SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q/A
                                (Amendment No. 1)

(Mark One)


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



For the quarterly period ended March 31, 2004


                                       OR


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


                         Commission File Number 1-13237


                                   CHARTERMAC
                                   ----------
         (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) 317-5700


       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 whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).  Yes    X   No
                                          ------    ------



<PAGE>

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A ("Form  10-Q/A") to our Quarterly  Report on
Form 10-Q for the quarterly  period ended March 31, 2004,  initially  filed with
the  Securities  and  Exchange  Commission  (the  "SEC")  on May 10,  2004  (the
"Original  Filing"),  is being filed to reflect  restatements  of our  condensed
consolidated  balance sheet at March 31, 2004,  and our  condensed  consolidated
statements of  operations,  shareholders'  equity and cash flows for the quarter
ended March 31, 2004, and certain  disclosures in the notes thereto.  For a more
detailed  description  of these  restatements,  see Note 1A to the  accompanying
condensed consolidated financial statements in this Form 10-Q/A.

For the  convenience  of the reader,  this Form  10-Q/A sets forth the  Original
Filing in its entirety. However, this Form 10-Q/A only amends and restates Items
1, 2 and 4 of Part I of the Original  Filing,  in each case,  solely as a result
of, and to reflect,  the restatement,  and no other  information in the Original
Filing is amended  hereby.  The foregoing items have not been updated to reflect
other events  occurring  after the Original  Filing or to modify or update those
disclosures affected by subsequent events. In addition, pursuant to the rules of
the SEC,  Item 6 of Part II of the  Original  Filing has been amended to contain
currently-dated  certifications  from our  Chief  Executive  Officer  and  Chief
Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act
of 2002. The  certifications  of our Chief Executive Officer and Chief Financial
Officer  are  attached  to this Form  10-Q/A  as  exhibits  31.1,  31.2 and 32.1
respectively.

Except for the  foregoing  amended  information,  this Form 10-Q/A  continues to
describe  conditions  as of the  date of the  Original  Filing,  and we have not
updated the  disclosures  contained  herein to reflect events that occurred at a
later date.  Other events  occurring  after the date of the  Original  Filing or
other  disclosures  necessary to reflect  subsequent events have been or will be
addressed  in our  amended  Quarterly  Report on Form  10-Q/A for the  quarterly
periods  ended June 30,  2004 and  September  30,  2004,  which are being  filed
concurrently  with the filing of this Form 10-Q/A and any reports filed with the
SEC subsequent to the date of this filing.

                                       2
<PAGE>

PART I - FINANCIAL

ITEM 1.  FINANCIAL STATEMENTS

                           CHARTERMAC AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                   =============   =============
                                                                     March 31,      December 31,
                                                                       2004             2003
                                                                   -------------   -------------
                                                                  (AS RESTATED -
                                                                    SEE NOTE 1A)
<S>                                                                  <C>            <C>
                                     ASSETS

Revenue bonds-at fair value                                          $ 1,883,104    $ 1,871,009
Mortgage servicing rights                                                 33,260         33,351
Cash and cash equivalents                                                 79,401         58,257
Cash and cash equivalents-restricted                                      24,066         26,636
Investments in partnerships                                               66,317         26,638
Investments in partnerships - FIN 46R                                  2,173,621             --
Assets consolidated pursuant to FIN 46R                                  210,494             --
Deferred costs - net of amortization of $14,431 and $13,463               58,656         58,408
Goodwill                                                                 205,652        214,744
Other intangible assets - net of amortization of $8,332 and $4,163       190,033        194,203
Other assets                                                              54,867        100,027
                                                                     -----------    -----------

Total assets                                                         $ 4,979,471    $ 2,583,273
                                                                     ===========    ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
   Financing arrangements                                            $   989,568    $   900,008
   Preferred shares of subsidiary (subject to mandatory
     repurchase)                                                         273,500        273,500
   Notes payable and other liabilities consolidated pursuant
     to FIN 46R                                                        1,047,976             --
   Notes payable                                                         174,426        153,350
   Accounts payable, accrued expenses and other liabilities               41,815         58,577
   Deferred tax liability                                                 48,421         60,370
   Distributions payable                                                  31,577         27,612
                                                                     -----------    -----------

Total liabilities                                                      2,607,283      1,473,417
                                                                     -----------    -----------

Minority interest in FIN 46R partnerships                              1,297,587             --
                                                                     -----------    -----------
Minority interest in consolidated subsidiary - convertible SCUs          269,424        288,006
                                                                     -----------    -----------
Minority interest in consolidated subsidiary - PWF                         4,306          4,193
                                                                     -----------    -----------

Commitments and contingencies

SHAREHOLDERS' EQUITY:
   Beneficial  owners' equity - Convertible CRA Share-
     holders  (7,408,681 and 8,179,761 shares issued and
     outstanding in 2004 and 2003, respectively)                         158,811        160,618
   Beneficial owners equity - special preferred voting shares                151            161
   Beneficial owners' equity-other common shareholders
     (100,000,000 shares authorized; 44,612,335 shares issued
     and 44,529,905 outstanding and 42,726,232
     shares issued and 42,703,600 outstanding in
     2004 and 2003, respectively)                                        624,906        622,771
   Deferred compensation                                                 (14,871)       (19,385)
   Treasury shares of beneficial interest (82,430 and 22,632
     shares in 2004 and 2003, respectively)                               (1,706)          (378)
   Accumulated other comprehensive income                                 33,580         53,870
                                                                     -----------    -----------
Total shareholders' equity                                               800,871        817,657
                                                                     -----------    -----------

Total liabilities and shareholders' equity                           $ 4,979,471    $ 2,583,273
                                                                     ===========    ===========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                    ============================
                                                                         Three Months Ended
                                                                              March 31,
                                                                    ----------------------------
                                                                        2004            2003
                                                                    ----------------------------
                                                                   (AS RESTATED -
                                                                    SEE NOTE 1A)
<S>                                                                 <C>             <C>
Revenues:
   Revenue bond interest income                                     $     31,851    $     26,250
  Fee income:
     Mortgage banking fees                                                 3,116           3,067
     Fund management                                                       6,780              --
   Other income                                                            4,566           2,604
                                                                    ------------    ------------
       Total revenues                                                     46,313          31,921
                                                                    ------------    ------------

Expenses:
   Interest expense                                                        5,521           3,816
   Interest expense - distributions to preferred
     shareholders of subsidiary                                            4,724              --
   Recurring fees - securitizations                                        1,065             963
   Salaries and benefits                                                  13,882           3,360
   Interest rate derivatives                                               3,387              --
   General and administrative                                              6,349           3,694
   Depreciation and amortization                                           6,893           1,687
                                                                    ------------    ------------

     Total expenses                                                       41,821          13,520
                                                                    ------------    ------------

Income before gain (loss) on repayment of revenue
   bonds, gain on sale of loans and equity in earnings of ARCap            4,492          18,401

Equity in earnings of ARCap                                                  555             555

Gain on sale of loans                                                      1,745           2,139

Gain (loss) on repayment of revenue bonds                                    260            (412)
                                                                    ------------    ------------

Income before allocation of income to preferred shareholders
   of subsidiary, minority interest and SCUs                               7,052          20,683

Income allocated to preferred shareholders of subsidiary                      --          (4,724)

Income allocated to SCUs                                                  (2,918)             --

Income allocated to minority interest                                       (105)            (28)
                                                                    ------------    ------------

Income before benefit from income taxes                                    4,029          15,931

Benefit from income taxes                                                  2,389           1,976
                                                                    ------------    ------------

Net income                                                          $      6,418    $     17,907
                                                                    ============    ============

Allocation of net income to:
   Special distribution to Manager                                  $         --    $      1,411
                                                                    ============    ============
   Manager                                                          $         --    $          2
                                                                    ============    ============
   Common shareholders                                              $      5,449    $     15,089
   Convertible CRA Shareholders                                              969           1,405
                                                                    ------------    ------------
     Total for shareholders                                         $      6,418    $     16,494
                                                                    ============    ============

Net income per share
   Basic                                                            $       0.12    $       0.37
                                                                    ------------    ------------
   Diluted                                                          $       0.12    $       0.37
                                                                    ------------    ------------

Weighted average shares outstanding:
   Basic                                                              51,591,109      45,013,292
                                                                    ============    ============
   Diluted                                                            51,839,141      45,070,595
                                                                    ============    ============
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
                              SHAREHOLDERS' EQUITY
                           (AS RESTATED - SEE NOTE 1A)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                            Beneficial         Beneficial           Beneficial
                                         Owners' Equity -   Owners' Equity -     Owners' Equity -         Treasury
                                          Convertible CRA           Other          Special Preferred         Shares of
                                           Shareholders       Shareholders        Voting Shares      Beneficial Interest
                                         ----------------   ----------------    -----------------    -------------------
<S>                                         <C>                 <C>                  <C>                  <C>
Balance at December 31, 2003                $160,618            $622,771             $   161              $   (378)

Comprehensive income:
  Net income                                     969               5,449

  Other comprehensive income (loss):
   Net unrealized loss on interest
    rate derivatives
   Net unrealized loss on revenue
    bonds:
   Unrealized holding loss arising
    during the period
   Less: Reclassification adjustment
    for net gain included in net income

  Total other comprehensive loss:

  Comprehensive loss

  Deferred compensation
Retirement of special preferred voting
 shares                                                                                  (10)
Costs of issuance of Convertible CRA
 Shares                                         (148)
Issuance of common shares                                         17,201                                    (1,328)
Distributions                                 (2,628)            (20,515)
                                            --------            --------             -------              --------

Balance at March 31, 2004                   $158,811            $624,906             $   151              $ (1,706)
                                            ========            ========             =======              ========

<CAPTION>

                                                                             Accumulated
                                                                                Other
                                              Deferred      Comprehensive   Comprehensive
                                            Compensation    Income (Loss)   Income (Loss)       Total
                                            ------------    -------------   -------------    ------------
<S>                                           <C>             <C>              <C>             <C>
Balance at December 31, 2003                  $(19,385)                        $ 53,870        $817,657

Comprehensive income:
  Net income                                                  $   6,418                           6,418
                                                              ---------
  Other comprehensive income (loss):
   Net unrealized loss on interest
    rate derivatives                                             (2,292)
   Net unrealized loss on revenue
    bonds:
   Unrealized holding loss arising
    during the period                                           (17,738)
   Less: Reclassification adjustment
    for net gain included in net income                            (260)
                                                              ---------
  Total other comprehensive loss:                                (20,290)       (20,290)        (20,290)
                                                              ---------
  Comprehensive loss                                          $ (13,872)
                                                              ==========
  Deferred compensation                          4,514                                            4,514
Retirement of special preferred voting
 shares                                                                                             (10)
Costs of issuance of Convertible CRA
 Shares                                                                                            (148)
Issuance of common shares                                                                        15,873
Distributions                                                                                   (23,143)
                                              --------                         --------        --------

Balance at March 31, 2004                     $(14,871)                        $ 33,580        $800,871
                                              ========                         ========        ========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                   ==============================
                                                                         Three Months Ended
                                                                              March 31,
                                                                   ------------------------------
                                                                        2004            2003
                                                                   ------------------------------
                                                                   (Unaudited)
                                                                 (AS RESTATED -
                                                                   SEE NOTE 1A)
<S>                                                                  <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                        $     6,418    $    17,907
   Adjustments to reconcile net income to net cash
     provided by operating activities:
   (Gain) loss on repayment of revenue bonds                                (260)           412
   Depreciation and amortization                                           6,570          2,473
   Provision for uncollectible accounts                                      471              0
   Income allocated to preferred shareholders of
     subsidiary                                                            4,724          4,724
   Income allocated to minority interest - SCUs                            2,918             --
   Income allocated to minority interest                                     105             28
   Issuance of shares of subsidiary - compensation
     expenses                                                                 --            867
   Deferred tax liability                                                 (2,022)        (1,204)
   Changes in operating assets and liabilities:
     Mortgage servicing rights                                            (1,317)        (1,812)
     Other assets                                                         33,805          7,401
     Accounts payable, accrued expenses and other
       liabilities                                                       (16,396)       (20,582)
     Deferred compensation                                                 3,777             --
     Derivative assets and liabilities                                     3,387             34
                                                                     -----------    -----------

Net cash provided by operating activities                                 42,180         10,248
                                                                     -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from revenue bonds and notes                             $    27,786    $    31,212
   Revenue bond acquisitions                                             (91,065)        (3,050)
   Increase in investments in partnerships                               (39,679)            --
   Increase in goodwill                                                     (835)            --
   (Increase) decrease in cash and cash equivalents -
     restricted                                                            2,570           (187)
                                                                     -----------    -----------

Net cash (used in) provided by investing activities                     (101,223)        27,975
                                                                     -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Distributions to shareholders                                         (18,846)       (15,546)
   Distributions paid to preferred shareholders of subsidiary             (4,724)        (4,724)
   Distributions to SCU holders                                           (4,038)            --
   Proceeds from financing arrangements                                  127,569             --
   Principal repayments of financing arrangements                        (38,009)          (495)
   Increase in notes payable                                              21,076          2,793
   Retirement of special preferred voting shares                             (10)            --
   Options exercised                                                          --            649
   Increase in treasury stock                                             (1,328)            --
   Increase in other deferred costs                                       (1,503)        (1,204)
                                                                     -----------    -----------

Net cash provided by (used in) financing activities                       80,187        (18,527)
                                                                     -----------    -----------

Net increase in cash and cash equivalents                                 21,144         19,696

Cash and cash equivalents at the beginning of the period                  58,257         55,227
                                                                     -----------    -----------

Cash and cash equivalents at the end of the period                   $    79,401    $    74,923
                                                                     ===========    ===========

SUPPLEMENTAL INFORMATION:
   Interest paid                                                     $     6,926    $     4,414
                                                                     ===========    ===========
   Taxes paid                                                         $       --    $       103
                                                                     ===========    ===========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                   ==============================
                                                                          Three Months Ended
                                                                               March 31,
                                                                   ------------------------------
                                                                        2004             2003
                                                                   ------------------------------
                                                                    (Unaudited)
                                                                  (AS RESTATED -
                                                                    SEE NOTE 1A)
<S>                                                                  <C>            <C>
Supplemental disclosure of non cash activities relating to FIN 46R:

   Decrease in revenue bonds                                              33,821             --
   Increase in investments in partnerships - FIN 46R                  (2,173,621)            --
   Increase in assets consolidated pursuant to FIN 46R                  (210,494)            --
   Decrease in other assets - FIN 46R                                      4,731             --
   Increase in notes payable and other liabilities
     consolidated pursuant to FIN 46R                                  1,047,976             --
   Increase in minority interest in FIN 46R
     partnerships                                                      1,297,587             --
                                                                     -----------    -----------

                                                                     $       --     $        --
                                                                     ===========    ===========
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       7
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


NOTE 1 - GENERAL

CharterMac, which we refer to herein as "we", "us", "our", and "our Company", is
a Delaware statutory trust,  which commenced  operations in October 1997. We and
our subsidiaries are in the business of (i) portfolio investing,  which includes
acquiring  and  holding  (directly  and  indirectly  through  our  subsidiaries)
federally  tax-exempt  multifamily housing revenue bonds issued by various state
or local governments,  agencies or authorities and other investments designed to
produce  federally  tax-exempt  income;  (ii) mortgage  banking,  which includes
originating and servicing  mortgage loans on behalf of third parties such as the
Federal  National  Mortgage  Association  ("Fannie Mae"),  the Federal Home Loan
Mortgage Corporation  ("Freddie Mac") and the Federal Housing Authority ("FHA");
(iii) credit enhancement,  which includes guaranteeing tax credit equity returns
and  mortgage  loans;  and  (iv)  fund  management,  which  includes  sponsoring
investment programs for a fee.

We and a majority of our subsidiaries are each either treated as partnerships or
disregarded for federal income tax purposes.  Therefore,  we pass through to our
shareholders,  in  the  form  of  distributions,   income  (including  federally
tax-exempt  income) derived from our  investments  without paying federal income
tax on that income.  We intend to operate so that a  substantial  portion of our
ordinary  income  will be  excluded  from gross  income for  federal  income tax
purposes.  Other income,  such as capital gains and taxable interest income,  as
well as any dividend income from CharterMac Corporation ("CM Corp."), our wholly
owned subsidiary, generally will be subject to tax.

In 1999, we formed  CharterMac  Equity Issuer Trust,  a wholly owned  subsidiary
(collectively,   with  its  subsidiaries,   "Equity  Issuer"),   which  holds  a
substantial  portion of our revenue bonds.  From time to time, Equity Issuer may
issue  Series  A  and  Series  B  Cumulative  Preferred  Shares   (cumulatively,
"Preferred  Shares") to  institutional  investors.  The Preferred  Shares have a
senior claim to the  tax-exempt  income  derived from the  investments  owned by
Equity  Issuer.  Any income in Equity Issuer after the payment of the cumulative
distributions  on its Preferred  Shares,  and after the  fulfillment  of certain
covenants,  may then be allocated to  CharterMac.  The assets of Equity  Issuer,
while included in our condensed consolidated  financial statements,  are legally
owned by Equity  Issuer and are not  available  to any  creditors of our Company
outside of Equity Issuer.

In July  2001,  we  formed  CM Corp.  as a wholly  owned,  consolidated  taxable
subsidiary to help us more efficiently manage our taxable  businesses.  CM Corp.
and its subsidiaries conduct most of our taxable business, including many of the
fee-generating   activities  in  which  we  may  engage.  CM  Corp.  isolates  a
substantial  portion of the taxable  income and expenses of our Company.  Unlike
CharterMac, CM Corp. is a corporation which is subject to both Federal and State
income tax.

In December 2001, our Company,  through CM Corp. acquired 80% of the outstanding
capital  stock of PW  Funding  Inc.  and its  subsidiaries  ("PWF").  Under  the
acquisition  agreement,  the  stockholders  of PWF were granted the right to put
their remaining 20% stock interest to CM Corp.  after an initial period of 24 to
36 months.  The agreement  also grants CM Corp.  the right to call the remaining
20% stock interest of PWF from PWF's  stockholders after the same initial period
of 24 to 36  months.  Subsequent  to  the  initial  purchase  of  80%  of  PWF's
outstanding  stock, and pursuant to terms of individual  employee stock purchase
agreements,  we have purchased  additional PWF stock.  At March 31, 2004, we own
approximately 87% of the outstanding shares of PWF stock.

