CHARTER MUNICIPAL MORTGAGE ACCEPTANCE CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000
OR

____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File Number 1-13237

CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
(Exact name of Registrant as specified in its Trust Agreement)

Delaware 13-3949418
- ----------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

625 Madison Avenue, New York, New York 10022
- -------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 421-5333

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
-------------------
Shares of Beneficial Interest

Name of each exchange on which registered:
------------------------------------------
American Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, 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-K or any amendment to this
Form 10-K. [X]

The approximate market value of the voting and non-voting common equity
held by non-affiliates of the Registrant as of March 9, 2001 as $336,020,034,
based on a price of $15.00 per share, the closing sales price for the
Registrant's shares of beneficial interest on the American Stock Exchange on
that date.

As of March 9, 2001 there were 22,700,340 outstanding shares of the
Registrant's shares of beneficial interest.

DOCUMENTS INCORPORATED BY REFERENCE

Part III: Those portions of the Registrant's Proxy Statement for Annual Meeting
of Shareholders to be held on June 12, 2001, which are incorporated into Items
10, 11, 12 and 13.

Index to exhibits may be found on page 60
Page 1 of 75

CAUTIONARY STATEMENT FOR PURPOSES OF
THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES,"
"ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN
THIS ANNUAL REPORT ON FORM 10-KPURSUANT TO THE "SAFE HARBOR" PROVISION OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING
STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.

PART I
Item 1. Business.

General
- -------

Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware
business trust principally engaged in the acquisition and ownership (directly or
indirectly) of tax-exempt multifamily housing revenue bonds. The Company may
also acquire, at times, taxable multifamily housing revenue bonds. Both the
tax-exempt and the taxable bonds are herein referred to as Revenue Bonds
("Revenue Bonds"). Accordingly, the Company produces tax-exempt income which it
directly passes through to its shareholders in the form of a quarterly
tax-exempt dividend.

Generally, Revenue Bonds are secured by mortgage loans on underlying properties
("Underlying Properties"). Revenue Bonds that contain provisions for the Company
to receive additional interest payments by participating with the borrower in a
portion of the cash flow, sale or refinancing proceeds on the Underlying
Properties are referred to as "participating"; Revenue Bonds lacking this
provision are referred to as "non-participating". As of December 31, 2000, 98.5%
of the Revenue Bond par amount owned by the Company were first mortgage bonds.

As of December 31, 2000 there were 59 Revenue Bonds, with a par value of
$429,371,365, with Underlying Properties either under construction or undergoing
major rehabilitation. The Underlying Properties securing these Revenue Bonds are
garden apartments located in major metropolitan markets in 18 states. The
properties range in size from 70 units to 549 units with an average size of 215
units. Generally, the properties have a market appropriate, competitive amenity
package which may include swimming pools, clubhouses, exercise rooms and tennis
courts. The remaining Underlying Properties in the portfolio have stabilized
occupancies. The stabilized portfolio as of December 31, 2000 reports an average
occupancy of 96.3%.

The Company does not operate as a mortgage REIT, which generally utilize high
levels of leverage and acquire subordinated interests in commercial and/or
residential mortgage-backed securities. Pursuant to its Trust Agreement, the
Company is only able to incur leverage or other financing up to 50% of the
Company's Total Market Value (as defined in the Trust Agreement) as of the date
incurred. Mortgage REITs typically incur leverage at ratios ranging from between
3:1 to 10:1. Furthermore, the Revenue Bonds owned by the Company generally call
for ten-year restrictions from prepayments, eliminating the Company's
susceptibility to significant levels of repayment risk as a result of interest
rate reductions. Due to the Company's low level of leverage, the Company is less
likely than other higher leveraged REITs to be affected by any lack of
liquidity. The Company's portfolio does not contain assets that are especially
vulnerable to volatility during periods of interest rate fluctuations.
Consistent with the foregoing, the Company focuses on providing investors with a
stable level of distributions, even through unstable markets.

Organization
- ------------

The Company was formed on October 1, 1997 as the result of the merger (the
"Merger") of three publicly registered limited partnerships, Summit Tax Exempt
Bond Fund, L.P., Summit Tax Exempt L.P. II and Summit Tax Exempt L.P. III (the
"Partnerships"). One of the general partners of the Partnerships was an
affiliate of Related Capital Company ("Related"), a nationwide, fully integrated
real estate financial services firm. Unless otherwise indicated, the "Company",
as hereinafter used, refers to Charter Municipal Mortgage Acceptance Company and
its consolidated subsidiaries. Pursuant to the Merger, the Company issued shares
of beneficial interest ("Common Shares") to all partners in each of the
Partnerships in exchange for their proportionate interests. The Common Shares
commenced trading on the American Stock Exchange on October 1, 1997 under the
symbol "CHC."

The Company is governed by a board of trustees comprised of three independent
managing trustees and four managing trustees who are affiliated with Related.
The Company has engaged Related Charter LP (the "Manager"), an affiliate of
Related, to manage its day-to-day affairs. Through the Manager, Related offers
the Company a core group of experienced staff and executive management providing
the Company with services on both a full and part-time basis. These services
include, among other things, acquisition, financial, accounting, capital
markets, asset monitoring, portfolio management, investor relations and public
relations services. The Company believes that it benefits significantly from its
relationship with Related, since Related provides the Company with resources
that are not generally available to smaller-capitalized, self-managed companies.

Business Plan
- -------------

In order to generate tax-exempt income to pass through to the Company's
shareholders and, as a result, enhance the value of the Company's Common Shares,
the Company invests in or acquires tax-exempt bonds secured by multifamily
properties. The Company believes that it can earn above market rates of interest
on its bond acquisitions by focusing its efforts primarily on affordable
housing. The Manager estimates that nearly 50% of all new multifamily
development contains an affordable component which produces tax credits pursuant
to Section 42 of the Internal Revenue Code. The traditional method of financing
such tax-exempt properties requires the involvement of credit enhancement,
rating agencies and investment bankers. The up-front cost of such financing is
generally much higher than traditional multifamily financing. The Company has
designed a Direct Purchase Program specifically to appeal to developers of such
properties through which the Company will invest in or acquire tax-exempt bonds
without the cost associated with credit enhancement, rating agencies and
investment bankers. The Company believes that the up-front cost savings to the
developer will translate into a higher than market interest rate on the bonds
acquired by the Company.

The Company believes that it is well positioned to market its Direct Purchase
Program as a result of the Manager's affiliation with Related. The Manager is a
single purpose affiliate of Related and is controlled by the same individuals
and entities who own Related. The Manager benefits from its affiliation with
Related because the Manager is able to utilize Related's resources and
relationships in the multifamily affordable housing finance industry to source
potential borrowers of first mortgage bonds that the Company could invest in or
acquire. Related and its predecessor companies have specialized in offering debt
and equity products to mid-market multifamily owners and developers for over 29
years. Related has provided debt and equity financing to properties valued at
over $11 billion. According to the 2000 National Multihousing Council survey,
Related is the third largest owner of apartments in the United States.

In addition to tax-exempt bonds secured by multifamily properties producing tax
credits, the Company may acquire other multifamily tax-exempt bonds including
those issued to finance low-income multifamily projects and facilities for the
elderly owned by Section 501(c)(3) not-for-profit organizations. The Company
also has a portion of assets that produce a small amount of taxable income.

Revenue Bonds - General
- -----------------------

The principal and interest payments on each Revenue Bond are payable only from
the cash flows of the Underlying Properties, including proceeds from a sale of
an Underlying Property or the refinancing of the mortgage loan securing such
Revenue Bonds (the "Mortgage Loans"). None of the Revenue Bonds constitute a
general obligation of any state or local government, agency or authority. The
structure of each Mortgage Loan mirrors the structure of the corresponding
Revenue Bond that it secures. In order to protect the tax-exempt status of the
Revenue Bonds, the owners of the Underlying Properties are required to enter
into certain agreements to own, manage and operate the Underlying Properties in
accordance with requirements of the Internal Revenue Code of 1986, as amended.

Revenue Bonds are generally not expected to be subject to optional prepayment
during the first five to ten years of the Company's ownership of the bonds and
may carry prepayment penalties thereafter beginning at 5% of the outstanding
principal balance, declining by 1% per annum. Certain Revenue Bonds may be
purchased at a discount from their face value. Up to 15% of the Total Market
Value of the Company (as defined in its Trust Agreement) may be invested in
Revenue Bonds secured by Underlying Properties in which affiliates of the
Manager have a controlling interest, equity interest or security interest. The
15% limit is not applicable to properties to which the Manager or its affiliates
have taken title for the benefit of the Company and only applies to Revenue
Bonds acquired after the Merger. In selected circumstances and generally only in
connection with the acquisition of tax-exempt Revenue Bonds, the Company may
acquire a small amount of taxable bonds (i) which the Company may be required to
acquire in order to satisfy state regulations with respect to the issuance of
tax-exempt bonds and (ii) to fund certain costs associated with the issuance of
Revenue Bonds, that under current law cannot be funded by such Revenue Bonds.

From time to time, the Company has advanced funds to owners of certain
Underlying Properties in order to preserve the underlying asset. Such
preservation may include funds for construction completion, past due real estate
taxes, remedial deferred maintenance or other operating deficiencies. Promissory
notes and/or second mortgages typically secure such advances. As of December 31,
2000, the face amount of such advances was $15,165,389, with rates ranging from
8% to 13% and a carrying value of $9,909,933, (net of purchase accounting
adjustments), and a reserve for collectibility of $138,000. Included in such
amounts were advances to obligors which are affiliates of the Manager at an
aggregate face amount of $5,028,812, with rates ranging from 8% to 10%.

With respect to Revenue Bonds which are subject to forbearance agreements with
their respective obligors, the difference between the stated interest rates and
the rates paid (whether deferred and payable out of available future cash flow
or, ultimately, from sale or refinancing proceeds) is not accrued for financial
statement purposes. The accrual of interest at the stated interest rate will
resume once an Underlying Property's ability to pay the stated rate has been
adequately demonstrated. Unrecorded contractual interest income was
approximately $1,609,000, $1,916,000 and $3,047,000 for the years ended December
31, 2000, 1999 and 1998, respectively. Payments under each of the existing
forbearance agreements are current as of December 31, 2000.

Participating Revenue Bonds
- ---------------------------

Participating Revenue Bonds with an aggregate face amount of approximately
$179,502,000 as of December 31, 2000, call for interest only debt service
payments during their respective terms (which generally are 24 to 30 years from
issuance or re-issuance) with repayment of principal due in a lump sum "balloon"
payment at the expiration of their respective terms or upon sale or refinancing.
In addition to the stated base rates of interest, these Revenue Bonds provide
for "participating interest" which is based on a percentage of the underlying
properties cash flow or net sales/refinancing proceeds. Both the stated and
participating interest on the Revenue Bonds are exempt from federal income
taxation. During the years ended December 31, 2000, 1999 and 1998, the Company
was paid participating interest amounting to approximately $1,716,000, $728,000
and $960,000, respectively.

Non-Participating Revenue Bonds
- -------------------------------

Non-participating, tax-exempt revenue bonds, with an aggregate face amount of
approximately $690,518,000 as of December 31, 2000, generally bear a fixed base
interest rate and may or may not provide for amortization of principal. Terms
are expected to be 5 to 35 years, although the Company may have the right to
cause repayment prior to maturity through a mandatory redemption feature (five
to seven years with up to six month's notice). Bonds that call for amortization
or "sinking fund" payments of principal are usually based on thirty to forty
year level debt service amortization schedules with amortization generally
beginning at the completion of rehabilitation or construction.

Certain other non-participating Revenue Bonds, with an aggregate face amount of
$6,195,000 are taxable and call for amortization or sinking fund payments of
principal on a term ranging between 13 and 40 years.

