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 September 30, 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
                                         -----    -----

As of  October  29,  2004,  57,680,798  shares  of the  Registrant's  shares  of
beneficial interest were outstanding.



<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  September 30, 2004,  initially  filed
with the Securities and Exchange Commission (the "SEC") on November 4, 2004 (the
"Original  Filing"),  is being filed to reflect  restatements  of our  condensed
consolidated  balance  sheet at September 30, 2004,  our condensed  consolidated
statements of operations for the three and nine months ended  September 30, 2004
and our condensed consolidated statement of cash flows for the nine months ended
September 30, 2004, and certain disclosures in the notes thereto,  including the
disclosure of our commitments and  contingencies in Note 13. 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 Annual Report on Form 10-K for the year ended December 31, 2004
and any reports filed with the SEC subsequent to the date of this filing.


                                        2
<PAGE>


ITEM 1.  FINANCIAL STATEMENTS

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

                                                                  September 30,   December 31,
                                                                      2004            2003
                                                                  ------------    ------------
                                                                 (As Restated -
                                                                  See Note 1A)
<S>                                                                <C>            <C>
                                     ASSETS

Revenue bonds - at fair value                                      $ 2,024,157    $ 1,871,009
Cash and cash equivalents                                               57,697         58,257
Cash and cash equivalents - restricted                                  25,672         26,636
Other investments                                                      162,966         48,460
Mortgage servicing rights                                               33,031         33,351
Deferred costs - net of amortization of $18,343 and $13,463             59,789         58,408
Goodwill                                                               205,737        214,744
Other intangible assets - net of amortization of $16,674
   and $4,163                                                          181,692        194,203
Loan to affiliate                                                       15,361             --
Other assets                                                            47,959         75,946
Investments in partnerships of consolidated VIEs                     2,394,398             --
Other assets of consolidated VIEs                                      302,682             --
                                                                   -----------    -----------

Total assets                                                       $ 5,511,141    $ 2,581,014
                                                                   ===========    ===========

                      LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES:
   Financing arrangements                                          $   973,663    $   900,008
   Preferred shares of subsidiary (subject to mandatory
     repurchase)                                                       273,500        273,500
   Notes payable                                                       176,737        153,350
   Accounts payable, accrued expenses and other liabilities             84,608         56,318
   Deferred tax liability                                               33,773         60,370
   Distributions payable                                                38,569         27,612
   Notes payable and other liabilities of consolidated VIEs          1,225,523             --
                                                                   -----------    -----------

Total liabilities                                                    2,806,373      1,471,158
                                                                   -----------    -----------

Minority interest in consolidated subsidiary - convertible SCUs        267,520        288,006
                                                                   -----------    -----------
Minority interest in consolidated subsidiary - PWF                       4,413          4,193
                                                                   -----------    -----------
Preferred shares of subsidiary (not subject to mandatory
   repurchase)                                                         104,000             --
                                                                   -----------    -----------
Partners' interests in consolidated VIEs                             1,419,462             --
                                                                   -----------    -----------

Commitments and contingencies

SHAREHOLDERS' EQUITY:
   Beneficial owners' equity - Convertible CRA Shareholders;
     no par value (6,552 shares issued and outstanding in 2004
     and 8,180 issued and outstanding in 2003)                         158,574        160,618
   Beneficial owners' equity - special preferred voting shares;
     no par value                                                          151            161
   Beneficial owners' equity - other common shareholders;  no
     par value (100,000 shares authorized;  51,211 shares issued
     and 51,129 outstanding in 2004 and 42,726 shares issued
     and 42,704 outstanding in 2003)                                   729,900        622,771
   Restricted shares granted                                           (11,372)       (19,385)
   Treasury shares of beneficial interest - common, at cost
     (82 shares in 2004 and 23 shares in 2003)                          (1,706)          (378)
   Accumulated other comprehensive income                               33,826         53,870
                                                                   -----------    -----------
Total shareholders' equity                                             909,373        817,657
                                                                   -----------    -----------

Total liabilities and shareholders' equity                         $ 5,511,141    $ 2,581,014
                                                                   ===========    ===========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                     Three Months Ended       Nine Months Ended
                                                        September 30,            September 30,
                                                   ----------------------   ----------------------
                                                     2004         2003         2004        2003
                                                   ----------------------   ----------------------
                                                 (As Restated -           (As Restated -
                                                  See Note 1A)             See Note 1A)
<S>                                                <C>          <C>         <C>          <C>
Revenues:
   Revenue bond interest income                    $  33,027    $  30,353   $  97,365    $  83,528
  Fee income:
     Mortgage banking                                  3,321        3,171      11,124        9,711
     Fund sponsorship                                 10,493           --      27,780           --
     Credit enhancement                                2,715          995       7,541        2,986
   Other income                                        6,062        1,329      12,337        4,752
   Revenues of consolidated VIEs                       4,460           --       7,250           --
                                                   ---------    ---------   ---------    ---------
       Total revenues                                 60,078       35,848     163,397      100,977
                                                   ---------    ---------   ---------    ---------
Expenses:
   Interest expense                                    8,301        5,928      22,424       16,613
   Interest expense of consolidated VIEs               7,263           --      13,952           --
   Interest expense - distributions to
     preferred shareholders of subsidiary 4,724        4,724        4,724      14,173        4,724
   Salaries and benefits                              13,474        3,196      40,406        8,521
   General and administrative                         12,775        4,477      30,830       12,141
   Depreciation and amortization                       7,864        2,242      22,553        6,844
   Loss on impairment of revenue bonds                   610        1,758         610        1,758
   Other expenses of consolidated VIEs                10,917           --      19,398           --
                                                   ---------    ---------   ---------    ---------
       Total expenses                                 65,928       22,325     164,346       50,601
                                                   ---------    ---------   ---------    ---------
Income (loss) before equity in earnings of
   investments, loss on investments held by
   consolidated VIEs, gain on sale of loans and
   gain (loss) on repayment of revenue bonds          (5,850)      13,523        (949)      50,376
Equity in earnings of investments                        611          555       1,731        1,665
Loss on investments held by consolidated
   VIEs                                              (46,434)          --     (95,111)          --
Gain on sale of loans                                    571          444       5,646        2,994
Gain (loss) on repayment of revenue bonds                 (5)         557         217        2,797
                                                   ---------    ---------   ---------    ---------
Income (loss) before allocation of (income)
   loss to preferred shareholders of subsidiary,
   Special Common Units of subsidiary,
   minority interests and partners of
   consolidated VIEs                                 (51,107)      15,079     (88,466)      57,832
(Income) allocated to preferred shareholders of
   subsidiary                                         (1,556)          --      (2,386)      (9,449)
(Income) allocated to Special Common Units of
   subsidiary                                         (7,577)          --     (20,032)          --
(Income) loss allocated to minority interests            145          147        (220)         186
Loss allocated to partners of consolidated VIEs       70,174           --     141,992           --
                                                   ---------    ---------   ---------    ---------
Income before income taxes                            10,079       15,226      30,888       48,569
Income tax benefit                                     4,832          689      14,644        3,453
                                                   ---------    ---------   ---------    ---------
Net income                                         $  14,911    $  15,915   $  45,532    $  52,022
                                                   =========    =========   =========    =========

Allocation of net income to:
   Special distribution to Manager                 $      --    $   1,583   $      --    $   4,453
                                                   =========    =========   =========    =========
   Manager                                         $      --    $       2   $      --    $       5
                                                   =========    =========   =========    =========
   Common shareholders                             $  13,098    $  12,727   $  39,268    $  43,132
   Convertible CRA shareholders                        1,813        1,603       6,264        4,432
                                                   ---------    ---------   ---------    ---------
     Total for shareholders                        $  14,911    $  14,330   $  45,532    $  47,564
                                                   =========    =========   =========    =========

Net income per share:
   Basic                                           $    0.26    $    0.31   $    0.85    $    1.05
                                                   =========    =========   =========    =========
   Diluted                                         $    0.26    $    0.31   $    0.84    $    1.04
                                                   =========    =========   =========    =========

Weighted average shares outstanding:
   Basic                                              57,708       46,331      53,794       45,485
                                                   =========    =========   =========    =========
   Diluted                                            58,112       46,366      54,220       45,518
                                                   =========    =========   =========    =========

Dividends declared per share                       $     .41    $     .35   $    1.16    $    1.00
                                                   =========    =========   =========    =========