On  November  17,  2003,  we acquired  100% of the  ownership  interests  in and
substantially all of the businesses  operated by Related Capital Company ("RCC")
(other  than  specific  excluded  interests).  RCC had  previously  acted as our
external manager ("Manager"). The acquisition was structured so that the selling
principals of RCC  contributed  their  ownership  interests in RCC to CharterMac
Capital Company,  LLC ("CCC"), a newly formed subsidiary of CM Corp, in exchange
for 15,854,505  special common units ("SCUs") in CCC. The SCUs are  exchangeable
for cash or, at our option,  common  shares on a one-for-one  basis.  All of the
selling  principals were also issued one special  preferred  voting share of our
Company for each SCU they received.  The special preferred voting shares have no
economic  interest,  but entitle  the holder to one vote per  special  preferred
voting  share on all  matters  subject  to a vote of the  holders  of our common
shares.  One of the selling  principals  also received $50 million in cash.  The
selling  principals of RCC included its four executive managing partners (Stuart
J. Boesky,  Alan P. Hirmes,  Marc D. Schnitzer and Denise L. Kiley), all of whom
are members of our board of trustees, and an affiliate of The Related Companies,
L.P., a New York  limited  partnership  ("TRCLP")  with a majority of its equity
controlled  by Stephen M. Ross,  who is also the  non-executive  Chairman of our
board of trustees. As a result of the acquisition,  the economic interest in our
Company of (i) TRCLP  equals  approximately  15.5% and (ii) our  management  and
employees  equals  approximately  7.2%. We conduct our fund management  business
through RCC.

We are governed by a board of trustees  comprised of eight independent  managing
trustees and seven managing trustees who are affiliated with RCC.

The  condensed   consolidated  financial  statements  include  the  accounts  of
CharterMac and its majority owned  subsidiary  business trusts and  corporations
which it controls.  We also own approximately 87% of PWF and 100% of RCC through
our wholly owned subsidiary, CM Corp. All intercompany accounts and transactions
have  been  eliminated  in  consolidation.   Unless  otherwise  indicated,   our
"Company",  as  hereinafter  used in these Notes,  refers to CharterMac  and its
consolidated subsidiaries.

The accompanying  interim financial statements have been prepared without audit.
In the opinion of management,  the financial  statements contain all adjustments
(consisting of only normal  recurring  adjustments)  necessary to present fairly
the  financial  statements  of the interim  periods.  However,  given the highly
seasonal nature of our business,  the operating  results for the interim periods
may not be indicative of the results for the full year.

                                       8
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


Certain  information and footnote  disclosures  normally  included in the annual
consolidated   financial  statements  prepared  in  accordance  with  accounting
principles generally accepted in the United States of America ("GAAP") have been
condensed  or  omitted.  It  is  suggested  that  these  condensed  consolidated
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial  statements and notes thereto  included in the Company's Form 10-K for
the year ended December 31, 2003.

Our  condensed  consolidated  financial  statements  are prepared on the accrual
basis of  accounting  in  accordance  with GAAP.  The  preparation  of financial
statements in conformity with GAAP requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent  assets and  liabilities  at the date of the financial  statements as
well as the  reported  amounts of revenues  and  expenses  during the  reporting
period. Actual results could differ from those estimates.  Significant estimates
in the financial  statements include the valuation of our investments in revenue
bonds, mortgage servicing rights ("MSRs") and interest rate swap agreements.

Certain  amounts in the 2003  financial  statements  have been  reclassified  to
conform to the 2004 presentation.

Significant Accounting Policies
-------------------------------

INVESTMENTS IN REVENUE BONDS

We account  for our  investments  in revenue  bonds as  available-for-sale  debt
securities under the provisions of Statement of Financial  Accounting  Standards
No. 115,  "Accounting  for Certain  Investments  in Debt and Equity  Securities"
("SFAS  115"),  due to a provision  in most of our revenue  bonds under which we
have a right to require  redemption  and they have the right to call the revenue
bonds prior to their maturity,  although we can and may elect to hold them up to
their maturity dates unless otherwise modified. As such, SFAS 115 requires us to
classify these investments as "available-for-sale." Accordingly,  investments in
revenue bonds are carried at their estimated fair values,  with unrealized gains
and losses reported in accumulated other comprehensive income.  Unrealized gains
or losses  do not  affect  the cash flow  generated  from  property  operations,
distributions to shareholders,  the  characterization  of the tax-exempt  income
stream or the financial obligations under the revenue bonds.

If in our  judgment,  we determine  it is probable  that we will not receive all
contractual  payments  required,  when they are due,  the revenue bond is deemed
impaired and is written down to its then estimated  fair value,  with the amount
of the write-down accounted for as a realized loss.

Because  revenue  bonds have a limited  market,  we estimate fair value for each
bond as the present  value of its expected  cash flows using a discount rate for
comparable  tax-exempt  investments.  This process is based upon  projections of
future economic events affecting the real estate collateralizing the bonds, such
as property  occupancy  rates,  rental rates,  operating cost inflation,  market
capitalization  rates and an appropriate  market rate of interest,  all of which
are based on good faith estimates and assumptions we develop.  Changes in market
conditions  and  circumstances  may occur which would cause these  estimates and
assumptions to change; therefore, actual results may vary from the estimates and
the variance may be material.

For certain  revenue  bonds,  management  believes  that  certain  factors  have
impacted the near-term  fair value.  In these  instances,  the revenue bonds are
valued  at  either  the  outstanding  face  amount  of the bond or  management's
estimate of the fair value, whichever is lower.

EQUITY INVESTMENTS

Equity investments in other assets on the condensed  consolidated balance sheets
include the following:

   INVESTMENT IN ARCAP - Our  preferred  equity  investment in ARCap  Investors,
   L.L.C. ("ARCap") is accounted for using the equity method because we have the
   ability to exercise  significant  influence,  but not  control,  over ARCap's
   operating and financial policies.

CASH AND CASH EQUIVALENTS

Cash and cash  equivalents  includes cash in banks and investments in short-term
instruments with an original  maturity of three months or less.  Certain amounts
of cash and cash  equivalents are restricted and serve as additional  collateral
for borrowings within our existing securitization programs.

MORTGAGE BANKING ACTIVITIES

PWF is an approved seller/servicer of multifamily mortgage loans for Fannie Mae,
Freddie Mac,  FHA and the  Government  National  Mortgage  Association  ("Ginnie
Mae").  For Fannie Mae, PWF is approved  under the  Delegated  Underwriting  and
Servicing  ("DUS")  program.  Under DUS, upon obtaining a commitment from Fannie
Mae with regard to a particular loan, Fannie Mae commits to acquire the mortgage
loan based upon PWF's  underwriting and PWF agrees to bear a portion of the risk
of potential  losses in the event of a default.  Fannie Mae  commitments  may be
made to acquire the mortgage loan for cash or in exchange for a  mortgage-backed
security  backed by the mortgage loan. As a Program Plus lender for Freddie Mac,
Freddie  Mac agrees to acquire  for cash from PWF loans for which PWF has issued
commitments.  Ginnie Mae agrees to exchange FHA-insured  mortgages originated by
PWF for Ginnie Mae securities.

Mortgage loans  originated for Fannie Mae,  Freddie Mac or Ginnie Mae are closed
in the name of PWF,  which uses  corporate  cash  obtained by  borrowing  from a
warehouse  lender to fund the loans.  Approximately  a week to a month following
closing of a loan, loan  documentation and an assignment are delivered to Fannie

                                       9
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


Mae, Freddie Mac, Ginnie Mae, or a document custodian on its behalf and the cash
purchase  price or  mortgage-backed  security is  delivered to PWF. PWF uses the
cash it receives to repay its warehouse loans and the mortgage-backed securities
are sold  pursuant  to prior  agreements  for cash,  which is also used to repay
warehouse loans. PWF also underwrites and originates  multifamily and commercial
mortgages for insurance companies and banks.

PWF receives origination fees which are included in mortgage banking fees in the
condensed  consolidated  statements  of  income.  Neither  we nor PWF retain any
interest in any of the mortgage loans,  except for MSRs and certain  liabilities
under the loss-sharing arrangement with Fannie Mae (see Note 9).

MORTGAGE SERVICING RIGHTS

PWF  recognizes  as assets  the  rights to service  mortgage  loans for  others,
whether  the MSRs are  acquired  through a separate  purchase  or  through  loan
origination,  by allocating  total costs incurred  between the loan and the MSRs
retained  based on their  relative  fair value.  MSRs are being carried at their
adjusted cost basis.  MSRs are  amortized in proportion  to, and over the period
of, estimated net servicing income.

We have two areas of loss exposure related to PWF's lending  activities.  First,
while a loan is recorded on the balance  sheet,  there is exposure to  potential
loss if a loan becomes impaired and defaults.  Second,  we have exposure to loss
due to the retention of a portion of credit risk within PWF's servicing contract
under the Fannie Mae DUS program.

For loans on our balance sheet, we identify loans that are impaired and evaluate
the allowance for loss on a specific loan basis for losses believed to currently
exist.

We account for exposure to loss under our servicing  contract with Fannie Mae as
guarantees  under FIN 45 by  recording  an asset  equal to our  estimate  of the
portion of the  servicing  cash flows deemed to represent  compensation  for our
guarantee for loans originated on or after January 1, 2003. On an ongoing basis,
we will account for the asset by  offsetting  cash  received  for the  guarantee
against the asset and crediting  interest  income for the change in asset due to
the passage of time.  The portion of the liability  representing  an accrual for
probable  losses under SFAS No. 5 "Accounting  for  Contingencies"  ("FAS 5") is
adjusted as loss estimates change;  the portion  representing our willingness to
stand by as guarantor will be amortized over the expected life of the guarantee.

REVENUE RECOGNITION

We derive our revenues from a variety of investments and guarantees,  summarized
as follows:

     o    REVENUE BOND  INTEREST  INCOME - Interest  income is recognized at the
          stated rate as it accrues and when collectibility of future amounts is
          reasonably  assured.  Contingent interest is recognized when received.
          Interest  income from revenue bonds with  modified  terms or where the
          collectibility of future amounts is uncertain is recognized based upon
          expected  cash  receipts.  Certain  revenue  bonds  carry a  different
          interest  rate  during the  construction  period,  which  will  either
          increase or decrease for the balance of the term.  In these cases,  we
          calculate the effective yield on the revenue bond and use that rate to
          recognize interest over the life of the bond.

     o    MORTGAGE BANKING FEES - PWF fees earned for arranging financings under
          the Fannie Mae DUS product line as well as Freddie Mac,  insurance and
          banking or other  programs  are  recorded  at the point the  financing
          commitment  is accepted by the  mortgagor and the interest rate of the
          mortgage loan is fixed. PWF also receives fees for servicing the loans
          it has originated. This income is recognized on an accrual basis.

     o    OTHER INCOME

              INTEREST INCOME FROM PROMISSORY NOTES - Interest on mortgage loans
              and notes  receivable  is  recognized  on the accrual  basis as it
              becomes  due.   Deferred  loan  origination  costs  and  fees  are
              amortized over the life of the applicable loan as an adjustment to
              interest  income,  using the interest  method.  Interest which was
              accrued is reversed out of income if deemed to be uncollectible.

              INTEREST  INCOME ON TEMPORARY  INVESTMENTS - Interest  income from
              temporary  investments,  such  as  cash in  banks  and  short-term
              instruments, is recognized on the accrual basis as it becomes due.

              CONSTRUCTION  SERVICE  FEES - We receive fees from  borrowers  for
              servicing revenue bonds during the construction period. These fees
              are deferred and  amortized  into other income over the  estimated
              construction period.

              CREDIT  ENHANCEMENT  FEES - We receive fees for  providing  credit
              enhancements. The credit enhancement fees are received monthly and
              recognized in other income when received.

              GUARANTEE  FEES - We  receive  fees for  providing  guarantees  on
              guaranteed yields. These fees are deferred and recognized in other
              income on a pro-rata basis over the guarantee period.

                                       10
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


     o    FUND MANAGEMENT FEES

              ORIGINATION   FEES  -  Origination   fees  include  both  property
              acquisition  fees  and  partnership   management  fees  which  are
              received  by RCC from the  proceeds  raised  at  formation  of the
              investment funds. Property acquisition fees (generally 2% to 4% of
              equity raised) are for services  performed in connection  with the
              acquisition of interests in  property-owning  partnerships and are
              recognized   when   the   earnings   process   is   complete   and
              collectibility is reasonably assured, which is defined as the date
              the  investor  equity  is  raised  and the  properties  have  been
              acquired  by the  investment  fund.  Partnership  management  fees
              (generally  1% of equity  raised) are for services to be performed
              by RCC for (i) maintaining the books and records of the investment
              fund, including requisite investor reporting,  and (ii) monitoring
              the acquired property  interests to ensure that their development,
              leasing and operations comply with low income housing or other tax
              credit requirements.  RCC recognizes these fees when such services
              are  rendered,   which,  per  the  partnership   agreements,   are
              contractually over five years following the initial closing of the
              investment fund, using the straight-line method.

              ACQUISITION  FEES - Acquisition  fees received upon acquisition of
              revenue bonds are deferred and amortized  over the estimated  life
              of the revenue bond.

              DEVELOPMENT  FEES -  Development  fees are earned from  properties
              co-developed  by RCC  with  unaffiliated  developers  and  sold to
              investment  funds.  Recognition  of  development  fees is based on
              completion and  stabilization  of properties,  after guarantees of
              completion  and deficits are no longer deemed to require  funding.
              The  guarantees are issued by an affiliate of RCC, which is also a
              subsidiary  of  CharterMac,  to the  lender  (for  the  underlying
              financing of the  properties)  on behalf of RCC and as required by
              the investment fund.

              ASSET  MANAGEMENT FEES - RCC earns asset  management fees from its
              investment  funds  on  an  annual  basis  calculated  based  on  a
              percentage of each investment  fund's invested  assets,  generally
              0.5%.  These fees are paid from the  investment  fund's  available
              working capital  balances,  and are earned by RCC for managing the
              Underlying  Property assets of the investment fund. These fees are
              recorded  monthly as earned,  but only when the  management of RCC
              determines  that  collection  is  reasonably  assured based on the
              investment funds' working capital balance.

     o    EQUITY IN EARNINGS  OF ARCAP - Our equity in the  earnings of ARCap is
          accrued at our preferred  dividend rate of 12%,  unless ARCap does not
          have   earnings  and  cash  flows   adequate  to  meet  this  dividend
          requirement.  In the case where  earnings are not  sufficient to cover
          the 12%  dividend  rate,  any  excess  dividends  received  would be a
          returned capital and would decrease our investment.

DEFERRED COSTS

Prior to our  acquisition  of RCC, we paid fees to RCC, as our Manager,  for its
activities  performed to acquire revenue bonds,  including their  evaluation and
selection,   negotiation  of  mortgage  loan  terms,  coordination  of  property
developers and government  agencies,  and other direct expenditures of acquiring
or investing in revenue  bonds.  These fees are  capitalized  and amortized as a
reduction to interest  income over the terms of the revenue bonds.  Direct costs
relating to  unsuccessful  acquisitions  and all indirect  costs relating to the
revenue bonds are charged to operations.

Costs  incurred in connection  with our various  borrowings  and  securitization
programs, such as legal, accounting,  documentation and other direct costs, have
been capitalized and are being amortized using the straight-line  method over 10
years,  which approximates the average remaining term to maturity of the revenue
bonds in this program.

Costs  incurred in  connection  with the issuance of preferred  shares of Equity
Issuer  subsidiary,  such as legal,  accounting,  documentation and other direct
costs,  have been  capitalized  and are being  amortized using the straight line
method  over  the  period  to the  mandatory  repurchase  date  of  the  shares,
approximately  50 years.  Costs  incurred  in  connection  with the  issuance of
Convertible   Community   Reinvestment  Act  ("CRA")  Shares,   such  as  legal,
accounting,  documentation and other direct costs, have been accounted for as an
offset to beneficial owners' equity of such shares.

FINANCIAL RISK MANAGEMENT AND DERIVATIVES

We have entered into several derivative instruments,  including an interest rate
cap, interest rate swaps and forward bond purchase commitments, all of which are
accounted  for under the  Statement of Financial  Accounting  Standards No. 133,
"Accounting for Derivative  Instruments and Hedging Activities" ("SFAS 133"), as
amended and interpreted. We have designated the interest rate swaps as cash flow
hedges on the variable interest  payments on our floating rate  securitizations.
All but one of the interest rate swaps do not become  effective  until 2005. The
one  interest  rate swap that is  currently  in place,  is  recorded at its fair
market value each accounting period, with changes in market value being recorded
in accumulated other  comprehensive  income to the extent the hedge is effective
in achieving offsetting cash flows. This hedge has been perfectly effective,  so
it  generated  no  ineffectiveness  that needs to be included in  earnings.  The
effectiveness  of the  other  swaps is being  measured  using  the  hypothetical
derivative method, until they go into effect in 2005. For the three months ended
March  31,  2004,  we  recorded   approximately   $3.4  million  as  an  expense
representing  the  ineffective  portion of these swaps.  The interest  rate cap,
although  designed to mitigate our exposure to rising  interest  rates,  was not
designated as a hedging derivative;  therefore,  any change in fair market value
flows  through the  condensed  consolidated  statements  of income,  where it is
included  in  interest  income.   The  forward   commitments  create  derivative
instruments  under SFAS 133,  which have been  designated as cash flow hedges of
the anticipated funding of the revenue bonds, and, as such, are recorded at fair
value,  with changes in fair value recorded in accumulated  other  comprehensive
income until the revenue bonds are funded.

                                       11
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


GOODWILL AND OTHER INTANGIBLE ASSETS

We have  adopted  SFAS 141 on July 1, 2001 and SFAS 142, on January 1, 2002.  We
have determined that the amounts previously  capitalized as goodwill relating to
our initial  formation and to the merger of American  Tax-Exempt Bond Trust meet
the  criteria  in SFAS 141 for  recognition  as  intangible  assets  apart  from
goodwill,  and accordingly  will continue to amortize the remaining $2.2 million
over their remaining useful lives, subject to impairment testing.

We  amortize  intangible  assets on a straight  line basis over their  estimated
useful lives. The goodwill amounts are tested during the fourth quarter annually
for  impairment in accordance  with the provisions of FAS 142. We have concluded
that  goodwill  was not  impaired at December  31, 2003 and nothing has occurred
that would indicate goodwill has become impaired since that date.

