee’s net operating income for the preceding lease year or (y) $1,053,800 which is
recorded in revenue in monthly installments of $87,817, which, in the latter amount, will permit
basic distributions to Participants at an annual rate of approximately 14.95% per annum on their
remaining cash investment in Registrant; provided, however, if such advances exceed Lessee’s net
operating income for any lease year, advances otherwise required during the subsequent lease year
shall be reduced by an amount equal to such excess until Lessee shall have recovered, through
retention of net operating income, the full amount of such excess. After the Participants have
received distributions equal to a return of 14% per annum, $7,380 is paid to Supervisor from the
advances against Additional Rent.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Lessee is required to make an annual payment to Registrant of Further Additional Rent, which,
as explained above, is the amount representing 50% of the remaining net operating income reported
by Lessee for the lease year ending September 30th after deducting the advance against Additional
Rent. The Lease requires that the report be delivered by Lessee to Registrant annually within 60
days after the end of each such lease year. Since it is not practicable to estimate Further
Additional Rent for the lease year ending on September 30<sup style="font-size: 85%; vertical-align: text-top">th</sup> which would be allocable to
the first nine months of the lease year until Lessee, pursuant to the Lease, renders to Registrant
a report on the operation of the Property. Registrant recognizes Further Additional Rent when
earned from the Lessee at the close of the lease year ending September 30<sup style="font-size: 85%; vertical-align: text-top">th </sup>and records
such amount in revenue during the three months ended September 30th.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">For the lease year ended September 30, 2010, Lessee reported net operating income of
$1,164,498. Lessee paid advances against Additional Rent of $1,053,800 for that lease year prior to
September 30, 2010 and Further Additional Rent of $55,347 subsequent to September 30, 2010. The
Further Additional Rent of $55,347 represents 50% of the excess of the Lessee’s net operating
income of $1,164,498 over $1,053,800. During November 2010 Registrant did not make any additional
distribution of Further Additional Rent received for the lease year ending September 30, 2010 to
Participants but added to the contingency reserves of Registrant.
</div>
<!-- Folio -->
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</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 4 - eastas:MortgagesPayableTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Note D Mortgages Payable
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On November 29, 2004, a new first mortgage (“Mortgage”) was placed on the Property in the
amount of $84,000,000 with Prudential Insurance Company of America to provide financing for the
improvement program described below. At closing, $49,000,000 was drawn to pay off the former first
mortgage with Morgan Guaranty Trust Company in the amount of $12,020,814 and the second mortgage in
the amount of $27,979,186 with Emigrant Savings Bank. The remaining $35,000,000 available under the
Mortgage was drawn on various dates through July 5, 2007. The proceeds of $49,000,000 drawn at
closing and all subsequent draws have been used to pay for refinancing costs and capital
improvements as needed. The initial draw of $49,000,000 and all subsequent draws required constant
equal monthly payments of interest only, at the rate of 5.34% per annum, until July 5, 2007.
Commencing August 5, 2007, Registrant is required to make equal monthly payments of $507,838
applied to interest and then principal calculated on a 25-year amortization schedule. The entire
$84,000,000 has been drawn and at June 30, 2011 the balance is $77,010,194. The Mortgage matures on
November 5, 2014 at which time the principal balance will be $69,797,589.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On November 5, 2009 Registrant took out an additional $16,000,000 loan with Prudential
Insurance Company of America secured by a second mortgage on the Property, subordinate to the first
mortgage and to be used for capital improvements. The loan requires payments of interest at 7% per
annum and principal in the aggregate amount of $113,085 calculated on a twenty-five year
amortization schedule and is co-terminus with the first mortgage. At June 30, 2011, the balance is
$15,604,356. The mortgage matures on November 5, 2014 with a principal balance of $14,613,782.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The mortgage loans may be prepaid at any time, in whole only, upon payment of a prepayment
penalty based on a yield maintenance formula. There is no prepayment penalty if the mortgages are
paid in full during the last 60 days of the term.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The estimated fair value of Registrant’s mortgage debt based on available market information
is approximately $97,019,193 as of June 30, 2011.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Mortgage financing costs of $2,873,632 were capitalized by Registrant and are being amortized
ratably over the terms of the mortgages.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In 1999, the Participants of Registrant and the members in Lessee consented to a building
improvements program (the “Program”) estimated to cost approximately $22,800,000. In 2000, the
Participants of Registrant and members in Lessee approved an increase in the Program from
$22,800,000 to approximately $28,000,000 under substantially the same conditions as had
previously been approved. To induce the Lessee to approve the Program, Registrant authorized
the Agents to grant to the Lessee, upon completion of the Program, the right to further