Modified Revenue Bonds
- ----------------------

From time to time, the Company, as an alternative to foreclosure in the event of
default, enters into forbearance agreements and/or permanent modifications with
certain borrowers. The determination as to whether it is in the best interest of
the Company to enter into permanent modifications or forbearance agreements, to
advance second mortgages, or alternatively, to pursue its remedies under the
loan documents, including foreclosure, is based upon several factors. These
factors include, but are not limited to, Underlying Property operations and
performance, owner cooperation and projected costs of foreclosure and litigation
- - irrespective of whether or not the obligor has an affiliation with the
Manager.

In connection with the sale of two of the Underlying Properties, Cedar Creek and
Pelican Cove, the Company has agreed to a modification of the terms of the
respective Revenue Bonds. Subject to the local issuer's approval, the stated
interest rate of the Cedar Creek and Pelican Cove Revenue Bonds will be modified
to a stated interest rate of 7.43% and 7.25%, respectively, and the maturity and
call dates for each will be extended to October 1, 2010 and October 1, 2020,
respectively.

In addition to the above two Revenue Bonds, other Revenue Bonds, with an
aggregate face amount of $130,025,000, have previously been modified. These
modifications have generally encompassed an extension of the maturity together
with a prepayment lock out feature and/or prepayment penalties together with an
extension of the mandatory redemption feature (5-10 years from modification).
Stated interest rates have also been adjusted together with a change in the
participating interest features. Base interest rates, participating interest,
prepayment lock-outs, mandatory redemption and maturity features are arrived at
through negotiations between the Company and the owners of the Underlying
Properties and vary dependent on the facts of a particular Revenue Bond, the
owner of the Underlying Property, the Underlying Property's performance and
requirements of bond counsel and local issuers. Should negotiations break down,
the Company has the option to pursue its other remedies including acceleration
and foreclosure. The Company may agree to the modification of other Revenue
Bonds to generally reflect similar terms as those modified previously, where and
as appropriate. Significant modifications to interest rates and maturity dates
are subject to final approval of the local issuers, bond counsel and indenture
trustees.

Revenue Bonds with the Obligor as an Affiliate of the Manager
- -------------------------------------------------------------

The obligors of $404,263,000 of Revenue Bonds are partnerships in which
affiliates of the Manager own a 1% general partner interest. In addition, the
original owners of underlying properties and obligors of $11,282,000 of Revenue
Bonds, have been replaced with affiliates of the Manager who have not made
equity investments. These affiliate entities could have interests that do not
coincide with, and may be adverse to, the interests of the Company.
Negotiations, if any, with respect to modifications of Revenue Bonds between the
Company and obligors who are affiliates may be affected by these conflicts as
the Manager determines the appropriate terms and conditions of modifications or
otherwise opts for some other remedy including foreclosure.

The original obligors and owners of the Underlying Properties of the Cedar
Creek, Highpointe, Pelican Cove and Loveridge Revenue Bonds have been replaced
with affiliates of the Manager who have not made equity investments. These
affiliates have assumed the day-to-day responsibilities and obligations of the
Underlying Properties. On September 29, 2000, the affiliates of the Manager sold
49% of Pelican Cove and Cedar Creek, with an option from the buyers to purchase
the remaining 51% in 2001. Buyers are being sought for the remaining two
Underlying Properties. These properties are generally paying as interest an
amount equal to the net cash flow generated by operations, which in some cases
is less than the stated rate of the Revenue Bond. The Company has no present
intention of declaring default on these Revenue Bonds. The aggregate carrying
value of these remaining Revenue Bonds at December 31, 2000 and December 31,
1999 was approximately $11,282,000 and $12,280,000, respectively, and the income
earned from them for the years ended December 31, 2000 and 1999 was
approximately $849,000 and $847,500, respectively.

Revenue Bond Repayments
- -----------------------

During the period January 1, 2000 through December 31, 2000, three Revenue Bonds
were repaid and two RITES were terminated as described in the table below.

Dispositions for the Year Ended December 31, 2000
Par Amortized Realized Gains
Property/Bond Name Amount Cost / (Losses)
-------------------- ------------------- ---------------- ---------------
Bonds
Bay Club $6,400,000 $6,438,942 $ (38,942)
East Ridge 8,700,000 8,437,747 262,253
Martin's Creek 7,300,000 6,842,946 457,054

RITES
Avalon 5,000 40,073 (35,073)
Meadowview Park 5,000 5,141 (141)
---------
$645,151
--------

As of December 31, 2000, the Company and its consolidated subsidiaries owned
participating and non-participating Revenue Bonds. Certain of the Revenue Bonds
are taxable, were acquired in connection with the purchase of tax-exempt Revenue
Bonds and are secured by the same Underlying Properties that secure the
associated tax-exempt Revenue Bonds. The following table provides certain
information with respect to each of the Revenue Bonds.

Table of Investments
--------------------

Unit
Last Year Partici- Type Revenue Bond Rental Rental Number of
Of Con- pating- (LIHTC/ Revenue Fair Value Stated Occupancy Rates at Compet-
struction Bond 501c3/ Date Bond Par at December Interest December December ing Prop-
Property Location Units /Rehab (Y)es/(N)o Other6 Closed Amount 31, 2000 1 Rate2 31, 2000 31, 2000 erties Notes
- -------- -------- ----- ------- -------- ------ ------ ------ ---------- ----- -------- -------- ------- -----

Tax-Exempt First Mortgage Bonds
- -------------------------------

Owned by the Company (not including its consolidated subsidiaries)
- ------------------------------------------------------------------

Highpointe Harrisburg, PA 240 1991 Y Other Jul-86 $ 8,900,000 $5,591,000 8.500% 96.2% $ 450-830 24 D, E

Owned by the CM Holding Trust 3
- -------------------------------

Highpointe Harrisburg, PA - 1991 N Other Nov-00 3,250,000 3,927,000 9.000% - - - D
Lexington Trails Houston, TX 200 1997 N 501c3 Nov-00 4,900,000 5,921,000 9.000 88.9% 435-700 25
Reflections Casselberry, FL 336 1995 Y Other Nov-00 10,700,000 12,929,000 9.000 88.9% 280-780 9
Rolling Ridge Chino Hills, CA 110 1996 Y Other Nov-00 4,925,000 5,951,000 9.000 96.3% 830-1,005 7
------- ------------- -----------

Subtotal 646 23,775,000 28,728,000
------- ------------- -----------

Owned by CharterMac Equity Issuer Trust3
- ----------------------------------------

Armstrong Farm Jeffersonville, IN 168 - N LIHTC Oct-00 8,246,000 8,246,000 7.500% - - 158 C,G,H,J
Barnaby Manor Washington, DC 124 - N LIHTC Nov-99 4,500,000 4,418,000 7.375 82.5% 850-975 12 B,C,I,J
Bay Colony League City, TX 248 - N LIHTC Aug-00 10,100,000 10,084,000 7.500 - - 15 C,G,H,J
Chandler Creek Round Rock, TX 216 - N 501c3 Oct-00 15,850,000 15,850,000 8.500 - - 19 G,H,J,CC
Chapel Ridge of Claremore, OK 104 - N LIHTC Oct-00 4,100,000 4,100,000 7.500 - - 5 C,G,H,J
Claremore
Del Monte Pines Fresno, CA 366 2000 N LIHTC May-99 11,000,000 9,957,000 6.800 94.8% 388-544 256 A, C
Douglas Pointe Miami, FL 176 - N LIHTC Sep-99 7,100,000 6,616,000 7.000 59.1% 504-604 184A,C,G,H,J

Forest Hills Garner, NC 136 2000 N LIHTC Dec-98 5,930,000 5,580,000 7.125 91.9% 550-650 152 A, C
Fort Chaplin Washington, DC 549 - N LIHTC Dec-99 25,800,000 23,698,000 6.900 98.4% 419-1,032 158 B,C,F
Franciscan Riviera Antioch, CA 129 - N LIHTC Aug-99 6,587,500 6,248,000 7.125 100.0% 500-872 17 A,C,F
Garfield Park Washington, DC 94 2000 N LIHTC Aug-99 3,260,000 3,146,000 7.250 100.0% 585-946 158
Grace Townhomes Ennis, TX 112 - N LIHTC May-00 5,225,600 5,217,000 7.500 - - 9 G,H,J
Grandview Forest Durham, NC 92 - N LIHTC Dec-00 5,483,907 5,484,000 8.500 - - 82C,G,H,J,GG
Greenbriar Concord, CA 199 - N LIHTC May-99 9,585,000 8,772,000 6.875 98.0% 750-1,100 55 B,C,F
Greenbridge at Richardson, TX 242 - N 501c3 Nov-00 19,735,000 19,735,000 7.400 - - 30 G,H,J
Buckingham
Hamilton Gardens Hamilton, NJ 174 - N LIHTC Mar-99 6,400,000 6,054,000 7.125 98.3% 625-730 16 A,C,N
Hidden Grove Miami, FL 222 - N LIHTC Sep-00 8,600,000 8,472,000 7.400 - - 184C,G,H,J
Lake Jackson Lake Jackson, TX 160 2000 N LIHTC Dec-98 10,934,000 10,189,000 7.000 85.9% 550-1095 10 A, C
Lake Park Turlock, CA 104 2000 N LIHTC Jun-99 3,638,000 3,511,000 7.250 98.0% 452-634 24 B, C
Lakemoor Durham, NC 160 - N LIHTC Dec-99 9,000,000 8,686,000 7.250 - - 89 A,G,H,J
Lakes Edge at WaldenMiami, FL 400 1986 N LIHTC Jun-99 14,850,000 13,640,000 6.900 97.5% 618-944 184 B, F
Lenox Park Gainesville, GA 292 2000 N LIHTC Jul-99 13,000,000 11,768,000 6.800 47.2% 431-620 15 B, C
Lewis Place Gainesville, FL 112 2000 N LIHTC Jun-99 4,000,000 3,594,000 6.750 89.2% 529-642 91 B,C,T
Millpond Village East Windsor, CT 360 - N LIHTC Dec-00 14,300,000 14,300,000 8.550 62.5% 477-1,020 2 F, HH
Mountain Ranch Austin, TX 196 - N LIHTC Dec-98 9,128,000 8,658,000 7.125 99.5% 586-814 453A,C,G,
H, J
Newark Commons New Castle, DE 220 - N LIHTC May-00 14,300,000 13,896,000 7.300 - - 35 A,C,G,
H, J
Oaks at Hampton Dallas, TX 250 - N LIHTC Apr-00 9,535,000 9,139,000 7.200 - - 11 B,C,G
Parks at DeSoto, TX 250 - N LIHTC Jul-00 9,535,000 9,139,000 8.500 - - 14 G,H,J
Westmoreland X
Princess Anne House Virginia Beach, VA 186 - N LIHTC Apr-00 7,500,000 7,488,000 7.500 - - 250 A,C,G
H, J
Red Hill Villas Round Rock, TX 168 - N LIHTC Dec-00 9,900,000 9,900,000 8.400 - - 19 C,G,FF
Running Brook Miami, FL 186 - N LIHTC Sep-00 8,495,000 8,368,000 7.400 - - 15C,G,H,J
Southwest Trails Austin, TX 160 - N LIHTC Aug-00 6,500,000 6,360,000 7.350 - - 15 C,G,H,J
Standiford Modesto, CA 250 - N LIHTC Sep-99 9,520,000 9,029,000 7.125 97.1% 395-650 63 A, C, F
Sunset Creek Lancaster, CA 148 1989 N Other Mar-88 8,275,000 6,129,000 5.477 98.6% 460-869 37 B,U,V,II
Sunset Village Lancaster, CA 204 1989 N Other Mar-88 11,375,000 8,434,000 5.477 94.5% 520-840 37 B,U,V,II
Sycamore Woods Antioch, CA 186 2000 N LIHTC May-99 9,415,000 8,616,000 6.875 97.8% 575-1,003 17 A, C
Tallwood Virginia Beach, VA 120 2000 N LIHTC Sep-99 6,205,000 5,988,000 7.250 96.7% 597-688 86 A, C
Williams Run Dallas, TX 252 1986 N 501c3 Dec-00 12,650,000 12,650,000 7.650 92.1% 554-751 10
Woods Edge Charlottesville, VA 97 - N LIHTC Nov-00 4,850,000 4,850,000 7.800 - - 20 EE
------- ------------- -----------