</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                                        September 30,
                                                                 --------------------------
                                                                     2004         2003
                                                                 --------------------------
                                                                (As Restated -
                                                                 See Note 1A)
<S>                                                                <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                      $  45,532    $  52,022
   Adjustments to reconcile net income to net cash provided by
     operating activities:
   Gain on repayment of revenue bonds                                   (217)      (2,797)
   Loss on impairment of revenue bonds                                   610        1,758
   Depreciation and amortization                                      24,655        8,694
   Income allocated to preferred shareholders of subsidiary           16,559       14,173
   Income allocated to Special Common Units of subsidiary             20,032           --
   Income (loss) allocated to minority interests                         220         (186)
   Non-cash compensation expense                                      10,779        3,578
   Deferred taxes                                                    (16,670)      (4,223)
   Changes in operating assets and liabilities:
     Mortgage servicing rights                                        (5,642)      (1,897)
     Loans to affiliates                                             (15,361)          --
     Other assets                                                      7,801       35,753
     Accounts payable, accrued expenses and other liabilities         25,887      (18,657)
                                                                   ---------    ---------
Net cash provided by operating activities                          $ 114,185    $  88,218
                                                                   =========    =========

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds from revenue bonds and notes                           $  36,244    $  94,151
   Revenue bond acquisitions and fundings                           (239,888)    (265,796)
   Investments in partnerships                                       (30,273)       2,309
   Other investments                                                 (84,000)          --
   Increase in goodwill                                                 (920)        (767)
   Decrease (increase) in cash and cash equivalents - restricted         964      (37,219)
                                                                   ---------    ---------

Net cash used in investing activities                              $(317,873)   $(207,322)
                                                                   =========    =========

CASH FLOWS FROM FINANCING ACTIVITIES:
   Distributions to shareholders                                   $ (59,996)   $ (47,849)
   Distributions to preferred shareholders of subsidiary             (15,003)     (14,173)
   Distributions to Special Common Unit holders                      (19,868)          --
   Proceeds from financing arrangements                              137,761      192,699
   Repayments of financing arrangements                              (64,105)        (737)
   Increase in notes payable                                          23,155       15,139
   Issuance of common shares                                         105,541           --
   Issuance of preferred shares                                      104,000       53,783
   Retirement of special preferred voting shares                         (10)          --
   Proceeds from stock options exercised                                  --           --
   Treasury stock purchases                                           (1,328)          --
   Deferred financing costs                                           (7,019)     (10,342)
                                                                   ---------    ---------

Net cash provided by financing activities                            203,128      188,520
                                                                   ---------    ---------

Net increase (decrease) in cash and cash equivalents                    (560)      69,416
                                                                   ---------    ---------

Cash and cash equivalents at the beginning of the year                58,257       13,699
                                                                   ---------    ---------

Cash and cash equivalents at the end of the period                 $  57,697    $  83,115
                                                                   ---------    ---------
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>


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

<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                                        September 30,
                                                                 --------------------------
                                                                     2004         2003
                                                                 --------------------------
                                                                (As Restated -
                                                                 See Note 1A)
<S>                                                                              <C>
SUPPLEMENTAL NON-CASH INFORMATION:
   Supplemental disclosure of non cash activities relating to adoption of
     FIN 46R:
  Decrease  in  revenue  bonds                                                   $    34,281
  Decrease in other assets                                                            17,814
  Increase  in  investments  in
  partnerships of consolidated  VIEs                                              (2,394,398)
  Increase in other assets of consolidated VIEs                                     (302,682)
  Increase in notes payable and other liabilities of consolidated
    VIEs                                                                           1,225,523
  Increase in partners' interests of consolidated VIEs                             1,419,462
                                                                                 -----------
                                                                                 $        --
                                                                                 ===========

Conversion of Special Common Units to Common Shares                              $    17,789
                                                                                 ===========

</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


NOTE 1 - BASIS OF PRESENTATION

The  condensed   consolidated  financial  statements  include  the  accounts  of
CharterMac,  its wholly  owned and  majority  owned  subsidiaries  and  entities
consolidated  pursuant to the adoption of Financial  Accounting  Standards Board
("FASB")  Interpretation  No. 46R (see Note 2). All  intercompany  accounts  and
transactions have been eliminated in consolidation.  Unless otherwise indicated,
"the Company",  as used throughout  this document,  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.

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 be read in  conjunction  with the  consolidated  financial
statements  and  notes  thereto  included  in our Form  10-K for the year  ended
December 31, 2003.

Our annual  report on Form 10-K for the year ended  December 31, 2003 contains a
summary of our  significant  accounting  policies.  There have been no  material
changes to these  items since  December  31,  2003,  nor have there been any new
accounting  pronouncements pending adoption that would have a significant impact
on our condensed consolidated financial statements.

We are responsible for the unaudited condensed consolidated financial statements
included in this document.  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.

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

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 Related Capital Company,  LLC ("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 that  quarter in the amount of  $1,930,000.  Additionally,
the Company incorrectly  characterized the nature of the difference between GAAP
and tax amortization of the deferred tax component of restricted  shares granted
to employees also as part of the RCC acquisition.  Accordingly,  the Company has
restated the condensed consolidated financial statements to correct these errors
to increase the tax benefit in the income statement by approximately  $4,041,000
and  $2,111,000  for the three and nine months ended  September  30, 2004 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
          $302,000 and  $446,000  for the three and nine months ended  September
          30, 2004);
     (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  $870,000 and  $2,520,000  for the three and nine months
          ended September 30, 2004); and
     (3)  the related tax benefit of approximately $257,000 and $933,000 for the
          three and nine months ended September 30, 2004.

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

                                       7
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


The net effect of the revenue and tax restatement adjustments, before allocation
of the net  impact  to  SCUs,  was an  increase  in  earnings  of  approximately
$3,730,000 and $970,000 for the three and nine months ended September 30, 2004.

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

                                                                     As previously                 As previously
(in thousands except per share amounts)                                 reported    As restated       reported    As restated
----------------------------------------------------------------------------------------------------------------------------

                                                                       THREE MONTHS ENDED             NINE MONTHS ENDED
Condensed Consolidated Statement of Income data:                       SEPTEMBER 30, 2004             SEPTEMBER 30, 2004
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>            <C>            <C>             <C>
Fund sponsorship fee income                                         $    11,363    $    10,493    $    30,300     $   27,780
Other income                                                              5,760          6,062         11,891         12,337
Total revenues                                                           60,646         60,078        165,471        163,397
Income (loss) before equity in earnings of investments, loss
  on investments held by consolidated VIEs, gain on sale of
  loans and gain (loss) on repayment of revenue bonds                    (5,282)        (5,850)         1,125           (949)
Income (loss) before allocation of (income) loss to
  preferred shareholders of subsidiary, Special Common
  Units of subsidiary, minority interests and partners
  of consolidated VIEs                                                  (50,539)       (51,107)       (86,392)       (88,466)
Income allocated to Special Common Units of subsidiaries                 (6,484)        (7,577)       (19,737)       (20,032)
Income before income taxes                                               11,740         10,079         33,257         30,888
Income tax benefit                                                          534          4,832         11,600         14,644
Net income                                                               12,274         14,911         44,857         45,532
Allocation of net income to common shareholders                          10,839         13,098         38,686         39,268
Allocation of net income to Convertible CRA shareholders                  1,435          1,813          6,171          6,264
Net income per share - basic                                        $      0.21    $      0.26    $      0.83     $     0.85
Net income per share - diluted                                      $      0.21    $      0.26    $      0.83     $     0.84

Condensed Consolidated Balance Sheet data:                           AS OF SEPTEMBER 30, 2004


Goodwill                                                            $   207,667    $   205,737
Total assets                                                          5,513,071      5,511,141
Accounts payable, accrued expenses and other liabilities                 82,073         84,608
Deferred tax liability                                                   39,348         33,773
Total liabilities                                                     2,809,413      2,806,373
Minority interest in consolidated subsidiary - convertible SCUs         267,227        267,520
Total shareholders' equity                                              908,556        909,373
</TABLE>

NOTE 2 - VARIABLE INTEREST ENTITIES CONSOLIDATED PURSUANT TO FASB INTERPRETATION
46R

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 revised FIN 46, codifying  certain FASB Staff positions and extending
the  implementation   date.  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.  Effective March
31, 2004, we adopted FIN 46R.

Through our  acquisition of Related  Capital  Company  ("RCC") and in subsequent
fund  originations,  we became the general  partner,  or equivalent,  in over 70
investment  funds in which we have no direct  financial  investment.  Typically,
outside 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 multi-family  housing complexes.  Limited partners in the investment
partnerships  are  most  often  corporations  who are  able to  utilize  the tax
benefits,  which are comprised of operating  losses and  Low-Income  Housing Tax
Credits ("LIHTCs").

                                       8
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


Investment and operating partnerships are variable interest entities ("VIEs") as
defined by FIN 46R. We have concluded  that, as the general  partner or managing
member for these types of  investments,  and because the  partners or members do
not have the right to  remove  us as such,  we are the  primary  beneficiary  as
defined by FIN 46R  because we absorb the  majority of the  expected  income and
loss variability, which is disproportionate to any actual ownership interest. We
have  consolidated the assets and liabilities of these entities in our condensed
consolidated  balance sheet and have recorded their results of operations in our
condensed  consolidated statement of income beginning April 1, 2004. The balance
sheets and  statements of  operations  consolidated  in our condensed  financial
statements  reflect the financial  position and results of operation of the VIEs
as of and for the six month period  ended as of June 30,  2004,  the latest date
available.

