<PAGE>


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


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

     For the fiscal year ended December 31, 2000
                                              OR
|_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

     For the transition period from ________ To ________


                          Commission file number 1-7265

                               AMBASE CORPORATION
               (Exact name of registrant as specified in its charter)

              DELAWARE                                 95-2962743
      (State of incorporation)            (I.R.S.Employer Identification No.)

             51 Weaver Street, Building 2, Greenwich, CT 06831-5155
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (203) 532-2000

          Securities registered pursuant to Section 12(b)of the Act:

          Title of each class        Name of each exchange on which registered

          Common Stock ($0.01 par value)                 None

          Rights to Purchase Common Stock                None

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. X

At January 31, 2001, there were 46,208,519  shares of registrant's  Common Stock
outstanding.  At January 31, 2001 the  aggregate  market  value of  registrant's
voting securities  (consisting of its Common Stock) held by nonaffiliates of the
registrant, based on the average bid and asking price on such date of the Common
Stock of $0.71 per share,  was  approximately  $26  million.  The  Common  Stock
constitutes registrant's only outstanding security.

Portions of the  registrant's  definitive  Proxy  Statement  for its 2001 Annual
Meeting of Stockholders,  which Proxy Statement  registrant intends to file with
the Securities  and Exchange  Commission not later than 120 days after the close
of its  fiscal  year,  is  incorporated  by  reference  with  respect to certain
information contained therein, in Part III of this Annual Report.

The Exhibit Index is located in Part IV, Item 14, Page 36.


<PAGE>


AmBase Corporation

Annual Report on Form 10-K
December 31, 2000
<TABLE>
<CAPTION>

CROSS REFERENCE SHEET FOR
PARTS I, II, III and IV                                                                                        Page
----------------------------------------------                                                               ------
<S>             <C>                                                                                             <C>

PART I

Item 1.         Business..........................................................................................1

Item 2.         Properties........................................................................................2

Item 3.         Legal Proceedings.................................................................................2

Item 4.         Submission of Matters to a Vote of Security Holders...............................................3

                Executive Officers of the Registrant..............................................................3

PART II

Item 5.         Market for Registrant's Common Equity and Related Stockholder Matters.............................4

Item 6.         Selected Financial Data...........................................................................4

Item 7.         Management's Discussion and Analysis of Financial Condition and Results of Operations.............5

Item 7A.        Quantitative and Qualitative Disclosures About Market Risk.......................................10

Item 8.         Financial Statements and Supplementary Data......................................................11

Item 9.         Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............35

PART III

Item 10.        Directors and Executive Officers of the Registrant...............................................35

Item 11.        Executive Compensation...........................................................................35

Item 12.        Security Ownership of Certain Beneficial Owners and Management...................................35

Item 13.        Certain Relationships and Related Transactions...................................................35

PART IV

Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K..................................36
</TABLE>

<PAGE>

PART I

ITEM 1.       BUSINESS

Corporate Profile

AmBase Corporation (the "Company") was incorporated as a Delaware corporation in
1975 by the City Investing  Company ("City") as the holding company for The Home
Insurance Company,  a New Hampshire  insurance  corporation,  and its affiliated
property and casualty  insurance  companies ("The Home").  In 1985,  City, which
prior to that date owned all the  outstanding  shares of the Common Stock of the
Company,  distributed the Company's  shares to City's common  stockholders.  The
Home was sold on February 13, 1991 to Home Holdings, Inc. ("Home Holdings").

In  December  1997,  the  Company  formed  a new  wholly-owned  subsidiary,  SDG
Financial Corp. ("SDG Financial"),  to pursue merchant banking  activities.  SDG
Financial  purchased  an  approximate  6.3%  equity  interest in SDG,  Inc.  for
$1,250,000  and  was  granted  the  exclusive  right  to act  as the  investment
banking/financial  advisor  to  SDG,  Inc.  and  all  of  its  subsidiaries  and
affiliates.

SDG, Inc. is a  development  stage  company  which  specializes  in creating new
technology-specific  companies that are dedicated to the clinical and commercial
development   of   proprietary,   targeted   liposomal   delivery   systems  for
pharmaceutical  therapies and consumer  product  ingredients.  SDG, Inc.'s lipid
vesicles are protected by numerous U.S. and related foreign patents.

The Company has also  purchased  $350,000 of  convertible  preferred  and common
stock in AMDG, Inc. ("AMDG"), a majority owned subsidiary of SDG, Inc. AMDG is a
development stage pharmaceutical  company focused on the clinical development of
new  therapies  for the  treatment  of both Type I and Type II diabetes  and has
received from SDG, Inc. a worldwide, exclusive,  royalty-free license to certain
patented  technology.  AMDG  raised  $3.7  million  of equity  through a private
placement in December 1997.

In November 1993, the Company acquired 51% of the issued and outstanding  common
stock of  Augustine  Asset  Management,  Inc.  ("Augustine"),  a  Florida  based
investment  advisory  firm.  On  October 4, 1996,  the  Company  sold its entire
interest in Augustine, to Augustine.

In August 1988, the Company  acquired  Carteret  Bancorp Inc.  Carteret  Bancorp
Inc.,  through its principal wholly owned subsidiary,  Carteret Savings Bank, FA
("Carteret"),  was  principally  engaged in retail  and  consumer  banking,  and
mortgage banking including mortgage  servicing.  On December 4, 1992, the Office
of  Thrift  Supervision  ("OTS")  placed  Carteret  in  receivership  under  the
management of the Resolution  Trust  Corporation  ("RTC") and a new institution,
Carteret  Federal Savings Bank, was established to assume the assets and certain
liabilities  of Carteret.  Following  the seizure of  Carteret,  the Company was
deregistered as a savings and loan holding company by the OTS,  although the OTS
retains jurisdiction for any regulatory violations prior to deregistration.

The Company's  assets currently  consist  primarily of cash and cash equivalents
and investment securities.

The Company had 7 employees at December 31, 2000.

The Company's main source of non-operating  revenue is interest income earned on
investment  securities and cash equivalents.  In order to maintain the principal
value of its assets, the Company has invested  substantially all of its funds in
U.S.  Treasury Bills and short-term money market funds. The Company continues to
evaluate a number of possible acquisitions,  and is engaged in the management of
its  remaining  assets and  liabilities,  including the  contingent  and alleged
litigation  liabilities,  as  described  in  Item 8 - Note  11 to the  Company's
consolidated  financial statements.  The Company intends to aggressively contest
all pending and threatened  litigation and contingencies,  as well as pursue all
sources for  contributions  to settlements.  In order to continue on a long-term
basis,  the Company must both resolve its contingent and alleged  liabilities by
prevailing  upon or settling these claims for less than the amounts  claimed and
generate  profits by acquiring  existing  operations  and/or by  developing  new
operations.