INCOME TAXES

Effective July 1, 2001, we conduct most of our taxable  business,  including our
mortgage  servicing  activities and fund management  activities through CM Corp.
and its  subsidiaries.  We provide for income taxes in accordance with Statement
of Financial  Accounting  Standards No. 109, "Accounting for Income Taxes" ("FAS
109").  FAS 109 requires the  recognition of deferred tax assets and liabilities
for the expected future tax  consequences of temporary  differences  between the
financial   statement   carrying  amounts  and  the  tax  basis  of  assets  and
liabilities.

SEGMENT INFORMATION

SFAS  No.  131,  "Disclosures  About  Segments  of  an  Enterprise  and  Related
Information",  requires  enterprises to report certain financial and descriptive
information   about   their   reportable   operating   segments,   and   certain
enterprise-wide  disclosures  regarding products and services,  geographic areas
and major customers.

We have  three  reportable  business  segments:  portfolio  investing,  mortgage
banking and fund management. Portfolio investing includes our activities related
to investing in revenue bonds. Mortgage banking includes our activities, carried
out through PWF involving originating mortgages on behalf of third parties. Fund
management  involves our activities related to providing  management services to
real estate investment programs sponsored by RCC.

NEW PRONOUNCEMENTS

In April 2002, the FASB issued SFAS No. 145  "Rescission of FASB  Statements No.
4, 44 and 64,  Amendment of FASB  Statement No. 13 and  Technical  Corrections".
SFAS No. 145,  among other  things,  rescinds SFAS No. 4,  "Reporting  Gains and
Losses from Extinguishment of Debt", and accordingly,  the reporting of gains or
losses from the early  extinguishments of debt as extraordinary  items will only
be required if they meet the specific  criteria of extraordinary  items included
in  Accounting  Principles  Board  Opinion  No. 30,  "Reporting  the  Results of
Operations".  The  revision of SFAS No. 4 became  effective  January  2003.  The
implementation  of SFAS No. 145 did not have a material  impact on our condensed
consolidated financial statements.

In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with
Exit  or  Disposal  Activities".   SFAS  No.  146  replaces  current  accounting
literature  and  requires  the  recognition  of costs  associated  with  exit or
disposal  activities  when  they  are  incurred  rather  than  at the  date of a
commitment to an exit or disposal plan. SFAS No. 146 became effective January 1,
2003. The  implementation  of SFAS No. 146 did not have a material impact on our
condensed consolidated financial statements.

In November 2002,  the FASB issued FIN 45. FIN 45 elaborates on the  disclosures
to be made by a guarantor  in its  financial  statements  about its  obligations
under certain  guarantees that it has issued. It also clarifies that a guarantor
is required to recognize,  at the inception of a guarantee,  a liability for the
fair  value  of  the  obligation  undertaken  in  issuing  the  guarantee.  This
Interpretation does not prescribe a specific approach for subsequently measuring
the guarantor's recognized liability over the term of the related guarantee. The
initial  recognition  and  initial  measurement  provisions  of this  FIN 45 are
applicable  on a  prospective  basis to  guarantees  issued  or  modified  after
December 31, 2002. We entered into one credit  enhancement  transaction  and two
yield guarantee  transactions prior to December 31, 2002. The fee for the credit
enhancement  transaction is received  monthly and recognized as income when due.
The fees  for the  yield  guarantee  transactions,  received  in  advance,  were
deferred and amortized over the guarantee periods.  During 2003, we entered into
four more yield guarantee  transactions.  We believe the fees received for these
guarantees  approximates the fair value of the obligations undertaken in issuing
the guarantees and have recorded  liabilities  included in deferred income equal
to the fair values of the obligations.

In  December  2002,  the FASB issued SFAS No. 148  "Accounting  for  Stock-Based
Compensation-Transition and Disclosure," an amendment of FASB statement No. 123.
This statement amends SFAS No. 123, "Accounting for Stock-Based Compensation" to
provide  alternative  methods of transition  for a voluntary  change to the fair
value based method of accounting for stock-based employer compensation.  Because
we account for our share options using the fair value method,  implementation of
this  statement did not have an impact on our condensed  consolidated  financial
statements. We have adopted the provisions of SFAS No. 123 for its share options
issued to  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 us until the vesting  date,  we estimate the
fair value of the employee  options at each  period-end  up to the vesting date,
and adjust expensed amounts accordingly.  The fair value of each option grant is
estimated using the Black-Scholes  option-pricing  model. In connection with the
purchase of RCC, we issued 778,420  common shares to employees,  of which 52,863

                                       12
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


vested  immediately.  For the three months ended March 31, 2004, another 120,925
restricted  common shares vested.  The remaining  balance of 604,632  restricted
common shares vests over periods  ranging from one to four years.  We recognized
compensation expense for the vested shares at the market price for the shares on
the grant date and deferred  compensation expense for the non-vested shares also
at the market price on the grant date.

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities"  ("FIN 46"). In December 2003, the FASB issued FIN
46R, which revises FIN 46, codifying  certain FASB Staff positions and extending
the  implementation  date.  FIN  46,  as  revised  by  FIN  46R,  clarifies  the
application of existing  accounting  pronouncements to certain entities in which
equity  investors do not have the  characteristics  of a  controlling  financial
interest or do not have sufficient  equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
Prior to the  issuance of FIN 46R,  we had not  applied FIN 46 to any  entities;
accordingly,  the provisions of FIN 46R are effective for us beginning March 31,
2004.

FIN 46R is a complex standard that requires  significant  analysis and judgment.
We have  completed  our  evaluation  of FIN 46R and its impact on our  condensed
consolidated financial statements. We have concluded that we need to consolidate
certain  entities  for which we are the  general  partner.  For a more  complete
discussion, see Note 9 in these condensed consolidated financial statements.

In recording our acquisition of RCC, we ascribed approximately $5 million of the
purchase  price to the  estimated  future cash flows to be received from general
partner  interests in investment  partnership  in which we maintain a non-equity
controlling  interest.  However,  from time to time the  general  partner of the
investment funds, may be called upon to fund investment fund operations which we
would advance on behalf of the general  partner and would be repaid to us out of
future  operating  cash flow or sale or  refinancing  proceeds  received  by the
investment fund, so our maximum  exposure to loss cannot be quantified.  We also
have  exposure  to losses  under  guarantees  of returns on  certain  funds,  as
described in Note 16.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments and Hedging  Activities."  SFAS 149 amends and clarifies
the  accounting  for  derivative   instruments,   including  certain  derivative
instruments  embedded in other contracts,  and for hedging activities under SFAS
133.  SFAS 149 is generally  effective  for  contracts  entered into or modified
after June 30,  2003 and for  hedging  relationships  designated  after June 30,
2003.  The adoption of SFAS No. 149 on July 1, 2003, as required,  had no impact
on our condensed consolidated financial statements.

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with Characteristics of Both Liabilities and Equity." This statement
requires that certain  financial  instruments that have the  characteristics  of
debt and equity be classified as debt.  SFAS No. 150 was effective for financial
instruments  entered into or modified  after May 31,  2003,  and  otherwise  was
effective at the beginning of the first interim period  beginning after June 15,
2003. Pursuant to SFAS No. 150, on July 1, 2003 we classified the $273.5 million
previously  shown in the  "mezzanine"  (between  liabilities  and equity) in the
condensed consolidated balance sheets as "preferred shares of subsidiary subject
to mandatory  redemption" into the liability section,  and the dividends paid on
such shares  (approximately  $4.7  million for the period  ended March 31, 2004)
have been  classified as interest  expense;  dividends  related to prior periods
continue to be  classified  as income  allocated  to preferred  shareholders  of
subsidiary.

NOTE 1A - RESTATEMENT

In the course of finalizing the 2004 year-end audit,  management determined that
the Company had not properly  accounted  for certain  components of its deferred
tax accounts.  In the first quarter of 2004,  certain  Special Common Units of a
subsidiary that were issued as part of the RCC purchase were converted to common
shares of the Company,  triggering  an  adjustment to the deferred tax liability
and the corresponding  goodwill.  The tax effect of this conversion was recorded
incorrectly,  leading to an  overstatement  of the tax  benefit in the  quarter.
Accordingly,  the Company has  restated  the  condensed  consolidated  financial
statements  to reduce the tax benefit in the income  statement by  approximately
$1,930,000 and to correct goodwill and the deferred tax liability on the balance
sheet.

Also, in the course of finalizing the year-end audit, management determined that
the Company had not properly  accounted for bond  acquisition  and  construction
service  fees in the Fund  Management  segment.  Due to the  purchase  of RCC in
November  2003,  the character of these  revenue  streams  changed,  requiring a
shorter  recognition  period  for the  construction  service  fees  and a longer
recognition period for the bond acquisition fees.  Accordingly,  the Company has
restated the condensed consolidated financial statements to properly reflect:

(1)  the  recognition  of  the  construction  service  fees  over  the  expected
     construction  period  (increasing  other  income by a net of  approximately
     $16,000);
(2)  the  recognition of the bond  acquisition  fees over the estimated lives of
     the  related  bonds  (reducing  fund  management  fee  income  by a net  of
     approximately $1,087,000); and
(3)  the related tax benefit of approximately $481,000.

In  addition,  the  Company  restated  the  deferred  revenue and  deferred  tax
liabilities on the balance sheet.

The net effect of the revenue and tax restatement adjustments, before allocation
of the  net  impact  to  SCUs,  was a  decrease  in  earnings  of  approximately
$2,520,000.

                                       13
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


A summary of the significant effects of the restatement is as follows:
<TABLE>
<CAPTION>

                                                                   As previously
(in thousands except per share amounts)                               reported    As restated
---------------------------------------------------------------------------------------------
                                                                       THREE MONTHS ENDED
Condensed Consolidated Statement of Income data:                         MARCH 31, 2004
---------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>
Fund management fee income                                         $     7,867    $     6,780
Other income                                                             4,550          4,566
Total revenues                                                          47,384         46,313
Income before gain (loss) on repayment of revenue bonds, gain on
  sale of loans and equity in earnings of ARCap                          5,563          4,492
Income before allocation to preferred shareholders of
  subsidiary, minority interest and SCUs                                 8,123          7,052
Income allocated to SCUs                                                (3,705)        (2,918)
Income before benefit from income taxes                                  4,313          4,029
Benefit from income taxes                                                3,838          2,389
Net income                                                               8,151          6,418
Allocation of net income to common shareholders                          6,923          5,449
Allocation of net income to Convertible CRA
  shareholders                                                           1,228            969
Net income per share - basic                                       $      0.16    $      0.12
Net income per share - diluted                                     $      0.16    $      0.12

Condensed Consolidated Balance Sheet data:                            AS OF MARCH 31, 2004

Goodwill                                                           $   207,582    $   205,652
Total assets                                                         4,981,401      4,979,471
Accounts payable, accrued expenses and other liabilities                40,887         41,815
Deferred tax liability                                                  48,902         48,421
Total liabilities                                                    2,606,836      2,607,283
Minority interest in consolidated subsidiary - convertible SCUs        270,210        269,424
Total shareholders' equity                                             802,462        800,871
</TABLE>

NOTE 2 - REVENUE BONDS

Total interest income from revenue bonds, including  participating interest, was
approximately  $31,851,000,  for the three months  ended March 31,  2004,  which
represents  an average  annual  yield of 6.85%  based on weighted  average  face
amount of approximately $1,859,957,000.

The amortized  cost basis of our revenue  bonds  portfolio at March 31, 2004 and
December  31,  2003  was  approximately   $1,877,835,000   and   $1,814,180,000,
respectively.  The net  unrealized  gain  on  revenue  bonds  in the  amount  of
$39,091,000 at March 31, 2004 consisted of gross  unrealized gains and losses of
$60,632,000 and  $21,541,000,  respectively.  The net unrealized gain on revenue
bonds of $56,829,000 at December 31, 2003  consisted of gross  unrealized  gains
and losses of $65,394,000 and $8,565,000, respectively.

The fair value and gross  unrealized  losses of our revenue bonds  aggregated by
length of time that individual  bonds have been in a continuous  unrealized loss
position, at March 31, 2004, is summarized in the table below:

<TABLE>
<CAPTION>
                                 Less than       12 Months
(Dollars in thousands)           12 Months        or More           Total
-------------------------------------------------------------------------------
<S>                               <C>             <C>              <C>
Fair value                        $  85,429       $389,997         $475,426
Gross unrealized loss             $  (3,230)      $(18,311)        $(21,541)
</TABLE>

                                       14
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


The following is a table summarizing the maturity dates of our revenue bonds.
<TABLE>
<CAPTION>

                                  Outstanding                 Weighted Average
(Dollars in thousands)            Bond Amount    Fair Value    Interest Rate
-------------------------------------------------------------------------------
<S>                              <C>            <C>                 <C>
Due in less than one year        $     2,872    $     2,750         9.18%
Due between one and five years        35,136         32,596         6.94%
Due after five years               1,854,100      1,881,579         6.89%
-------------------------------------------------------------------------------
Total / Weighted Average          $1,892,108     $1,916,925         6.89%
-------------------------------------------------------------------------------

  Less: FIN 46R Eliminations
  (1)                            $     33,612   $    33,821
-------------------------------------------------------------------------------
Total/Per Balance Sheet           $1,858,496    $ 1,883,104
-------------------------------------------------------------------------------
</TABLE>

All of our revenue bonds have fixed interest rates.

(1)  These bonds were  eliminated  for FIN 46R  purposes  because they relate to
     properties we are consolidating.

2004 Transactions
-----------------

The following  table  summarizes our  acquisition  activity for the three months
ended March 31, 2004.

<TABLE>
<CAPTION>
                                                                            Weighted
                                                             Weighted       Average
                                              Aggregate       Average       Permanent      Number of
                                              Purchase     Construction     Interest        Revenue
(Dollars in thousands)         Face Amount      Price      Interest Rate      Rate           Bonds
------------------------------------------------------------------------------------------------------
<S>                              <C>           <C>             <C>            <C>              <C>
Construction/rehabilitation
  properties                     $91,065       $91,065         5.73%          6.6%             14
</TABLE>

During the three months ended March 31, 2004,  three  revenue bonds were repaid.
We received net proceeds of  approximately  $23.6  million.  The bonds had a net
carrying  value  of  approximately  $23.4  million,   resulting  in  a  gain  of
approximately $260,000.

NOTE 3 - INVESTMENT IN PARTNERSHIPS

Investments  in  partnerships  at March 31, 2004 and December 31, 2003 consisted
of:
<TABLE>
<CAPTION>
                                                                March 31,       December 31,
            (Dollars in thousands)                                2004              2003
                                                              -------------    -------------
            <S>                                                  <C>              <C>
            Investment to acquire equity interests               $63,713          $24,644
            Investment in properties in development                2,604            1,994
                                                              -------------    -------------
                                                                 $66,317          $26,638
                                                              =============    =============
</TABLE>

A subsidiary wholly owned by RCC acquires equity interests in property ownership
entities  on a  short-term  basis,  and also  invests  funds  with  third  party
developers to develop properties for inclusion in offerings to investors,  which
are arranged by RCC.  Such amounts are expected to be repaid to such  subsidiary
the  proceeds  of the equity and debt  financing  when the  investment  fund has
closed. The developer has also guaranteed repayment of these investments to RCC.
Substantially  all of these  investments  are  pledged as  collateral  for RCC's
borrowings under the warehouse facility.

RCC also invests  funds in  affiliated  entities,  whereby  subsidiaries  of RCC
co-develop  properties to be sold to investment funds.  Development  investments
include  amounts  invested  to  fund   pre-development  and  development  costs.
Investment funds organized by RCC acquire the limited  partnership  interests in
these  properties.  Repayment of such  subsidiaries  development  investment  is
expected  to be  made  from  various  sources  attributable  to the  properties,
including capital contributions of investments funds, cash flow from operations,
and/or from co-development  partners,  who in turn have cash flow notes from the
properties.  In connection with RCC's co-development  agreements,  affiliates of
CharterMac issue  construction  completion,  development  deficit guarantees and
operating  deficit  guarantees  to the  lender  and  investment  funds  (for the
underlying financing of the properties) on behalf of RCC.

                                       15
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)



NOTE 4 - OTHER ASSETS

INVESTMENT IN ARCAP

On October 18, 2001, our Company,  through CM Corp.,  purchased 739,741 units of
Series A Convertible  Preferred Membership Interests in ARCap Investors,  LLC at
the price of $25 per unit,  with a preferred  return of 12%. The carrying values
of our  interests  in  ARCap at  March  31,  2004 and  December  31,  2003  were
$19,054,409 in both periods,  which is included in other assets in the condensed
consolidated balance sheets.

ARCap  Investors,  LLC was formed in January  1999 by  REM/CAP  and Apollo  Real
Estate Investors to invest  exclusively in subordinated  CMBS. Since then, ARCap
has changed its focus and has begun to provide portfolio management services for
third parties.

NOTE 5 - DEFERRED COSTS

The components of deferred costs are as follows:
<TABLE>
<CAPTION>
                                                              (Dollars in thousands)
                                                            March 31,       December 31,
                                                              2004             2003
                                                         ---------------   -------------
<S>                                                         <C>              <C>
Deferred bond selection costs (1)                           $  47,783        $  46,479
Deferred financing costs                                       11,715           11,170
Deferred costs relating to the issuance of preferred
  shares of subsidiary                                         10,445           10,445
Other deferred costs                                            3,144            3,777
                                                            ---------        ---------
                                                               73,087           71,871

Less: Accumulated amortization                                (14,431)         (13,463)
                                                            ---------        ---------
                                                            $  58,656        $  58,408
                                                            =========        =========
</TABLE>

(1)  This  primarily  represents  the 2% bond  selection fee paid to the Manager
     prior to our acquisition of RCC (see Note 7).

NOTE 6 - GOODWILL AND INTANGIBLE ASSETS

We adopted  SFAS 141 on July 1, 2001 and SFAS 142,  on January 1, 2002.  We have
determined that the amounts  previously  capitalized as goodwill relating to our
initial  formation and to our merger with  American Tax Exempt Bond Trust,  meet
the  criteria  in SFAS 141 for  recognition  as  intangible  assets  apart  from
goodwill,  and  accordingly  will continue to be amortized over their  remaining
useful lives, subject to impairment testing.

In  conjunction  with our  purchase of RCC, we  acquired  additional  intangible
assets and goodwill.  The value of the intangible  assets was verified via third
party valuation.  The excess of the total paid over the fair value of the assets
and liabilities was classified as goodwill.