NOTE 3 - REVENUE BONDS

The following table summarizes our revenue bond portfolio:
<TABLE>
<CAPTION>

                                      September 30,   December 31,
(In thousands)                             2004           2003
                                      ------------    -----------
<S>                                    <C>            <C>
Unamortized cost basis                 $ 2,017,541    $ 1,814,180
Gross unrealized gains                      59,471         65,394
Gross unrealized losses                    (18,574)        (8,565)
                                       -----------    -----------
Subtotal/fair value                      2,058,438      1,871,009


  Less: eliminations (1)                   (34,281)            --
                                       -----------    -----------
Total fair  value per  balance sheet   $ 2,024,157    $ 1,871,009
                                       ===========    ===========
</TABLE>

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 September 30, 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>
Number of bonds                 39           33           72
Fair value               $ 354,057    $ 221,527    $ 575,584
Gross unrealized loss    $ (13,759)   $  (4,815)   $ (18,574)
</TABLE>

The  unrealized  losses related to these revenue bonds are due solely to changes
in interest  rates,  in that we calculate  present values based upon future cash
flows from the bonds and  discount  these cash flows at the current  rate on our
recent bond issuances; as rates rise, the fair value of our portfolio decreases.
We have  the  intent  and  ability  to hold  these  bonds to  maturity  and have
therefore concluded that these declines in value are temporary.

In the third  quarter of 2004,  in light of the  underperformance  of one of our
investments  which will necessitate the temporary  revision of payment terms, we
recognized an impairment loss of approximately $610,000.

The following  summarizes the maturity dates of our revenue bonds,  all of which
have fixed interest rates:
<TABLE>
<CAPTION>
                                                                  Weighted
                                  Outstanding                      Average
(In thousands)                    Bond Amount     Fair Value    Interest Rate
                                  -----------    -----------    -------------
<S>                               <C>            <C>                <C>
Due in less than one year         $        --    $        --              N/A
Due between one and
   five years                          34,840         32,963            7.02%
Due after five years                1,993,075      2,025,475            6.76%
                                  -----------    -----------        ---------

Total / Weighted                    2,027,915      2,058,438            6.76%
                                                                    =========

   Less: eliminations (1)             (31,082)       (34,281)
                                  -----------    -----------
Total per balance sheet           $ 1,996,833    $ 2,024,157
                                  ===========    ===========
</TABLE>

                                       9
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


(1) These bonds are recorded as  liabilities  on the balance  sheets of entities
    consolidated  pursuant to FIN 46R (see Note 2) and are therefore  eliminated
    in consolidation.

The following table summarizes our acquisition  activity and additional fundings
to previously  acquired  revenue  bonds for the nine months ended  September 30,
2004.
<TABLE>
<CAPTION>
                                                            Weighted Average
                                                             Construction           Weighted        Number of
                                             Aggregate       Interest Rate           Average         Revenue
                                Face         Purchase      (excluding points        Permanent         Bonds
                               Amount          Price        paid at closing)       Interest Rate     Acquired
(In thousands)               ----------     ----------    --------------------     ------------     ----------
<S>                          <C>             <C>                 <C>                  <C>              <C>
Construction/rehabilitation  $239,948        $239,948            5.40%                6.55%            29
  properties
</TABLE>

During the nine months ended September 30, 2004, seven revenue bonds were repaid
generating net proceeds of approximately $26.9 million. The bonds had a net book
value of  approximately  $26.7  million,  resulting  in a gain of  approximately
$217,000.

At September 30, 2004,  $1.9 billion of revenue bonds were pledged as collateral
for  our  borrowing  facilities.  Two of  these  bonds,  with a  book  value  of
approximately $14.1 million, are included in the bonds pledged as collateral and
are eliminated in consolidation as noted in the tables above.

NOTE 4 - OTHER INVESTMENTS

Investments other than revenue bonds consisted of:
<TABLE>
<CAPTION>

                                                     September 30,    December 31,
                                                          2004            2003
(In thousands)                                       -------------   -------------
<S>                                                    <C>             <C>
Investment in equity interests in LIHTC properties     $ 53,768        $ 24,644
Investment in properties under development                2,476           1,994
Investment in ARCap                                      19,054           19,054
Capri Capital loan                                       84,000              --
Other investments                                         3,668           2,768
                                                       --------        --------
   Total other investments                             $162,966        $ 48,460
                                                       ========        ========
</TABLE>

In July 2004, CM Investor LLC ("CM Investor"), one of our subsidiaries, provided
an interim loan in the  principal  amount of $84.0 million  ("Interim  Loan") to
Capri Capital Limited  Partnership  ("CCLP"),  which bears interest at a rate of
11.5% per year and matures on January 15, 2005 subject to extension.

We anticipate  that the Interim Loan will be repaid in full and that CM Investor
would then make new loans in the aggregate  principal  amount of $90.0  million,
one of which would give CM Investor the right to acquire  100% of Capri  Capital
Finance (CCLP's mortgage banking affiliate) within six months, and the other one
of which  would give CM Investor  the right to acquire a 49% equity  interest in
Capri Capital  Advisors  ("CCA") (CCLP's pension fund advisory  affiliate) on or
after  August 1, 2005  (provided  that CCA has the right to extend the  exercise
date to a date no later than June 30, 2006).  The  acquisitions are both subject
to certain  approvals,  including,  but not  limited to,  regulatory  and agency
approval for the acquisition of Capri Capital  Finance.  We have signed a letter
of intent  with  respect to the  subsequent  acquisitions;  however,  definitive
agreements  have  yet to be  signed,  and  there  can be no  assurance  that the
subsequent  acquisitions will occur. If CM Investor ultimately completes both of
these acquisitions pursuant to these arrangements, the total purchase price will
be based on the operating performance of the respective businesses.

We funded the Interim Loan through bridge loans from Fleet National Bank,  which
bear interest at rates of LIBOR plus 1.65% and mature in July 2005. The weighted
average interest rate on the loans at September 30, 2004 was 3.42%.

                                       10
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


NOTE 5 - GOODWILL AND INTANGIBLE ASSETS

The components of identifiable intangible assets are as follows:
<TABLE>
<CAPTION>
                                                                         Other            Total
                                          RCC           Mortgage     Identifiable     Identifiable
                                       Intangible       Banking       Intangible       Intangible
(In thousands)                           Assets         Licenses        Assets           Assets          Goodwill
                                       -----------    -----------    -------------    -------------    ------------

<S>                                     <C>            <C>             <C>              <C>              <C>
Balance at December 31, 2003            $ 185,300      $   8,639       $   4,427        $ 198,366        $ 214,744
Accumulated amortization                   (1,936)            --          (2,227)          (4,163)              --
                                        ---------      ---------       ---------        ---------        ---------
Net balance at December 31, 2003          183,364          8,639           2,200          194,203          214,744
Additions                                      --             --              --               --              920
Tax effect of conversion of SCUs to
  common shares                                --             --              --               --           (9,927)
Amortization expense                      (12,154)            --            (357)         (12,511)              --
                                        ---------      ---------       ---------        ---------        ---------
Net balance at September 30, 2004       $ 171,210      $   8,639       $   1,843        $ 181,692        $ 205,737
                                        =========      =========       =========        =========        =========

Estimated amortization expense per
  year for next five years              $  16,206      $      --       $     474        $  16,680        $      --
                                        =========      =========       =========        =========        =========
</TABLE>

The  amortization  of other  identifiable  intangible  assets is  included  as a
reduction to revenue bond interest  income as they pertain to the acquisition of
such bond investments.

NOTE 6 - RELATED PARTY TRANSACTIONS

Following  are the  expenses  and the special  distributions  paid or payable to
related parties,  which are included in general and administrative  expense. For
periods prior to November 17, 2003, the amounts were paid or payable to RCC. For
periods  after our  acquisition  of RCC, the amounts were paid or payable to The
Related Companies, L.P. ("TRCLP").
<TABLE>
<CAPTION>
                                    Three Months Ended       Nine Months Ended
                                       September 30,            September 30,
                                    -------------------     --------------------

(In thousands)                        2004        2003       2004         2003
                                    -------     -------     -------     -------
<S>                                 <C>         <C>         <C>         <C>
Special distribution/investment
  management fee                    $    --     $ 1,690     $    --     $ 4,712
Bond servicing fees                      --       3,793          --       8,459
Expense reimbursement                    --         269          --         748
Shared services agreement             1,209          --       3,145          --
                                    -------     -------     -------     -------
                                    $ 1,209     $ 5,752     $ 3,145     $13,919
                                    =======     =======     =======     =======
</TABLE>

In  addition,  a  subsidiary  of  TRCLP  earned  fees  for  performing  property
management  services for various  properties  held in investment  funds which we
manage.  These fees, which are included in other expenses of consolidated  VIEs,
totaled  approximately  $760,000  and $1.5 million for the three and nine months
ended September 30, 2004.