See Item 8 - Note 11 to the Company's  consolidated  financial  statements for a
discussion of Supervisory Goodwill Litigation.

<PAGE>

At  December  31,  2000,  the  Company's  liabilities,  including  reserves  for
contingent  and  alleged   liabilities,   exceeded  total  recorded   assets  by
$24,097,000.  The Company has significant alleged liabilities and is a defendant
in a number of lawsuits and  governmental  proceedings,  the ultimate outcome of
which  could have a  material  adverse  effect on its  financial  condition  and
results  of  operations.  Because of the nature of the  contingent  and  alleged
liabilities  and the  inherent  difficulty  in  predicting  the  outcome  of the
litigation and governmental proceedings, management is unable to predict whether
the Company's recorded reserves will be adequate or its resources  sufficient to
satisfy  its  ultimate  obligations.  The  accompanying  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
these uncertainties.  For a discussion of the alleged liabilities,  lawsuits and
proceedings,  see  Item 8 -  Note  11 to the  Company's  consolidated  financial
statements.  Although  the  basis  for the  calculation  of the  litigation  and
contingency  reserves  and the  withholding  obligation  reserve  are  regularly
reviewed by the Company's  management and outside legal counsel,  the assessment
of these reserves includes an exercise of judgment and is a matter of opinion.

ITEM 2.       PROPERTIES

The Company  leases  approximately  4,800  square feet for use as its  executive
office at 51 Weaver Street, Building 2, Greenwich, CT 06831-5155.

The Company is currently in negotiations to purchase a 14,000 square feet office
building in Greenwich,  CT for  approximately  $2,400,000.  Approximately  3,000
square feet is expected to be used by the Company for its executive offices with
the remaining square footage leased to unaffiliated third parties.

ITEM 3.       LEGAL PROCEEDINGS

The Company has significant  alleged  liabilities and is a defendant in a number
of lawsuits and  governmental  proceedings,  the ultimate outcome of which could
have a  material  adverse  effect on its  financial  condition  and  results  of
operations.  Because of the nature of the contingent and alleged liabilities and
the  inherent  difficulty  in  predicting  the  outcome  of the  litigation  and
governmental proceedings,  management is unable to predict whether the Company's
recorded  reserves will be adequate or its  resources  sufficient to satisfy its
ultimate obligations.  The accompanying consolidated financial statements do not
include  any   adjustments   that  might   result  from  the  outcome  of  these
uncertainties.  Although the basis for the  calculation  of the  litigation  and
contingency  reserves  and the  withholding  obligation  reserve  are  regularly
reviewed by the Company's  management and outside legal counsel,  the assessment
of these  reserves  includes an exercise of judgment and is a matter of opinion.
At December 31, 2000, the litigation and contingency  reserves were  $1,746,000.
For a discussion of alleged liabilities,  lawsuits and proceedings, see Item 8 -
Note 11 to the Company's consolidated financial statements.

In  addition  to the  litigation  and  contingency  reserves,  the Company has a
withholding  obligation  reserve of  $66,388,000  at December  31,  2000.  For a
further  discussion,  see  Item 8 - Note  11 - Legal  Proceedings, Dispute  with
Internal Revenue Service Withholding Obligations  (Netherlands Antilles), to the
Company's consolidated financial statements.

See Item 8 - Note 11 to the Company's  consolidated  financial  statements for a
discussion of Supervisory Goodwill Litigation.

<PAGE>

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Executive Officers of the Registrant

Each executive officer is elected to serve in the executive officer capacity set
forth   opposite  his   respective   name  until  the  next  Annual  Meeting  of
Stockholders.  The Company is not aware of any family relationships  between any
of the executive officers or directors of the Company.

Set forth below is a list of  executive  officers of the Company at December 31,
2000:
<TABLE>
<CAPTION>
Name                                    Age                            Title
====                                    ===                            ==========
<S>                                     <C>                            <C>

Richard A. Bianco                        53                            Chairman, President and
                                                                       Chief Executive Officer of
                                                                       AmBase Corporation

John P. Ferrara                          39                            Vice President, Chief Financial Officer
                                                                       and Controller of AmBase Corporation
</TABLE>

Mr. Bianco was elected a director of the Company in January 1991, and has served
as  President  and Chief  Executive  Officer of the Company  since May 1991.  On
January 26, 1993,  Mr. Bianco was elected  Chairman of the Board of Directors of
the Company.  He served as Chairman,  President and Chief  Executive  Officer of
Carteret, then a subsidiary of the Company, from May 1991 to December 1992.

Mr.  Ferrara was  elected to the  position of Vice  President,  Chief  Financial
Officer and Controller of the Company in December 1995, having previously served
as Acting Chief  Financial  Officer,  Treasurer and Assistant Vice President and
Controller  since January 1995; as Assistant Vice President and Controller  from
January  1992 to  January  1995;  and as  Manager of  Financial  Reporting  from
December 1988 to January 1992.

<PAGE>

PART II

ITEM 5.       MARKET FOR REGISTRANT'S COMMON EQUITY AND
              RELATED STOCKHOLDER MATTERS

The Common Stock of the Company trades through one or more  market-makers,  with
quotations  made  available  in the  "pink  sheets"  published  by the  National
Quotation Bureau, Inc. ("Pink Sheets"),  under the symbol ABCP. The sales prices
per share for the  Company's  Common Stock  represent  the range of the reported
high and low bid  quotations as indicated in the Pink Sheets or as  communicated
orally to the Company by market-makers.  Such prices reflect interdealer prices,
without  retail  mark-up,  mark-down  or  commission,  and may  not  necessarily
represent actual transactions.
<TABLE>
<CAPTION>

                                                      2000                                        1999
                                           ==============================             ==============================
                                               High               Low                     High                Low
                                               ====               ===                     ====                ===
<S>                                        <C>                <C>                      <C>                <C>
First Quarter.......................       $    1.00          $   0.75                 $    2.77          $   2.18
Second Quarter......................            0.93              0.65                      2.49              1.08
Third Quarter.......................            0.91              0.64                      1.25              0.83
Fourth Quarter......................            0.90              0.54                      1.12              0.80
</TABLE>

As of January 31, 2001, there were approximately 17,700 beneficial owners of the
Company's  Common  Stock.  No dividends  were  declared or paid on the Company's
Common  Stock in 2000 or 1999.  The  Company  does not  intend to declare or pay
dividends in the foreseeable future.