The following  table  provides  further  information  regarding  our  intangible
assets:
<TABLE>
<CAPTION>

                                                (Dollars in thousands)
                                      Other                                                Total
                                   Identifiable                            RCC         Identifiable
                                    Intangible            PWF          Intangible       Intangible
                                      Assets            Licenses          Assets           Assets         Goodwill
                                  --------------     -------------   ---------------   -------------   -------------
<S>                                 <C>                <C>             <C>               <C>             <C>
Balance at December 31, 2003        $    4,427         $   8,639       $  185,300        $  198,366      $  214,744
Accumulated amortization               (2,227)               --            (1,936)           (4,163)             --
                                  --------------     -------------   ---------------   -------------   -------------
Net balance at December 31, 2003        2,200              8,639          183,364           194,203         214,744
Additions                                  --                 --               --                --             835
Conversion of SCUs to common
  shares                                   --                 --               --                --          (9,927)
Amortization expense                     (118)                --           (4,052)           (4,170)             --
                                  --------------     -------------   ---------------   -------------   -------------
Net balance at March 31, 2004       $   2,082          $   8,639       $  179,312        $  190,033      $  205,652
                                  --------------     -------------   ---------------   -------------   -------------

Amortization expense for the
  three months ended March 31,
  2004                              $     118          $      --       $    4,052        $    4,170      $       --
                                  --------------     -------------   ---------------   -------------   -------------
Estimated amortization expense
  per year for next five years      $     472          $      --       $   16,208        $   16,680      $       --
                                  --------------     -------------   ---------------   -------------   -------------
</TABLE>

                                       16
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


The  amortization  of other  identifiable  intangible  assets is  included  as a
reduction to revenue bond interest income.

The amounts  indicated as goodwill in the  accompanying  condensed  consolidated
financial  statements as of March 31, 2004 are related to the  acquisitions,  on
December  31,  2001 of PWF and on  November  17,  2003  of  RCC.  These  amounts
represent  goodwill under SFAS 142, and therefore,  are not being amortized.  In
accordance with SFAS 142, we performed the required annual  impairment  tests in
the fourth quarter of 2003 and determined that no impairment existed at December
31, 2003.  Nothing has occurred  since that date that would  indicate  there has
been any subsequent impairment.

NOTE 7 - RELATED PARTY TRANSACTIONS

Due to our  acquisition of RCC, our related  parties have changed  substantially
from the period prior to the acquisition to the period after the acquisition.

PRIOR TO THE RCC ACQUISITION

Prior  to our  acquisition  of  RCC,  we and  our  subsidiaries  had  engaged  a
subsidiary of RCC to provide us with management services.

Pursuant  to the  terms of our  prior  Management  Agreement,  the  Manager  was
entitled to receive the fees and other compensation set forth below:
<TABLE>
<CAPTION>

Fees/Compensation*                                 Amount
-----------------                                  ------
<S>                                                <C>
Bond Selection Fee                                 2.00% of the face  amount of each asset  invested  in or  acquired  by
                                                   CharterMac or its subsidiaries.
Special Distributions/Investment Management Fee    0.375% per annum of the total invested  assets of CharterMac
                                                   or its subsidiaries.
Loan Servicing Fee                                 0.25%  per annum  based on the  outstanding  face  amount of
                                                   revenue bonds and other  investments  owned by CharterMac or
                                                   its subsidiaries.
Operating Expense Reimbursement                    For direct expenses incurred by the Manager in an amount not
                                                   to exceed  $901,035 per annum  (subject to increase based on
                                                   increases in CharterMac's and its  subsidiaries'  assets and
                                                   to annual  increases  based upon  increases  in the Consumer
                                                   Price Index).
Incentive Share Options                            The Manager may receive options to acquire additional Common
                                                   shares   pursuant   to  the  Share   Option   Plan  only  if
                                                   CharterMac's  distributions  in any year exceed  $0.9517 per
                                                   common share and the Compensation  Committee of the Board of
                                                   Trustees determines to grant such options.
Liquidation Fee                                    1.50%  of the  gross  sales  price  of the  assets  sold  by
                                                   CharterMac  in connection  with a liquidation  of CharterMac
                                                   assets supervised by RCC.
</TABLE>

*  RCC is also permitted to earn  miscellaneous  compensation which may include,
   without limitation,  construction fees, escrow interest,  property management
   fees,  leasing  commissions and insurance  brokerage fees. The payment of any
   such  compensation  is  generally  limited  to the  competitive  rate for the
   services  being  performed.  A bond placement fee of 1.0% to 1.5% of the face
   amount  of  each  asset   invested  in  or  acquired  by  CharterMac  or  its
   subsidiaries is payable to the Manager by the borrower, and not by CharterMac
   or its subsidiaries.

Affiliates  of RCC  may  provide  certain  financial  guarantees  to  facilitate
leveraging  by  CharterMac,  for which they could be paid market  rate fees.  In
addition,  affiliates  of RCC may provide  certain  financial  guarantees to the
owner  (or  partners  of the  owners)  of  the  Underlying  Properties  securing
CharterMac's revenue bonds, for which they could be paid market rate fees.

SUBSEQUENT TO THE RCC ACQUISITION

On November 17, 2003,  CCC entered into an agreement  with TRCLP for the purpose
of TRCLP to provide various services to CCC and any of its affiliates  including
RCC. The services provided include computer support, office management, payroll,
human  resources  and other  office  services as defined in the  agreement.  The
majority of the services are charged to CCC at 100% of the direct costs incurred
by TRCLP.

                                       17
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


GENERAL

The costs,  expenses and the special distributions paid or payable to RCC, prior
to our  acquisition  of RCC, its affiliates and TRCLP for the three months ended
March 31, 2004 and 2003 were as follows:
<TABLE>
<CAPTION>
                                                      Paid or Payable to TRCLP,
                                                         RCC and Affiliates
                                                      --------------------------
                                                          Three Months Ended
                                                               March 31,
                                                      --------------------------
          (Dollars in thousands)                         2004            2003
                                                      -----------     ----------
<S>                                                   <C>             <C>
Special distribution/Investment                       $        --     $    1,483
management fee
Bond servicing fees                                            --          1,015
Expense reimbursement                                          --            233
Shared service agreement                                    1,252             --
                                                      -----------     ----------

                                                      $    1,252      $    2,731
                                                      ===========     ==========
</TABLE>

Substantially all of RCC's revenues are received from investment funds they have
originated and manage.  Affiliates of RCC maintain a continuing  equity interest
in the investment funds' general partner and/or managing member/advisor. RCC has
no direct  investments in these general partner and/or  managing  member/advisor
entities,  and RCC does not guarantee  the  obligations  of the general  partner
and/or managing member/advisor  entities. RCC has agreements with these entities
under which RCC provides  ongoing services for the investment funds on behalf of
the general  partners  and/or  managing  members/advisors,  and receives all fee
income to which these  entities are entitled.  RCC does not  participate  in the
investment funds' operating income or losses or on gains or losses from property
sales.

As of  March  31,  2004,  the  obligors  of  certain  revenue  bonds  are  local
partnerships  for which  the  general  partners  of the  controlling  investment
partnerships are non-equity managing partners controlled by RCC.

As of December 31, 2002, the owner of the Underlying Property and obligor of the
Highpointe  revenue  bond was an  affiliate  of RCC who has not  made an  equity
investment.   This  entity  has  assumed  the  day-to-day  responsibilities  and
obligations of the Underlying  Property.  Buyers are being sought who would make
equity  investments  in the  Underlying  Property  and  assume  the  nonrecourse
obligations for the revenue bond or otherwise buy the property and payoff all or
most of the revenue bond obligation.

In December  2001, we completed a credit  enhancement  transaction  with Merrill
Lynch Capital Services,  Inc. ("MLCS") pursuant to which CM Corp. initially will
receive a fee in return for  assuming  MLCS's  first loss  position on a pool of
tax-exempt  weekly  variable  rate  multifamily  mortgage  loans  originated  by
CreditRe Mortgage  Capital,  LLC, an affiliate of Credit Suisse First Boston and
the  Related  Companies,  L.P.  Our  maximum  exposure  under  the  terms of the
transaction  was  approximately  $19 million at March 31, 2004 and  December 31,
2003.

We have  entered  into several  agreements  with an  unrelated  third party (the
"Primary Guarantor") to guarantee agreed-upon internal rates of return for pools
of multifamily  properties  owned by real estate  investment  funds for which we
have received  guarantee fees for the three months ended March 31, 2004 totaling
approximately  $566,000.  No guarantee fees were received during the same period
of 2003.

Related  Management  Company,  which is wholly  owned by TRCLP  earned  fees for
performing   property   management  services  for  various  properties  held  in
investment  funds,  which are  managed by RCC.  The fees  totaled  $720,000  and
$608,000 for the three months ended March 31, 2004 and 2003, respectively.

NOTE 8-  EARNINGS  PER SHARE,  PROFIT  AND LOSS  ALLOCATIONS  AND  DISTRIBUTIONS

Prior  to our  acquisition  of RCC,  pursuant  to our  Trust  Agreement  and the
Management Agreement with the Manager, RCC was entitled,  in its capacity as our
general partner, to a special distribution equal to .375% per annum of our total
invested  assets  (which  equals the face amount of the revenue  bonds and other
investments),  payable  quarterly.  After  payment of the special  distribution,
distributions  were made to the shareholders in accordance with their percentage
interests.  Income was allocated  first to RCC in an amount equal to the special
distribution. The net remaining profits or losses, after a special allocation of
..1% to RCC,  were then  allocated  to  shareholders  in  accordance  with  their
percentage interests.

Subsequent  to the RCC  acquisition,  CCC's  income  is  allocated  first to the
holders  of the  SCUs  in an  amount  equivalent  to the SCU  holders  ownership
percentage,  assuming all SCUs  converted to common  shares,  divided by .72, to
take into account the fact that dividends paid on the SCUs are taxable.

Net income per share is computed in accordance  with SFAS No. 128,  Earnings Per
Share.  Basic income per share is  calculated  by dividing  income  allocated to
Common and Convertible CRA Shareholders ("Shareholders") by the weighted average
number of Common and Convertible CRA Shares  outstanding  during the period. The
Convertible  CRA   Shareholders  are  included  in  the  calculation  of  shares

                                       18
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


outstanding  as they share the same  economic  benefits as Common  shareholders,
including  receipt  of the same  dividends  per  share as  common  shareholders.
Diluted  income per share is  calculated  using the weighted  average  number of
shares  outstanding  during the period plus the  additional  dilutive  effect of
common share  equivalents.  The dilutive effect of outstanding  share options is
calculated  using the treasury stock method.  The dilutive effect of the SCUs is
calculated   using  the   "if-converted   method".   The  SCUs  will  always  be
antidilutive,  because while the shares are  convertible on a one-to-one  basis,
the  dividends  paid will always be greater than the  dividends  paid per common
share.
<TABLE>
<CAPTION>
                                                       (Dollars in thousands)
                                                   Three Months Ended March 31, 2004
                                          ---------------------------------------------------

                                            Income              Shares             Per Share
                                           Numerator          Denominator            Amount
                                          -----------         -----------          ----------
<S>                                        <C>                 <C>                 <C>
Net income allocable to share-
  holders (Basic EPS)                      $    6,418          51,591,109          $     0.12
                                                                                   ==========
  Effect of dilutive securities
    106,581 share options                          --             248,032
                                           ----------          ----------
  Diluted net income allocable to
    shareholders (Diluted EPS)             $    6,418          51,839,141          $     0.12
                                           ==========          ==========          ==========

<CAPTION>

                                                       (Dollars in thousands)
                                                   Three Months Ended March 31, 2003
                                          ---------------------------------------------------

                                            Income              Shares             Per Share
                                           Numerator          Denominator            Amount
                                          -----------         -----------          ----------
<S>                                        <C>                 <C>                 <C>
Net income allocable to share-
  holders (Basic EPS)                      $   16,494          45,013,292          $     0.37
                                                                                   ==========
  Effect of dilutive securities
    168,136 stock options                          --              57,303
                                           ----------          ----------
Diluted net income allocable to
  shareholders (Diluted EPS)               $   16,494          45,070,595          $     0.37
                                           ==========          ==========          ==========
</TABLE>


*  Includes Common and Convertible CRA Shares.

During the quarter  ended  September  30, 2002,  we issued  40,000  options at a
strike price of $17.56.  These  options vest  equally,  in thirds,  in September
2003, 2004 and 2005 and expire in 10 years.  These options were dilutive for the
three months ended March 31, 2004 and were taken into account in the calculation
of diluted shares. At March 31, 2004, these options had a fair value of $103,600
based on the  Black-Scholes  pricing  model,  using the  following  assumptions:
dividend  yield of 5.97%,  estimated  volatility of 20%, swap rate of 4.016% and
expected lives of 8.5 years. We recorded compensation cost of $20,458 and $1,693
for the three months ended March 31, 2004 and 2003,  relating to these  options,
respectively.

As part of the RCC acquisition,  we issued 1,000,000 options to Stephen M. Ross,
at a strike price of $17.78,  which vest over five years and expire in 10 years.
At March 31, 2004, these options had a fair value of approximately $2,630,000.

Also, in conjunction  with the RCC  acquisition,  we issued  778,420  restricted
common shares to various individuals who are either employees of RCC or TRCLP. A
small portion of these shares, 52,863, vested immediately.  For the three months
ended March 31, 2004,  another  120,925  restricted  common shares  vested.  The
remaining balance of 604,632 restricted common shares vests over periods ranging
from one to four years.

We have recorded deferred  compensation of approximately $14.9 million and $19.4
million at March 31, 2004 and December 31, 2003,  respectively,  included in the
equity  section of our  condensed  consolidated  balance  sheets.  The  deferred
compensation is being amortized as compensation expense on a straight line basis
over the respective  vesting periods  (approximately  $4.5 million for the three
months ended March 31,  2004).  Distributions  paid related to these  non-vested
shares are being recorded directly to equity (approximately $3.5 million for the
three months ended March 31, 2004).

                                       19
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


The following table shows the number of options outstanding,  granted, exercised
and exercisable and the exercise price of those options.
<TABLE>
<CAPTION>

                                                                March 31,               December 31,
                                                                  2004                      2003
                                                        ------------------------- -------------------------

                                                                      Weighted                  Weighted
                                                                       Average                   Average
                                                                      Exercise                  Exercise
                                                          Options       Price       Options       Price
                                                        ------------ ------------ ------------ ------------
<S>                                                      <C>          <C>           <C>               <C>
Options outstanding at beginning of year                 1,119,914    $  17.33        263,509    $    12.47

Options granted during the period                               --          --      1,000,000    $    17.78

Options exercised during the period                             --          --        143,595    $  11.5625
                                                         ---------                  ---------
Options outstanding at end of period                     1,119,914    $  17.33      1,119,914
                                                         ---------                  ---------

Options exercisable at end of period                        93,247    $11.5625         93,247    $    12.42

Weighted-average fair value of options granted
  during the year                                                           --                   $3,460,000
</TABLE>

The following table summarizes  information  about stock options  outstanding at
March 31, 2004.
<TABLE>
<CAPTION>

                        Options Outstanding                                     Options Exercisable
-----------------------------------------------------------------------------------------------------------

                    Number        Weighted-Average      Weighted              Number           Weighted
Exercise          Outstanding         Remaining          Average          Exercisable at        Average
 Prices           at 3/31/04      Contractual Life   Exercise Price           3/31/04       Exercise Price
-----------------------------------------------------------------------------------------------------------
<C>                 <C>                  <C>             <C>                  <C>               <C>
$11.5625            79,914               7.2             $11.5625             79,914            $11.5625
$17.78           1,000,000               9.6             $17.7800                 --            $17.7800
$17.56              40,000               8.5             $17.5600             13,333            $17.5600
</TABLE>


Other
-----

Through  November 17, 2003,  two of our  independent  trustees  were entitled to
receive annual  compensation  for serving as trustees in the aggregate amount of
$17,500 payable in cash (maximum of $7,500 per year) and/or common shares valued
at their  fair  market  value on the date of  issuance.  The  third  independent
trustee is entitled to 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 March  31,  2004 and  December  31,  2003,  2,198 and  1,728  common  shares,
respectively,  having an aggregate value on the date of issuance of $30,000 each
year,  were issued to the  independent  trustees as  compensation  for  services
rendered  during the years ended  December  31, 2003 and 2002.  The  independent
trustees also  received an aggregate of 5,535 shares,  worth $97,500 at the time
of issuance,  as payment for their work on the special  committee  analyzing the
proposed  acquisition  of RCC.  After  the  acquisition  of RCC,  the  five  new
independent  trustees  received  $18,750  as  compensation  for  their  services
rendered  during the year ended  December  31, 2003.  In 2004,  all eight of the
independent trustees will receive annual compensation of $30,000 payable in cash
(maximum of $15,000 per year) and/or  common  shares valued at their fair market
value on the date of issuance.

Effective May 3, 2000, we implemented a dividend  reinvestment  and Common share
purchase plan (the "Plan").  Under the Plan,  common  shareholders  may elect to
have their distributions from our Company automatically reinvested in additional
common  shares at a  purchase  price  equal to the  average  of the high and low
market  price  from  the  previous  day's  trading.   If  a  common  shareholder
participates in the Plan, such shareholder may also purchase  additional  common
shares through quarterly voluntary cash payments with a minimum  contribution of
$500.  There are no  commissions  for common  shares  purchased  under the Plan.
Participation  in the Plan is  voluntary  and a common  shareholder  may join or
withdraw at any time. The opportunity for  participation  in the Plan began with
the distributions paid in August 2000.

The board of  trustees  has  authorized  the  implementation  of a common  share
repurchase plan,  enabling us to repurchase,  from time to time, up to 1,500,000
of its common shares.  The  repurchases  will be made in the open market and the
timing is  dependant  on the  availability  of common  shares  and other  market
conditions.  As of March 31, 2004 and December 31, 2003, we have acquired 82,430
and 22,632 of its common shares for an aggregate purchase price of approximately
$1,706,000  and  $378,000,   respectively  (including  commissions  and  service
charges).  Repurchased  common shares are  accounted  for as treasury  shares of
beneficial interest.

                                       20
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


NOTE 9 - COMMITMENTS AND CONTINGENCIES

PW FUNDING INC.

PWF is required to meet minimum net worth and capital requirements and to comply
with other  requirements  set by Fannie Mae, Freddie Mac, Ginnie Mae and FHA and
was in compliance with these requirements as of March 31, 2004.

PWF  maintains,  as of March 31,  2004,  treasury  notes of  approximately  $5.3
million and a money  market  account of  approximately  $0.9  million,  which is
included in cash and cash  equivalents-restricted  in the condensed consolidated
balance  sheet,  to  satisfy  the  Fannie Mae  collateral  requirements  of $6.2
million.