A subsidiary of ours collects  asset  management and incentive  management  fees
from   American   Mortgage   Acceptance   Company   ("AMAC"),    an   affiliated
publicly-traded  real estate investment trust. These fees, which are included in
fund  sponsorship  income,  totaled  $419,000 and $1.2 million for the three and
nine months ended September 30, 2004, respectively.

In June 2004,  we entered  into an  unsecured  revolving  credit  facility  (the
"Revolving  Facility")  with AMAC to  provide  it up to $20.0  million,  bearing
interest at LIBOR plus 300 basis  points,  which is to be used to  purchase  new
investments.  The  Revolving  Facility  has a term of one  year  with a one year
optional extension. In the opinion of management, the terms of this facility are
consistent  with those of transactions  with  independent  third parties.  As of
September 30, 2004, we had advanced AMAC approximately $15.4 million.

                                       11
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


NOTE 7 - DERIVATIVE INSTRUMENTS

We have  designated  our 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 begin in 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 recorded in accumulated  other  comprehensive  income to
the extent the hedge is effective in achieving offsetting cash flows. This hedge
has been  effective to date.  The  effectiveness  of the other swaps is measured
using the  hypothetical  swap method until they go into effect in 2005.  For the
nine months ended  September  30,  2004,  we recorded  approximately  $30,000 of
expense related to an interest rate cap.

NOTE 8 - YIELD GUARANTEE AND FUND SPONSORSHIP TRANSACTIONS

Yield Guarantees
----------------

In April 2004,  we  completed a  transaction  to  guarantee  tax  benefits to an
investor  in  a  partnership   designed  to  generate  LIHTCs.  Our  subsidiary,
CharterMac  Corporation  ("CM Corp."),  has agreed to back-up the guarantee of a
primary  guarantor of an agreed upon  internal rate of return to the investor in
Related  Capital  Guaranteed  Corporate  Partners  II,  L.P.  - Series D (a fund
managed by RCC), for which we 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.  We recorded a
liability  of  approximately  $2.8 million in deferred  income  relating to this
guarantee.

In June 2004,  we  completed  a  transaction  to  guarantee  tax  benefits to an
investor in a partnership  designed to generate  Georgia State LIHTCs.  CM Corp.
has agreed to back-up the  guarantee  of a primary  guarantor  of an agreed upon
internal rate of return to the investor in Related Capital Guaranteed  Corporate
Partners II, L.P - Series E (a fund  managed by RCC),  for which we will receive
guarantee fees totaling  approximately  $1.1 million in three  installments,  as
well as acquisition,  partnership management and asset management fees amounting
to approximately  $883,000. We recorded a liability of approximately $658,000 in
deferred income relating to this guarantee.

In July 2004,  we  completed  a  transaction  to  guarantee  tax  benefits to an
investor in a partnership  designed to generate  Georgia  State LIHTCs.  We have
agreed to  back-up  the  guarantee  of a  primary  guarantor  of an agreed  upon
internal rate of return to the investor in Related Capital Guaranteed  Corporate
Partners II, L.P. - Series F, for which we will receive  guarantee fees totaling
approximately  $3.9  million  in  three  installments,  as well as  acquisition,
partnership management and asset management fees amounting to approximately $5.8
million.  We recorded deferred income of approximately  $6.4 million relating to
this guarantee.

Fund Sponsorship
----------------

In May 2004, RCC completed the sponsorship of Related  Corporate  Partners XXVI,
L.P.  ("RCP 26"), a $225 million  multi-investor  corporate tax credit fund. RCP
26, which is comprised of LIHTC equity investments in more than 30 properties in
15 states  across the country,  was sold to seven  institutional  investors,  of
which the majority are Fortune 500 companies.

NOTE 9 - Equity

Equity Conversions
------------------

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,
15,172,217 SCUs remained outstanding.

In February and April 2004, at shareholders'  requests, we converted 771,080 and
216,450 of Convertible CRA Shares to an equivalent number of common shares.

Preferred Shares of a Subsidiary
--------------------------------

On May 14, 2004, our subsidiary CharterMac Equity Issuer Trust ("Equity Issuer")
completed a $104.0 million preferred equity offering to institutional investors.
Securities sold were as follows:

     o    60 of its  5.75%  Series  A-4-1  Perpetual  Preferred  Shares  with an
          aggregate liquidation amount of $30 million;
     o    58 of its  6.00%  Series  A-4-2  Perpetual  Preferred  Shares  with an
          aggregate liquidation amount of $29 million;

                                       12
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


     o    50 of its 6.00% Series B-3-1  Subordinate  Perpetual  Preferred Shares
          with an aggregate liquidation amount of $25 million and
     o    40 of its 6.30% Series B-3-2  Subordinate  Perpetual  Preferred Shares
          with an aggregate liquidation amount of $20 million.

Total net proceeds of the offering,  after deducting  underwriter  discounts and
commissions,  were $101.9 million. The underwriter for this offering was Merrill
Lynch & Co.

These  preferred  shares  have most of the same  characteristics  of  previously
outstanding  preferred shares of Equity Issuer, with the exception that they are
not  subject to  mandatory  redemption.  As such,  they are  classified  between
liabilities and equity,  with their dividends  classified as preferred dividends
on the income  statement.  The previously  issued preferred  shares,  due to the
mandatory redemption feature, are classified on our balance sheet as liabilities
with their dividends classified as interest expense.

Common Share Offering
---------------------

On June 30, 2004,  we completed a common  share  offering,  whereby we sold 5.75
million shares  (including an over-allotment of 750,000 shares) to the public at
a price  of  $19.27  per  share.  This  offering  resulted  in net  proceeds  of
approximately  $105.5  million  after  deducting   underwriting   discounts  and
commissions.  The underwriters for this offering were Wachovia  Securities,  UBS
Securities LLC, RBC Capital Markets Corporation and Legg Mason Wood Walker.

Treasury Stock Repurchased
--------------------------

During the six months ended June 30, 2004,  we increased  the number of treasury
shares by 59,798 for a total cost of approximately $1.3 million,  in conjunction
with the tax  withholdings  associated with stock based  compensation  awards to
employees.

NOTE 10 - Comprehensive Income

Comprehensive  income for the nine months ended September 30, 2004 and 2003, was
as follows:
<TABLE>
<CAPTION>
          (In thousands)                                                 2004          2003
                                                                       --------      --------
<S>                                                                    <C>           <C>
Net income                                                             $ 45,532      $ 52,022
Net unrealized gain (loss) on interest rate derivatives                  (4,113)        2,073
Net unrealized loss on revenue bonds:
   Unrealized loss during the period                                    (15,714)      (42,294)
   Reclassification adjustment for net gain included in net income         (217)       (2,797)
                                                                       --------      --------
Comprehensive income                                                   $ 25,488      $  9,004
                                                                       ========      ========
</TABLE>

NOTE 11 - EARNINGS PER SHARE

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>
                                            Three Months Ended September 30, 2004    Nine Months Ended September 30, 2004
                                            -------------------------------------    ------------------------------------

(In thousands, except per share amounts)     Income        Shares     Per Share       Income      Shares     Per Share
                                            -------------------------------------    ------------------------------------
<S>                                          <C>           <C>        <C>            <C>          <C>        <C>
Basic EPS                                    $ 14,911      57,708     $     0.26     $45,532      53,794     $     0.85
                                                                      ==========                             ==========

Effect of dilutive securities                      --         404                         --         426
                                             --------     -------                    -------     -------
Diluted EPS                                  $ 14,911      58,112     $     0.26     $45,532      54,220     $     0.84
                                             ========     =======     ==========     =======     =======     ==========

<CAPTION>
                                            Three Months Ended September 30, 2003    Nine Months Ended September 30, 2003
                                            -------------------------------------    ------------------------------------

                                             Income        Shares     Per Share       Income      Shares     Per Share
                                            -------------------------------------    ------------------------------------
<S>                                          <C>           <C>        <C>            <C>          <C>        <C>
Basic EPS                                    $ 14,330      46,331     $     0.31     $47,564      45,485     $     1.05
                                                                      ==========                             ==========

Effect of dilutive securities                      --          35                         --          33
                                             --------     -------                    -------     -------

Diluted EPS                                  $ 14,330      46,366     $     0.31     $47,564      45,518     $     1.04
                                             ========     =======     ==========     =======     =======     ==========
</TABLE>

                                       13
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


The  number  of  shares  includes  common  and  Convertible  CRA  Shares  as the
Convertible CRA Shares have the same economic benefits as common shares.