For information  concerning the Company's  stockholder rights plan, see Item 8 -
Note 5 to the Company's consolidated financial statements.

ITEM 6.       SELECTED FINANCIAL DATA

The selected  financial  data should be read in  conjunction  with the Company's
consolidated  financial  statements  included  in Item 8 of this Form 10-K.  The
consolidated  statements  of  operations,  for the  periods  ended  prior to the
October 4, 1996 sale of Augustine  Asset  Management,  Inc.  were  retroactively
reclassified to reflect their operations as discontinued operations.

<TABLE>
<CAPTION>

                                                                        Years ended December 31
                                                  ==================================================================
(in thousands, except per share data)                 2000           1999         1998         1997            1996
                                                      ====           ====         ====         ====            ====
<S>                                               <C>            <C>          <C>           <C>            <C>
Interest income, net........................      $  2,795       $  2,166     $  2,430      $ 2,661        $  2,641
Income (loss) from continuing operations,
   before income taxes......................         5,379         (4,280)         423       (1,275)          6,636
Income tax (expense) benefit................          (205)          (235)        (242)         191           7,189
Income (loss) from continuing operations ...         5,174         (4,515)         181       (1,084)         13,825
Income from discontinued investment
   management operations, net of income taxes            -            -             -              -            207
Net income (loss)...........................      $  5,174       $ (4,515)    $    181      $(1,084)       $ 14,032

Earnings per common share - basic
Income (loss) from continuing operations....      $   0.11       $  (0.10)    $      -      $ (0.02)       $   0.31
Income (loss) from discontinued operations..             -              -            -            -               -
                                                  -----------    -----------  -----------   -----------    -----------
Net income (loss)...........................      $   0.11       $  (0.10)    $      -      $ (0.02)       $   0.31
                                                    ======         ======       ======       ======           ======
Earnings per common share - assuming dilution
Income (loss) from continuing operations....      $   0.11       $  (0.10)    $      -      $ (0.02)       $   0.30
Income (loss) from discontinued operations..             -              -            -            -               -
                                                  -----------    -----------  -----------   -----------    -----------
Net income (loss)...........................      $   0.11       $  (0.10)    $      -      $ (0.02)       $   0.30
                                                    ======         ======       ======       ======          ======
Dividends...................................             -              -            -            -               -
                                                    ======         ======       ======       ======          ======
Total assets................................      $ 53,102       $ 47,678     $ 51,638      $64,270        $ 66,229
Total stockholders' equity..................       (24,097)       (29,424)     (25,000)     (25,181)        (24,097)
                                                    ======         ======       ======       ======          ======
</TABLE>
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  should  be read  in  conjunction  with  the  consolidated  financial
statements and related notes which are contained in Item 8, herein.

CONTINUING OPERATIONS

Financial Condition

The Company's  assets at December 31, 2000  aggregated  $53,102,000,  consisting
principally of cash and cash equivalents of $4,844,000 and investment securities
of  $46,547,000.  At December 31, 2000,  the  Company's  liabilities,  including
reserves for contingent and alleged liabilities,  as further described in Item 8
- Note 11 to the Company's  consolidated  financial  statements,  exceeded total
recorded assets by $24,097,000.

In June 2000 the Company  entered  into a  settlement  agreement  with Zurich SF
Holdings LLC (f/k/a Reorganized Home Holdings, Inc.)("SF Holdings") settling the
disputed  claims  relating to the April 1999  complaint the Company filed in the
Supreme Court of New York.  Pursuant to the  settlement  agreement,  the Company
received,  among other things,  net proceeds of $8,250,000 from SF Holdings.  In
addition,  an  affiliate  of SF  Holdings  deposited  $9,500,000  in an interest
bearing escrow  account (the "Escrow  Account") to be used to pay 50% of certain
expenses and/or withholding obligations,  if any, up to the amount in the Escrow
Account in connection with the dispute with the Internal Revenue Service ("IRS")
over  the  Netherlands  Antilles   Withholding   Obligation  Issue.  Upon  final
resolution of the Netherlands Antilles Withholding Obligation Issue with the IRS
and payment of outstanding expenses, the residual of the Escrow Account, if any,
will be delivered to an affiliate of SF Holdings.

In June 1998,  the Company  paid  $12,700,000  to the IRS for tax and  estimated
interest to be applied to the Company's  Fresh Start tax liability which related
to a 1987 tax dispute with the IRS. This amount was  previously  reserved for as
part of the Company's income tax reserves account. See Item 8 - Note 9 for a
more complete  discussion  regarding  the Company's  payment to the IRS in
connection  with the Fresh Start tax proceeding and utilization of net operating
loss carryforwards.

Pursuant  to the Home  Holdings  Revised  Third  Amended  and  Restated  Plan of
Reorganization  (the  "Revised  Plan"),  on July 30, 1998 the  Company  received
$15,200,000 in full  satisfaction  of all the Company's  claims relating to Home
Holdings other than certain  disputed  claims which were settled in June 2000 as
further discussed above.

The cash needs of the  Company in 2000 were  principally  satisfied  by proceeds
received  in  connection  with the SF  Holdings  litigation  settlement  further
described above, and interest income received on investment  securities and cash
equivalents.   Management   believes  that  the  Company's  cash  resources  are
sufficient  to  continue  operations  for  2001.  Because  of the  nature of the
contingent  and  alleged  liabilities  described  in  Item  8 -  Note  11 to the
Company's  consolidated  financial statements,  the Company is unable to predict
whether it will have the ability to generate sufficient resources to satisfy its
ultimate  obligations.  For the year ended December 31, 2000, cash of $2,590,000
was  provided  by  operating  activities,  mainly due to the receipt of funds in
connection with the SF Holdings  litigation  settlement offset by the payment of
expenses, payment of other liabilities,  and payments charged against litigation
and contingency reserves.

The cash needs of the  Company in 1999 were  principally  satisfied  by interest
income received on investment securities and cash equivalents, and the Company's
current financial resources. Because of the nature of the contingent and alleged
liabilities  described  in  Item  8 -  Note  11 to  the  Company's  consolidated
financial statements,  the Company is unable to predict whether it will have the
ability to generate  sufficient  resources to satisfy its ultimate  obligations.
For the year ended  December 31, 1999,  cash of $6,120,000 was used by operating
activities,  including the payment of expenses, payment of other liabilities and
payments charged against litigation and contingency  reserves,  partially offset
by the receipt of interest income.