PWF has  liability  under the terms of its master loss  sharing  agreement  with
Fannie Mae for a portion of any loss that may result from  borrower  defaults on
the mortgage loans it originates and sells to Fannie Mae.

We maintain an allowance for loan losses for loans  originated  under the Fannie
Mae DUS product line at a level that, in management's  judgment,  is adequate to
provide for estimated  losses. At March 31, 2004, that reserve was approximately
$6.9 million,  which we believe  represents its maximum  liability at this time.
Unlike loans  originated for Fannie Mae, PWF does not share the risk of loss for
loans it originates for Freddie Mac or FHA.

In connection  with the PWF warehouse  line,  both  CharterMac and CM Corp. have
entered  into  guarantees  for the  benefit of Fleet  National  Bank  ("Fleet"),
guaranteeing  the total advances drawn under the line, up to the maximum of $100
million,  together with interest,  fees,  costs,  and charges related to the PWF
warehouse line.

At March 31, 2004,  PWF had  commitments of  approximately  $46.7 million to six
borrowers.

CREDIT ENHANCEMENT TRANSACTION

CM Corp.  completed a credit enhancement  transaction with Merrill Lynch Capital
Services,  Inc. ("MLCS"),  pursuant to which, CM Corp. assumes MLCS's first loss
position on a pool of  tax-exempt  weekly  variable  rate  multifamily  mortgage
loans.  TRCLP has provided CM Corp. with an indemnity covering 50% of any losses
that are incurred by CM Corp. as part of this transaction.  Our maximum exposure
under the terms of the transaction was approximately  $19.0 million at March 31,
2004.

As of March 31, 2004,  the credit  enhanced  pool of properties  are  performing
according to their  contractual  obligations and we do not anticipate any losses
to be incurred  on its  guaranty.  Should our  ongoing  analysis of risk of loss
change in the future,  a provision  for probable  loss might be  required;  such
provision could be material.

YIELD GUARANTEE TRANSACTION

We have entered into six agreements with Merrill Lynch (the "Primary Guarantor")
to  guarantee  an  agreed  upon rate of return  for three  pools of  multifamily
properties each owned by a local  partnership which in turn is majority owned by
affiliates of RCC.

These  transactions  were  each  structured  as  two  separate  guarantees,  one
primarily  guaranteeing  the return through the lease-up phase of the properties
and the  other  guaranteeing  the  return  through  the  operating  phase of the
properties.  The fee for the first guarantee is paid at closing. The fee for the
second  guarantee  is  typically  paid in two  installments.  These fees will be
recognized in income on a straight line basis over the period of the  respective
guarantees.

Some of the  properties  included  in these  pools have been  financed  with the
proceeds of revenue bonds acquired by an affiliate of CharterMac.  In connection
with these transactions, the Primary Guarantor required that those revenue bonds
be deposited  into a trust pursuant to which the revenue bonds were divided into
senior  and  subordinated   interests  with  50%  of  each  revenue  bond  being
subordinated.  We have financed the senior trust interest as part of the Merrill
Lynch P-FloatsSM/RitesSM program. The subordinate trust interests are being used
as collateral in other of our financing programs.

In  connection  with  these  transactions,  we  have  posted  $20.8  million  as
collateral  with the  Primary  Guarantor  in the form of either  cash or revenue
bonds.

OTHER

We have entered into  transactions  related to certain  properties,  pursuant to
which  we  provide  credit  support  to  the  construction  lender  for  project
completion   and  Fannie  Mae  conversion  and  will  be  obligated  to  acquire
subordinated  bonds to the extent  the  construction  period  bonds do not fully
convert.

Up until the point of completion,  we will guaranty to the  construction  lender
reimbursement of any draw on its construction  letter of credit up to 40% of the
stated  amount  of the  letter of  credit.  Following  completion,  up until the
project loan  converts to  permanent  loan status,  we will  guarantee  the full
amount of the letter of credit.  Our  maximum  exposure,  related to these three
transactions, is approximately $27 million.

                                       21
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


The developer has also issued  several  guarantees to the  construction  lender,
each of which  would be called  upon  before our  guarantees,  and each of which
would be assigned to us should its guarantees be called.

We have entered into other  transactions  to purchase  revenue bonds pursuant to
agreements  which require us, at the earlier of  stabilization  or conversion to
permanent  financings  to  acquire  Series  A and  Series  B  revenue  bonds  at
predetermined  prices and  interest  rates.  We are  obligated  to purchase  the
revenue bonds only if  construction  is  completed.  We are obligated to buy the
Series B revenue  bonds only if, at the date the Series A bonds are  stabilized,
the property's cash flow is sufficient to provide debt service coverage of 1.15x
for both the Series A and B bonds.  An unrelated third party lender will advance
funds to the developer,  as needed during the construction period, at a floating
rate. These forward  commitments  create  derivative  instruments under SFAS No.
133, which have been designated as a cash flow hedge of the anticipated  funding
of the revenue bonds, and are recorded at fair value, with changes in fair value
recorded in accumulated other  comprehensive  income until the revenue bonds are
funded.  The total  potential  amount we could  possibly  be required to fund is
$83.4 million.

We are 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 our  financial  position,  results  of
operations or cash flows.

NOTE 10 - FINANCIAL RISK MANAGEMENT AND DERIVATIVES

Our revenue bonds generally bear fixed rates of interest, but the interest rates
we pay under our  securitization  programs are variable  rates re-set  weekly or
every 35 days,  so we are  exposed  to  interest  rate risk.  Various  financial
vehicles  exist  which  allow our  management  to hedge  against  the  impact of
interest rate fluctuations on our cash flows and earnings.

We currently  manage a portion of our interest  rate risk through the use of The
Bond  Market  Association  ("TBMA")  indexed  interest  rate  swaps.  Under each
interest rate swap agreement,  for a specified period of time we are required to
pay a fixed rate of interest on a specified  notional  amount to the transaction
counterparty  and we receive a floating rate of interest  equivalent to the TBMA
index, which is the most widely used tax-exempt floating rate index. As of March
31, 2004,  we have entered into one such swap with MLCS as  counterparty  with a
notional  amount of $50 million fixed at an annual rate of 3.98%,  which expires
in January  2006.  We have also entered into  several  interest  rate swaps with
Fleet National Bank and RBC Capital Markets as the  counterparty all of which go
into effect in January  2005.  The notional  amount on these swaps  totaled $450
million.  The weighted average fixed interest rate is 3.07% and they mature from
January 2007 to January 2010.

The average TBMA rates for the three months ended March 31, 2004 and 2003,  were
0.95% and 1.07%, respectively. Net swap payments received by us, if any, will be
taxable income to our Company and, accordingly, to shareholders. A possible risk
of such swap  agreements is the possible  inability of the  Counterparty to meet
the terms of the contracts with us; however,  there is no current  indication of
such an inability.

At  March  31,  2004,  the  fair  market  value of our  interest  rate  swaps of
approximately $6.5 million were recorded in our condensed  consolidated  balance
sheets.  Interest paid or payable under the terms of the swaps, of approximately
$638,000,  is included in interest expense. For the three months ended March 31,
2004,  we recorded  approximately  $3.4 million as an expense  representing  the
ineffective portion of these swaps.

During  January 2002, we entered into an interest rate cap agreement with Fleet,
with a cap of 8% on a notional amount of $30 million.  Although this transaction
is designed to mitigate  our  exposure  to rising  interest  rates,  we have not
designated this interest rate cap as a hedging derivative. As of March 31, 2004,
this  interest  rate cap was  recorded as an asset with a fair  market  value of
$18,101 included in other assets in the condensed  consolidated  balance sheets.
Because we have not designated  this  derivative as a hedge,  the change in fair
market value flows  through the  condensed  consolidated  statements  of income,
where it is included in interest  rate  derivatives,  in the amount of $(15,902)
for the three months ended March 31, 2004.

NOTE 11 - DIVIDENDS AND RESTRICTED ASSETS

CharterMac may not receive any distributions from its subsidiary, Equity Issuer,
until Equity Issuer has either paid all accrued but unpaid distributions related
to its  preferred  shares,  or in the  case of the next  following  distribution
payment date, set aside funds sufficient for payment. The distributions  related
to the  preferred  shares are payable only from Equity  Issuer's  quarterly  net
income,  defined as the  tax-exempt  income (net of expenses) for the particular
calendar  quarter.  Equity Issuer is required,  under the terms of its preferred
share  issuance,  to  meet  certain  leverage  ratios  calculated  as its  total
obligations divided by the gross fair value of investments. This could limit the
ability of Equity Issuer to  distribute  cash or revenue bonds to our Company or
to make loans or advances to our Company.

Equity Issuer and its subsidiaries hold Revenue Bonds,  which at March 31, 2004,
had an aggregate  carrying  amount of  approximately  $1.8 billion that serve as
collateral for securitized borrowings or are securitized.  The total securitized
borrowings at March 31, 2004 were  approximately  $406 million.  Equity Issuer's
net assets at March 31, 2004 were approximately $508 million.

NOTE 12 - BUSINESS SEGMENTS

We have three reportable  business segments which include  portfolio  investing,
mortgage banking, and fund management.

The portfolio  investing  segment  consists  primarily of  subsidiaries  holding
investments in revenue bonds producing primarily  tax-exempt interest income and

                                       22
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


includes our credit enhancement activities.

The mortgage banking segment consists of subsidiaries which originate  mortgages
on behalf  of third  parties  and  receive  mortgage  origination  and  mortgage
servicing fees generated by those activities.

The fund management  segment  consists of subsidiaries  that generate fee income
from the asset management, underwriting, originating and other services provided
to the real estate equity investment  programs RCC sponsors,  and the management
and related services provided to us and a publicly-traded real estate investment
trust.

Segment results include all direct and contractual revenues and expenses of each
segment and  allocations of indirect  expenses based on specific  methodologies.
These reportable  segments are strategic  business units that primarily generate
revenue  streams  that  are  distinctly  different  and  are  generally  managed
separately.

The following table provides more information regarding our Company's segments:
<TABLE>
<CAPTION>


                                         Three Months Ended March 31, 2004         Three Months Ended March 31, 2003 (1)
                                     -------------------------------------------   -------------------------------------
(Dollars in thousands)               Portfolio   Mortgage     Fund                 Portfolio      Mortgage
                                     Investing   Banking   Management    Total     Investing      Banking       Total
                                     -------------------------------------------   -------------------------------------
<S>                                  <C>         <C>       <C>         <C>         <C>           <C>          <C>
Total revenues                       $   34,012  $  3,880  $    8,421  $   46,313  $   28,602    $   3,319    $   31,921
                                     ============================================  =====================================
Net income (loss)                    $   21,103  $    700  $  (15,385) $    6,418  $   18,487    $    (580)   $   17,907
                                     ============================================  =====================================
Assets consolidated pursuant to
FIN 46R                              $       --  $     --  $2,384,115  $2,384,115  $       --    $      --    $       --
                                     ============================================  =====================================
Total assets                         $2,117,043  $ 64,644  $2,797,784  $4,979,471  $1,720,371    $ 110,894    $1,831,265
                                     ============================================  =====================================
</TABLE>

(1)  The Fund  Management  segment began with our acquisition of RCC on November
     17, 2003.

NOTE 13 - NOTES PAYABLE

In connection  with the  acquisition  of PWF, we entered into a loan  commitment
(the "PWF Acquisition  Loan"). The PWF Acquisition Loan has a term of five years
with an  interest  rate of LIBOR plus 2.25%.  The loan is interest  only for the
first twelve  months.  Beginning in January 2003 and through the remaining  loan
term, quarterly  straight-line  principal amortization on the initial advance is
paid based on a ten-year amortization period.

At March 31, 2004 and December 31, 2003, there was  approximately  $24.5 million
and $25.2  million  outstanding  on this loan,  respectively,  included in notes
payable in the accompanying condensed consolidated financial statements.

PWF has a $100 million secured,  revolving mortgage warehouse facility,  subject
to annual renewal. CM Corp. is a guarantor of this PWF warehouse  facility.  The
interest  rate for each  warehouse  advance  is the Fed Funds rate at the end of
each year plus 1.25%,  which at March 31, 2004 was 2.24%.  At March 31, 2004 and
December 31, 2003, the amount  outstanding  was  approximately  $4.8 million and
$21.9 million, respectively.

In order to further increase  financial  flexibility,  on March 31, 2003, Equity
Issuer entered into a $75 million  secured  revolving  tax-exempt bond warehouse
line of credit with Fleet National Bank and Wachovia Bank N.A. This facility has
a built in accordion  feature  allowing up to a $25 million increase for a total
size of $100 million and a term of two years,  plus a one year  extension at our
option.  This facility bears interest at 31, 60, 90, or 180-day reserve adjusted
LIBOR plus 1.5%, or prime plus 0.25%, at our option. During the third quarter of
2003,  Citibank  became the third lender under this  facility.  The  outstanding
balance of this facility at March 31, 2004 was approximately $21.7 million.

On  November  17,  2003,  CM Corp.  entered  into $50  million  and $10  million
acquisition  bridge loan facilities with Wachovia Bank in order to fund the cash
portion,  fees  and  expenses  of our  acquisition  of RCC.  These  bridge  loan
facilities have a nine-month  term with two 90-day  extension  options.  We have
pledged our common  ownership  interest in the Equity  Issuer as security  under
these  facilities.  The facilities are pre-payable at any time and bear interest
at LIBOR plus 1.5% and 2.4%, respectively. As of March 31, 2004 and December 31,
2003,  CM Corp.  had  borrowed  the  full  $60  million  available  under  these
facilities.

On November 17, 2003, RCC entered into a warehouse facility in the amount of $85
million,  with Fleet National Bank, Merrill Lynch C.D.C and Citicorp,  USA. This
facility has a maturity  date of October 29, 2004 and bears  interest,  at RCC's
option, at either LIBOR plus 2% or the prime rate plus .125%. At March 31, 2004,
there was an outstanding balance of $63.3 million at a weighted average net rate
of  3.90%.  This  facility  is  collateralized  by a  lien  on  certain  limited
partnership  interests  (See Note 4).  Payments  of  interest  only are due on a
monthly  basis.  RCC has the option to extend the  warehouse  facility  upon its
maturity in 2004.

                                       23
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


<TABLE>
<CAPTION>

       Minimum payments due under
         non-cancellable leases
------------------------------------------
(Dollars in thousands)       Payments Due
-----------------------      -------------

                            <C>
2004                           $130,204
2005                             24,456
2006                              2,726
2007                              2,726
2008 and thereafter              14,314
                               --------

                               $174,426
                               ========
</TABLE>

NOTE 14 - FINANCING ARRANGEMENTS

We raise capital to acquire  additional revenue bonds through two securitization
programs.

P-FLOATSSM/RITESSM PROGRAM

During 2004, we  transferred  20 revenue bonds with an aggregate  face amount of
approximately  $118.8  million to the  P-FLOATSSM/RITESSM  program and  received
proceeds of approximately  $127.6 million.  Additionally,  we repurchased  three
revenue bonds with an aggregate face value of approximately $28.4 million. As of
March 31, 2004 our total borrowings outstanding were approximately $406 million.

Our cost of funds  relating to our secured  borrowings  under the Merrill  Lynch
P-FLOATSSM/RITESSM  program  (calculated as interest  expense as a percentage of
the weighted average amount of the secured  borrowings) was  approximately  1.9%
and  2.0%,  annualized,  for the three  months  ended  March 31,  2004 and 2003,
respectively.

MBIA SECURITIZATION PROGRAMS

As of March 31,  2004,  the  maximum  amount of capital we could raise under the
security agreement with MBIA was $650 million, including $425 million in Floater
Certificates  under the Owner  Trust and $225  million in  Auction  Certificates
under the Auction Trust. In addition, the surety commitment by MBIA was recently
extended for eight years,  through October 1, 2011. As of March 31, 2004,  total
outstanding was $383.5 million under the Floater Certificate  structure and $100
million under the Auction Certificate structure.

Our Company's  floating rate cost of funds relating to our MBIA  securitizations
(calculated  as interest  expense plus  recurring  fees as a  percentage  of the
weighted average amount of the outstanding Senior Certificate) was approximately
2.05%  and  2.08%  for  the  three   months  ended  March  31,  2004  and  2003,
respectively.

The following table shows the components of the financing arrangements.
<TABLE>
<CAPTION>

                                          Amount Financed (Dollars in thousands)
     Financing Arrangement                March 31, 2004      December 31, 2003
     ---------------------                --------------      -----------------
       <S>                                   <C>                  <C>
       P-FLOATSSM/RITESSM                    $406,068             $316,508
       MBIA: Low Floater                      383,500              383,500
       MBIA: Auction Rate                     100,000              100,000
       Fixed-Rate Securitization              100,000              100,000
                                             --------             --------

          Total                              $989,568             $900,008
                                             ========             ========
</TABLE>

NOTE 15 - SHAREHOLDERS' EQUITY

In January 2004, at a holder's  request,  we converted  992,688  special  common
units  to  an  equivalent  number  of  common  shares.  After  this  conversion,
15,079,097 SCUs remained outstanding.

In February 2004, our Company, at the shareholders'  request,  converted 771,080
of outstanding Convertible CRA Shares to Common Shares. The conversion was based
on a  one-to-one  conversion  ratio.  After  this  conversion,  15,079,097  SCUs
remained outstanding.

NOTE 16 - FASB INTERPRETATION NO. 46

In January  2003,  the FASB  issued  Interpretation  No. 46,  "Consolidation  of
Variable  Interest  Entities"  ("FIN 46"). In December 2003, the FASB issued FIN
46R, which revises FIN 46, codifying  certain FASB Staff positions and extending
the  implementation  date.  FIN  46,  as  revised  by  FIN  46R,  clarifies  the
application of existing  accounting  pronouncements to certain entities in which
equity  investors do not have the  characteristics  of a  controlling  financial

                                       24
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2004
                                   (UNAUDITED)


interest or do not have sufficient  equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
Prior to the  issuance of FIN 46R,  we had not  applied FIN 46 to any  entities;
accordingly,  the provisions of FIN 46R are effective for us beginning March 31,
2004.

Through our  acquisition  of RCC,  we entered  the Low Income  Hosing Tax Credit
("LIHTC")  syndication  business,  becoming the general partner or equivalent in
over  70  investment  funds.  Typically,   the  investors  acquire  all  limited
partnership interest in an upper-tier,  or investment partnership or 100% of the
membership interest if structured as a limited liability company. The investment
partnership, in turn, invests as a limited partner in one or more lower-tier, or
operating  partnerships,  that own and  operate the  housing  projects.  Limited
partners in the investment partnerships are most often corporations who are able
to utilize  the tax  benefits  and,  in most  cases,  are not  anticipating  any
economic  benefit from the investment  other than the expected tax benefits.  In
some cases, in conjunction  with the final  disposition of the portfolio,  there
may be some additional return to the limited partners.