NOTE 12 - BUSINESS SEGMENTS

We  operate in three  business  segments,  which  include  Portfolio  Investing,
Mortgage Banking, and Fund Management.

o        The Portfolio  Investing segment consists of subsidiaries  investing in
         primarily  tax-exempt  first mortgage  revenue  bonds,  the proceeds of
         which  are  used  to   finance   the  new   construction,   substantial
         rehabilitation,  acquisition,  or refinancing of affordable multifamily
         housing throughout the United States.
o        The Mortgage Banking segment  consists of subsidiaries  which originate
         and service  primarily  multifamily  mortgage  loans on behalf of third
         parties,  including  Fannie  Mae,  Freddie  Mac,  the  Federal  Housing
         Authority,  Insurance  Companies  and  Conduits.  In  exchange  for the
         origination and servicing activities,  the Company receives origination
         and servicing fees.
o        The Fund  Management  segment  includes two business  lines.  The first
         consists of our subsidiaries that sponsor real estate equity investment
         funds  that  primarily  invest in LIHTC  properties.  In  exchange  for
         sponsoring and managing these  investment  funds,  the Company receives
         fee income for providing asset  management,  underwriting,  origination
         and other  services.  In  addition,  these  subsidiaries  also  provide
         management  and  advisory  services  to AMAC  and  other  investors  in
         exchange for fees.
          The second business line consists of our subsidiaries that participate
         in credit enhancement  transactions,  including  guaranteeing  mortgage
         loans and  specified  returns to investors in LIHTC  equity  funds,  in
         exchange for guarantee fees.  Since the adoption of FIN 46R,  effective
         March 31, 2004,  this segment also includes the results of consolidated
         VIEs (see Note 2).

In prior periods,  results from credit enhancement transactions were included in
Portfolio  Investing.  We have  reclassified  the results to Fund  Management to
better  reflect the  management of our  businesses  and have restated prior year
results accordingly.

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 segments:

<TABLE>
<CAPTION>

(In thousands)                  Three Months Ended September 30, 2004              Three Months Ended September 30, 2003
                          --------------------------------------------------    ---------------------------------------------
                            Portfolio      Mortgage     Fund                    Portfolio   Mortgage     Fund
                            Investing      Banking   Management      Total      Investing   Banking    Management    Total
                          --------------------------------------------------    ---------------------------------------------
<S>                       <C>              <C>       <C>          <C>           <C>          <C>         <C>        <C>
Total revenues            $   36,198       $ 4,978   $   18,902   $   60,078    $   30,760   $ 4,093     $  995     $   35,848
                          ==================================================    ==============================================

Depreciation and
amortization              $      710       $ 2,408   $    4,746   $    7,864    $      338   $ 1,616     $  288     $    2,242
                          ==================================================    ==============================================

Net income (loss)         $   13,729       $  (742)  $    1,924   $   14,911    $   16,163   $  (955)    $  707     $   15,915
                          ==================================================    ==============================================

<CAPTION>

                                 Nine Months Ended September 30, 2004                Nine Months Ended September 30, 2003
                          --------------------------------------------------    ---------------------------------------------
                            Portfolio      Mortgage     Fund                    Portfolio   Mortgage     Fund
                            Investing      Banking   Management      Total      Investing   Banking    Management    Total
                          --------------------------------------------------    ---------------------------------------------
<S>                       <C>              <C>       <C>          <C>           <C>          <C>         <C>        <C>
Total revenues            $  101,921       $15,514   $   45,962   $  163,397    $   85,294   $12,697     $2,986     $  100,977
                          ==================================================    ==============================================

Depreciation and
amortization              $    2,042       $ 6,107   $   14,404   $   22,553    $    1,468   $ 4,804     $  572     $    6,844
                          ==================================================    ==============================================

Net income (loss)         $   50,976       $ 1,689   $   (7,133)  $   45,532    $   50,777   $(1,169)    $2,414     $   52,022
                          ==================================================    ==============================================

Total assets as of
September 30              $2,085,716       $78,221   $3,347,204   $5,511,141    $1,979,123   $77,325     $1,967     $2,058,415
                           ==================================================    ==============================================

Assets as of September
  30 of consolidated
  VIEs included in total
  assets (see Note 2)     $  (34,281)(1)   $    --   $2,697,080   $2,662,799
                          ==================================================
</TABLE>

(1) This amount represents  revenue bonds recorded as liabilities on the balance
    sheets of  entities  consolidated  pursuant  to FIN 46R (see Note 2) and are
    therefore eliminated in consolidation.

                                       14
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


NOTE 13 - 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 September 30, 2004.

PWF maintains,  as of September 30, 2004,  treasury notes of approximately  $5.6
million and a money  market  account of  approximately  $0.2  million,  which is
included in cash and cash  equivalents-restricted  in the condensed consolidated
balance  sheet,  to  satisfy  the  Fannie Mae  collateral  requirements  of $6.3
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  September  30,  2004,  that  reserve  was
approximately $6.7 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 September 30, 2004,  PWF had  commitments of  approximately  $32.6 million to
seven 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 September
30, 2004.

As of September 30, 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 TRANSACTIONS

We have  entered  into  several  agreements  with  Merrill  Lynch (the  "Primary
Guarantor")  to  guarantee  an agreed  upon  rates of return  for pools of seven
multifamily  properties  each owned by RCGCP II, an investment fund sponsored by
RCC prior to our acquisition 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 posted  collateral  to the Primary
Guarantor  in the form of either cash or revenue  bonds of  approximately  $20.6
million.

                                       15
<PAGE>

                           CHARTERMAC AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


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.

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
$134.3 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 14 - SUBSEQUENT EVENTS

Shelf Registration
------------------
In October  2004, we filed a shelf  registration  with the SEC providing for the
issuance of up to $400.0  million in common  shares,  preferred  shares and debt
securities.  This shelf  registration has not yet been declared effective and we
have no current plans to draw upon it.

                                       16
<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

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.
These  forward-looking  statements  are not  historical  facts,  but  rather our
beliefs  and  expectations  are based on our  current  expectations,  estimates,
projections,  beliefs and assumptions about our Company and industry. Words such
as  "anticipates,"   "expects,"   "intends,"   "plans,"   "believes,"   "seeks,"
"estimates"  and similar  expressions  are intended to identify  forward-looking
statements.  These  statements are not guarantees of future  performance and are
subject to risks,  uncertainties and other factors, some of which are beyond our
control,  are  difficult  to predict  and could cause  actual  results to differ
materially from those expressed or forecasted in the forward-looking statements.
Some of these risks  include,  among other things:  adverse  changes in the real
estate  markets;  risk of default  associated  with the revenue  bonds and other
securities held by us or our subsidiaries;  interest rate fluctuations;  our tax
treatment,  the tax treatment of our  subsidiaries  and the tax treatment of our
investments;  general and local economic and business conditions; and changes in
applicable laws and  regulations.  We caution you not to place undue reliance on
these  forward-looking  statements,  which  reflect our view only as of the date
hereof.

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.

Factors Affecting Comparability
-------------------------------

Our operating results for 2004 were impacted  significantly by the November 2003
acquisition of RCC, an affiliated  business that, until the date of acquisition,
had acted as an external  manager for our  Company  and our  subsidiaries.  As a
result of the  acquisition,  we generate  more  taxable  income and have assumed
numerous expenses that had previously been covered by fees paid to RCC. Further,
the  issuance  of a new class of  subsidiary  equity as part of the  acquisition
requires  us to  apportion  certain  earnings  and  identify  them as due to the
holders of that equity.

Additionally, the adoption of several accounting pronouncements has caused us to
reclassify  certain  liability and expense  categories  while not increasing the
actual  amounts to be  recorded,  and has led to a  significant  increase in the
amount of assets and  liabilities  we record due to  consolidation  of  numerous
investment  partnerships  (see Note 2 to the  Condensed  Consolidated  Financial
Statements). This consolidation also results in the recognition of the operating
results of partnerships in which we have no equity interest,  the elimination of
transactions between our businesses and those partnerships and the allocation of
their results to their partners.

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

QUARTER ENDED SEPTEMBER 30, 2004 VS. QUARTER ENDED SEPTEMBER 30, 2003
---------------------------------------------------------------------

The  following  is a  summary  of our  operations  for the  three  months  ended
September 30, 2004 and 2003:
<TABLE>
<CAPTION>

                                        % of                  % of
(In thousands)                 2004    Revenues     2003     Revenues   % Change
                            --------- ---------- ---------- --------- ----------
<S>                          <C>         <C>      <C>         <C>       <C>
Revenues                     $60,078              $35,848                67.6
Income before income taxes    10,079     16.8      15,226     42.5      (33.8)
Net income                    14,911     24.8      15,915     44.4      (6.3)
</TABLE>

Compared  to 2003,  the  third  quarter  of 2004  benefited  from a  substantial
expansion of our core Portfolio Investing  business,  the addition of the equity
fund sponsorship portion of our Fund Management segment and the expansion of the
credit  enhancement  portion of that  segment.  In  addition,  revenues  in 2004
include  $4.5  million  generated  by VIEs that were not  consolidated  in 2003.
Offsetting  the revenue  gains is the  elimination  of $10.0 million of revenues
earned  by our  subsidiaries  in  transactions  with  VIEs we have  consolidated
beginning April 1, 2004.  Although the amounts are eliminated in  consolidation,
the expenses  recognized by the VIEs in connection with these  transactions  are
absorbed  entirely by the  partners of the VIEs;  as such,  the  elimination  in
consolidation has no impact on our net income.