The cash needs of the  Company in 1998 were  principally  satisfied  by interest
income  received on investment  securities and cash  equivalents,  the Company's
current  financial  resources and the $15,200,000  received pursuant to the Home
Holdings Revised Plan. For the year ended December 31, 1998, cash of $14,892,000
was used by operating  activities,  including the payment of  $12,700,000 to the
Internal  Revenue  Service  ("IRS") for the Company's Fresh Start tax liability,
the payment of operating  expenses and payments  charged  against the litigation
and contingency  reserve partially offset by interest income, and the receipt of
amounts received pursuant to the Home Holdings Revised Plan.

Except for the possible purchase of an office building,  as more fully discussed
in Item 8 - Note 10, to the Company's consolidated  financial statements,  there
are no material  commitments  for capital  expenditures as of December 31, 2000.
Inflation  has had no material  impact on the  business  and  operations  of the
Company.

<PAGE>

The Company  continues  to evaluate a number of  possible  acquisitions,  and is
engaged in the management of its remaining assets and liabilities, including the
contingent and alleged and litigation  liabilities described in Item 8 - Note 11
to the Company's  consolidated  financial statements.  Extensive discussions and
negotiations  are ongoing with respect to certain of these matters.  The Company
intends to  aggressively  contest  all  pending and  threatened  litigation  and
contingencies,  as well as pursue all sources for  contributions to settlements.
In order to continue on a long-term  basis,  the Company  must both  resolve its
contingent and alleged  liabilities by prevailing  upon or settling these claims
for less than the amounts claimed,  and generate  profits by acquiring  existing
operations and/or by developing new operations.

See Item 8 - Note 11 to the Company's  consolidated  financial  statements for a
discussion of Supervisory Goodwill Litigation.

Management of the Company  continually  reviews the  likelihood of liability and
associated costs of pending and threatened litigation. At December 31, 2000, the
litigation and contingency reserves were $1,746,000. For a discussion of alleged
withholding obligation reserve,  alleged liabilities,  lawsuits and proceedings,
see Item 8 - Note 11 to the Company's consolidated financial statements.

In  addition  to the  litigation  and  contingency  reserves,  the Company had a
withholding  obligation  reserve of  $66,388,000  at December  31,  2000.  For a
further  discussion,  see  Item 8 - Note  11 - Legal  Proceedings, Dispute  with
Internal Revenue Service over Withholding Obligations (Netherlands Antilles), to
the Company's consolidated financial statements.

As noted  above,  the  Company  has  significant  alleged  liabilities  and is a
defendant in a number of lawsuits  and  governmental  proceedings,  the ultimate
outcome of which could have a material adverse effect on its financial condition
and results of  operations.  Because of the nature of the contingent and alleged
liabilities and the inherent  difficulty in predicting the outcome of litigation
and  governmental  proceedings,  management  is unable to  predict  whether  the
Company's  recorded  reserves  will be adequate or its  resources  sufficient to
satisfy  its  ultimate  obligations.  The  accompanying  consolidated  financial
statements do not include any adjustments  that might result from the outcome of
these uncertainties.  For a discussion of the alleged liabilities,  lawsuits and
proceedings,  see  Item 8 -  Note  11 to the  Company's  consolidated  financial
statements.  Although  the  basis  for the  calculation  of the  litigation  and
contingency  reserves and withholding  obligation reserve are regularly reviewed
by the Company's  management and outside legal counsel,  the assessment of these
reserves includes an exercise of judgment and is a matter of opinion.

In  connection  with the  liquidation  of City  Investing  Company  ("City") the
Company,  among others,  contractually  assumed certain tax liabilities of City,
which, prior to September 1985, owned all the outstanding shares of Common Stock
of the Company.  Other liabilities were assumed by, among others, City Investing
Company Liquidating Trust (the "Trust").  The only issue that remains in dispute
between City and the IRS is with respect to obligations  for the  withholding of
taxes in connection with a Netherlands  Antilles finance subsidiary of City (the
"Withholding Issue").

With respect to the Withholding Issue, in connection with a Netherlands Antilles
finance  subsidiary  of City,  on May 11,  1995,  the IRS  issued  a  Notice  of
Deficiency for the  withholding  of tax on interest  payments for the years 1979
through 1985. In the Notice of  Deficiency,  the IRS contends that City's wholly
owned  Netherlands  Antilles  finance  subsidiary  should be disregarded for tax
purposes.  The  Company,  on  behalf  of City,  vigorously  contested  the IRS's
position in accordance with the IRS's internal  appeals  procedures.  In January
1992,  the National  Office of the IRS issued  technical  advice  supporting the
auditing agent's position.  In October 1992, the Company appealed this technical
advice to the National  Office.  The National Office advised the Company that it
expected to issue technical  advice  supporting the auditing  agent's  position,
whereupon  the Company  advised the IRS that it was  withdrawing  its  technical
advice request.

On June 30, 1995, the Company, on behalf of City, filed a petition in the United
States Tax Court ("Tax  Court")  contesting  the Notice of  Deficiency.  The IRS
filed its answer on August 23,  1995.  The  Company  filed a motion for  summary
judgment in its favor on February 13, 1996.  On April 17, 1996,  the IRS filed a
Notice of Objection to the Company's motion for summary judgment.  The Tax Court
requested,  and the Company filed,  on July 3, 1996, a reply to the IRS's Notice
of Objection.  On September 19, 1996, the Court denied the Company's  motion for
summary judgment without prejudice.  Based on the Tax Court's examination of the
record and the status of the discovery  process,  the Tax Court  concluded  that
summary adjudication at that time was inappropriate.  The Tax Court directed the
parties to engage in full and complete discovery as expeditiously as possible. A
trial was held in this case on March 24,  1997,  after which the Judge asked the
IRS and the Company to submit post-trial briefs, which were submitted to the Tax
Court in August  1997.  If the IRS were to prevail on this  issue,  the  Company
could be liable for City's withholding obligation plus interest in excess of the
Company's financial resources. A significant factor in determining the amount of
the  Company's  ultimate  liability  for this issue is whether  pursuant  to the
contractual  arrangement  between the Company and City, the Company is primarily
liable for the withholding obligation and interest. See Item 8 - Note 11 - Legal
Proceedings,  AmBase Corporation v. City Investing Company  Liquidating Trust et
al., to the Company's consolidated financial statements.