Subtotal 7,812 364,408,007 346,009,000
------- ------------- -----------

Owned by CharterMac Origination Trust3, 4
- -----------------------------------------

Cedar Pointe Nashville, TN 210 1989 N Other Apr-87 9,500,000 8,852,000 7.000% 95.7% 540-860 168
Clarendon Hills Hayward, CA 285 1989 Y Other Dec-86 17,600,000 12,933,000 5.520 99.7% 619-1,700 99 W
Cypress Run Tampa, FL 408 1988 Y Other Aug-86 15,402,428 13,156,000 5.500 89.0% 485-855 247 U
Greenway Manor St. Louis, MO 312 1987 Y Other Oct-86 12,850,000 14,540,000 8.500 99.7% 535-625 172
Lakepoint Atlanta, GA 360 1989 N Other Nov-87 15,100,000 12,061,000 6.000 98.3% 462-895 30
Lakes, The Kansas City, MO 400 1989 Y Other Dec-86 13,650,000 10,636,000 4.870 92.4% 495-700 152 W
Lexington Square Clovis, CA 130 2000 N LIHTC Aug-98 3,850,000 3,267,000 6.375 96.9% 393-471 42 C,P
Loveridge Pittsburg, CA 148 1987 Y Other Nov-86 8,550,000 5,691,000 5.000 98.6% 650-1,300 18 D,E
San Marcos San Marcos, TX 156 - N LIHTC May-00 7,231,000 7,099,000 7.375 - - 25C,G,H,J
Shannon Lake Atlanta, GA 294 1988 Y Other Jun-87 12,000,000 11,182,000 7.000 94.3% 463-855 371 L, W
Summer Lake Davie, FL 108 - N LIHTC Mar-00 5,600,000 5,516,000 7.400 - - 6 C,G,H,J
Sunset Downs Lancaster, CA 264 1987 N Other Feb-87 15,000,000 10,965,000 5.477 96.6% 535-810 37 U,V,II
Sunset Terrace Lancaster, CA 184 1987 N Other Feb-87 10,350,000 7,566,000 5.477 95.6% 530-815 37 U,V,II
------- ------------- -----------

Subtotal 3,259 146,683,428 123,464,000
------- ------------- -----------

Owned by CharterMac Owner Trust3,5
- ----------------------------------

Autumn Ridge San Marcos, CA 192 - N LIHTC Aug-00 9,304,230 9,475,000 8.000% 95.6% 569-930 11 C,F,Z
Bristol Village Bloomington, MN 290 1989 N Other Jul-87 17,000,000 16,973,000 7.500 93.7% 400-2,398 25
Carrington Point Los Banos, CA 80 1999 N LIHTC Sep-98 3,375,000 2,864,000 6.375 98.7% 448-565 5 C
Casa Ramon Orange County, CA 75 1976 N LIHTC Jul-00 4,744,000 4,736,000 7.500 100.0% 652-1,086 43 C, F
Cedar Creek McKinney, TX 250 1988 N Other Dec-86 8,100,000 8,011,000 7.430 93.5% 250-940 10 U, V
Cedarbrook Hanford, CA 70 1999 N LIHTC Apr-98 2,840,000 2,691,000 7.125 100.0% 418-517 18 C
Chapel Ridge at Little Rock, AR 128 - N LIHTC Aug-99 5,600,000 5,311,000 7.125 - - 83C,G,H,J
Little Rock
Chapel Ridge at Texarkana, AR 144 - N LIHTC Sep-99 5,800,000 5,694,000 7.375 72.7% 320-685 26 C
Texarkana
College Park Naples, FL 210 2000 N LIHTC Jul-98 10,100,000 9,748,000 7.250 89.8% 451-780 33 O
Columbia at Bells Cherokee Co., GA 272 - N LIHTC Apr-00 13,000,000 12,806,000 7.400 - 5 G,H J
Ferry
Country Lake W. Palm Beach, FL 192 1985 N Other Nov-99 6,255,000 6,255,000 6.000 96.3% 647-995 44 M,F
Crowne Pointe Olympia, WA 160 1986 Y Other Dec-86 5,075,000 4,898,000 7.250 97.4% 485-845 39
Falcon Creek Indianapolis, IN 131 2000 N LIHTC Sep-98 6,144,600 5,930,000 7.250 97.0% 425-800 252 C, R
Gulfstream Dania, FL 96 2000 N LIHTC Jul-98 3,500,000 3,371,000 7.250 89.5% 502-633 5 C
Highland Ridge St. Paul, MN 228 1989 Y Other Dec-86 15,000,000 14,477,000 7.250 94.7% 850-1,460 86
Jubilee Courtyards Florida City, FL 98 1999 N LIHTC Sep-98 4,150,000 3,867,000 7.125 96.9% 525-710 2 C, S
Kings Villages Pasadena, CA 313 - N LIHTC Jul-00 17,650,000 17,622,000 8.500 80.2% 456-855 12 C,F,Y
Madalyn Landing Palm Bay, FL 304 2000 N LIHTC Nov-98 14,000,000 13,046,000 7.000 67.6% 425-599 8 C
Mansion, The Independence, MO 550 1987 N Other May-86 19,450,000 19,124,000 7.250 93.0% 410-1,350 15
Marsh Landing Portsmouth, VA 250 - N LIHTC May-98 6,050,000 5,834,000 7.250 72.7% 300-475 23 C, F
Newport Village Tacoma, WA 402 1987 Y Other Feb-87 13,000,000 12,546,000 7.250 95.1% 376-690 181
North Glen Atlanta, GA 284 1987 Y Other Sep-86 12,400,000 12,380,000 7.500 95.1% 575-1,010 371 K, W
Northpointe Village Fresno, CA 406 2000 N LIHTC Aug-98 13,250,000 13,229,000 7.500 93.5% 388-583 256 C, Q
Ocean Air Norfolk, VA 434 - N LIHTC Apr-98 10,000,000 9,651,000 7.250 78.3% 590-690 60 C,I,J
Orchard Hills Tacoma, WA 176 1987 Y Other Dec-86 5,650,000 5,453,000 7.250 99.4% 475-815 181
Orchard Mill Atlanta, GA 238 1990 Y Other May-89 10,500,000 10,483,000 7.500 92.4% 459-900 371 C
Park Sequoia San Jose, CA 81 - N LIHTC Oct-00 6,740,000 6,740,000 8.500 78.2% 799-1,350 165C,F,BB
Pelican Cove St. Louis, MO 402 1989 N Other Feb-87 18,000,000 17,372,000 7.250 99.0% 390-725 172 U, V
Phoenix Stockton, CA 186 2000 N LIHTC Apr-98 3,250,000 3,055,000 7.125 99.5% 395-721 96 C
River Run Miami, FL 164 1987 Y Other Aug-87 7,200,000 7,668,000 8.000 98.8% 351-1,034 184 C
Silvercrest Clovis, CA 100 1999 N LIHTC Sep-98 2,275,000 2,158,000 7.125 100.0% 300-393 142 C
South Congress Austin, TX 172 - N LIHTC May-00 6,300,000 6,290,000 7.500 65.1% 303-504 152 C,F
Stonecreek Clovis, CA 120 2000 N LIHTC Apr-98 8,820,000 8,350,000 7.125 100.0% 654-993 5 C
Thomas Lake Eagan, MN 216 1988 N Other Sep-86 12,975,000 12,954,000 7.500 95.3% 830-1,300 16
Village Green Merced, CA - - N LIHTC Aug-00 503,528 503,000 8.500 47.7% 380-485 11C,F,AA
Village Green Merced, CA 128 - N LIHTC Aug-00 3,078,000 3,073,000 8.500 - - -C,F,AA
Walnut Creek Austin, TX - - N LIHTC May-00 360,000 349,000 7.500 76.5% 338-556 152 F
Walnut Creek Austin, TX 98 - N LIHTC May-00 3,240,000 3,235,000 7.500 - - - F
Walnut Park Plaza Philadelphia, PA 224 2000 N LIHTC Apr-00 5,500,000 5,491,000 7.500 83.9% 597-650 49 C, F
Willow Creek Ames, IA 138 1988 Y Other Feb-87 6,100,000 5,887,000 7.250 100.0% 565-810 7
------- ------------ -----------

Subtotal 8,002 326,279,358 319,600,000
------- ------------- -----------

Subtotal - Tax-Exempt First Mortgage 19,959 870,045,793 823,392,000
Bonds
------- ------------- -----------

Taxable First Mortgage Bonds
- ----------------------------

Owned by the Company (not including its consolidated subsidiaries)
- ------------------------------------------------------------------

Chandler Creek Round Rock, TX - - N 501c3 Oct-00 350,000 350,000 9.750% - - 19 G H,J,
DD
Greenbriar Concord, CA - - N LIHTC May-99 2,015,000 2,015,000 9.000 98.0% 750-1,100 55 C,F
Greenbridge at Richardson, TX - - N 501c3 Nov-00 350,000 350,000 10.000 - - G,H,J
Buckingham
Lake Park Turlock Park, CA - 2000 N LIHTC Jun-99 375,000 375,000 9.000 98.0% 452-634 24
Lakes Edge at WaldenMiami, FL - - N LIHTC Jun-99 1,400,000 1,711,111 11.000 97.5% 618-944 184 F
Oaks at Hampton Dallas, TX - - N LIHTC Apr-00 525,000 525,000 9.000 - - 11 C, G
Parks at DeSoto, TX - - N LIHTC Jul-00 455,000 455,000 9.000 - - 14 G,H,J
Westmoreland
Princess Anne House Virginia Beach, VA - - N LIHTC Apr-00 125,000 131,945 9.500 - - 250C,G,H,J
Red Hill Villas Round Rock, TX - - N LIHTC Dec-00 400,000 400,000 9.500 - - 19 C, G
Williams Run Dallas, TX - 1986 N 501c3 Dec-00 200,000 200,000 9.250 - - 10
------- ---------- -----------

Subtotal 0 6,195,000 6,513,056
------- ------------- -----------

Total First Mortgage Bonds 19,959 $876,240,793 $829,905,056
------- ------------- -----------

Tax-Exempt Subordinate Bonds
- ----------------------------

Owned by the CharterMac Equity Issuer Trust3
- --------------------------------------------

Museum Tower Philadelphia, PA 286 N Other Nov-00 $ 6,000,000 $ 6,000,000 8.250% B
Park Landmark Alexandria, VA 396 N Other Sep-00 9,500,000 9,500,000 8.750 B
------- ------------- -----------

Total Tax-Exempt Subordinate Bonds 682 15,500,000 15,500,000
------- ------------- -----------

Total Revenue Bonds 20,641 $891,740,793 $845,405,056
======= ============= ===========

1 The Revenue Bonds are deemed to be available-for-sale debt securities and,
accordingly, are carried at their estimated fair values at December 31, 2000.