Despite the revenue gains and the benefit of eliminating  fees following the RCC
acquisition,  the additional  costs assumed  following the  acquisition (a large
part of which are  non-cash  amortization  costs and income  allocated  to a new
class of subsidiary equity) led to a decline in net income.

                                       17
<PAGE>


REVENUES

Our revenues were as follows:
<TABLE>
<CAPTION>

                               For the Three Months Ended September 30,
(In thousands)                   2004            2003         % Change
                               -------         -------        --------
<S>                            <C>             <C>                <C>
Revenue bond interest income   $33,027         $30,353            8.8
Fee income
   Mortgage banking              3,321           3,171            4.7
   Fund sponsorship             10,493              --            N/A
   Credit enhancement            2,715             995          172.9
Other income                     6,062           1,329          356.1
Revenues of consolidated VIEs    4,460              --            N/A
                               -------         -------          -----

   Total revenues              $60,078         $35,848           67.6
                               =======         =======          =====
</TABLE>

The increase in revenue bond  interest  income is primarily due to the increased
investment  base  resulting  from new bonds funded during later quarters of 2003
and during 2004. We funded $90.0 million of bonds at an average interest rate of
6.53% in the 2004 period as compared to fundings of $119.8 million at an average
interest rate of 6.62% in the same period in 2003. The weighted average level of
the bond  portfolio in the quarter was $2.2  billion,  an increase of 39.7% over
the same period in 2003.  The average  annual yield for the bond  portfolio  was
6.14% compared to 7.88% in the 2003 period.  Offsetting  these  increases is the
elimination in consolidation of approximately $447,000 of revenue on bonds where
the  debtor  is a VIE  that  is  now  consolidated  in our  condensed  financial
statements.

The increase in mortgage  banking fees resulted from a 7.5% increase in mortgage
servicing fees partially  offset by a slight decrease in origination fees due to
changes in the components of total originations.  Loan originations  amounted to
$113.2  million in the 2004  quarter as compared  to $107.9  million in the same
period last year and the total  serviced  loan  portfolio  reached  $4.2 billion
compared  to $3.9  billion at  September  30,  2003.  Originations  in the third
quarter are broken down as follows:
<TABLE>
<CAPTION>
(In thousands)        2004        % of total       2003        % of total
                   ---------      ----------     ---------     ----------
<S>                <C>              <C>          <C>                <C>
Fannie Mae         $  36,456         32.2        $  49,816           46.2
Freddie Mac           44,375         39.2           21,669           20.0
FHA                      (35)        --                 --             --
Assumptions            8,297          7.3           13,828           12.8
Conduit - Bank        24,150         21.3           22,624           21.0
                   ---------      ----------     ---------     ----------

  Total            $ 113,243        100.0        $ 107,937          100.0
                   =========      ==========     =========     ==========
</TABLE>

The increase in fund  sponsorship  fees  represents the fee income earned by RCC
which was not acquired until the fourth  quarter of 2003. The reported  amounts,
however,  exclude  $8.6  million  of fees  earned  by RCC in  transactions  with
consolidated  VIEs. On a pro forma basis,  comparing the 2004 period  (including
the revenues eliminated in consolidation) to the same pre-acquisition  period in
2003, revenue in the Fund Management  business increased 13% over the prior year
due to steady growth in the level of assets under  management and an increase in
origination  fees  as a  result  of  an  increase  in  equity  raised  for  fund
sponsorships.  The increases were partially  offset by a decrease in acquisition
fees, paid by third-party  borrowers of the underlying  revenue bonds,  and from
other loan origination,  due to a decrease in revenue bond acquisitions.  Equity
raised for fund  sponsorships in the quarter totaled $355.6 million  compared to
$310.3  million  in the third  quarter of 2003.  Revenue  bond  transactions  we
arranged  for our Company and others,  for which we receive fee income,  totaled
$133.7  million in the third  quarter of 2004 compared to  approximately  $137.1
million of revenue bonds acquired in the third quarter of 2003.

The  increase  in credit  enhancement  fees  relates  to  growth  in the  credit
enhancement business. In the third quarter of 2004, we completed one transaction
to guarantee  tax  benefits to  investors,  and  continued to earn fees from two
transactions completed earlier in 2004 and three transactions completed in 2003.

Other income comprises:
<TABLE>
<CAPTION>
                             For the Three Months Ended September 30,
(In thousands)                2004            2003          % Change
                             ------          ------         --------
<S>                          <C>             <C>              <C>
Capri loan interest          $1,993          $   --             N/A
Other interest                1,365             686            99.0
Service fee                     704              --             N/A
Other                         2,000             643           211.0
                             ------          ------         -------

   Total other income        $6,062          $1,329           356.1
                             ======          ======         =======
</TABLE>

                                       18
<PAGE>


The Capri loan interest  relates to the Interim Loan we provided to CCLP in July
2004 (see Note 4).  Service  fee  income  represents  income  for  services  RCC
provides  to  affiliates,  which  became  a part  of  our  operations  with  the
acquisition  of RCC in November  2003. The increase in other income is primarily
due to exit fees received within the Mortgage Banking business.

EXPENSES

Our expenses were as follows:
<TABLE>
<CAPTION>
                                 For the Three Months Ended September 30,
(In thousands)                    2004            2003          % Change
                                 -------         -------        ---------
<S>                              <C>             <C>              <C>
Interest expense                 $ 8,301         $ 5,928           40.0
Interest expense - preferred
   shares of subsidiary            4,724           4,724             --
Salaries and benefits             13,474           3,196          321.6
General and administrative        12,775           4,477          185.3
Depreciation and amortization      7,864           2,242          250.8
Loss on impairment of revenue
   bonds                             610           1,758          (65.3)
Expenses of consolidated VIEs     18,180              --            N/A
                                 -------         -------         -------

Total expenses                   $65,928         $22,325          195.3
                                 =======         =======         =======
</TABLE>

The increase in interest  expense  reflects the higher borrowing levels stemming
from our acquisition of RCC,  additional  investments in revenue bonds, our loan
to fund the interim loan to Capri Capital and LIHTC equity interests inherent in
the Fund Management business, which was not yet part of our Company in the third
quarter of 2003. In addition,  our average  borrowing  rate increased to 3.0% as
compared to 2.4% in the 2003 period.

The  increases  in  salaries  and  benefits,   general  and  administrative  and
depreciation  and  amortization  all relate to the RCC acquisition in the fourth
quarter  of  2003  and  the  resulting   recognition  of  expenses  due  to  the
internalization  of management,  as well as  amortization  of intangible  assets
acquired.  General and administrative expenses in the 2004 quarter also included
$5.6 million of costs relating to fund originations.

We did not record the expenses of consolidated  VIEs prior to April 1, 2004. The
expenses are not  controlled  by us, nor do they  represent any cash or non-cash
charges to be absorbed by us. The expenses of the VIEs are absorbed  entirely by
the partners of the VIEs.

OTHER ITEMS

The income  allocation  to SCUs  represents  the  proportionate  share of income
attributable to holders of the new class of equity issued at the time of the RCC
acquisition  in the fourth  quarter of 2003.  The income  allocated to preferred
shareholders  relates to shares we issued in 2004 that  differ  from  previously
issued shares in that they are not subject to mandatory redemption; as such, the
distributions are classified as expense outside of operating earnings.  The loss
allocation  to  partners  of  VIEs  represents  the  full  operating  losses  of
consolidated VIEs for the current period, none of which we have absorbed.

NINE MONTHS ENDED SEPTEMBER 30, 2004 VS. NINE MONTHS ENDED SEPTEMBER 30, 2003
-----------------------------------------------------------------------------
The following is a summary of our operations for the nine months ended September
30, 2004 and 2003:
<TABLE>
<CAPTION>

                                          % of                 % of
(In thousands)                  2004    Revenues    2003     Revenues  % Change
                             ---------------------------------------------------
<S>                          <C>          <C>     <C>           <C>      <C>
Revenues                     $163,397             $100,977                61.8
Income before income taxes     30,888     18.9      48,569      48.1     (36.4)
Net income                     45,532     27.9      52,022      51.5     (12.5)
</TABLE>

The nine  months of 2004  benefited  from a  substantial  expansion  of our core
Portfolio  Investing  business,  the  addition  of the equity  fund  sponsorship
portion  of our  Fund  Management  segment  and  the  expansion  of  the  credit
enhancement portion of that segment.  In addition,  our mortgage banking segment
posted  substantial growth in the first half of the year, and 2004 includes $7.3
million of revenues generated by VIEs that were not consolidated in 2003.