<PAGE>

In a case dealing with a similar withholding issue, the Tax Court ruled in favor
of the taxpayer,  Northern Indiana Public Service Co. ("Northern  Indiana"),  in
November 1995. The Tax Court rejected the IRS's contention that interest paid to
Northern  Indiana's foreign  subsidiary was subject to United States withholding
of tax. The IRS appealed this decision  (Northern  Indiana Public Service Co. v.
Commissioner)  to the United  States  Court of Appeals for the 7th Circuit  (the
"Appeals Court"). In June 1997 the Appeals Court affirmed the Tax Court's ruling
in favor of  Northern  Indiana.  Although  the  Appeals  Court  decision  in the
Northern  Indiana case could be beneficial to the case involving City, it is not
necessarily  indicative  of the ultimate  result of the final  settlement of the
Netherlands Antilles issue involving City.

Based on an evaluation of the IRS's contention,  counsel has advised the Company
that, although the outcome in litigation can by no means be assured, the Company
has a very strong case and should prevail. Notwithstanding counsel's opinion and
the Tax Court's ruling in the Northern  Indiana case, it is not possible at this
time to determine the final  disposition of this issue,  when the issues will be
resolved,  or their final financial effect. A final disposition of this issue in
the  Company's  favor  would have a material  positive  effect on the  Company's
Consolidated Statement of Operations and Financial Condition.

The Company has a reserve for the  withholding  issue of $66,388,000 at December
31,  2000.  For a  further  discussion,  see Item 8 - Note 11 - Legal
Proceedings, Dispute with Internal Revenue Service over Withholding Obligations
(Netherlands Antilles), to the Company's consolidated financial statements.

Results of Operations

Summarized financial information for the operations of the Company for the years
ended December 31 is as follows:
<TABLE>
<CAPTION>

(in thousands)                                                              2000             1999              1998
                                                                            ====             ====              ====
<S>                                                                    <C>              <C>              <C>
Operating expenses:
Compensation and benefits.....................................         $   3,507        $   3,605         $   3,117
Professional and outside services.............................             2,051            2,707             1,128
Insurance.....................................................                60               69                82
Occupancy.....................................................                91              100                86
Other operating...............................................               143              159               142
                                                                        --------         --------          --------
                                                                           5,852            6,640             4,555
                                                                        --------         --------          --------
Operating loss................................................            (5,852)          (6,640)           (4,555)
                                                                        --------         --------          --------
Interest income...............................................             2,795            2,166             2,430
Other income - litigation settlement..........................             8,250                -                 -
Other income..................................................               186              194             2,548
                                                                        --------         --------          --------
Income (loss) before income taxes.............................             5,379           (4,280)              423
Income tax expense............................................              (205)            (235)             (242)
                                                                        --------         --------          --------
Net income (loss).............................................         $   5,174        $  (4,515)        $     181
                                                                           =====            =====             =====
</TABLE>

The Company's main source of non-operating  revenue is interest income earned on
investment  securities and cash equivalents.  The Company's  management  expects
that  operating  cash  needs in 2001 will be met  principally  by the  Company's
current financial resources and the receipt of non-operating  revenue consisting
of interest income earned on investment securities and cash equivalents.

The Company  recorded net income of $5,174,000 or $0.11 per share,  for the year
ended  December  31,  2000.  As further  described  above the  December 31, 2000
results  includes  $8,250,000  of  other  income  principally  representing  net
proceeds  received in connection with the Company's  litigation  settlement with
Zurich SF Holdings LLC, ("SF Holdings"). Excluding this other income the Company
would have  reported a net loss of  $3,076,000  for the year ended  December 31,
2000.

The Company  recorded a net loss of $4,515,000  for the year ended  December 31,
1999. As further  detailed  below the 1999 net loss reflects an increase in 1999
compared with 1998 of $1,579,000 of  professional  and outside service fees as a
result of Supervisory Goodwill litigation expenses.

<PAGE>

For the year  ended  December  31,  1998 the  Company  recorded  net  income  of
$181,000.  As further  described in Financial  Condition,  above,  1998 includes
$2,548,000  of  non-recurring  other  income,  principally  attributable  to the
receipt  of  $2,500,000  in  connection  with the Home  Holdings  Revised  Plan.
Excluding the non-recurring  other income, the Company would have recorded a net
loss of $2,367,000 for the year ended December 31, 1998.

Compensation  and  benefits  were  $3,507,000  in 2000,  $3,605,000  in 1999 and
$3,117,000 in 1998.  The decrease in 2000 compared to 1999 is primarily due to a
decrease in Year 2000 incentive  compensation  accrued in 2000 and paid in 2001.
The  increase  of  $488,000  in 1999,  compared  with 1998 is  primarily  due to
increased incentive compensation and supplemental retirement plan accruals.

Professional and outside services  decreased to $2,051,000 in 2000,  compared to
$2,707,000  in 1999.  The amounts in the 2000 periods are  comprised of expenses
relating  to the  Supervisory  Goodwill  litigation  although  at a lower  level
compared to 1999, and expenses  incurred  relating to the litigation  settlement
with SF Holdings.  The amounts in the 1999 periods are principally  comprised of
expenses relating to the Supervisory Goodwill litigation.  The increase in 1999,
compared  to 1998,  was due to an increase in  Supervisory  Goodwill  litigation
expenses as a result of litigation discovery expenses and the preparation of the
Company's  Summary  Judgment  Motion as further  discussed in Item 8 - Note 11,
offset to some effect by a reduction of legal fees  attributable to the
Home Holdings,  Inc.  bankruptcy case, which were incurred in 1998. Expenses for
professional  and outside  services in 2000,  1999 and 1998 do not include costs
associated  with  defending   pending  and  threatened   litigation  which  were
previously  reserved for and are charged  against the litigation and contingency
reserves when paid.

Insurance  expenses  decreased in 2000,  compared to 1999,  due to  management's
renegotiation of insurance programs.

Occupancy  expenses were $91,000 in 2000,  $100,000 in 1999 and $86,000 in 1998.
The increase in 1999  compared to 1998 is the result of an increase in occupancy
related maintenance expenses.

Interest  income was  $2,795,000 in 2000,  $2,166,000 in 1999, and $2,430,000 in
1998. The increase in 2000 compared to the 1999 period,  was  attributable  to a
higher  average level of investment  securities  and an increased  yield on cash
equivalents and investment securities. The decrease in 1999 compared to 1998, is
the result of a lower average level of investment securities.

The  additional  other  income  of  $186,000  in 2000  and  $194,000  in 1999 is
primarily  attributable  to  the  collection  by  an  inactive  subsidiary  of a
receivable  previously  considered  uncollectible.   Other  income  in  1998  of
$2,548,000 is principally  attributable to the receipt of $2,500,000 received in
connection with the Home Holdings Revised Plan.