2 The stated interest rate represents the coupon rate of the Revenue Bond at
December 31, 2000.

3 This entity is a consolidated subsidiary of the Company (see Merger).

4 The Revenue Bonds are held as collateral in connection with the TOP (see
Private Label Tender Option Program below).

5 These Revenue Bonds have been transferred to CharterMac Owner Trust in
connection with the Company's Private Label Tender Option Program (see Private
Label Tender Option Program below).

6 LIHTC bonds are bonds for which the owner of the Underlying Property is
eligible to receive Low Income Housing Tax Credits. Bonds for which the obligor
is a non-for-profit entity under Section 501(c)3 of the Internal Revenue Code
are classified as 501(c)3 bonds. Other bonds are those which are neither LIHTC
or 501(c)3 bonds.

A Held by Merrill Lynch as collateral for secured borrowings (see Securitization
Transactions below).

B These Revenue Bonds are held as collateral in connection with the Merrill
Lynch RITES/P-FLOATS Program (see Securitization Transactions below).

C The obligors of these Revenue Bonds are partnerships in which affiliates of
the Manager are partners that own a controlling interest.

D The original owners of the Underlying Properties and the obligors of these
Revenue Bonds have been replaced with affiliates of the Manager.

E The minimum pay rate is the current cash flow of the property.

F The Underlying Property is undergoing substantial rehabilitation.

G The Underlying Property is still in the construction phase as of December 31,
2000.

H The Underlying Property is under construction. In the event construction is
not completed in a timely manner, the Company may "put" the Revenue Bond to the
construction lender at par.

I The Underlying Property is undergoing substantial rehabilitation. In the event
it is not completed in a timely manner, the Company may "put" the Revenue Bond
to the construction lender at par.

J All of the "puts" (see (H) and (I) above) are secured by a letter of credit
issued by the construction lender to the Company.

K Pursuant to a bond modification as of October 1, 1997, the stated interest
rate was lowered to 7% through June 30, 2000, and 7.5% thereafter.

L Pursuant to a bond modification as of October 1, 1997, the stated interest
rate was lowered to 6% through July 31, 2000, and 7% thereafter.

M The interest rate for this Revenue Bond is 6% until expected refunding in 2nd
quarter 2001.

N The interest rate for this Revenue Bond is 7.625% during the construction
period and 7.125% thereafter.

O The interest rate for this Revenue Bond is 7% during the construction period
and 7.25% thereafter.

P The interest rate for this Revenue Bond is 7% during the construction period
and 6.375% thereafter.

Q The interest rate for this Revenue Bond is 7.965% through September 23, 1998,
8.125% for the remainder of the construction period and 7.5% thereafter.

R The interest rate for this Revenue Bond is 7% through August 31, 2000 and
7.25% thereafter.

S The interest rate for this Revenue Bond is 7% through September 30, 2000 and
7.125% thereafter.

T The interest rate for this Revenue Bond is 6.75% through May 31, 2000 and 7%
thereafter.

U These Revenue Bonds are currently awaiting approval from the Issuer for
modification. The Company is confident that the modification will occur and has
therefore shown the terms of the Revenue Bond as per a forbearance agreement
which mirrors the terms of the bond modification.

V Due to the sale of the Underlying Property, the Company received deferred Base
Interest.

W The Company received participating interest during 2000.

X The interest rate for this Revenue Bond is 8.5% through October 31, 2001 and
7.2% thereafter.

Y The interest rate for this Revenue Bond is 8.5% through October 31, 2001 and
7.5% thereafter.

Z The interest rate for this Revenue Bond is 8.0% through July 31, 2001 and
7.65% thereafter.

AA The interest rate for this Revenue Bond is 8.5% through June 30, 2001 and
7.5% thereafter.

BB The interest rate for this Revenue Bond is 8.5% through August 31, 2001 and
7.5% thereafter.

CC The interest rate for this Revenue Bond is 8.5% through November 30, 2002 and
7.6% thereafter.

DD The interest rate for this Revenue Bond is 9.75% through November 30, 2002
and 9.25% thereafter.

EE The interest rate for this Revenue Bond is 7.8% through November 30, 2002 and
7.5% thereafter.

FF The interest rate for this Revenue Bond is 8.4% through December 31, 2002 and
7.4% thereafter.

GG The interest rate for this Revenue Bond is 8.5% through January 31, 2003 and
7.5% thereafter.

HH The interest rate for this Revenue Bond is 8.55% through November 30, 2001
and 7.55% thereafter.

II A third party has the option to acquire these Revenue Bonds for an aggregate
of $35,250,000. The right to exercise the option commenced January 1, 2001 and
shall continue as long as these bonds are outstanding.

Raising Capital
- ---------------

In order for the Company to fund its investments in Revenue Bonds and facilitate
growth, the Company will need to access additional capital. The Company has
primarily used two sources of capital: collateralized debt securitizations and
equity offerings. The most efficient and economical source of capital is
securitization. The Company has two primary securitization programs: the Private
Label Tender Option Program ("TOP") and the P-FLOATS/RITES program.
Securitizations continue to offer the lowest cost of capital, albeit with
certain covenants and leverage limits. Pursuant to its Trust Agreement, the
Company is only able to incur leverage or other financing up to 50% of the
Company's Total Market Value; this leverage restriction is generally consistent
or more conservative than leverage covenants on the Company' s securitized debt.
The Company's conservative capital structure therefore requires periodic equity
offerings to maintain leverage within required limits.

During 2000, the Company's growth was financed by the Private Label Tender
Option Program, preferred stock offerings by a subsidiary, the Company's
Convertible Community Reinvestment Act Preferred Share offerings ("Convertible
CRA Shares") and securitization transactions as well as funds generated from
operations in excess of distributions. The Company's continued growth will be
financed by the TOP or similar programs, additional securitization transactions
and funds generated from operations in excess of distributions. In addition,
before the end of 2001, the Company expects to raise funds through additional
common, preferred and Convertible CRA offerings; however, there can be no
assurance that these initiatives will be successful.

Private Label Tender Option Program
- -----------------------------------

On May 21, 1998, the Company closed on its Private Label Tender Option Program
("TOP") in order to raise additional capital to acquire additional Revenue
Bonds. As of December 31, 1999, the maximum amount of capital that could be
raised under the TOP was $400,000,000. On December 7, 2000, the Company refined
the structure the TOP for the primary purpose of segregating Revenue Bonds
issued by governmental entities in California from the remainder of the Revenue
Bonds under the TOP and to increase the maximum amount of capital available
under the program to $500,000,000.

As of December 31, 2000, the Company has contributed 53 issues of Revenue Bonds
in the aggregate par amount of approximately $473,000,000 to Charter Mac
Origination Trust I (the "Origination Trust"), a wholly-owned, indirect
subsidiary of the Company. The Origination Trust then contributed 40 of its
Revenue Bonds, with an aggregate par amount of approximately $326,000,000, to
Charter Mac Owner Trust I (the "Owner Trust") which is controlled by the
Company. The Owner Trust contributes selected bonds to specific "Series Trusts"
in order to segregate Revenue Bonds issued by governmental entities selected by
state of origin. As of December 31, 2000, two such Series Trusts were created: a
"California only" series that had 12 issues of Revenue Bonds in the aggregate
par amount of approximately $76,000,000 and a "National" (non-state specific)
series that had 28 issues of Revenue Bonds in the aggregate principal amount of
approximately $250,000,000.

Each Series Trust issues two equity certificates: (i) a Senior Certificate,
which has been deposited into another Delaware business trust (a "Certificate
Trust") which issues and sells "Floater Certificates" representing proportional
interests in the Senior Certificate to new investors and (ii) a Residual
Certificate representing the remaining beneficial ownership interest in each
Series Trust, which has been issued to the Origination Trust. At December 31,
2000, the California only and National Series Trusts had Floater Certificates
with an outstanding amount of $70,000,000 and $205,000,000, respectively.

The Revenue Bonds remaining in the Origination Trust (aggregate principal amount
of approximately $147,000,000) are additional collateral for the Owner Trust's
obligations under the Senior Certificate. In addition, the Owner Trust obtained
a municipal bond insurance policy from MBIA to credit enhance Certificate
distributions for the benefit of the holders of the Floater Certificates and
arranged for a liquidity facility, issued by a consortium of highly rated
European banks, with respect to the Floater Certificates. The Company owns no
beneficial interest in and does not control the Certificate Trusts.

The effect of the TOP structure is that a portion of the interest received by
the Owner Trust on the Revenue Bonds it holds is distributed through the Senior
Certificate to the holders of the Floater Certificates with the residual
interest remitted to the Origination Trust (and thus to the benefit of the
Company) via the Residual Certificate. The effect of the December 7, 2000,
refinement of the TOP structure was to segregate the California related Floater
Certificates as they generally will pay distributions at lower rates than
National (non-state specific) Floater Certificates and thus the yield on the
Residual Certificates owned by the Origination Trust is increased.

The Owner Trust, controlled by the Company, is consolidated and is noted on the
Balance Sheet of the Company as "minority interest in subsidiary (subject to
mandatory redemption)." The Company's cost of funds relating to the TOP
(calculated as income allocated to the minority interest plus recurring fees as
a percentage of the weighted average amount of the outstanding Senior
Certificate) was approximately 5.4%, 4.5% and 4.9% for the years ended December
31, 2000, 1999 and 1998, respectively.

P-FLOATs/RITES
- --------------

Another source of financing for the Company's investments is the securitization
of selected Revenue Bonds through the Merrill Lynch Pierce Fenner & Smith
Incorporated ("Merrill Lynch") P-FLOATS/RITES program. Merrill Lynch deposits
each Revenue Bond into an individual special purpose trust together with a
Credit Enhancement Guarantee ("Guarantee"). Two types of securities are then
issued by each trust, (1) Puttable Floating Option Tax-Exempt Receipts
("P-FLOATS"), a short-term senior security which bears interest at a floating
rate that is reset weekly and (2) Residual Interest Tax Exempt Securities
("RITES"), a subordinate security which receives the residual interest payment
after payment of P-FLOAT interest and ongoing transaction fees. The P-FLOATS are
sold to qualified third party, tax-exempt investors and the RITES are generally
sold back to the Company. The Company has the right, with 14 days notice to the
trustee, to purchase the outstanding P-FLOATS and to withdraw the underlying
Revenue Bonds from the trust. When the Revenue Bonds are deposited into the
P-FLOAT Trust, the Company receives the proceeds from the sale of the P-FLOATS
less certain transaction costs. In certain other cases, Merrill Lynch may
directly buy the Revenue Bonds from local issuers, deposit them in the trust,
sell the P-FLOAT security to qualified investors and then sell the RITES to the
Company.

In order to facilitate the securitization under the P-FLOATS program, the
Company has pledged certain additional Revenue Bonds, cash and cash equivalents
and temporary investments as collateral for the benefit of the credit enhancer
or liquidity provider. At December 31, 2000, the total carrying amount of such
additional Revenue Bonds, cash and cash equivalents and temporary investments
pledged as collateral was $120,058,000.

During the year 2000, the Company transferred three Revenue Bonds with an
aggregate face amount of $30,800,000 to the P-FLOATS/RITES program and received
proceeds of $29,348,725.

The Company's cost of funds relating to its secured borrowings under the Merrill
Lynch P-FLOATS/RITES program (calculated as interest expense as a percentage of
the weighted average amount of the secured borrowings) was approximately 4.96%
and 4.8%, annualized, for the years ended December 31, 2000 and for the period
June 29, 1999 (inception of this program) through December 31, 1999,
respectively.

ATEBT Merger
- ------------

On November 2, 1999, the Company and American Tax Exempt Bond Trust ("ATEBT"),
whose manager was an affiliate of the Manager of the Company, entered into an
Agreement and Plan of Merger providing for the merger of ATEBT into and with the
Company as the surviving trust in the merger (the "ATEBT Merger"). The ATEBT
Merger was approved by the ATEBT shareholders on September 27, 2000 and
consummated on November 14, 2000.