Offsetting these gains is the elimination of $20.8 million of revenues earned by
our subsidiaries in transactions with VIEs we have consolidated  beginning April
1, 2004.  Although the amounts are  eliminated  in  consolidation,  the expenses
recognized  by the VIEs in  connection  with  these  transactions  are  absorbed
entirely by the partners of the VIEs; as such, the elimination in  consolidation
has no impact on our net income.

                                       19
<PAGE>

Despite the revenue gains and the benefit of eliminating  fees following the RCC
acquisition,  the additional  costs assumed  following the  acquisition (a large
part of which are  non-cash  amortization  costs and income  allocated  to a new
class of subsidiary equity) led to a decline in net income.

REVENUES

Our revenues were as follows:
<TABLE>
<CAPTION>

                                      For the Nine Months Ended September 30,
(In thousands)                         2004            2003          % Change
                                   -------------    ------------    ------------
 <S>                                <C>              <C>              <C>
Revenue bond interest income        $ 97,365         $ 83,528          16.6
Fee income
   Mortgage banking                   11,124            9,711          14.6
   Fund sponsorship                   27,780               --           N/A
   Credit enhancement                  7,541            2,986         152.5
Other income                          12,337            4,752         159.6
Revenues of consolidated VIEs          7,250               --           N/A
                                   -------------    ------------    ------------

Total revenues                      $163,397         $100,977          61.8
                                   =============    ============    ============
</TABLE>

The increase in revenue bond  interest  income is primarily due to the increased
investment  base  resulting  from new bonds funded during later quarters of 2003
and during 2004. We funded $239.9  million of bonds at an average  interest rate
of 6.55% in the 2004 period as  compared  to  fundings  of $265.8  million at an
average  interest rate of 6.37% in the same period in 2003. The weighted average
level of bond  investments  for the nine  months  of 2004 was $2.1  billion,  an
increase of 33.8% over the same period in 2003. The average annual yield for the
bond portfolio was 6.22% compared to 7.14% in the 2003 period.  Offsetting these
increases is the  elimination  in  consolidation  of  approximately  $694,000 of
revenue  on bonds  where  the  debtor is a VIE that is now  consolidated  in our
condensed financial statements.

The  increase  in  mortgage  banking  fees  resulted  from a 28.9%  increase  in
origination  fees with  solid  increases  in Freddie  Mac and FHA  originations,
mostly in the first six months of 2004.  Opportunistic  pricing on a significant
transaction  in the  second  quarter of 2004 and a change in the  components  of
total originations resulted in a less significant change in the mortgage banking
fees as compared to the growth in loan originations.  Loan originations amounted
to $664.3  million in 2004 as compared to $407.8 million in the same period last
year. Originations for the first nine months are broken down as follows:
<TABLE>
<CAPTION>
(In thousands)        2004        % of total         2003        % of total
                  ------------------------------------------------------------
<S>                <C>               <C>         <C>                <C>
Fannie Mae         $235,731           35.5       $201,194            49.3
Freddie Mac         282,006           42.4         59,254            14.6
FHA                  27,714            4.2             --             --
Assumptions          40,253            6.1         41,728            10.2
Conduit - Bank       78,588           11.8        101,161            24.8
Other                    --             --          4,500             1.1
                  ------------------------------------------------------------

   Total           $664,292          100.0       $407,837           100.0
                  ============================================================
</TABLE>

In addition,  servicing  fees  increased 7.9% over the first nine months of 2003
due to the 7.7% growth in the servicing portfolio.

The increase in fund  sponsorship  fees represents the fee income earned by RCC,
which was not acquired until the fourth  quarter of 2003. The reported  amounts,
however,  exclude  $18.2  million  of fees  earned by RCC in  transactions  with
consolidated  VIEs. On a pro forma basis,  comparing the 2004 period  (including
the revenues eliminated in consolidation) to the same pre-acquisition  period in
2003, revenue in the Fund Management  business increased 16% over the prior year
due to steady growth in the level of assets under  management and an increase in
origination and acquisition fees as a result of an increase in equity raised for
fund  sponsorships.  The  increases  were  partially  offset  by a  decrease  in
acquisition  fees paid by third party borrowers of the underlying  revenue bonds
and from other loan originations. This is due to a decrease of approximately 15%
in the  average  percentage  acquisition  fee  charged,  despite an  increase in
acquired   revenue  bonds  and  loan   originations.   Equity  raised  for  fund
sponsorships  for the first nine months of 2004 totaled $754.5 million  compared
to $563.5  million for the first nine months of 2003.  Debt and debt  securities
acquired,  mostly  revenue  bonds  transactions  we arranged for our Company and
others,  totaled  $354.5  million for the first nine months of 2004  compared to
$304.7  million for the first nine months of 2003.  Of the debt acquired for the
first nine months of 2004, $32.9 million has not been funded as of September 30,
2004.

The  increase  in credit  enhancement  income  relates  to growth in the  credit
enhancement  business.   For  the  nine  months  of  2004,  we  completed  three
transactions to guarantee tax benefits to investors,  and continued to earn fees
from three transactions completed in 2003.

                                       20
<PAGE>

Other income comprises:

<TABLE>
<CAPTION>

                                      For the Nine Months Ended September 30,
(In thousands)                         2004             2003         % Change
                                   -------------    ------------    ------------
<S>                                 <C>             <C>                 <C>
Capri loan interest                 $  1,993        $      --             N/A
Other interest                         3,375            2,342            44.1
Service fee                            4,516               --             N/A
Other                                  2,453            2,410             1.8
                                   -------------    ------------    ------------

   Total other income                $12,337         $  4,752           159.6
                                   =============    ============    ============
</TABLE>

The Capri loan interest  relates to the Interim Loan we provided to CCLP in July
2004 (see Note 4).  Service  fee  income  represents  income  for  services  RCC
provides  to  affiliates,  which  became  a part  of  our  operations  with  the
acquisition of RCC in November 2003.

EXPENSES

Our expenses were as follows:
<TABLE>
<CAPTION>

                                       For the Nine Months Ended September 30,
 (In thousands)                        2004            2003          % Change
                                   -------------    ------------    ------------
<S>                                <C>                <C>             <C>
 Interest expense                  $  22,424          $16,613          35.0
 Interest expense - preferred
    shares of subsidiary              14,173            4,724         200.0
 Salaries and benefits                40,406            8,521         374.2
 General and administrative           30,830           12,141         153.9
 Depreciation and amortization        22,553            6,844         229.5
 Loss of impairment of revenue
    bonds                                610            1,758         (65.3)
 Expenses of consolidated VIEs        33,350               --           N/A
                                   -------------    ------------    ------------

 Total expenses                     $164,346          $50,601         224.8
                                   =============    ============    ============
</TABLE>

The increase in interest  expense  reflects the higher borrowing levels stemming
from our acquisition of RCC,  additional  investments in revenue bonds, our loan
to fund the interim loan to Capri Capital and LIHTC equity interests inherent in
the  Fund  Management  business,  which  was not yet part of our  Company  as of
September 30, 2003. In addition, our average borrowing rate increased to 2.6% as
compared to 2.4% in the 2003 period.

The amount  reported  as  interest  expense on  preferred  shares of  subsidiary
represent  dividends on our preferred  shares  subject to mandatory  redemption,
which had been reported as an allocation of income outside of operating earnings
in the first half of 2003.

The  increases  in  salaries  and  benefits,   general  and  administrative  and
depreciation  and  amortization  all relate to the RCC acquisition in the fourth
quarter  of  2003  and  the  resulting   recognition  of  expenses  due  to  the
internalization  of management,  as well as  amortization  of intangible  assets
acquired.  General and administrative  expenses for the nine months of 2004 also
include $10.8 million of costs relating to fund originations.

We did not record the expenses of consolidated  VIEs prior to April 1, 2004. The
expenses are not  controlled  by us, nor do they  represent any cash or non-cash
charges to be absorbed by us. The expenses of the VIEs are absorbed  entirely by
the partners of the VIEs.

OTHER ITEMS

Gains on sales of loans increased  approximately 88.6% for the nine months ended
September  30, 2004 versus the same period in 2003,  due to the higher  level of
mortgage  originations  in 2004.  The income  allocation to SCUs  represents the
proportionate share of income attributable to holders of the new class of equity
issued at the time of the RCC acquisition in the fourth quarter of 2003.

The income  allocated to preferred  shareholders  relates to shares we issued in
2004 that differ from  previously  issued shares in that they are not subject to
mandatory  redemption;  as such,  the  distributions  are  classified as expense
outside  of  operating  earnings.  The  loss  allocation  to  partners  of  VIEs
represents  the full  operating  losses  of  consolidated  VIEs for the  current
period, none of which we have absorbed.