The  2000,  1999 and 1998  income  tax  provisions  of  $205,000,  $235,000  and
$242,000, respectively, are principally attributable to state and local taxes.

A reconciliation between income taxes computed at the statutory federal rate and
the  provision  for income taxes is included in Item 8 - Note 9 to the Company's
consolidated financial statements.

<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company holds short-term investments as a source of liquidity. The Company's
interest rate sensitive  investments at December 31, 2000 and 1999 with maturity
dates of less than one year consist of the following:
<TABLE>
<CAPTION>

                                                                        2000                       1999
                                                            ==========================   =========================
                                                            Carrying          Fair       Carrying           Fair
                                                               Value         Value          Value           Value
                                                            -----------    -----------  ------------    -----------
<S>                                                         <C>             <C>          <C>            <C>

(in thousands)
U.S. Treasury Bills.........................................$ 46,547        $ 46,595     $ 43,260       $  43,259
                                                            ========        ========     =========      =========

Weighted average interest rate.............................    5.80%                        4.81%
                                                             =======                      =======
</TABLE>


The  Company's  current  policy is to  minimize  the  interest  rate risk of its
short-term  investments by investing in U.S.  Treasury Bills with  maturities of
less than one year. There were no significant changes in market exposures or the
manner in which interest rate risk is managed during the year.

STOCKHOLDER INQUIRIES

Stockholder  inquiries,  including  requests  for the  following:  (i) change of
address;  (ii) replacement of lost stock  certificates;  (iii) Common Stock name
registration changes; (iv) Quarterly Reports on Form 10-Q; (v) Annual Reports on
Form 10-K; (vi) proxy material;  and (vii) information regarding  stockholdings,
should be directed to:

           American Stock Transfer and Trust Company
           40 Wall Street, 46th Floor
           New York, NY  10005
           Attention:  Shareholder Services
           (800) 937-5449 or (718) 921-8200

In addition,  the Company's public reports,  including Quarterly Reports on Form
10-Q, Annual Reports on Form 10-K and Proxy Statements,  can be obtained through
the Securities and Exchange Commission EDGAR Database over the World Wide Web at
www.sec.gov.


<PAGE>


ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors
and Stockholders of
AmBase Corporation

In our opinion,  the  accompanying  consolidated  Balance Sheets and the related
consolidated  Statements of Operations,  of Changes in Stockholders' Equity, and
of Cash Flows present fairly, in all material  respects,  the financial position
of AmBase  Corporation and its subsidiaries (the "Company") at December 31, 2000
and 1999,  and the results of their  operations and their cash flows for each of
the three years in the period  ended  December  31,  2000,  in  conformity  with
accounting principles generally accepted in the United States of America.  These
financial  statements are the  responsibility of the Company's  management;  our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
auditing  standards  generally  accepted in the United States of America,  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis our opinion.

The  accompanying  financial  statements  include  a withholding obligation
reserve relating to a significant issue discussed in Note 11. Final resolution
of this issue is dependent upon future events,  which may result in amounts more
or less  than  those  presented.  The  ultimate  outcome  of this  issue  cannot
presently be determined.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial   statements,   substantial   operations  of  the  Company  have  been
discontinued, and substantial contingencies exist against the Company in various
lawsuits  and  proceedings,  which  are  discussed  in Note 11 to the  financial
statements  and the second  paragraph  of this  report.  The  Company  has a net
capital  deficiency of  approximately  $24,097,000  at December 31, 2000.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going  concern.  It will be necessary for the Company to resolve the  contingent
liabilities by prevailing upon or settling these claims at amounts less than the
claims and the amounts  recorded and to generate,  through  acquisition or start
up,  profitable  operations  to continue on a  long-term  basis.  See Note 1 for
further  discussion  of  management's  plans.  The  financial  statements do not
include  any   adjustments   that  might   result  from  the  outcome  of  these
uncertainties.





PricewaterhouseCoopers LLP
New York, New York
March 12, 2001



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Operations
                             Years Ended December 31


<TABLE>
<CAPTION>


(in thousands, except per share data)                                       2000             1999              1998
                                                                            ====             ====              ====
<S>                                                                    <C>              <C>              <C>
Operating expenses:
Compensation and benefits.....................................         $   3,507        $   3,605         $   3,117
Professional and outside services.............................             2,051            2,707             1,128
Insurance.....................................................                60               69                82
Occupancy.....................................................                91              100                86
Other operating...............................................               143              159               142
                                                                        --------         --------          --------
                                                                           5,852            6,640             4,555
                                                                        --------         --------          --------
Operating loss................................................            (5,852)          (6,640)           (4,555)
                                                                        --------         --------          --------
Interest income...............................................             2,795            2,166             2,430
Other income - litigation settlement..........................             8,250                -                 -
Other income..................................................               186              194             2,548
                                                                        --------         --------          --------
Income (loss) before income taxes.............................             5,379           (4,280)              423
Income tax expense ...........................................              (205)            (235)             (242)
                                                                        --------         --------          --------
Net income (loss).............................................         $   5,174        $  (4,515)        $     181
                                                                           =====            =====             =====
Earnings per common share:
Net income (loss) - basic.....................................         $    0.11      $   ( 0.10)         $       -
Net income (loss) - assuming dilution.........................              0.11          ( 0.10)                 -
                                                                           =====            =====             =====
Dividends.....................................................         $       -        $       -         $       -
                                                                           =====            =====             =====
Average shares outstanding....................................            46,209           44,724            44,534
                                                                           =====            =====             =====
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                            Consolidated Balance Sheets
                                     December 31


<TABLE>
<CAPTION>

(in thousands)                                                                               2000              1999
                                                                                             ====              ====
<S>                                                                                     <C>              <C>
Assets:
Cash and cash equivalents.......................................................        $   4,844        $    2,646
Investment securities - held to maturity
    (market value $46,595 and $43,259, respectively)............................           46,547            43,260
Investment in SDG, Inc. at cost.................................................            1,250             1,250
Other assets....................................................................              461               522
                                                                                         --------          --------
Total assets....................................................................        $  53,102        $   47,678
                                                                                            =====             =====
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities........................................        $   1,889        $    1,902
Supplemental retirement plan....................................................            6,033             5,545
Postretirement welfare benefits.................................................            1,053             1,178
Other liabilities...............................................................               90               106
Litigation and contingency reserves.............................................            1,746             1,983
Withholding obligation reserve..................................................           66,388            66,388
                                                                                         --------          --------
Total liabilities...............................................................           77,199            77,102
                                                                                         --------          --------
Commitments and contingencies...................................................                -                 -
                                                                                         --------          --------
Stockholders' equity:
Common stock....................................................................              463               455
Paid-in capital.................................................................          547,940           547,795
Accumulated deficit.............................................................         (571,853)         (577,027)
Treasury stock..................................................................             (647)             (647)
                                                                                         --------          --------
Total stockholders' equity......................................................          (24,097)          (29,424)
                                                                                         --------          --------
Total liabilities and stockholders' equity......................................        $  53,102        $   47,678
                                                                                            =====             =====
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
           Consolidated Statements of Changes in Stockholders' Equity
                             Years Ended December 31
<TABLE>
<CAPTION>