On the ATEBT Merger consummation date, ATEBT had total assets of approximately
$29,700,000 and net assets of approximately $28,300,000. ATEBT had four
tax-exempt first mortgage bonds financing properties in four states, with an
aggregate outstanding face amount of $23,775,000, and with individual interest
rates of 9.0%.

Pursuant to the Merger Agreement, each share of beneficial ownership in ATEBT
issued and outstanding was converted into 1.43112 Common Shares of the Company.
Following the ATEBT Merger, previous ATEBT shareholders own 2,115,722 Common
Shares (representing approximately 9.3% of the outstanding Common Shares) of the
Company.

Competition
- -----------

The Company, from time to time, may be in competition with private investors,
mortgage banking companies, lending institutions, quasi-governmental agencies
such as FNMA and FHA, trust funds, mutual funds, domestic and foreign credit
enhancers, bond insurers, investment partnerships and other entities with
objectives similar to the Company. Although the Company operates in a
competitive environment, competitors focused on providing tax-exempt financing
on multifamily housing consistent with the Company's custom-designed programs
are relatively few.

The Company's business is also affected by competition to the extent that the
Underlying Properties from which it derives interest and, ultimately, principal
payments may be subject to competition relating to rental rates and relative
levels of amenities from those offered by comparable neighboring properties. See
the comprehensive table under the heading "Revenue Bonds - Characteristics",
above, for additional competitive information.

In addition, the Manager and/or its affiliates have formed, and may continue to
form, various entities to engage in businesses that may be competitive with the
Company. However, the Company generally benefits from its relationship with the
Manager and its affiliates as a "one-stop" shopping source for borrowers seeking
debt and equity financing for affordable multifamily housing.

Employees and Management
- ------------------------

The Company has no employees. Management and administrative services for the
Company and its subsidiaries are performed by the Manager and its affiliates
pursuant to the Management Agreement between the Company and the Manager dated
October 1, 1997, as amended (the "Management Agreement"). The Manager has
subcontracted with Related to provide the services contemplated under the
Management Agreement. The Manager receives compensation for such services and
the Company and its subsidiaries reimburses the Manager and certain of its
affiliates for expenses incurred in connection with the performance of employee
services to the Company in accordance with the Management Agreement.

Information Regarding Other Companies Managed by Affiliates of the Manager.
- ---------------------------------------------------------------------------

On or about February 8, 2001, a complaint was filed in the New York Supreme
Court, County of New York, against the external adviser of Aegis Realty, Inc.
("Aegis"), a public company which, like the Company, is externally advised by
affiliates of the Manager. Also individually named in the suit were Messrs.
Boesky, Hirmes, Ross, Brenner, Allen and Fisch. Messrs. Boesky, Hirmes, Brenner,
Allen, and Fisch are trustees of the Company. Aegis was also named as a nominal
defendant. The action is entitled Paul v. The Related Companies, L.P., Index No.
01-600669, and is purportedly a class and derivative action. On or about March
23, 2001 a second action, entitled Schnipper v. Aegis Realty, Inc., Case No.
219736-V, was filed in the Circuit Court for Montgomery County, Maryland against
Aegis and each of Aegis's five directors (Messrs. Boesky, Brenner, Hirmes, Allen
and Fisch). Schnipper is purportedly brought as a class action. Each of these
two actions challenges Aegis' proposed acquisition of a property portfolio and
development business owned by a third party, which transaction also involves the
acquisition by Aegis of its external advisor from affiliates of the Manager.
Each suit alleges that the defendants breached their fiduciary duty to the Aegis
stockholders by, among other things, committing Aegis to pay unwarranted fees
and other consideration to affiliates of the Manager. The actions seek money
damages, injunctive and declaratory relief and attorneys' fees. The transaction
at issue in each suit, however, was approved by Aegis' independent directors
(Messrs. Allen and Fisch), who first obtained legal advice and two fairness
opinions from nationally recognized investment banking firms before approving
those transactions. Additionally, the transaction at issue is subject to Aegis
stockholders approval and will be submitted for a vote of the Aegis stockholders
after proxy materials describing that transaction are disseminated to the Aegis
stockholders. The defendants have advised the Company that they intend to defend
both actions vigorously. With respect to the allegations in the lawsuits, the
defendants have advised that they continue to believe that the transaction is
fair and reasonable and in the best interests of Aegis and its stockholders and
will be submitted for approval by a vote of the Aegis stockholders.

The Manager has advised the Company that it does not believe that the Aegis
lawsuit will have a material impact on its operations or financial condition.

Recent Legislation
- ------------------

The States of California and Florida recently adopted administrative amendments
to their allocation plans pursuant to which they award bond value capital to
developers of multifamily housing. These amendments will require, in some cases,
that a certain portion of the debt financing for such properties to be taxable.
Therefore, in certain cases, the Company may be required to offer taxable
financing to California and Florida developers in order to be competitive.

Since 1986, the Internal Revenue Code has provided that any revenue bond which
is a "private activity bond" (other than certain refunding bonds and bonds
issued for Section 501(c)(3) organizations) must receive an allocation of
"volume cap" from the governmental issuer of the bond. The amount of volume cap
was established in 1986 and was not indexed for inflation. Thus, the amount of
available volume cap in real dollars has decreased each year, reducing the
number of projects that may be financed with private activity bonds. On December
21, 2000, President Clinton signed into law an omnibus funding bill (H.R. 4577)
containing $31.5 billion in tax cuts. Included in the law are provisions
increasing both the low-income housing tax credit and tax exempt bond volume
caps over a two year period as follows: (i) the tax credit cap is increased to
$1.50 per capita in 2001 and $1.75 per capita in 2002; (ii) the bond volume cap
is increased to the greater of $62.50 per resident or $187.5 million in 2001 and
$75 per resident or $225 million in 2002. Both volume caps are indexed for
inflation beginning in 2003.

Item 2. Properties

The Company does not own or lease any property. The Manager leases office space
at 625 Madison Avenue, New York, New York, 10022.

Item 3. Legal Proceedings

The Company is subject to routine litigation and administrative proceedings
arising in the ordinary course of business. Management does not believe that
such matters will have a material adverse impact on the Company's financial
position, results of operations or cash flows.

Item 4. Submission of Matters to a Vote of Shareholders

None.

PART II

Item 5. Market for the Company's Common Shares and Related Shareholder Matters.

As of March 9, 2001, there were 3,793 registered shareholders owning 22,700,340
Common Shares. The Company's Common Shares have been listed on the American
Stock Exchange since October 1, 1997 under the symbol "CHC". Prior to October 1,
1997, there was no established public trading market for the Company's Common
Shares.

The high and low prices for each quarterly period of the last two years during
which the Common Shares were traded are as follows:

2000 2000 1999 1999
Quarter Ended Low High Low High
- ------------- --- ---- --- ----

March 31 $11.250 $12.375 $11.9375 $13.375
June 30 11.375 12.813 12.375 13.0625
September 30 12.188 14.250 12.375 13.0625
December 31 12.400 13.930 11.375 13.125

The last reported sale price of Common Shares on the American Stock Exchange on
March 9, 2001 was $15.00.

Incentive Share Option Plan
- ---------------------------

The Company has adopted an incentive share option plan (the "Incentive Share
Option Plan"), the purpose of which is to (i) permit the Company and the Manager
to attract and retain qualified persons as trustees and officers and (ii) to
provide incentive and to more closely align the financial interests of the
Manager and its employees and officers with the interests of the shareholders by
providing the Manager with substantial financial interest in the Company's
success. The Compensation Committee administers the Incentive Share Option Plan.
Pursuant to the Incentive Share Option Plan, if the Company's distributions per
Common Share in the immediately preceding calendar year exceed $0.9517 per
Common Share, the Compensation Committee has the authority to issue options to
purchase, in the aggregate, that number of Common Shares which is equal to three
percent of the Common Shares outstanding as of December 31 of the immediately
preceding calendar year, provided that the Compensation Committee may only
issue, in the aggregate, options to purchase a maximum number of Common Shares
over the life of the Incentive Share Option Plan equal to 10% of the Common
Shares outstanding on October 1, 1997 (2,058,748 Common Shares).

Subject to the limitations described in the preceding paragraph, if the
Compensation Committee does not grant the maximum number of options in any year,
then the excess of the number of authorized options over the number of options
granted in such year will be added to the number of authorized options in the
next succeeding year and will be available for grant by the Compensation
Committee in such succeeding year.

All options granted by the Compensation Committee will have an exercise price
equal to or greater than the fair market value of the Common Shares on the date
of the grant. The maximum option term is ten years from the date of grant. All
Common Share options granted pursuant to the Incentive Share Option Plan may
vest immediately upon issuance or in accordance with the determination of the
Compensation Committee. For the years ended December 31, 1997 and 1998 the
Company did not grant any options since its distributions per Common Share did
not exceed the minimum threshold of $0.9517 per Common Share. In 2000 and 1999,
the Company distributed $1.070 and $0.995 per Common Share, respectively, thus
enabling the Compensation Committee, at its discretion, to issue options.

On May 1, 2000, options to purchase 297,830 common shares were granted to
officers of the Company and certain employees of an affiliate of the Manager,
none of whom are employees of the Company. The exercise price of these options
is $11.5625 per share. The term of each option is ten years. The options will
vest in equal installments on May 1, 2001, 2002 and 2003. The Company has
adopted the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation" for its share options issued to non-employees. Accordingly,
compensation cost is accrued based on the estimated fair value of the options
issued, and amortized over the vesting period. Because vesting of the options is
contingent upon the recipient continuing to provide services to the Company
until the vesting date, the Company estimates the fair value of the non-employee
options at each period-end up to the vesting date, and adjusts expensed amounts
accordingly. The 297,830 options granted on May 1, 2000 had an estimated fair
value at December 31, 2000 of $.90 per option grant, or a total of $268,047. The
fair value of each option grant is estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
grants in 2000: dividend yield of 8.18%, expected volatility of 18%, and
expected lives of ten years. None of the options granted during 2000 were
exercised or expired. The Company recorded compensation cost of $109,952 during
the year ended December 31, 2000 relating to these option grants.

Common Share Repurchase Plan
- ----------------------------

On October 9, 1998, the Board of Trustees authorized the implementation of a
Common Share repurchase plan, enabling the Company to repurchase, from time to
time, up to 1,500,000 of its Common Shares. The repurchases, if any, are to be
made in the open market and the timing is dependent on the availability of
Common Shares and other market conditions. As of December 31, 2000, the Company
had acquired 8,400 of its Common Shares for an aggregate purchase price of
$103,359 (including commissions and service charges). Repurchased Common Shares
are accounted for as treasury Common Shares of beneficial interest.

Preferred Equity Issuance by Subsidiary
- ---------------------------------------

On June 29, 1999 a subsidiary of the Company completed a sale to institutional
investors of $90 million tax-exempt "Series A Cumulative Preferred Shares". In
connection with this transaction, the Company caused 100% of the ownership of
the Origination Trust to be transferred to Charter Mac Equity Issuer Trust (the
"Issuer"), a newly formed Delaware business trust and an indirectly-owned
subsidiary in which the Company owns 100% of the common equity. The Issuer then
issued the Series A Cumulative Preferred Shares as well as all subsequent
cumulative preferred issuances (collectively, "Cumulative Preferred Shares"). As
a result, the Issuer became the direct and indirect owner of all of the Revenue
Bonds held by the Origination Trust and Owner Trust and its directly-owned and
indirectly-owned subsidiaries (see discussion of Private Label Tender Option
Program, above). In addition to contributing the ownership of the Origination
Trust, the Company also contributed certain additional Revenue Bonds to the
Issuer. Net proceeds of approximately $86,395,000 from the Series A preferred
offering were used to invest in or acquire additional tax-exempt assets for the
Issuer.