There are  certain  entities  in which the  limited  partners  have the right to
remove us as the  general  partner  or  managing  member  without  cause.  These
entities  are not VIEs under the  provisions  of FIN 46R  therefore  will not be
consolidated.

Entities and  operating  partnerships  in which the limited  partners or limited
members do not have the right to remove us as the  general  partner or  managing
member are variable  interest  entities as defined by FIN 46R. We have concluded
that as the general partner or managing member for these type of investments, we
are the primary beneficiary as defined by FIN 46R because we absorb the majority
of the  expected  income and  losses  disproportionate  to our actual  ownership
interest.

We have included the  consolidated  amounts in Investments in partnerships - FIN
46R,  assets  consolidated   pursuant  to  FIN  46R,  notes  payable  and  other
liabilities  consolidated  pursuant to FIN 46R, and minority interest in FIN 46R
partnerships in the condensed  consolidated  balance sheets at our cost basis as
of December  31,  2003 (such date  approximates  the date we became  involved in
these entities), which approximates their fair values.

NOTE 17 - SUBSEQUENT EVENTS

New Acquisitions
----------------
Subsequent to March 31, 2004,  CharterMac  has acquired one revenue bond with an
aggregate face amount of approximately $8.0 million,  secured by 321 multifamily
units.  We have also  advanced  additional  funds to  revenue  bonds  which were
previously acquired totaling approximately $4.5 million.

LIHTC Guarantee
---------------
On April 19, 2004, we completed our fourth transaction to guarantee tax benefits
to an investor in a  partnership  designed to earn  LIHTCs.  We entered into two
agreements with the Primary Guarantor to guarantee an agreed-upon rate of return
to the  investor in Related  Capital  Guaranteed  Corporate  Partners II, L.P. -
Series  D  for  which  our  Company  will  receive   guarantee   fees   totaling
approximately  $6.5  million  in  three  installments  as well  as  acquisition,
partnership management and asset management fees amounting to $7.4 million.

Conversion of Convertible CRA Shares to Common Shares
-----------------------------------------------------
On April 26, 2004, an investor converted 216,540 of outstanding  Convertible CRA
Shares to Common Shares.  The  conversion  was based on a one-to-one  conversion
ratio for the Convertible CRA Shares.

                                       25
<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

General
-------

We are CharterMac,  a Delaware  statutory trust,  which commenced  operations in
October  1997.  We and our  subsidiaries  are in the  business of (i)  portfolio
investing, which includes acquiring and holding (directly and indirectly through
our subsidiaries)  federally tax-exempt multifamily housing revenue bonds issued
by  various  state or local  governments,  agencies  or  authorities  and  other
investments  designed to produce  federally  tax-exempt  income;  (ii)  mortgage
banking,  which includes  originating and servicing  mortgage loans on behalf of
third parties such as the Federal National Mortgage  Association ("Fannie Mae"),
the Federal Home Loan  Mortgage  Corporation  ("Freddie  Mac"),  the  Government
National Mortgage  Association  ("Ginnie Mae") and the Federal Housing Authority
("FHA"); (iii) credit enhancement, which includes guaranteeing tax credit equity
returns and mortgage loans; and (iv) fund management,  which includes sponsoring
investment programs for a fee.

We and a majority of our  subsidiaries,  are each either treated as partnerships
or disregarded  for federal income tax purposes.  Therefore,  we pass through to
our  shareholders,  in the form of distributions,  income  (including  federally
tax-exempt  income) derived from our  investments  without paying federal income
tax on that income.

We conduct most of our  portfolio  investing  through  CharterMac  Equity Issuer
Trust  (collectively,   with  its  subsidiaries,   "Equity  Issuer").  Portfolio
investing  includes the  acquisition  and  ownership  (directly  and  indirectly
through our subsidiaries) of federally  tax-exempt  multifamily  housing revenue
bonds issued by various state or local governments,  agencies or authorities and
other investments  designed to produce federally tax-exempt income. The proceeds
of the  revenue  bonds are used to make  mortgage  loans  for the  construction,
rehabilitation,  acquisition or refinancing  of affordable  multifamily  housing
properties throughout the United States.

Our Company,  through its wholly owned  subsidiary  CharterMac  Corporation ("CM
Corp."),  owns  approximately  87% of the outstanding  capital stock (85% of the
economics)  of PW  Funding,  Inc.  ("PWF"),  a national  mortgage  banking  firm
specializing in multifamily  housing.  CM Corp. expects to acquire the remaining
outstanding  capital  stock of PWF over the next 6 to 18 months.  As a result of
the  acquisition of PWF, our Company has diversified the range of our investment
products and is able to offer  developers fixed and floating rate tax-exempt and
taxable  financing  through  Fannie Mae,  Freddie Mac and FHA for affordable and
market rate  multifamily  properties.  Combining  this with our  Company's  core
business of investing in revenue bonds and its affiliation with RCC, we are able
to provide developers with financing for all aspects of their property's capital
structure.

We  also  own  Related  Capital  Company  ("RCC").  RCC  is in the  business  of
syndicated Low Income Housing Tax Credits ("LIHTC") via investment  partnerships
and  providing  origination,   acquisition,  asset  management  and  partnership
management services to partnerships we sponsor,  which are the LIHTC syndication
vehicles.

Restatements
------------

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  gives  effect  to  the  restatements  disclosed  in  Note  1A to the
condensed consolidated financial statements.

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

The  following is a summary of our  operations  for the three months ended March
31, 2004 and 2003. Net income for the three months ended March 31, 2004 and 2003
was approximately $8.2 million and $18.0 million, respectively.
<TABLE>
<CAPTION>

REVENUES

                                  For the Three Months Ended March 31,

(Dollars in thousands)               2004            2003          % Change
--------------------------------------------------------------------------------
<S>                                <C>              <C>               <C>
Revenue bond interest income       $31,851          $26,250           21.3%
Fee income
   Mortgage banking fees             3,116            3,067            1.6%
   Fund management fees              6,780              N/A           N/A
Other income                         4,566            2,604           75.3%
                                ------------------------------------------------

Total revenues                     $46,313          $31,921           45.1%
                                ================================================
</TABLE>


Total  revenues  for the  three  months  ended  March  31,  2004,  increased  by
approximately  45.1% or $14.4  million over 2003,  primarily due to increases in
revenue bond  interest  income of  approximately  21.3% or $5.6 million and $6.8
million in fund management fees.

The  increase in revenue  bond  interest  income is  primarily  due to new bonds
acquired  during later  quarters of 2003 and during  2004.  The increase in fund
management fees represents the fee income earned by RCC.

                                       26
<PAGE>

<TABLE>
<CAPTION>

EXPENSES

                                          For the Three Months Ended March 31,

(Dollars in thousands)                     2004            2003         % Change
--------------------------------------------------------------------------------
<S>                                      <C>             <C>               <C>
Interest expense                         $  5,521        $  3,816          44.7%
Interest expense - distribution to
   preferred shareholders of
   subsidiary                               4,724             N/A            N/A
Recurring fees - securitizations            1,065             963          10.6%
Salaries and benefits                      13,882           3,360         313.2%
Interest rate derivatives                   3,387             N/A            N/A
General and administrative                  6,349           3,694          71.9%
Depreciation and amortization               6,893           1,687         308.6%
                                         ---------------------------------------

Total expenses                           $ 41,821        $ 13,520         209.3%
                                         =======================================
</TABLE>

Total  expenses  increased  approximately  209.3% or $28.3 million for the three
months ended March 31, 2004 versus 2003,  primarily  due to increases of 313.2%,
or $10.5 million in salaries and benefits, 71.9%, or $2.7 million in general and
administrative   expenses,   308.6%,   or  $5.2  million  in  depreciation   and
amortization,  and $4.7 million in interest expense represented by distributions
to our preferred shareholders.

The increase in interest  expense - distributions  to preferred  shareholders of
subsidiary  represents a  reclassification  pursuant to FAS 150 of  distribution
paid to the holders of our mandatorily redeemable preferred shares.

The above  increases are  predominantly  due to our  acquisition  of RCC and the
associated  recognition  of  approximately  $19.4  million  in  expenses.  These
increases  include  salary  and  benefits  of $11.6  million,  depreciation  and
amortization of $4.4 million, and general and administrative of $3.4 million.

<TABLE>
<CAPTION>

OTHER ITEMS
                                          For the Three Months Ended March 31,

(Dollars in thousands)                    2004           2003         % Change
--------------------------------------------------------------------------------
<S>                                      <C>          <C>                 <C>
Equity in earnings of ARCap              $   555      $   555             0.0%
Gain on sale of loans                      1,745        2,139          (18.4)%
Gain(loss) on repayment of revenue
   bonds                                     260         (412)          163.1%
Income allocated to preferred
   shareholders of subsidiary                N/A        4,724              N/A
Income allocated to special common
   units                                   2,918          N/A              N/A
Income allocated to minority
   interest                                  105           28           275.0%
Benefit for income taxes                   2,389        1,976            20.9%
</TABLE>


Gains on sales of loans decreased  approximately 18.4% or $394,000 for the three
months  ended  March 31,  2004 versus  2003,  due to the  decrease in PWF's loan
origination activity in 2004 versus 2003.

The income allocated to SCUs represents the distributions payable to the holders
of the SCUs for the three months ended March 31, 2004.

Since FIN 46R was effective for us beginning March 31, 2004, there was no impact
to our results of operations.

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

Short-term liquidity provided by operations comes primarily from interest income
from  revenue  bonds and  promissory  notes in excess of the  related  financing
costs,  mortgage  origination and servicing fees, and fund management  fees. For
the three  months  ended  March 31,  2004,  we had net cash from  operations  of
approximately $42.2 million.  Additionally, we have entered into three revolving
warehouse facilities,  one, in the amount of $100 million, used by PWF, another,
in the amount of $75 million,  used by us to fund mortgage loans and investments
in  revenue  bonds on a short  term  basis and the  third,  in the amount of $85
million,  used by RCC to acquire equity interests in property ownership entities
prior to the inclusion of these equity interests into investments funds. The PWF
facility is renewable annually,  our facility matures March 31, 2005, with a one
year extension at our option, and the RCC facility matures on October 29, 2004.

During the three months ended March 31, 2004,  cash and cash  equivalents of our
Company and its consolidated subsidiaries increased approximately $21.1 million.
The increase was  primarily  due to cash  provided by  operating  activities  of
approximately  $42.2  million,  proceeds  from the repayment of revenue bonds of
approximately   $27.8   million,   proceeds  from  financing   arrangements   of
approximately  $127.6  million,  an increase in notes  payable of  approximately
$21.1 million and a decrease in restricted cash of  approximately  $2.6 million,
partially  offset by an  increase in goodwill  of  approximately  $0.8  million,
distribution payments of approximately $27.6 million, purchases of revenue bonds
of approximately $91.1 million and principal payments on financing  arrangements
of  approximately  $38.0 million and increase in investments in  partnerships of
approximately $39.7 million.

                                       27
<PAGE>

During May 2004,  distributions  of approximately  $16,476,000  ($.37 per share)
will be paid to  holders  of Common  and  Convertible  CRA  Shares,  which  were
declared in March 2004.

Our long term  liquidity  needs are met using  primarily two sources of capital:
collateralized  debt  securitization  and various types of equity offerings.  We
believe that our financing  capacity and cash flow from current  operations  are
adequate to meet our 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.

Critical Accounting Policies
----------------------------

Our Company's  critical  accounting  policies are described in our Form 10-K for
the  year  ended  December  31,  2003  and in  Note 1 of  the  footnotes  of the
accompanying financial statements.

Acquisitions
------------

During the period  January 1, 2004 through March 31, 2004, we acquired  thirteen
tax-exempt  revenue bonds and one taxable  revenue bonds with an aggregate  face
amount of approximately $91.1 million.

Forward-Looking Statements
--------------------------

Certain   statements  made  in  this  report  may  constitute   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended,  and Section 21E of the  Securities  Exchange Act of 1934,  as amended.
Such forward-looking  statements include statements regarding the intent, belief
or current  expectations of our Company and its management and involve known and
unknown  risks,  uncertainties  and other  factors  which  may cause the  actual
results,  performance or achievements of our Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such forward-looking  statements.  Such factors include, among other things, the
following:  general  economic and business  conditions,  which will, among other
things,  affect the availability and  creditworthiness  of prospective  tenants,
lease rents and the terms and availability of financing for properties  financed
by  revenue  bonds  owned by us;  adverse  changes  in the real  estate  markets
including,  among other things,  competition with other companies; risks of real
estate development and acquisition;  governmental  actions and initiatives;  and
environment/safety  requirements.  Readers  are  cautioned  not to  place  undue
reliance on these  forward-looking  statements,  which speak only as of the date
hereof.

Inflation
---------

Inflation  did not  have a  material  effect  on our  results  for  the  periods
presented.

Related Parties
---------------

Our Company's  day-to-day  affairs are handled under the terms of the Management
Agreements with the Manager.

We have invested in, and may in the future  invest in,  revenue bonds secured by
properties  in which  either  direct or  indirect  affiliates  of RCC own equity
interests in the borrower.  Our Company's trust agreement contains a limitation,
equal to 15% of total market value, on the aggregate  amount of revenue bonds we
may hold where the  borrowers  under  such  revenue  bonds are either  direct or
indirect  affiliates  of  RCC  and  RCC  generally  has a  controlling  economic
interest.

In some cases,  RCC or its  affiliates  may own a  partnership  or joint venture
interest  merely to  facilitate  an equity  financing  on behalf of one of RCC's
investment  funds.   These  instances  are  not  considered  in  the  above  15%
limitation.  This  type of  transaction  with an  affiliated  borrower  would be
structured as a limited partnership as follows:  the general partner would be an
unaffiliated  third  party with a 1% general  partnership  interest  and the 99%
limited  partner would itself be a limited  partnership in which an affiliate of
RCC would own a 1% general  partnership  interest  and one or more  Fortune  500
companies would own a 99% limited partnership interest.

Affiliates of the Manager may provide certain financial guarantees to facilitate
leveraging  by us, for which they could be paid market rate fees.  In  addition,
affiliates of the Manager may provide certain financial  guarantees to the owner
(or partners of the owners) of the  underlying  properties  securing our revenue
bonds, for which they could be paid market rate fees.

Certain  of the  revenue  bonds held by our  Company  are  supported  by various
guarantees including,  but not limited to, construction and operating guarantees
from affiliates of the Manager.

On September  24,  2003,  we  completed a second  yield  guarantee  transaction,
agreeing to back up a primary guarantor's obligation to guarantee an agreed-upon
rate of return to the investor in Related Capital Guaranteed  Corporate Partners
II, L.P. - Series B ("RCGCP - Series B").  RCGCP - Series B is a fund  sponsored
by RCC.

In connection  with the  refinancing  of River Run, we entered into an agreement
which allows the revenue  bond to be put to our Company  should the owner of the
underlying  property  default on the bond. We, in turn,  entered into agreements
which  allow us to put the bond to the  general  partners  of the  owner who are
affiliates  of the Manager.  Our  Company's  put right is secured by  collateral
assignments  of the  general  partners'  partnership  interests  in the  limited
partnership which owns the underlying property.

                                       28
<PAGE>

We have entered into a credit enhancement transaction with Merrill Lynch Capital
Services.  TRCLP has  provided us with an  indemnity  covering 50% of any losses
incurred by us pursuant to such transaction.

Commitments and Contingencies
-----------------------------

MORTGAGE BANKING ACTIVITIES

Through PWF, we originate and service multifamily mortgage loans for Fannie Mae,
Freddie  Mac and FHA.  PWF's  mortgage  lending  business  is subject to various
governmental and quasi-governmental  regulations. PWF is licensed or approved to
service and/or  originate and sell loans under Fannie Mae,  Freddie Mac,  Ginnie
Mae and FHA programs.  FHA and Ginnie Mae are agencies of the Federal government
and  Fannie  Mae  and   Freddie  Mac  are   federally-chartered   investor-owned
corporations.  These agencies  require PWF and its  subsidiaries to meet minimum
net worth  and  capital  requirements  and to comply  with  other  requirements.
Mortgage  loans  made  under  these  programs  are  also  required  to meet  the
requirements of these programs. In addition, under Fannie Mae's DUS program, PWF
has the authority to originate loans without a prior review by Fannie Mae and is
required to share in the losses on loans originated under this program.

The DUS program is Fannie Mae's principal loan program. Under the Fannie Mae DUS
Product  Line,  PWF  originates,  underwrites  and  services  mortgage  loans on
multifamily  residential  properties  and sells the  project  loans  directly to
Fannie Mae. PWF assumes responsibility for a portion of any loss that may result
from borrower defaults, based on the Fannie Mae loss sharing formulas, Levels I,
II or III. At March 31, 2004, all of PWF's loans consisted of Level I loans. For
such loans, PWF is responsible for the first 5% of the unpaid principal  balance
and a portion  of any  additional  losses to a  maximum  of 20% of the  original
principal  balance.  Level II and Level III loans  carry a higher  loss  sharing
percentage. Fannie Mae bears any remaining loss.

Under the terms of the Master Loss Sharing Agreement between Fannie Mae and PWF,
PWF is  responsible  for funding 100% of mortgagor  delinquency  (principal  and
interest) and servicing (taxes,  insurance and foreclosure costs) advances until
the amounts  advanced exceed 5% of the unpaid  principal  balance at the date of
default.  Thereafter,  for Level I loans,  we may request  interim  loss sharing
adjustments  which allow us to fund 25% of such advances until final  settlement
under the Master Loss Sharing Agreement. No interim loss sharing adjustments are
available for Level II and Level III loans.

We maintain  an accrued  liability  for  probable  losses  under FAS 5 for loans
originated  under  the  Fannie  Mae  DUS  product  line  at  a  level  that,  in
management's judgment, is adequate to provide for estimated losses. At March 31,
2004, that liability was approximately $6.9 million, which we believe represents
its probable liability at this time. Unlike loans originated for Fannie Mae, PWF
does not share the risk of loss for loans PWF originates for Freddie Mac or FHA.

In connection  with the PWF warehouse  line,  both our Company and CM Corp. have
entered  into  guarantees  for the  benefit of Fleet  National  Bank  ("Fleet"),
guaranteeing  the total advances drawn under the line, up to the maximum of $100
million,  together with interest,  fees,  costs,  and charges related to the PWF
warehouse line.