                                  Common        Paid-In        Accumulated        Treasury
(in thousands)                     Stock        Capital            Deficit           Stock           Total
                                 =======          =====          =========          ======            ====
<S>                             <C>          <C>               <C>                <C>             <C>

December 31, 1997.........      $    447     $  547,712        $  (572,693)       $   (647)       $(25,181)
Net income................             -              -                181             -               181
                               ---------     ----------         ------------      ----------      ---------
December 31, 1998.........           447        547,712           (572,512)           (647)        (25,000)
Stock options exercised                8             83                  -               -              91
Net loss..................             -              -             (4,515)              -          (4,515)
                               ---------     ----------         -----------       ----------      ---------
December 31, 1999.........     $     455     $  547,795       $   (577,027)       $   (647)     $  (29,424)
Stock options exercised                8            145                  -               -             153
Net income................             -              -              5,174               -           5,174
                               ---------     ----------         -----------       ----------      ---------

December 31, 2000.........     $     463     $  547,940       $   (571,853)       $   (647)     $  (24,097)
                                  ======         ======            =======          ======          ======
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                             Years Ended December 31


<TABLE>
<CAPTION>


(in thousands)                                                                       2000             1999           1998
                                                                                     ====             ====           ====
<S>                                                                              <C>             <C>           <C>

Cash flows from operating activities:
Net income (loss)........................................................        $  5,174        $  (4,515)    $      181
Adjustments  to  reconcile  net  income  (loss) to net cash  provided
     (used by) operating activities:
Other assets.............................................................              36               48             86
Accounts payable and accrued liabilities.................................             (13)             260             92
Litigation and contingency reserves uses.................................            (237)             (93)          (264)
Fresh Start tax payment..................................................               -                -        (12,700)
Accretion of discount - investment securities............................          (2,732)          (2,133)        (2,350)
Other, net...............................................................             362              313             63
                                                                                 --------         --------       --------
Net cash provided (used) by operating activities.........................           2,590           (6,120)       (14,892)
                                                                                 --------         --------       --------
Cash flows from investing activities:
Maturities of investment securities - held to maturity...................         118,084          108,986         78,451
Purchases of investment securities - held to maturity....................        (118,639)        (102,957)       (78,947)
Purchases of investment securities - available for sale..................               -             (250)             -
Proceeds from Home Holdings, Inc. receivable.............................               -                -         12,708
Other, net...............................................................              10               10             18
                                                                                 --------         --------       --------
Net cash provided (used) by investing activities.........................            (545)           5,789         12,230
                                                                                 --------         --------       --------
Cash flows from financing activities:
Stock options exercised..................................................             153               91              -
                                                                                 --------         --------       --------
Net cash provided by financing activities................................             153               91              -
                                                                                 --------         --------       --------
Net increase (decrease) in cash and cash equivalents.....................           2,198             (240)        (2,662)
Cash and cash equivalents at beginning of year...........................           2,646            2,886          5,548
                                                                                 --------         --------       --------
Cash and cash equivalents at end of year.................................        $  4,844        $   2,646     $    2,886
                                                                                    =====            =====          =====
</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

Note 1 - Organization

AmBase Corporation (the "Company") is a holding company which,  through a wholly
owned  subsidiary,  owns a 6.3%  ownership  interest  in SDG,  Inc.  The Company
previously held a majority  ownership  interest in Augustine  Asset  Management,
Inc.  ("Augustine"),  an investment advisor, and also previously owned a savings
bank and an insurance company, all of which have been designated as discontinued
operations, as further discussed below.

On  December 4, 1992,  Carteret  Savings  Bank,  FA  ("Carteret")  was placed in
receivership by the Office of Thrift Supervision ("OTS").

On February  13,  1991,  the  Company  sold its  ownership  interest in The Home
Insurance  Company  ("The Home") and its  subsidiaries  to Home  Holdings,  Inc.
("Home Holdings").

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  Substantial  contingent and
alleged  liabilities  exist  against the Company  through  various  lawsuits and
proceedings,  as described in Note 11. These  factors  raise  substantial  doubt
about the Company's ability to continue as a going concern. In order to continue
on a long-term  basis,  the Company must both resolve its contingent and alleged
liabilities  by  prevailing  upon or  settling  these  claims  for less than the
amounts claimed, and generate profits by acquiring existing operations and/or by
developing new operations.  The financial  statements do not include adjustments
to the carrying value of assets and liabilities  which might be necessary should
the  Company not  continue in  operation.  The Company  continues  to evaluate a
number  of  possible  acquisitions,  and is  engaged  in the  management  of its
remaining  assets  and   liabilities,   including  the  contingent  and  alleged
liabilities,  as  described  in Note 11. The  Company  intends  to  aggressively
contest all pending and threatened litigation and governmental  proceedings,  as
well as pursue all sources for contributions to settlements.  The Company's main
source of non-operating  revenue is interest earned on investment securities and
cash equivalents.  The Company's management expects that operating cash needs in
2001 will be met principally by the Company's  current  financial  resources and
the receipt of  non-operating  revenue  consisting of interest  income earned on
investment  securities  and  cash  equivalents.  Because  of the  nature  of the
contingent and alleged liabilities and the inherent difficulty in predicting the
outcome of  litigation  and  governmental  proceedings,  management is unable to
predict  whether  the  Company's  recorded  reserves  will  be  adequate  or its
resources  sufficient  to satisfy its  ultimate  obligations.  The  accompanying
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of these uncertainties.  For a discussion of the alleged
liabilities,  lawsuits and governmental  proceedings,  see Note 11. Although the
basis  for the  calculation  of the  litigation  and  contingency  reserves  and
withholding   obligation   reserve  are  regularly  reviewed  by  the  Company's
management and outside legal counsel,  the assessment of these reserves includes
an exercise of judgment and is a matter of opinion.

See Note 11 for a discussion of Supervisory Goodwill Litigation.