The Series A Cumulative Preferred Shares have an annual preferred dividend
payable quarterly in arrears on January 31, April 30, July 31 and October 31 of
each year, and payable upon declaration thereof by the Issuer's Board of
Trustees, but only to the extent of the Issuer's tax-exempt income (net of
expenses) for the particular quarter. The Series A Cumulative Preferred Shares
are subject to mandatory tender by the holders thereof for remarketing and
purchase on June 30, 2009 and each remarketing date thereafter at a price equal
to $2,000,000 per share plus an amount equal to all distributions accrued but
unpaid on the Series A Cumulative Preferred Shares.

Holders of the Series A Cumulative Preferred Shares may elect to retain their
shares upon remarketing, with a distribution rate to be determined immediately
prior to the remarketing date by the remarketing agent. Each holder of the
Series A Cumulative Preferred Shares will be required to tender its shares to
the Issuer for mandatory repurchase on June 30, 2049, unless the Issuer decides
to remarket the shares on such date. The Issuer may not redeem the Series A
Cumulative Preferred Shares before June 30, 2009. After that date, all or a
portion of the shares may be redeemed, subject to certain conditions. The Series
A Cumulative Preferred Shares are not convertible into Common Shares of the
Issuer or Common Shares of the Company.

The Series A Cumulative Preferred Shares rank, with respect to payment of
distributions and amounts upon liquidation, dissolution or winding-up of the
Issuer, senior to all classes or series of Convertible CRA Shares and Common
Shares of the Issuer and therefore, of the Company.

On July 21, 2000, the Company, through the Issuer, completed a $79 million
tax-exempt preferred equity offering comprised of "Series A-1 Cumulative
Preferred Shares" and "Series B Subordinate Cumulative Preferred Shares." The
Company received net proceeds of approximately $76,126,000 from this offering.

The Series A-1 Cumulative Preferred Shares rank senior to Convertible CRA Shares
and Common Shares and pari passu with the Issuer's Series A Cumulative Preferred
Shares and senior to the Series B Subordinate Cumulative Preferred Shares. The
Series A-1 Cumulative Preferred Shares have identical terms to the Series A
Cumulative Preferred shares except as to the annual preferred dividend rate and
the liquidation amount per share.

The Series B Subordinate Cumulative Preferred Shares rank senior to the
Company's Convertible CRA Shares and Common Shares and junior to the Issuer's
Series A and Series A-1 Cumulative Preferred Shares. The shares have an annual
preferred dividend payable quarterly in arrears on January 31, April 30, July 31
and October 31 of each year but only after payment of all distributions payable
with respect to the Series A and Series A-1 Cumulative Preferred Shares and any
other senior securities. The Series B Subordinate Cumulative Preferred Shares
are subject to mandatory tender by the holders at their liquidation amount for
remarketing and purchase on November 30, 2010 under the same terms as the Series
A and Series A-1 Cumulative Preferred Shares.

Since inception, all quarterly distributions have been declared at the stated
annualized dividend rate for each respective series and all distributions due
have been paid. Attributes of each series of Cumulative Preferred Shares are as
follows:

Preferred Date of Number Liquidation Total Face Dividend
Series Issuance of Shares Preference per Share Amount Rate
- --------- ---------- ----------- ------------------ ------------- ---------
Series A June 29, 45 $2,000,000 $90,000,000 6.625%
1999
Series A-1 July 21, 48 500,000 24,000,000 7.100%
2000
Series B July 21, 110 500,000 55,000,000 7.600%
2000

Convertible Community Reinvestment Act Preferred Share Offerings
- ----------------------------------------------------------------

On May 10, 2000, the Company completed a $27,497,000 private placement of
Convertible Community Reinvestment Act Preferred Shares ("Convertible CRA
Shares") to three financial institutions (1,946,000 Convertible CRA Shares
priced at $14.13 per share). The Company incurred an initial purchasers'
discount of approximately $1,109,000 and other related costs of approximately
$610,000 resulting in net proceeds (less expenses) of $25,778,000. On December
14, 2000, the Company completed an additional $9,100,000 private placement of
Convertible CRA Shares to three additional financial institutions (644,000
Convertible CRA Shares priced at $14.13 per share). After an initial purchasers'
discount of approximately $367,000 and other related costs of approximately
$318,000, the Company received net proceeds (less expenses) of $8,414,000.

The Convertible CRA Shares enable financial institutions to receive certain
regulatory benefits in connection with their investment. The Company has
developed a proprietary method for specially allocating these regulatory
benefits to specific financial institutions that invest in the Convertible CRA
Shares. Other than the preferred allocation of regulatory benefits, the
investors receive the same economic benefits as Common Shareholders of the
Company, including receipt of the same dividends per share as those paid to
Common Shareholders. Other than on matters relating to the terms of the
Convertible CRA Shares or to amendments to the Company's Trust Agreement which
would adversely affect the Convertible CRA Shares, the Convertible CRA Shares do
not have any voting rights. The Company's earnings are allocated pro rata among
the Common Shares and the Convertible CRA Shares, and the Convertible CRA Shares
rank on parity with the Common Shares with respect to rights upon liquidation,
dissolution or winding up of the Company. The investors, at their option, have
the ability to convert their Convertible CRA Shares into Common Shares at a
predetermined conversion price. Upon conversion, the investors will no longer be
entitled to a special allocation of the regulatory benefit. The conversion price
is the greater of (i) the Company's book value per Common Share as set forth in
the Company's most recently issued annual or quarterly report filed with the SEC
prior to the respective Convertible CRA issuance date or (ii) 110% of the
closing price of a Common Share on the respective Convertible CRA Share's
pricing date. The conversion price for each Convertible CRA Share offering is
indicated on the following table:

Issuance Date Conversion Price Conversion Ratio
--------------------------- --------------------- --------------------
May 10, 2000 $15.33 0.9217
December 20, 2000 $14.60 0.9678

The Company expects to raise additional equity in the future from similar
financial institutions that can utilize the regulatory benefits that have not
previously been allocated to other holders of the Convertible CRA Shares. While
the Company expects that these future offerings will be a source of liquidity,
it is only one of many sources of potential liquidity. Furthermore, there is no
assurance that the Company will be able to consummate such transactions or the
price or terms on which the offering may be consummated. If the federal
regulatory agencies that monitor these regulatory benefits were to determine
that an investment in the Convertible CRA Shares did not result in the financial
institutions being able to receive these regulatory benefits, the Company would
lose this potential source of liquidity.

Other
- -----

Through calendar year 1999, each independent trustee was entitled to receive
annual compensation for serving as a trustee in the aggregate amount of $15,000
payable in cash (maximum of $5,000 per year) and/or Common Shares valued at
their fair market value on the date of issuance. Beginning in calendar year
2000, the annual compensation for the two original independent trustees was
increased from $15,000 to $17,500 and the maximum payable in cash was increased
from $5,000 to $7,500. In 2000, a third independent trustee was appointed and
such trustee will receive annual compensation in the aggregate amount of $30,000
payable in cash (maximum of $20,000 per year) and/or Common Shares. As of
December 31, 2000 and 1999, 3,552 and 1,910 Common Shares, respectively, having
an aggregate value on the date of issuance of $45,000 and $25,000, respectively,
were issued to the independent trustees as compensation for their services. An
additional 2,001 shares, with an aggregate value of $30,000 at issuance, were
issued to the independent trustees in January 2001 as compensation for their
2000 service.

Distribution Information

Distributions Per Share

The Company's earnings are allocated pro rata among the Common Shares and the
Convertible CRA Shares (collectively, "Shares"), and the Convertible CRA Shares
rank on parity with the Common Shares with respect to rights upon liquidation,
dissolution or winding up of the Company. Quarterly cash distributions per Share
for the years ended December 31, 2000 and 1999 were as follows:

Shareholders of the Company
------------------------------------------------------
Cash Distribution Date Per Total Amount
for Quarter Ended Paid Share Distributed
--------------------- ------------- ------------------ ---------------------
March 31, 2000 5/15/00 $0.265 $ 5,454,406
June 30, 2000 8/15/00 0.265 5,749,086
September 30, 2000 11/15/00 0.265 5,970,096
December 31, 2000 2/15/01 0.275 6,800,306
----- -----------
Total for 2000 $1.070 $23,973,894
===== ==========

March 31, 1999 5/14/99 $0.240 $ 4,939,437
June 30, 1999 8/15/99 0.245 5,042,352
September 30, 1999 11/14/99 0.245 5,042,352
December 31, 1999 2/14/00 0.265 5,453,971
----- -----------
Total for 1999 $0.995 $20,478,112
===== ==========

In addition to the distributions set forth in the table above, the Company paid
the Manager a special distribution (equal to .375% per annum of the total
invested assets of the Company) which amounted to $2,743,465 and $2,018,822 for
the years ended December 31, 2000 and 1999, respectively.

There are no material legal restrictions upon the Company's present or future
ability to make distributions in accordance with the provisions of the Company's
Amended and Restated Trust Agreement. Future distributions paid by the Company
will be at the discretion of the Trustees based upon evaluation of the actual
cash flow of the Company, its financial condition, capital requirements and such
other factors as the Trustees deem relevant.

Item 6. Selected Financial Data

The information set forth below presents selected financial data of the Company.
Additional financial information is set forth in the audited financial
statements and notes thereto contained in "Item 8. Financial Statements and
Supplementary Data".

For the Year Ended December 31, ($000s except per share data)
-------------------------------------------------------------
OPERATIONS 2000 1999 1998 1997 1996*
- ---------- -------------------------------------------------------------

Total revenues $ 59,091 $ 40,437 $ 27,940 $ 14,230 $ 11,628

Operating expenses (4,563) (3,151) (2,391) (1,902) (1,783)
Interest expense and financing costs (6,414) (3,166) (1,959) (429) 0
Other-than-temporary impairments related to - (1,859) - (1,843) (4,000)
investments in Revenue Bonds
Gain/(Loss) on repayment of revenue bonds 645 (463) 0 0 0
---------- ------- ----------- --------- --------

Income before minority interests 48,759 31,798 23,590 10,056 5,845
Income allocated to preferred shareholders of (8,594) (3,014) 0 0 0
subsidiary
Minority interest in income of subsidiary (10,074) (5,602) (1,564) 0 0
-------- -------- -------- ----------- ----------

Net income $ 30,091 $ 23,182 $ 22,026 $ 10,056 $ 5,845
======== ======= ======= ======= =======

Net income applicable to Shareholders ***** $ 27,074 $ 20,951 $ 20,343 $ 2,438***
======== ======= ======= ===========

Net income per Share *****
Basic $ 1.22 $ 1.02 $ .99 $ .12*** **
========== ========== ========== ==========

Diluted $ 1.22 $ 1.02 $ .98 $ .12*** **
========== ======== ========== ==========

Weighted average Shares outstanding
Basic 22,141 20,581 20,587 20,587*** **
====== ====== ====== ======
Diluted 22,152 20,581 20,741 20,587*** **
====== ====== ====== ======

FINANCIAL POSITION

Total assets $ 925,236 $ 673,791 $ 492,586 $ 362,391 $ 154,896
========= ========= ========= ========== =========

Secured borrowings $ 110,026 $ 80,770 $ 0 $ 0 $ 0
========= ======= ========= ========== ===========

Notes payable $ 0 $ 0 $ 0 $ 21,445 $ 0
========= ========= ========= ========= ==========

Total liabilities $ 124,222 $ 91,239 $ 15,092 $ 30,722 $ 574
========= ========== ========= ======== =========

Minority interest in subsidiary (subject to $ 275,000 $ 177,000 $ 150,000 $ 0 $ 0
mandatory redemption) ======== ========= ========= ======== ==========

Preferred shares of subsidiary (subject to $ 169,000 $ 90,000 $ 0 $ 0 $ 0
mandatory repurchase) ========= ========== ======== ========= ==========

Total shareholders' equity/partners' capital $ 357,014 $ 315,552 $ 327,494 $ 331,668 $ 154,323
======== ======== ========== ========== ==========

DISTRIBUTIONS

Distributions to Series A preferred shareholders $ 5,962,000 $ 3,014,375 N/A N/A N/A
=========== =========
Distributions to Series A-1 preferred shareholders $ 762,067 N/A N/A N/A N/A
==========
Distributions to Series B preferred shareholders $ 1,869,389 N/A N/A N/A N/A
=========
Distributions to BUC$holders N/A N/A N/A $7,138,263**** $9,517,685
========= =========
Distributions to Shareholders ***** $23,973,872 $20,478,112 $19,144,597 $4,735,120***
========== ========== ========== =========
Distributions per share** $ 1.07 $ 1.00 $ .93 $ .23***
=========== =========== ============ =========

OTHER DATA

*Information prior to October 1, 1997 (the date of the Merger) is only with
respect to Summit Tax Exempt L.P. II. Information subsequent to September 30,
1997 is with respect to the Company and its consolidated subsidiaries that
include Summit Tax Exempt II and the other Partnerships pursuant to the Merger.