                                       21
<PAGE>


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

We have corporate  subsidiaries that are subject to income taxes. We provide for
income taxes in  accordance  with SFAS No. 109,  "Accounting  for Income  Taxes"
("SFAS  109").  SFAS 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.  Our  effective  tax rate will  vary  from  period to period as the
composition of our earnings changes and due to the normal  transactional  nature
of much of our taxable business.

Liquidity and Capital Resources
-------------------------------
We meet our long term  liquidity  needs using  primarily two sources of capital,
debt 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.   We  fund  our  business  (including
investments  and  acquisitions)  primarily  with cash  provided  by  operations,
securitization  of investments and equity offerings by some of our subsidiaries.
Additionally,  we  have  entered  into  bridge  loans  and  revolving  warehouse
facilities:

     o    $100.0 million,  used for mortgage  banking needs,  which is renewable
          annually.

     o    $75.0 million,  used to fund mortgage loans and investments in revenue
          bonds on a short term basis,  which  matures  March 31,  2005,  with a
          built in accordion feature allowing up to a $25.0 million increase and
          a term of two years, and a one year extension at our option.

     o    $85.0 million,  used to acquire equity interests in property ownership
          entities  prior  to the  inclusion  of  these  equity  interests  into
          investments  funds, which matures on October 29, 2005, with a one year
          extension at our option.

     o    $85.0 million,  used to provide the interim loan to CCLP,  which bears
          interest at a rate of LIBOR plus 1.65% and matures in July 2005.

     o    $40.0  million,   established  in  connection   with  the  PW  Funding
          acquisition,  which expires  December 31, 2006 and bears interest at a
          rate of LIBOR plus 2.25%.

As of September  30, 2004,  we had  approximately  $208.3  million  available to
borrow under these debt  facilities  without  exceeding  limits  imposed by debt
covenants and our trust agreement.

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. We
typically generate funds for investment  purposes from  corresponding  financing
activities.

The net change in cash and cash equivalents during the first nine months of 2004
was lower than the  increase in the  comparable  2003 period,  primarily  due to
increased  investing  outflows.  Operating  cash flows  were  higher in the 2004
period by a margin of $26.0  million,  benefited  by a higher  level of earnings
exclusive of non-cash expenses and the timing of payments in operating liability
accounts.  The increase in investing  outflows resulted from our Interim Loan to
Capri  Capital  and  heightened  activity in advance of fund  sponsorships.  The
higher  level  of  financing  inflows  in the  2004  period  related  to  equity
issuances,  which were used to repay debt and  finance the  increased  investing
activity.

During November 2004,  distributions  of  approximately  $23.7 million ($.41 per
share) will be paid to holders of common and Convertible CRA Shares,  which were
declared in September 2004.

Management  currently  expects to pay  approximately  $6.4 million in the fourth
quarter of 2004 in connection with put and call options,  thereby  acquiring the
13% of PW Funding that we do not currently own.

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.

In October  2004, we filed a shelf  registration  with the SEC providing for the
issuance of up to $400.0  million in common  shares,  preferred  shares and debt
securities.  This shelf  registration has not yet been declared effective and we
have no current plans to draw upon it.

                                       22
<PAGE>


Commitments, Contingencies and Off Balance Sheet Arrangements
-------------------------------------------------------------

Note 13 to the condensed  consolidated financial statements contain a summary of
the Company's guarantees and off-balance sheet arrangements.

The  following  table  reflects our maximum  exposure and carrying  amount as of
September 30, 2004 for guarantees we and our subsidiaries have entered into:
<TABLE>
<CAPTION>
                                       Maximum         Carrying
 (In thousands)                        Exposure         Amount
--------------------------------     ------------    ------------
<S>                                  <C>               <C>
Payment guarantees                   $   4,533         $    --
Completion guarantees                   24,538              --
Operating deficit guarantees               949              --
Recapture guarantees                    53,426              --
Replacement reserve                      1,454              --
CMC credit enhancement                  19,000              --
LIHTC guarantees                       398,562          14,730
                                     ------------    ------------

                                      $502,462         $14,730
                                     ============    ============
</TABLE>

CONTRACTUAL OBLIGATIONS

The following  table  provides our  commitments as of September 30, 2004 to make
future payments under our debt agreements and other contractual obligations.
<TABLE>
<CAPTION>

                                                               Payments due by Period
                                           --------------------------------------------------------------
                                                        Less than                  More than
(In thousands)                                Total       1 year      1-3 years    3-5 years    5 years
                                           ----------   ----------   ----------   ----------   ----------
<S>                                        <C>          <C>          <C>          <C>                 <C>
Notes payable                              $  176,737   $  154,926   $    5,452   $   16,359          $--
Notes  payable of  consolidated VIEs (1)      474,914       88,152      271,744       22,486       92,532
Operating lease obligations                     5,028          840        2,710        1,333          145
Unfunded loan commitments                     176,421      119,376       57,045           --           --
Floating rate securitization                  873,663      873,663           --           --           --
Fixed rate securitization                     100,000      100,000           --           --           --
                                           ----------   ----------   ----------   ----------   ----------

   Total                                   $1,806,763   $1,336,957   $  336,951   $   40,178   $   92,677
                                           ==========   ==========   ==========   ==========   ==========
</TABLE>

(1) Of the notes payable of consolidated  VIEs,  $401.9 million is guaranteed by
the limited  partners of the investment  funds.  Per partnership  agreements the
limited  partners are also  obligated to pay the  principal  and interest on the
notes.  The  remaining  balance  of $73.0  million  is  collateralized  with the
underlying properties of the consolidated operating partnerships.

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  interest  rate 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.

The  assumptions  related to the  following  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.

                                       23
<PAGE>

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. Our exposure
to interest rates is twofold:

     o    the potential  increase in interest expense on our variablerate debt;
          and
     o    the impact of interest rate on the value of our assets.

                                       23
<PAGE>

IMPACT ON EARNINGS

Our  investments in 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 rate securitization  programs
vary based on market interest rates based on the Bond Market Association ("BMA")
municipal  swap index and are re-set  weekly or every 35 days.  In addition,  we
have floating rate debt related to our  acquisition  financing and our warehouse
facilities. Other long-term sources of capital, such as our Cumulative Preferred
Shares, carry a fixed dividend rate and, as such, are not impacted by changes in
market interest rates.

With the  exception  of $50.0  million of debt hedged via an interest  rate swap
agreement and the $100.0 million fixed rate  securitization,  the full amount of
our liabilities labeled as Financing Arrangements and Notes Payable are variable
rate  debts.  We  estimate  that an  increase  of 1.0% in  interest  rates would
decrease our annual net income by approximately $10.0 million.

We manage this risk through the use of interest  rate swaps,  interest rate caps
and forward  bond  origination  commitments,  as  described  in the notes to our
financial statements.

IMPACT ON VALUATION OF ASSETS

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 SFAS 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 September 30, 2004 value of approximately $2.1 billion to approximately $1.9
billion.  A 1%  decline  in  interest  rates  would  increase  the  value of the
September  30, 2004  portfolio to  approximately  $2.2  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.

ITEM 4. CONTROLS AND PROCEDURES

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

                                       24
<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.

ITEM 2.  CHANGES IN  SECURITIES, USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
         SECURITIES - None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES - None

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

ITEM 5.  OTHER INFORMATION - None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         Exhibits:

         10.6 Third   Amended and  Restated  Bylaws,  dated  September  15, 2004
              (incorporated by reference to  Exhibit 10.6  in our  September 30,
              2004 Quarterly Report on Form 10-Q).

         31.1 Chief  Executive Officer certification  pursuant to Section 302 of
              the Sarbanes-Oxley Act of 2002

         31.2 Chief  Financial Officer certification  pursuant to Section 302 of
              the Sarbanes-Oxley Act of 2002

         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.

         (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  September  30,
               2004.

               Current  report on Form 8-K relating to a press release we issued
               announcing that our  subsidiary,  CM Investor LLC, had provided a
               $72.0 million interim loan to Capri Capital  Limited  Partnership
               and committed to make an additional $12.0 million advance,  dated
               July 19, 2004.

               Current  report on Form 8-K relating to a press release we issued
               reporting our second quarter financial  results,  dated August 5,
               2004.

                                       25
<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 Operating 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 September 30, 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  of  internal  control  over  financial
         reporting,  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 information; and

b)       any fraud,  whether or not material,  that involves management or other
         employees  who have a  significant  role in the  registrant's  internal
         control 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 September 30, 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  of  internal  control  over  financial
         reporting,  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 information; and

b)       any fraud,  whether or not material,  that involves management or other
         employees  who have a  significant  role in the  registrant's  internal
         control 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 SEPTEMBER 30, 2004


In  connection  with the Quarterly  Report on Form 10-Q/A of CharterMac  for the
quarterly  period ending  September 30, 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