PWF  maintains,  as of March 31,  2004,  treasury  notes of  approximately  $5.3
million and a money  market  account of  approximately  $0.9  million,  which is
included in cash and cash  equivalents-restricted  in the condensed consolidated
balance  sheet,  to  satisfy  the  Fannie Mae  collateral  requirements  of $6.2
million.

Due to the  nature of PWF's  mortgage  banking  activities,  PWF is  subject  to
supervision by certain regulatory  agencies.  Among other things, these agencies
require PWF to meet certain minimum net worth requirements,  as defined. PWF met
these requirements for all agencies, as applicable, as of March 31, 2004.

At March 31, 2004,  PWF had  commitments of  approximately  $46.7 million to six
borrowers.

Off Balance Sheet Arrangements
------------------------------

CREDIT ENHANCEMENT TRANSACTION

In December  2001,  CM Corp.  completed a credit  enhancement  transaction  with
Merrill  Lynch Capital  Services,  Inc.  ("MLCS").  Pursuant to the terms of the
transaction, CM Corp. assumed MLCS's first loss position on a pool of tax-exempt
weekly variable rate  multifamily  mortgage loans.  TRCLP, has provided CM Corp.
with an indemnity  covering  50% of any losses that are incurred by CM Corp.  as
part of this transaction. As the loans mature or prepay, the first loss exposure
and the fees paid to CM Corp. will both be reduced.  The latest maturity date on
any loan in the  portfolio  occurs in 2009.  The  remainder  of the real  estate
exposure  after the million  first loss  position has been assumed by Fannie Mae
and Freddie Mac. In connection  with the  transaction,  we have  guaranteed  the
obligations of CM Corp., and have met its obligation to post  collateral,  in an
amount equal to 40% of the first loss  amount.  Our maximum  exposure  under the
terms of this transaction is approximately $19.0 million.

CM Corp.  performed  due  diligence on each  property in the pool,  including an
examination  of  loan-to-value  and debt service  coverage both on a current and
"stressed"  basis.  CM Corp.  analyzed the  portfolio  on a "stressed"  basis by
increasing capitalization rates and assuming an increase in the low floater bond
rate.  As of  March  31,  2004,  the  credit  enhanced  pool of  properties  are
performing  according to their contractual  obligations and we do not anticipate
any losses to be incurred on its guaranty. Should the Company's analysis of risk
of loss change in the future,  a provision  for probable loss might be required;
such provision could be material.

                                       29
<PAGE>

YIELD GUARANTEE TRANSACTIONs

CM Corp.  has entered  into six  agreements  with  Merrill  Lynch (the  "Primary
Guarantor")  to  guarantee  agreed-upon  rates  of  return  for  three  pools of
multifamily  properties  each  owned by a local  partnership  which in turn,  is
majority-owned  by  affiliates  of RCC for  which CM Corp.  has or will  receive
guarantee fees.

Each  transaction  was  structured  as two separate  guarantees,  one  primarily
guaranteeing  the returns  through the lease-up  phase of the properties and the
other guaranteeing the returns through the operating phase of the properties. CM
Corp.  receives a fee for each guarantee up front at the start of each guarantee
period.  These fees will be  recognized  in income on a straight line basis over
the period of the respective  guarantees.  Total potential  exposure pursuant to
these guarantees is approximately  $228.0 million. We have analyzed the expected
operations of the Underlying  Properties and believe there is no risk of loss at
this time. Should our analysis of risk of loss change in the future, a provision
for possible  losses might be required;  such  provision  could be material.  We
account  for these  guarantees  under FIN 45. We have  determined  that the fees
received represent the fair value of the respective  liabilities and accordingly
have  recorded  such fees as a  liability  included  in  deferred  income on our
condensed consolidated balance sheets.

Some of the local  partnerships have financed their properties with the proceeds
of our revenue bonds.  In these cases,  the Primary  Guarantor has required that
those  revenue  bonds be  deposited  into a trust  pursuant to which the revenue
bonds were divided into senior and subordinated interests with approximately 50%
of each  revenue  bond being  subordinated.  We have  financed  the senior trust
interest  as  part  of  the  Merrill  Lynch   P-FloatsSM/RitesSM   program.  The
subordinate  trust  interests  are  being  used as  collateral  in  other of our
Company's financing programs.

In  connection  with  these  transactions,  we  have  posted  $20.8  million  as
collateral  with the  Primary  Guarantor  in the form of either  cash or revenue
bonds.

REVENUE BOND FORWARD TRANSACTIONS

We have entered into six  transactions  to purchase  revenue  bonds  pursuant to
agreements  which require us, at the earlier of  stabilization  or conversion to
permanent  financing  to  acquire  Series  A and  Series  B  revenue  bonds at a
predetermined price and interest rates. We are obligated to purchase the revenue
bonds only if  construction  is completed.  We are obligated to buy the Series B
revenue  bonds  only if,  at the date the  Series A bonds  are  stabilized,  the
property's cash flow is sufficient to provide debt service coverage of 1.15x for
both the Series A and B bonds.  An  unrelated  third party  lender will  advance
funds to the developer,  as needed during the construction period, at a floating
rate. These forward  commitments  create  derivative  instruments under SFAS No.
133, which have been designated as a cash flow hedge of the anticipated  funding
of the revenue bonds, and are recorded at fair value, with changes in fair value
recorded in other accumulated  comprehensive  income until the revenue bonds are
funded.  The total  potential  amount we could  possibly  be required to fund is
$83.4 million.

OTHER GUARANTEES

We have entered into three  transactions  related to three properties:  Coventry
Place,  Canyon  Springs  and  Arbor  Ridge.  Pursuant  to  the  terms  of  these
transactions,  we will provide  credit  support to the  construction  lender for
project  completion  and  Fannie  Mae  permanent  loan  conversion  and  acquire
subordinated  bonds to the extent  the  construction  period  bonds do not fully
convert.  Up until the point of completion,  we will reimburse the  construction
lender for any draw on its construction letter of credit up to 40% of the stated
amount of the letter of credit. Following completion,  up until the project loan
converts to permanent loan status, we will, should the need arise, reimburse the
full amount of the letter of credit.  We closely  monitor these two  properties,
and believes  there is no need  currently,  to provide for any  potential  loss.
Should our analysis of risk of loss change in the future,  a provision  for loss
might be required;  such  provision  could be material.  The  developer has also
issued several  guarantees to the  construction  lender,  each of which would be
called  upon  before our  guarantees,  and each of which would be assigned to us
should  its  guarantees  be  called.  Once the  construction  loans  convert  to
permanent loans, we are obligated to acquire  subordinated  loans for the amount
by which each  construction  loan exceeds the  corresponding  permanent loan, if
any.  The  subordinated  bonds  will bear  interest  at 10%.  Under  Fannie  Mae
guidelines,  the size of the  subordinated  bonds will be limited to a 1.0x debt
service coverage based on 75% of the cash flow after the senior debt.

Our maximum exposure,  related to these two  transactions,  is 40% of the stated
amount of the letter of credit of approximately $27 million.

The  following  table  reflects our maximum  exposure  and  carrying  amount for
guarantees we and our subsidiaries have entered into:
<TABLE>
<CAPTION>
                                      Maximum      Carrying
(Dollars in  thousands)               Exposure      Amount
--------------------------------------------------------------
<S>                                  <C>          <C>
Payment guarantees                   $   17,933   $       --
Completion guarantees                    53,236           --
Operating deficit guarantees                614           --
CMC credit enhancement                   19,000           --
LIHTC guarantees                        228,000        5,850
                                     ----------   ----------

                                     $  318,783   $    5,850
                                     ==========   ==========
</TABLE>

                                       30
<PAGE>

CONTRACTUAL OBLIGATIONS

The following table provides our commitments as of March 31, 2004 to make future
payments under our debt agreements and other contractual obligations.
<TABLE>
<CAPTION>
                                                             Payments due by Period
                                   -------------------------------------------------------------------------
                                                   Less than                                       More than
(Dollars in  thousands)             Total            1 year        1-3 years        3-5 years       5 years
------------------------------------------------------------------------------------------------------------
<S>                                <C>              <C>             <C>              <C>           <C>
Notes payable                      $174,426         $130,204        $ 27,182         $17,040       $      --
Operating lease obligations           1,376              545             831              --              --
Unfunded loan commitments           178,930           49,750         129,180              --              --
Fixed rate securitization           100,000               --         100,000              --              --
Employee contracts                    6,000            2,000           4,000              --              --
                                   --------------------------------------------------------------------------s

   Total                           $460,732         $182,499        $261,193         $17,040       $      --
                                   ==========================================================================
</TABLE>

Income Taxes
------------

We are  organized  as a Delaware  statutory  trust and,  for tax  purposes,  are
classified as a partnership.  Almost all of our recurring  income is tax-exempt.
From time to time we may sell or securitize  various  assets which may result in
capital gains and losses.  This tax structure allows us to have the pass-through
income  characteristics of a partnership for both taxable and tax-exempt income.
We do not pay tax at the partnership level.  Instead,  the distributive share of
our income, deductions and credits is reported to each shareholder for inclusion
on their respective  income tax return.  The tax-exempt income derived from most
of our revenue bonds remains tax-exempt as it is passed through to shareholders.
Any cash dividends received by us from subsidiaries,  organized as corporations,
will be recorded as dividend  income for tax  purposes.  For such  subsidiaries,
created in 2001, there were no dividends distributed for tax purposes.

We provide for income taxes in accordance with Statement of Financial Accounting
Standards No. 109,  "Accounting for Income Taxes" ("FAS 109").  FAS 109 requires
the  recognition of deferred tax assets and  liabilities for the expected future
tax  consequences  of  temporary  differences  between the  financial  statement
carrying amounts and the tax basis of assets and liabilities.

We derive a substantial  portion of our income from  ownership of first mortgage
"Private Activity Bonds." The interest from these bonds is generally  tax-exempt
from regular Federal income tax. However,  the Tax Reform Act of 1986 classifies
the interest  earned on Private  Activity Bonds issued after August 7, 1986 as a
tax preference item for alternative minimum tax purposes ("AMT"). The percentage
of our  tax-exempt  interest  income subject to AMT for the years ended December
31, 2002, 2001 and 2000 was approximately 85%, 79% and 88% respectively.  AMT is
a mechanism within the Internal Revenue Code to ensure that all taxpayers pay at
least  a  minimum  amount  of  taxes.  All  taxpayers  are  subject  to the  AMT
calculation  requirements  although  the vast  majority  of  taxpayers  will not
actually  pay AMT.  As a result of AMT,  the  percentage  of our income  that is
exempt from federal income tax may be different for each  shareholder  depending
on that shareholder's individual tax situation.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We invest in certain  financial  instruments,  primarily revenue bonds and other
bond  related  investments  that are  subject to various  forms of market  risk,
including  real estate risk,  interest rate risk,  credit and liquidity risk and
prepayment  risk.  We seek to prudently  and actively  manage such risks to earn
sufficient compensation to justify the undertaking of such risks and to maintain
capital levels which are commensurate with the risks we undertake.

REAL ESTATE RISK

We derive income by investing in revenue bonds secured by multifamily affordable
residential  properties.  Investing in such revenue bonds collateralized by such
properties subjects us to various types and degrees of risk that could adversely
affect the value of our assets and our ability to generate revenue.  The factors
that may reduce our revenues, net income and cash available for distributions to
shareholders include the following: the property securing a revenue bond may not
generate  income  sufficient to meet its operating  expenses and debt service on
its  related  revenue  bond;  economic  conditions,  either  local,  regional or
national,  may limit the amount of rent that can be charged for rental  units at
the  properties,  and may result in a  reduction  in timely  rent  payments or a
reduction  in  occupancy  levels;  occupancy  and rent levels may be affected by
construction  of  additional  housing  units and  national,  regional  and local
politics,  including current or future rent  stabilization and rent control laws
and  agreements;  federal LIHTC and city,  state and federal  housing subsidy or
similar  programs  which  apply to many of the  properties,  could  impose  rent
limitations  and adversely  affect the ability to increase rents to maintain the
properties in proper  condition  during periods of rapid  inflation or declining
market value of such properties;  and, if a revenue bond defaults,  the value of
the property  securing such revenue bond (plus, for properties that have availed
themselves of the federal LIHTC,  the value of such credit) may be less than the
face amount of such revenue bond.

All of these  conditions and events may increase the possibility that a property
owner may be unable to meet its  obligations  to us under its  mortgage  revenue
bond.  This could affect our net income and cash available for  distribution  to
shareholders.   We  manage  these  risks  through  diligent  and   comprehensive
underwriting, asset management and ongoing monitoring of loan performance.

We may be  adversely  affected by periods of  economic or real estate  downturns
that result in declining  property  performance or property values. Any material
decline in property  values used as collateral  for our revenue bonds  increases
the  possibility  of a loss in the event of default.  Additionally,  some of our

                                       31
<PAGE>

income may come from additional  interest  received from the  participation of a
portion of the cash flow, sale or refinancing proceeds on underlying properties.
The collection of such  additional  interest may decrease in periods of economic
slowdown due to lower cash flows or values  available from the properties.  In a
few instances,  the revenue bonds are subordinated to the claims of other senior
interest  and  uncertainties  may  exist  as to a  borrower's  ability  to  meet
principal and interest payments. Because of these economic factors, debt service
on  the  revenue  bonds,  and  therefore  net  income  and  cash  available  for
distribution  to  shareholders is dependent on the performance of the underlying
properties.

INTEREST RATE RISK

The nature of our  investments  and the  instruments  used to raise  capital for
their acquisition expose us to income and expense volatility due to fluctuations
in market  interest rates.  Market  interest rates are highly  sensitive to many
factors,  including governmental  policies,  domestic and international economic
and political considerations and other factors beyond our control.

The revenue  bonds  generally  bear  interest at fixed  rates,  or pay  interest
according to the cash flows of the underlying properties, which do not fluctuate
with changes in market interest rates. In contrast,  payments required under our
floating rat  securitization  programs vary based on market interest rates based
on TBMA index and are re-set weekly or every 35 days.

In addition,  we have floating rate debt related to our acquisition financing of
PWF and RCC and our warehouse  facilities.  PWF has loans  receivable  and short
term borrowings  related to its mortgage  origination  operations  which are not
expected  to  subject  PWF to  significant  interest  rate risk.  PWF  typically
provides mortgages to borrowers  (mortgages  receivable) by borrowing from third
parties (short-term borrowings).  Since PWF's mortgages receivable are typically
subject to a take-out  commitment by Fannie Mae, Freddie Mac or FHA, the related
borrowings  to finance such  mortgages are  typically  short-term.  The interest
income or expense that represents the difference between the interest charged to
borrowers and the interest paid to PWF's lender  during the  warehousing  period
will be earned by PWF.

Other long-term  sources of capital,  such as Equity Issuer's  various series of
Cumulative  Preferred  Shares,  carry a fixed dividend rate and as such, are not
impacted by changes in market interest rates.

A rising  interest  rate  environment  could  reduce the demand for  multifamily
tax-exempt  and  taxable  financing,  which could limit our ability to invest in
revenue bonds or to structure transactions.  Conversely,  falling interest rates
may prompt historical renters to become homebuyers, in turn potentially reducing
the demand for multifamily housing.

An effective  interest rate  management  strategy can be complex and no strategy
can insulate us from all potential risks  associated with interest rate changes.
Various financial  vehicles exist which would allow us to mitigate the impact of
interest rate  fluctuations  on our cash flows and earnings.  Beginning in 2001,
based upon management's  analysis of the interest rate environment and the costs
and risks of such  strategies,  we entered into  interest rate swaps in order to
hedge a portion  of the risk of rising  interest  rates and the impact of such a
rise on our MBIA and P-FloatsSM/RitesSM programs.

We have entered into several derivative instruments,  including an interest rate
cap, interest rate swaps and forward bond origination commitments,  all of which
are accounted for under the Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative  Instruments and Hedging Activities" ("SFAS 133"), as
amended and interpreted. We have designated the interest rate swaps as cash flow
hedges on the variable interest  payments on our floating rate  securitizations.
All but one of the interest rate swaps do not become  effective  until 2005. The
one  interest  rate swap that is  currently  in place,  is  recorded at its fair
market value each accounting period, with changes in market value being recorded
in accumulated other  comprehensive  income to the extent the hedge is effective
in achieving offsetting cash flows. This hedge has been perfectly effective,  so
has  generated no  ineffectiveness  that needs to be included in  earnings.  The
effectiveness of the other swaps is being measured using the  hypothetical  swap
method,  until they go into effect in 2005. For the three months ended March 31,
2004,  we recorded  approximately  $3.4 million as an expense  representing  the
ineffective  portion of these swaps. The interest rate cap, although designed to
mitigate our exposure to rising interest rates,  was not designated as a hedging
derivative;  therefore,  any  change in fair  market  value  flows  through  the
condensed  consolidated  statements of income,  where it is included in interest
income. The forward  commitments  create derivative  instruments under SFAS 133,
which have been designated as cash flow hedges of the anticipated funding of the
revenue bonds,  and, as such,  are recorded at fair value,  with changes in fair
value recorded in accumulated other comprehensive income until the revenue bonds
are funded.

Interest rate swap agreements are subject to risk of early  termination by us or
the counterparty,  possibly at times unfavorable to us and,  depending on market
conditions at the time, may result in the  recognition of a significant  gain or
loss from changes in the market value of the hedging instrument. There can be no
assurance  that we will be able to  acquire  hedging  instruments  at  favorable
prices, or at all, when the existing arrangements expire or are terminated which
would then fully expose us to interest rate risk to the extent of the balance of
debt  subject  to such  hedges.  In  addition,  there is no  assurance  that the
counterparty  to these hedges will have the capacity to pay or perform under the
stated terms of the interest rate swap agreement; however, we seek to enter into
such agreements with reputable and investment grade rated counterparties.