**Distributions per share are the same for both common shares and Convertible
CRA Shares. Net income and distribution per Share information for periods prior
to October 1, 1997 is not presented because it is not indicative of the
Company's continuing capital structure.

***Represents amount for the three months ended December 31, 1997.

****Represents amount for the nine months ended September 30, 1997.

*****Includes common shareholders and Convertible CRA Shareholders.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

General
- -------

The Company is a Delaware business trust principally engaged in the acquisition
and ownership (directly or indirectly) of tax-exempt multifamily housing revenue
bonds ("Revenue Bonds") and other investments that produce tax-exempt income
issued by various state or local governments, agencies, or authorities.
Accordingly, the Company produces tax-exempt income which it directly passes
through to its shareholders in the form of a quarterly tax-exempt dividend.
Revenue Bonds are secured by mortgage loans on underlying properties
("Underlying Properties").

The Company is governed by a board of trustees comprised of three independent
managing trustees and four managing trustees who are affiliated with Related
Capital Company, a nationwide, fully integrated real estate financial services
firm. The Company has engaged Related Charter LP (the "Manager"), an affiliate
of Related, to manage its day-to-day affairs and to provide, among other things,
acquisition, financial, accounting, capital markets, asset monitoring, portfolio
management, investor relations and public relations services.

The Company does not operate as a mortgage REIT, which generally utilize high
levels of leverage and acquire subordinated interests in commercial and/or
residential mortgage-backed securities. Unlike mortgage REITs that typically
incur leverage at ratios ranging from 3:1 to 10:1, the Company is only able to
incur leverage or other financing up to 50% of the Company's Total Market Value
(as defined and pursuant to its Trust Agreement) as of the date incurred.
Furthermore, the Revenue Bonds owned by the Company generally call for ten-year
restrictions from prepayments, eliminating the Company's susceptibility to
significant levels of repayment risk as a result of interest rate reductions.
Due to the Company's low level of leverage, the Company has not been affected by
the lack of liquidity that recently impaired mortgage REITs and its portfolio
does not contain assets that are especially vulnerable to volatility during
periods of interest rate fluctuations. Consistent with the foregoing, the
Company focuses on providing investors with a stable level of distributions,
even through unstable markets.

In order to generate increased tax-exempt income and, as a result, enhance the
value of the Company's Shares, the Company intends to invest in or acquire
additional Revenue Bonds. The Company believes that it can earn above market
rates of interest on its bond acquisitions by focusing its efforts primarily on
affordable housing. The traditional method of financing tax-exempt properties
requires the involvement of credit enhancement, rating agencies and investment
bankers. Therefore, the up-front cost of such financing is generally much higher
than traditional multifamily financing. The Company has designed a Direct
Purchase Program specifically to appeal to developers of such properties through
which the Company will invest in or acquire tax-exempt bonds without the cost
associated with credit enhancement, rating agencies and investment bankers. The
Company believes that the up-front cost savings to the developer will translate
into a higher than market interest rate on the bonds acquired by the Company.

The Company believes that it is well positioned to market its Direct Purchase
Program as a result of the Manager's affiliation with Related because the
Manager is able to utilize Related's resources and relationships in the
multifamily affordable housing finance industry to source potential borrowers of
first mortgage bonds. Related and its predecessor companies have specialized in
offering debt and equity products to mid-market multifamily owners and
developers for over 26 years. According to the 2000 National Multihousing
Council survey, Related is the third largest owner of apartments in the United
States.

Liquidity and Capital Resources
- -------------------------------

In order for the Company to fund its investments in Revenue Bonds and facilitate
growth, the Company has primarily used two sources of capital: collateralized
debt securitizations and equity offerings. To date, the primary source of
long-term liquidity has come from the Company's Private Label Tender Option
Program and preferred equity offerings by the Company or a subsidiary. During
the years 1999 and 2000, the Company raised additional capital as follows:

Amount of Capital Raised During: Ending Balance
- --------------------------------------------------------------------------------------------------------------
Capital Source 1999 2000 December 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------

Equity:

Series A Preferred $ 90,000,000 $ 0 $ 90,000,000
Series A-1 Preferred $ 0 $24,000,000 $ 24,000,000
Series B Preferred $ 0 $55,000,000 $ 55,000,000
Convertible CRA Preferred $ 0 $36,596,700 $ 36,596,700

Securitizations:

Private Label Tender Option Program $177,000,000 $98,000,000 $275,000,000
P-Floats/RITES $ 80,769,616 $29,348,725 $110,026,031

These capital raising transactions are described in more detail below.

The Company has two primary securitization programs: the Private Label Tender
Option Program and the P-FLOATS/RITES program. Securitizations continue to offer
efficient execution and the lowest cost of capital, albeit with certain
covenants and leverage limits. Pursuant to its Trust Agreement, the Company is
only able to incur leverage or other financing up to 50% of the Company's Total
Market Value; such terms are generally consistent or more conservative than
leverage covenants on the Company' s securitized debt.

Short-term liquidity is provided by interest income from Revenue Bonds and
promissory notes in excess of the related financing costs, and interest income
from cash and temporary investments. The Company believes that its financing
capacity and cash flow from current operations are adequate to meet its current
and projected liquidity requirements.

Management is not aware of any trends or events, commitments or uncertainties,
which have not otherwise been disclosed that will or are likely to impact
liquidity in a material way.

Capital Raising Transactions

(i) Preferred Equity Issuances By Subsidiary

Since June 1999, the Company, through a subsidiary, has issued multiple series
of Cumulative Preferred Shares. Proceeds from these offerings were used to
invest in or acquire additional tax-exempt assets for the Company.

Preferred Date of Mandatory Mandatory Number Liquidation Total Face Dividend
Series Issuance Tender Repurchase of SharesPreference per Share Amount Rate
- ---------------------------------------------------------------------------------------------------------------

Series A 6/29/99 6/30/09 6/30/49 45 $2,000,000 $90,000,000 6.625%
Series A-1 7/21/00 6/30/09 6/30/49 48 500,000 24,000,000 7.100%
Series B 7/21/00 11/30/10 11/30/50 110 500,000 55,000,000 7.600%

Each series of Cumulative Preferred Shares has an annual preferred dividend
payable quarterly in arrears upon declaration thereof by the Company's Board of
Trustees, but only to the extent of tax-exempt net income for the particular
quarter. All series of Cumulative Preferred Shares are subject to mandatory
tender by the holders thereof for remarketing and purchase on their respective
mandatory tender dates and each remarketing date thereafter at their respective
liquidation preference per share plus an amount equal to all distributions
accrued but unpaid.

Holders of Cumulative Preferred Shares may elect to retain their shares upon
remarketing, with a distribution rate to be determined immediately prior to the
remarketing date by the remarketing agent. Each holder of Cumulative Preferred
Shares will be required to tender its shares to the Issuer for mandatory
repurchase on the mandatory repurchase date, unless the Company decides to
remarket the shares on such date. Cumulative Preferred Shares are not
convertible into Common Shares of the Company.

The Series A and A-1 Cumulative Preferred Shares rank, with respect to payment
of distributions and amounts upon liquidation, dissolution or winding-up of the
Company, senior to all classes or series of Convertible CRA Shares, Series B
Cumulative Preferred Shares and Common Shares of the of the Company. The Series
B Subordinate Cumulative Preferred Shares rank, with respect to payment of
distributions and amounts upon liquidation, dissolution or winding-up of the
Company, senior to the Company's Common Shares and the Company's Convertible CRA
Shares and junior to the Issuer's Series A and A-1 Cumulative Preferred Shares.

Since inception, all quarterly distributions have been declared at each stated
annualized dividend rate for each respective series and all distributions due
have been paid. In February 2001, preferred shareholder distributions that were
declared in December 2000, were paid to the preferred shareholders from cash
flow from operations for the quarter ended December 31, 2000. The per share
distributions declared and paid for this period were as follows:

Dividend per Share Total Distribution
------------------ ------------------

Series A; 6.625% $ 33,125 $1,490,625
Series A-1; 7.100% $ 8,875 $ 426,000
Series B; 7.600% $ 9,500 $1,045,000

(ii) Convertible Community Reinvestment Act Preferred Share Offerings

On May 10, 2000, the Company completed a $27,497,000 private placement of
Convertible Community Reinvestment Act Preferred Shares ("Convertible CRA
Shares") to three financial institutions (1,946,000 Convertible CRA Shares
priced at $14.13 per share.) On December 14, 2000, the Company completed an
additional $9,100,000 private placement of Convertible CRA Shares to three
additional financial institutions (644,000 Convertible CRA Shares priced at
$14.13 per share).

The Convertible CRA Shares enable financial institutions to receive certain
regulatory benefits in connection with their investment. The Company has
developed a proprietary method for specially allocating these regulatory
benefits to specific financial institutions that invest in the Convertible CRA
Shares. Other than the preferred allocation of regulatory benefits, the
preferred investors receive the same economic benefits as Common Shareholders of
the Company, including receipt of the same dividends per share as those paid to
Common Shareholders. The Company's earnings are allocated pro rata among the
Common Shares and the Convertible CRA Shares, and the Convertible CRA Shares
rank on parity with the Common Shares with respect to rights upon liquidation,
dissolution or winding up of the Company.

The investors, at their option, have the ability to convert their Convertible
CRA Shares into Common Shares at a predetermined conversion price. Upon
conversion, the investors will no longer be entitled to a special allocation of
the regulatory benefit. The conversion price is the greater of (i) the Company's
book value per Common Share as set forth in the Company's most recently issued
annual or quarterly report filed with the SEC prior to the respective
Convertible CRA Share issuance date or (ii) 110% of the closing price of a
Common Share on the respective Convertible CRA Share's pricing date. The
conversion price for each Convertible CRA Share offering is indicated on the
following table:

Issuance Date Conversion Price Conversion Ratio
------------- ---------------- ----------------

May 10, 2000 $15.33 0.9217
December 14, 2000 $14.60 0.9678

(iii) Private Label Tender Option Program

On May 21, 1998, the Company closed on its Private Label Tender Option Program
("TOP") in order to raise additional capital to acquire additional Revenue
Bonds. As of December 31, 1999, the maximum amount of capital that could be
raised under the TOP was $400,000,000. On December 7, 2000, the Company refined
the structure the TOP for the primary purpose of segregating Revenue Bonds
issued by governmental entities in California from the remainder of the Revenue
Bonds under the TOP and to increase the maximum amount of capital available
under the program to $500,000,000. In addition, the TOP's surety commitment was
extended for a five-year term. The liquidity commitment is a one-year renewable
commitment. The Company expects to renew or replace such commitments upon
expiration of their terms.