extensions of the Lease to 2083. The Program was further increased in 2004 to up to
$100,000,000. Such increase is expected to permit extending the Lease beyond 2083, based on the
net present benefit to Registrant of the improvements made. The granting of such Lease extension
rights upon completion of the Program is expected to trigger a New York State Transfer Tax under
current tax rules, which will be paid from mortgage proceeds and/or the Lessee’s operating cash
flow. As of June 30, 2011, Registrant had incurred costs related to the Program of $73,394,966
and estimates that the Program upon completion will be approximately $100,000,000 including
sprinkler work, required to be completed by 2019. The Participants of Registrant and the
members in Lessee had approved increased refinancing of $16,000,000 from the total of
$84,000,000 provided by the Mortgage to up to $100,000,000. As noted above, the additional
$16,000,000 financing closed on November 5, 2009. Costs of the Program in excess of financing,
if applicable, will be funded out of Lessee’s operating cash flow.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 5 - us-gaap:RelatedPartyTransactionsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Note E Supervisory Services
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Registrant pays Supervisor for supervisory services and disbursements. The basic fee has been
payable at the rate of $24,000 per annum, payable $2,000 per month, since October 1, 1958. The
Agents approved an increase in such fee in an amount equal to the increase in the consumer price
index since such date, resulting in an increase in the basic fee to $180,000 per annum effective
July 1, 2010. The basic fee will be subject to further increase in accordance with any future
increase in the consumer price index. The fee is payable (i) not less than $2,000 per month and
(ii) the balance out of available reserves from Further Additional Rent. If Further Additional Rent
is insufficient to pay such balance, any deficiency shall be payable in the next year in which
Further Additional Rent is sufficient. In addition, the Agents also approved payment by Registrant,
effective July 1, 2010, of the expenses in connection with regular accounting services related to
maintenance of Registrant’s books and records. Such expenses were previously paid by Supervisor.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The basic supervisory services provided to Registrant by Supervisor include, but are not
limited to, maintaining all of its entity and Participant records, performing physical inspections
of the Building, providing or coordinating certain counsel services to Registrant, reviewing
insurance coverage and conducting annual supervisory review meetings, receipt of monthly rent from
Lessee, payment of monthly and additional distributions to the Participants, payment of all other
disbursements, confirmation of the payment of real estate taxes, active review of financial
statements submitted to Registrant by Lessee and financial statements audited by and tax
information prepared by Registrant’s independent registered public accounting firm, and
distribution of related materials to the Participants. Supervisor also prepares quarterly, annual
and other periodic filings with the SEC and applicable state authorities.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Registrant pays Supervisor for other services at hourly rates. Pursuant to the fee
arrangements described herein, Registrant incurred supervisory service fees of $93,690 for the
six-month period ended June 30, 2011. Supervisory fees were $15,690 for the six-month period ended
June 30, 2010. No remuneration was paid during the six-month periods ended June 30, 2011 and 2010
by Registrant to any of the Members.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Supervisor also receives a payment (“Additional Payment”) equal to 10% of all distributions to
Participants in Registrant in any year in excess of the amount representing a return to them at the
rate of 14% per annum on their remaining cash investment in Registrant (which remaining cash
investment at June 30, 2011 was equal to the Participants’ original cash investment of $7,000,000).
For tax purposes, such Additional Payment is recognized as a profits interest, and the Supervisor
is treated as a partner, all without modifying each Participant’s distributive share of reportable
income and cash distribution. Supervisor receives $7,380 a year as an advance against the
Additional Payment, which Registrant expenses monthly.
</div>
<p align="center" style="font-size: 10pt"> 
<!-- Folio -->
<!-- /Folio -->
</p>
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Reference is made to Note C above for a description of the terms of the Lease between
Registrant and Lessee. As of June 30, 2011, entities for the benefit of Peter L. Malkin’s family
own member interests in Lessee. The respective interests of the Members in Registrant and Lessee
arise solely from ownership of their respective Participations in Registrant and, in the case of
Peter L. Malkin, entity ownership of member interests for the benefit of family members in
Lessee. The Members as such receive no extra or special benefit not shared on a pro rata basis
with all other Participants in Registrant or members in Lessee. However, all of the Members hold
senior positions at Supervisor (which supervises Registrant and Lessee) and, by reason of their
positions at Supervisor, may receive income attributable to supervisory or other remuneration paid
to Supervisor by Registrant and Lessee.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Subsequent Events
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Subsequent events have been evaluated for potential recognition and disclosure.
</div>
</div>
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