We adopted statement of Financial  Accounting  Standards No. 133, as amended and
interpreted ("FAS 133"), on January 1, 2001. Accordingly, we have documented and
established  our policy  for risk  management  and the  related  objectives  and
strategies for the use of derivative  instruments  to potentially  mitigate such
risks. Currently,  our strategy is intended to reduce interest rate risk through
the use of interest rate swaps. At inception,  we designated these interest rate
swaps as cash flow hedges on the variable interest payments on its floating rate
financing.  Accordingly,  the  interest  rate swaps are  recorded  at their fair
market  values each  accounting  period,  with  changes in market  values  being
recorded in accumulated other comprehensive  income to the extent that the hedge
is  effective  in  achieving  offsetting  cash  flows.  We  assess,  both at the
inception of the hedge and on an ongoing basis,  whether the swap agreements are
highly  effective  in  offsetting  changes  in the  cash  flows  of  the  hedged
financing.  Any  ineffectiveness  in the  hedging  relationship  is  recorded in
earnings.  Our hedges have been perfectly  effective  through December 31, 2003.
For the three months ended March 31, 2004, we have recorded  approximately  $3.4
million in general and  administrative  expenses on the  condensed  consolidated
income statement due to ineffectiveness,  calculated pursuant to FAS 133, of our
existing  interest rate swaps.  Net amounts payable or receivable under the swap
agreements are recorded as adjustments to interest expense.

                                       32
<PAGE>

At  March  31,  2004,  the  fair  market  value of our  interest  rate  swaps of
approximately $6.5 million were recorded in our condensed  consolidated  balance
sheets.  Interest paid or payable under the terms of the swaps of  approximately
$638,000  and  $884,000,  is included in interest  expense for the three  months
ended March 31, 2004 and 2003, respectively.

At March 31, 2004,  the  interest  rate cap was recorded as an asset with a fair
market value of $18,101  included in other assets on the condensed  consolidated
balance sheets.  Because we have not designated this derivative as a hedge,  the
change in fair market value flows through the condensed consolidated  statements
of income, where it is included in interest rate derivatives.

With respect to the portion of our floating rate  financing  programs  which are
not  hedged,  a change  in TBMA rate  would  result in  increased  or  decreased
payments under these financing programs,  without a corresponding change in cash
flows from the investments in revenue bonds. For example, based on the un-hedged
$839.6 million ($889.6  million  outstanding  under these financing  programs at
March 31, 2004,  less the $50 million  notional amount  subsequently  hedged and
assuming a perfect hedge  correlation),  we estimate that an increase of 1.0% in
TBMA rate would  decrease our annual net income by  approximately  $8.4 million.
Conversely,  a decrease in market interest rates would  generally  benefit us in
the same amount  described  above,  as a result of decreased  allocations to the
minority  interest  and  interest  expense  without  corresponding  decreases in
interest received on revenue bonds.

Changes in interest rates would also affect the PWF acquisition loan with Fleet,
the PWF warehouse lines, the RCC acquisition facility, Fleet line credit and the
RCC warehouse facility line. A 1% change in the underlying  interest rates would
affect  our  annual  net  income by  approximately  $1.7  million  (based on the
outstanding  balances at March 31, 2004 of  approximately  $24.5 million for the
PWF  acquisition  loan, $4.8 million for the PWF warehouse line, $60 million for
the RCC acquisition facility,  $21.7 million for the Fleet line credit and $63.3
million for the RCC warehouse facility line).

Changes in market  interest  rates would also impact the estimated fair value of
our portfolio of revenue bonds. We estimate the fair value for each revenue bond
as the  present  value of its  expected  cash flows,  using a discount  rate for
comparable  tax-exempt  investments.  Therefore,  as market  interest  rates for
tax-exempt  investments increase,  the estimated fair value of our revenue bonds
will  generally  decline,  and a decline in interest  rates would be expected to
result in an increase in their estimated fair values. For example,  we estimate,
using the same  methodology  used to estimate  the  portfolio  fair market value
under FAS 115,  that a 1% increase in market  rates for  tax-exempt  investments
would  decrease the estimated  fair value of our portfolio of revenue bonds from
its March 31, 2004 value of  approximately  $1.9 billion to  approximately  $1.8
billion.  A 1% decline in interest  rates would  increase the value of the March
31, 2004 portfolio to approximately $2.1 billion.  Changes in the estimated fair
value of the revenue  bonds do not impact our reported net income,  earnings per
share,  distributions  or cash flows,  but are reported as  components  of other
accumulated comprehensive income and affect reported shareholders' equity.

The  assumptions  related to the  foregoing  discussion  of market risk  involve
judgments   involving  future  economic  market  conditions,   future  corporate
decisions and other interrelating  factors, many of which are beyond our control
and all of which are difficult or impossible to predict with accuracy.  Although
we believe that the assumptions  underlying the forward-looking  information are
reasonable, any of the assumptions could be inaccurate and, therefore, there can
be no assurance that the forward-looking  information included herein will prove
to be accurate. Due to the significant uncertainties inherent in forward-looking
information,  the  inclusion of such  information  should not be regarded as our
representation that our objectives and plans would be achieved.

LIQUIDITY RISK

Our investments  generally lack a regular trading  market,  particularly  during
turbulent  market  conditions or if any of our  tax-exempt  revenue bonds become
taxable  or are in  default.  There is no  limitation  as to the  percentage  of
investments  that may be illiquid  and we do not expect to invest a  substantial
portion  of its  assets  in  liquid  investments.  There is a risk  involved  in
investing  in  illiquid  investments,  particularly  in the  event  that we need
additional cash. In a situation requiring additional cash, we could be forced to
liquidate some of its investments on unfavorable terms that could  substantially
impact  our  condensed  consolidated  balance  sheet and  reduce  the  amount of
distributions available and payments made in respect of our shares.

RISK ASSOCIATED WITH SECURITIZATION

Through  securitizations,   we  seek  to  enhance  our  overall  return  on  our
investments and to generate proceeds that, along with equity offering  proceeds,
facilitate   the   acquisition   of   additional   investments.   In  our   debt
securitizations,  an investment bank and/or credit enhancer  generally  provides
liquidity to the underlying  trust and credit  enhancement  to the bonds,  which
enables  the senior  interests  to be sold to  certain  accredited  third  party
investors seeking investments rated "AA" or better. The liquidity facilities are
generally for one-year terms and are renewable annually.  To the extent that the
credit  enhancer  is  downgraded  below  "AA",  either  an  alternative   credit
enhancement  provider would be  substituted to reinstate the desired  investment
rating or the senior interests would be marketed to other accredited  investors.
In either case,  it is  anticipated  that the return on the  residual  interests
would decrease,  which would negatively  impact our income.  If we are unable to
renew the liquidity or credit enhancement facilities, we would be forced to find
alternative   liquidity  or  credit  enhancement   facilities,   repurchase  the
underlying  bonds or liquidate the  underlying  bonds and its  investment in the
residual  interests.  If we are forced to  liquidate  our  investment,  we would
recognize gains or losses on the liquidation, which may be significant depending
on market conditions. As of March 31, 2004, $483.5 million of senior interest is
credit  enhanced by an  eight-year  term  facility  through MBIA. Of this $483.5
million,  $383.5 million is subject to annual "rollover"  renewal for liquidity.
Also as of March 31, 2004,  Merrill Lynch provided liquidity for $406 million of
senior  interests  in the P  Floats  program.  We do  not  maintain  an  ongoing
commitment  with  Merrill  Lynch and the senior  interest is subject to a weekly
re-set  schedule.  We  continue  to review  alternatives  that would  reduce and
diversify risks associated with securitization.

ITEM 4.  CONTROLS AND PROCEDURES

(a)  EVALUATION  OF DISCLOSURE  CONTROLS AND  PROCEDURES.  Our  Company's  Chief
Executive  Officer and Chief Financial  Officer have evaluated the effectiveness

                                       33
<PAGE>


of our  disclosure  controls  and  procedures  (as such term is defined in Rules
13a-15(e) and 15d-15(e)  under the  Securities  Exchange Act of 1934, as amended
(the  "Exchange  Act")),  as of the end of the period covered by this report and
have concluded that they were not effective as of that date.

As a result of the evaluation of the  effectiveness  of our disclosure  controls
and  procedures  as of December 31, 2004,  with the  participation  of our Chief
Executive Officer and Chief Financial Officer, we identified material weaknesses
in our internal controls over financial reporting relating to the accounting for
deferred  taxes  and  the   consolidation  of  subsidiaries   (with  respect  to
identifying  revenues  that  should  have  been  recharacterized   following  an
acquisition).  As a  result,  and as  set  forth  in  Note  1A to the  Condensed
Consolidated Financial Statements and the "Restatement" section included in Item
2,  Management's  Discussion and Analysis of Financial  Condition and Results of
Operations,  we have restated our  unaudited  condensed  consolidated  financial
statements  for the  periods  covered by this  report.  We have also  undertaken
remedial  action to address and correct the weaknesses in our internal  controls
over these processes.

(b)  INTERNAL  CONTROL  OVER  FINANCIAL  REPORTING.  There  have  not  been  any
significant  changes in our internal control over financial reporting during the
fiscal quarter to which this report relates that have  materially  affected,  or
are reasonably likely to materially  affect, our internal control over financial
reporting.

                                       34
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         We are 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 our financial
         position, results of operations or cash flows.

         On October  24,  2003,  the New York  Supreme  Court for Nassau  County
         issued a final  judgment  approving the  stipulation  of compromise and
         settlement  of the  class  and  derivative  action  entitled  Dulitz v.
         Hirmes, which had challenged certain aspects of our acquisition of RCC.
         Pursuant to that  settlement,  certain terms of the acquisition will be
         modified,  as fully detailed in our proxy statement that was previously
         mailed to  shareholders  and filed with the SEC on  September  5, 2003,
         together with the Notice of Pendency of Class and Derivative Action.

         Although the defendants in the action denied all wrongdoing and believe
         they had meritorious  defenses,  the settlement eliminates the cloud of
         litigation  over the acquisition in connection with Dulitz and provides
         us and our shareholders  with certain  benefits  described in the proxy
         statement and Notice.  The Court also approved an award pursuant to the
         settlement of $400,000 for attorney's  fees and expenses  payable by us
         to the plaintiff's attorneys.

ITEM 2.  CHANGES IN  SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES  OF EQUITY
         SECURITIES

         The following  table sets forth  information  with respect to purchases
         made by the Company of its common  stock  during the three months ended
         March 31, 2004.
<TABLE>
<CAPTION>

                                                              Total number of
                                                             shares purchased    Maximum number
                                                                as part of       of shares that
                                                                 publicly          may yet be
                          Total number of    Average price      announced        purchased under
         Period           shares purchased   paid per share      programs          the programs
         ---------------------------------------------------------------------------------------
         <S>                   <C>               <C>                <C>            <C>
         March 15, 2004        59,798            $22.20             0              1,500,000
</TABLE>


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES - None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None

ITEM 5.  OTHER INFORMATION - Stuart A. Rothstein  resigned his position as Chief
         Financial Officer ("CFO") of our Company effective March 31, 2004,  in
         order to pursue other endeavors.  Alan P. Hirmes, a Managing Trustee of
         our Company, replaced Mr. Rothstein as the new CFO.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         Exhibits:

         10.1  Acquisition Loan Agreement,  dated as of December 24, 2001, among
               Charter Mac  Corporation,  as Borrower,  Fleet  National Bank, as
               Agent, and the Lenders.

         10.2  Mortgage Warehousing Credit and Security  Agreement,  dated as of
               December 24,  2001, among PW Funding Inc.,  Cambridge  Healthcare
               Funding Inc. and Larson Financial Resources, Inc.,  as Borrowers,
               Fleet National Bank, as Agent, and the Lenders.

         10.3  Amended and Restated Reimbursement  Agreement,  dated as of March
               31, 2003,  among Charter Mac Equity Issuer Trust,  Fleet National
               Bank, as Agent,  Fleet  National  Bank, as Issuing Bank,  and the
               Participants.

         10.4  Tax-Exempt  Bond Line of Credit and Security Agreement,  dated as
               of March 26, 2003, among  harter Mac Equity  Issuer  Trust, Fleet
               National  Bank,   Wachovia   Bank,   National  Association, Fleet
               Securities Inc. and Wachovia Securities, Inc., and the Lenders.

         10.5  Severance  Agreement of Stuart A.  Rothstein,  dated December 15,
               2003,  between  the Company and the  Executive  (incorporated  by
               reference to Exhibit 10.5 in our March 31, 2004 Quarterly  Report
               on Form 10-Q).

         31.1  Chief Executive Officer certification  pursuant to Section 302 of
               the Sarbanes-Oxley Act of 2002 (filed herewith).

         31.2  Chief Financial Officer certification  pursuant to Section 302 of
               the Sarbanes-Oxley Act of 2002 (filed herewith).

         32.1  Chief Executive Officer and Chief Financial Officer certification
               pursuant  to 18 U.S.C.  Section  1350,  as  adopted  pursuant  to
               Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

         (b) Reports on Form 8-K

               The following  8-K reports were filed or  furnished,  as noted in
               the applicable Form 8-K, for the quarter ended March 31, 2004.

               Current  report on Form 8-K relating to a press release issued by
               our Company  reporting our fourth quarter and year-end  financial
               results, dated March 9, 2004.


                                       35
<PAGE>

                                   SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



                                   CHARTERMAC
                                  (Registrant)




Date:  April 7, 2005        By: /s/ Stuart J. Boesky
                                --------------------
                                Stuart J. Boesky
                                Managing Trustee and Chief Executive Officer




Date:  April 7, 2005        By: /s/ Alan P. Hirmes
                                ------------------
                                Alan P. Hirmes
                                Managing Trustee, Chief Financial Officer and
                                Chief Accounting Officer



<PAGE>
                                                                    Exhibit 31.1



                      CERTIFICATION PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002



I, STUART J. BOESKY, HEREBY CERTIFY THAT:

     1.  I have  reviewed  this  quarterly  report on Form 10-Q/A for the period
         ending March 31, 2004 of CharterMac;

     2.  Based  on my  knowledge,  this  report  does  not  contain  any  untrue
         statement of a material fact or omit to state a material fact necessary
         in order to make the  statements  made,  in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

     4.  The  registrant's  other certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for  the
         registrant and have:

         a) designed such  disclosure  controls and  procedures,  or caused such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision,  to  ensure  the  material  information  relating  to  the
         registrant,  including its consolidated subsidiaries,  is made known to
         us by others within those entities,  particularly  during the period in
         which this report is being prepared;

         b) evaluated the effectiveness of the registrant's  disclosure controls
         and procedures and presented in this report our  conclusions  about the
         effectiveness of the disclosure controls and procedures,  as of the end
         of the period covered by this report based on such evaluation; and

         c)  disclosed  in this report any change in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most  recent  fiscal  quarter  that  has   materially  affected  or  is
         reasonably  likely  to  materially  affect  the  registrant's  internal
         control over financial reporting; and

     5.  The registrant's other certifying officers and I have disclosed,  based
         on our most recent  evaluation,  to the  registrant's  auditors and the
         audit  committee  of   registrant's   board  of  directors  or  persons
         performing the equivalent functions:

         a) all significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial data; and

         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal controls over financial reporting.


Date: April 7, 2005                                 By:  /s/Stuart J. Boesky
                                                         -------------------
                                                         Stuart J. Boesky
                                                         Chief Executive Officer


<PAGE>

                                                                    Exhibit 31.2



                      CERTIFICATION PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002



I, ALAN P. HIRMES, HEREBY CERTIFY THAT:

     1.  I have  reviewed  this  quarterly  report on Form 10-Q/A for the period
         ending March 31, 2004 of CharterMac;

     2.  Based  on my  knowledge,  this  report  does  not  contain  any  untrue
         statement of a material fact or omit to state a material fact necessary
         in order to make the  statements  made,  in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this report;

     3.  Based on my knowledge,  the financial  statements,  and other financial
         information  included in this  report,  fairly  present in all material
         respects the financial condition,  results of operations and cash flows
         of the registrant as of, and for, the periods presented in this report;

     4.  The  registrant's  other certifying  officers and I are responsible for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined  in  Exchange  Act  Rules  13a-15(e)  and  15d-15(e))  for  the
         registrant and have:

         a) designed such  disclosure  controls and  procedures,  or caused such
         disclosure   controls  and   procedures   to  be  designed   under  our
         supervision,  to  ensure  the  material  information  relating  to  the
         registrant,  including its consolidated subsidiaries,  is made known to
         us by others within those entities,  particularly  during the period in
         which this report is being prepared;

         b) evaluated the effectiveness of the registrant's  disclosure controls
         and procedures and presented in this report our  conclusions  about the
         effectiveness of the disclosure controls and procedures,  as of the end
         of the period covered by this report based on such evaluation; and

         c)  disclosed  in this report any change in the  registrant's  internal
         control over financial  reporting that occurred during the registrant's
         most  recent  fiscal  quarter  that  has   materially  affected  or  is
         reasonably  likely  to  materially  affect  the  registrant's  internal
         control over financial reporting; and

     5.  The registrant's other certifying officers and I have disclosed,  based
         on our most recent  evaluation,  to the  registrant's  auditors and the
         audit  committee  of   registrant's   board  of  directors  or  persons
         performing the equivalent functions:

         a) all significant  deficiencies and material  weaknesses in the design
         or operation of internal  control over  financial  reporting  which are
         reasonably  likely to  adversely  affect  the  registrant's  ability to
         record, process, summarize and report financial data; and

         b) any fraud,  whether or not  material,  that  involves  management or
         other  employees  who  have a  significant  role  in  the  registrant's
         internal controls over financial reporting.


Date: April 7, 2005                                 By:  /s/ Alan P. Hirmes
                                                         ------------------
                                                         Alan P. Hirmes
                                                         Chief Financial Officer


<PAGE>


                                                                    Exhibit 32.1



        CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
            (UNITED STATES CODE, TITLE 18, CHAPTER 63, SECTION 1350)
                 ACCOMPANYING QUARTERLY REPORT ON FORM 10-Q/A OF
                 CHARTERMAC FOR THE QUARTER ENDED MARCH 31, 2004

                  CHARTERMAC FOR THE QUARTER ENDED MARCH 31, 2004


In  connection  with the Quarterly  Report on Form 10-Q/A of CharterMac  for the
quarterly  period  ending  March 31,  2004,  as filed  with the  Securities  and
Exchange  Commission  on the date hereof (the  "Report"),  Stuart J. Boesky,  as
Chief Executive  Officer of our Company,  and Alan P. Hirmes, as Chief Financial
Officer of our Company,  each hereby  certifies,  pursuant to 18 U.S.C.  Section
1350, that:


    (1) The Report fully  complies  with the  requirements  of Section  13(a) or
15(d), as applicable, of the Securities Exchange Act of 1934; and


    (2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of our Company.



By:  /s/ Stuart J. Boesky                           By:  /s/ Alan P. Hirmes
     --------------------                                ------------------
     Stuart J. Boesky                                    Alan P. Hirmes
     Chief Executive Officer                             Chief Financial Officer
     April 7, 2005                                       April 7, 2005