Under the TOP structure, the Company contributes Revenue Bonds to Charter Mac
Origination Trust I (the "Origination Trust"), a wholly owned, indirect
subsidiary of the Company. The Origination Trust then contributes certain of
these Revenue Bonds to Charter Mac Owner Trust I (the "Owner Trust") which is
controlled by the Company. The Owner Trust contributes selected bonds to
specific "Series Trusts" in order to segregate Revenue Bonds issued by
governmental entities selected by state of origin. As of December 31, 2000, two
such Series Trusts were created: a California only series and a National
(non-state specific) series.

Each Series Trust, issues two equity certificates: (i) a Senior Certificate
which has been deposited into a "Certificate Trust" which issues and sells
"Floater Certificates" representing proportional interests in the Senior
Certificate to new investors and (ii) a Residual Certificate, issued to the
Origination Trust which represents the remaining beneficial ownership interest
in each Series Trust.

The effect of the TOP structure is that a portion of the interest received on
Revenue Bonds in the Owner Trust is distributed through the Senior Certificate
to the holders of the Floater Certificates with any remaining interest remitted
to the Origination Trust (and thus to the benefit of the Company) via the
Residual Certificate. The effect of the December 7, 2000, refinement of the TOP
structure was to segregate the California related Floater Certificates as they
generally will pay distributions at lower rates than National (non-state
specific) Floater Certificates and thus the yield on the Residual Certificates
owned by the Origination Trust is increased. The Revenue Bonds remaining in the
Origination Trust (aggregate principal amount of approximately $147,000,000) are
an additional collateral pool for the Owner Trust's obligations under the Senior
Certificate.

The balance of the TOP at December 31, 2000 (the equity in the Owner Trust,
represented by the Senior Certificate), was $275,000,000. The Company's floating
rate cost of funds relating to the TOP (calculated as income allocated to the
minority interest plus recurring fees as a percentage of the weighted average
amount of the outstanding Senior Certificate) was approximately 5.4%, 4.5% and
4.9% for the years ended December 31, 2000, 1999 and the period May 21, 1998
(inception) through December 31, 1998, respectively.

(iv) P-FLOATs/RITES

Another source for financing the Company's investments is the securitization of
selected Revenue Bonds through the Merrill Lynch Pierce Fenner & Smith
Incorporated ("Merrill Lynch") P-FLOATS/RITES program. Merrill Lynch deposits
each Revenue Bond into an individual special purpose trust together with a
credit enhancement guarantee. Two types of securities are then issued by each
trust, (1) Puttable Floating Option Tax-Exempt Receipts ("P-FLOATS"), a
short-term senior security which bears interest at a floating rate that is reset
weekly and (2) Residual Interest Tax Exempt Securities ("RITES"), a subordinate
security which receives the residual interest payment after payment of P-FLOAT
interest and ongoing transaction fees. The P-FLOATS are sold to qualified third
party, tax-exempt investors and the RITES are generally sold back to the
Company.

During the year 2000, the Company transferred three Revenue Bonds with an
aggregate face amount of $30,800,000 to P-FLOATS/RITES program and received
proceeds of $29,348,725.

The Company's cost of funds relating to its secured borrowings under the Merrill
Lynch P-FLOATS/RITES program (calculated as interest expense as a percentage of
the weighted average amount of the secured borrowings) was approximately 4.96%
and 4.8%, annualized, for the year ended December 31, 2000 and the period June
29, 1999 (inception of this program) through December 31, 1999, respectively.

Acquisitions and Dispositions of Revenue Bonds

During 2000, the Company acquired 44 Revenue Bonds (including Revenue Bonds
acquired in the ATEBT Merger - see below) with an aggregate par value of
approximately $299.8 million, not including bond selection fees and expenses of
approximately $5.8 million.

Acquisitions for the Year Ended December 31, 2000
Bond
Closing Aggregate Interest
Property/Bond Name Date Par Amount Purchase Price Rate at
12/31/00
----------------------------------- ----------- ------------- ----------------- --------------

Summer Lake Mar-14 $5,600,000 $ 5,726,806 7.400%
Princess Anne House Apr-6 125,000 127,500 9.500%
Princess Anne House Apr-6 7,500,000 7,684,106 7.500%
Walnut Park Plaza Apr-11 5,500,000 5,611,284 7.500%
Columbia at Bells Ferry Apr-19 13,000,000 13,264,889 7.400%
Oaks at Hampton Apr-27 525,000 535,500 9.000%
Oaks at Hampton Apr-27 9,535,000 9,737,266 7.200%
Walnut Creek May-4 360,000 367,200 7.500%
Walnut Creek May-4 3,240,000 3,305,433 7.500%
South Congress May-4 6,300,000 6,431,026 7.500%
Newark Commons May-17 14,300,000 14,643,370 7.300%
Grace Townhomes May-23 5,225,600 5,330,112 7.500%
San Marcos May-23 7,231,000 7,380,311 7.375%
Casa Ramon Jul-11 4,744,000 4,856,800 7.500%
Parks at Westmoreland Jul-17 455,000 464,100 9.000%
Parks at Westmoreland Jul-17 9,535,000 9,745,037 8.500%
Kings Villages Jul-26 17,650,000 18,027,011 8.500%
Autumn Ridge Aug-11 9,304,230 9,495,593 8.000%
Bay Colony Aug-11 10,100,000 10,306,797 7.500%
Village Green Aug-14 503,528 513,598 8.500%
Village Green Aug-14 3,078,000 3,144,885 8.500%
Southwest Trails Aug-14 6,500,000 6,633,855 7.350%
Park at Landmark Sep-7 9,500,000 9,690,000 8.750%
Hidden Grove Sep-26 8,600,000 8,772,000 7.400%
Running Brook Sep-27 8,495,000 8,674,092 7.400%
Park Sequoia Oct-17 6,740,000 6,874,800 8.500%
Armstrong Farm Oct-19 8,246,000 8,410,920 7.500%
Chapel Ridge of Claremore Oct-26 4,100,000 4,182,000 7.500%
Chandler Creek Oct-31 350,000 357,000 9.750%
Chandler Creek Oct-31 15,850,000 16,167,000 8.500%
Greenbridge at Buckingham Nov-7 350,000 357,000 10.000%
Greenbridge at Buckingham Nov-7 19,735,000 20,143,757 7.400%
Woods Edge Nov-13 4,850,000 4,947,000 7.800%
Highpointe Club Nov-14 3,250,000 3,927,000 (a) 9.000%
Lexington Trails Nov-14 4,900,000 5,921,000 (a) 9.000%
Rolling Ridge Nov-14 4,925,000 5,951,000 (a) 9.000%
Reflections Nov-14 10,700,000 12,930,000 (a) 9.000%
Museum Tower Nov-29 6,000,000 6,120,000 8.250%
Williams Run Dec-6 200,000 204,000 9.250%
Williams Run Dec-6 12,650,000 12,903,000 7.650%
Red Hill Villas Dec-12 400,000 408,000 9.500%
Red Hill Villas Dec-12 9,900,000 10,112,024 8.400%
Grandview Forest Dec-22 5,483,907 5,597,602 8.500%
Millpond Village Dec-28 14,300,000 14,586,000 8.550%

(a) These bonds were purchased as part of the ATEBT merger.

During the period January 1, 2000 through December 31, 2000, three Revenue Bonds
were repaid and two RITES were terminated as more fully described in table
below.

Dispositions for the Year Ended December 31, 2000
Bond Par Amortized Realized Gains
Property/Bond Name Amount Cost / (Losses)
------------------------- ------------------- ---------------- ---------------
Bonds
Bay Club $6,400,000 $6,438,942 $ (38,942)
East Ridge 8,700,000 8,437,747 262,253
Martin's Creek 7,300,000 6,842,946 457,054
RITES
Avalon 5,000 40,073 (35,073)
Meadowview Park 5,000 5,141 (141)
---------
$645,151

Revenue Bond Modifications
- --------------------------

The original obligors and owners of the Underlying Properties of the Cedar Creek
and Pelican Cove Revenue Bonds have been replaced with affiliates of the Manager
who have not made equity investments. These affiliates have assumed the
day-to-day responsibilities and obligations of the Underlying Properties. On
September 29, 2000, the affiliates of the Manager sold 49% of Pelican Cove and
Cedar Creek to a third party buyer with an option from the buyers to purchase
the remaining 51% in 2001.

In connection with the sale of two of the Underlying Properties, Cedar Creek and
Pelican Cove, the Company has agreed to a modification of the terms of the
respective Revenue Bonds. Subject to Issuer approval, the stated interest rate
of the Cedar Creek Revenue Bond will be modified to a stated interest rate of
7.43% and 7.25% and the maturity and call dates will be extended to October 1,
2010 and October 1, 2020, respectively.

ATEBT Merger
- ------------

On November 2, 1999, the Company and American Tax Exempt Bond Trust ("ATEBT"),
whose manager is an affiliate of the Manager of the Company, entered into an
Agreement and Plan of Merger providing for the merger of ATEBT into and with the
Company as the surviving trust in the merger (the "ATEBT Merger"). The ATEBT
Merger was approved by the ATEBT shareholders on September 27, 2000 and
consummated on November 14, 2000.

On the ATEBT Merger consummation date, ATEBT had total assets of approximately
$29,700,000 and net assets of approximately $28,300,000. ATEBT had four
tax-exempt first mortgage bonds financing properties in four states, with an
aggregate outstanding face amount of $23,775,000, and with individual interest
rates of 9.0%.

Pursuant to the Merger Agreement, each share of beneficial ownership in ATEBT
issued and outstanding was converted into 1.43112 Common Shares of the Company.
Following the ATEBT Merger, previous ATEBT shareholders own 2,115,722 Common
Shares (representing approximately 9.3% of the then outstanding Common Shares)
of the Company.

Results of Operations
- ---------------------

The following is a summary of the Company's results of operations for the years
ended December 31, 2000, 1999 and 1998. Net income for the years ended December
31, 2000, 1999 and 1998 was $30.1 million, $23.2 million and $22.0 million,
respectively.

2000 vs. 1999
- -------------

For the year ended December 31, 2000 as compared to 1999, total revenues, total
expenses and net income increased due to the net result of the acquisition of 44
Revenue Bonds and the repayment of three Revenue Bonds.

Interest income from Revenue Bonds increased approximately $17.2 million for the
year ended December 31, 2000 as compared to 1999. This increase was primarily
due to an increase in interest income of $15.2 million on new Revenue Bonds
acquired during 1999 and 2000. Also contributing to the increase was the receipt
during 2000 of deferred, unrecorded, base interest of $2.5 million relating to
prior periods with respect to certain Revenue Bonds.

Total revenues for the year ended December 31, 2000 increased by approximately
$18,700,000, including the increases in interest income from Revenue Bonds noted
above. The remaining increase is due to an increase in interest income from
temporary investments of approximately $1,100,000 primarily due to cash pledged
as collateral during 2000 related to securitization transactions, and an
increase in interest income from promissory notes of approximately $300,000
primarily due to the Country Lake note acquired during 2000.

Interest expense and recurring fees increased approximately $3,200,000 for the
year ended December 31, 2000 as compared to 1999 primarily due to increased
secured borrowings and a higher outstanding balance of the TOP during 2000.

Loan servicing and asset management fees increased approximately $480,000 for
the year ended December 31, 2000 due to new acquisitions and the corresponding
increase in the Revenue Bond portfolio serviced. General and administrative