Note 2 - Summary of Significant Accounting Policies

The  consolidated  financial  statements  have been prepared in accordance  with
generally accepted accounting  principles  ("GAAP").  Certain  reclassifications
have been made to the 1999 and 1998 consolidated financial statements to conform
with the 2000 presentation.

Use of estimates in the preparation of financial statements:

The  preparation  of  financial  statements  in  conformity  with GAAP  requires
management to make estimates and  assumptions,  that it deems  reasonable,  that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from such estimates and assumptions.

<PAGE>

                      AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

Principles of consolidation:

The  consolidated  financial  statements  are  comprised  of the accounts of the
Company  and  its  majority  owned  subsidiaries.   All  material   intercompany
transactions  and balances  have been  eliminated.  Investments  in companies in
which  ownership  interest  is less  than 20% are  accounted  for using the cost
method.

Cash and cash equivalents:

Highly liquid  investments,  consisting  principally of funds held in short-term
money market accounts, are classified as cash equivalents.

Investment securities:

Securities  that the Company has both the positive intent and ability to hold to
maturity  are  classified  as  investment  securities - held to maturity and are
carried at amortized cost. Investment securities - available for sale, which are
those securities that may be sold prior to maturity,  are carried at fair value,
with any net  unrealized  gains or losses  reported in a separate  component  of
stockholders' equity, net of deferred taxes.

Interest and dividends on investment  securities are recognized in the Statement
of Operations  when earned.  Realized gains and losses on the sale of investment
securities  - available  for sale are  calculated  using the  first-in/first-out
basis  for  determining  the cost  basis of the  securities.  The fair  value of
publicly  traded  investment  securities  is  determined by reference to current
market quotations.

Income taxes:

The Company and its domestic subsidiaries file a consolidated federal income tax
return. The Company recognizes both the current and deferred tax consequences of
all  transactions  that  have  been  recognized  in  the  financial  statements,
calculated based on the provisions of enacted tax laws,  including the tax rates
in effect for current and future years.  Net deferred tax assets are  recognized
immediately  when a more likely than not  criterion  is met;  that is,  unless a
greater  than 50%  probability  exists that the tax  benefits  will  actually be
realized sometime in the future. At the present time, management has no basis to
conclude that realization is more likely than not.

Earnings per share:

Basic and fully diluted  earnings per share ("EPS") are computed by dividing net
income  (loss) by the weighted  average  number of common and common  equivalent
shares outstanding.

Stock-based compensation:

The  Company  adopted  the  disclosure   requirements  of  Financial  Accounting
Standards  Board issued  Statement of Financial  Accounting  Standards  No. 123,
"Accounting for  Stock-Based  Compensation"  ("Statement  123") and continues to
account  for stock  compensation  using APB Opinion  25,  "Accounting  for Stock
Issued to Employees" ("APB 25"),  making proforma  disclosures of net income and
earnings  per share as if the fair value based  method had been  applied.  For a
further discussion, see Note 8.


<PAGE>

             Notes to Consolidated Financial Statements (continued)

Note 3 - Investment Securities

Investment  securities - held to maturity  consist of U.S.  Treasury  Bills with
original  maturities of one year or less and are carried at amortized cost based
upon the Company's intent and ability to hold these investments to maturity.

Investment securities at December 31 consist of the following:
<TABLE>
<CAPTION>
                                             2000                                                 1999
                             =========================================       ==========================================
                                                               Cost or                                          Cost or
                              Carrying        Amortized           Fair        Carrying         Amortized           Fair
(in thousands)                   Value             Cost          Value           Value              Cost          Value
                                ======         ========          =====          ======          ========          =====
<S>                          <C>               <C>           <C>             <C>               <C>            <C>

Held to Maturity:
    U.S. Treasury Bills      $  46,547         $ 46,547      $  46,595       $  43,260         $  43,260      $  43,259
                                 =====            =====          =====           =====             =====          =====
</TABLE>

The gross unrealized  gains and losses on investment  securities at December 31,
consist of the following:

<TABLE>
<CAPTION>

(in thousands)                                                                                 2000                1999
                                                                                               ====                ====
<S>                                                                                         <C>                <C>

Held to Maturity - Gross unrealized gains (losses)..................................        $    48            $     (1)
                                                                                               ====                ====
</TABLE>

Other investment securities at December 31, 2000 and 1999 consist of convertible
preferred stock and/or common stock in AMDG, Inc., which were purchased  through
private  placements,  are  classified as other  assets,  and are carried at cost
which approximates market value; $350,000 at December 31, 2000 and 1999.



<PAGE>


             Notes to Consolidated Financial Statements (continued)


Note 4 - Earnings Per Share

The  calculation  of basic  earnings per share and dilutive  earnings per share,
including the effect of dilutive securities, for the years ended December 31, is
as follows:

<TABLE>
<CAPTION>

                                                                                          2000
                                                                ====================================================
                                                                    Income                Shares           Per Share
(in thousands, except per share data)                          (Numerator)          (Denominator)             Amount
                                                                  ========          ============              ======
<S>                                                             <C>                     <C>               <C>

Basic earnings per share:
Net income.............................................         $    5,174              46,209            $     0.11
                                                                     =====                                     =====
Effect of Dilutive Securities:
Assumed stock option exercise..........................                                     55
                                                                                    ----------
Diluted earnings per share:
Net income and assumed conversions.....................         $    5,174              46,264            $     0.11
                                                                     =====               =====                 =====
</TABLE>

<TABLE>
<CAPTION>

                                                                                         1999
                                                                ====================================================
                                                                      Loss              Shares             Per Share
(in thousands)                                                 (Numerator)       (Denominator)                Amount
                                                               ==========         ===========              =========
<S>                                                             <C>                     <C>               <C>

Basic earnings per share:
Net loss...............................................         $   (4,515)             44,724            $   ( 0.10)
                                                                    ======                                    ======
Effect of Dilutive Securities:
Assumed stock option exercise..........................                                      -
                                                                                    ----------
Diluted earnings per share:
Net loss and assumed conversions.......................         $  (4,515)              44,724            $   ( 0.10)
                                                                    ======              ======                ======
</TABLE>

<TABLE>
<CAPTION>


                                                                                          1998
                                                                ====================================================
                                                                    Income                Shares           Per Share
(in thousands)                                                 (Numerator)          (Denominator)             Amount
                                                                ==========          ============           =========
<S>                                                             <C>                     <C>               <C>

Basic earnings per share:
Net income.............................................         $      181              44,534            $         -
                                                                     =====                                      =====
Effect of Dilutive Securities:
Assumed stock option exercise..........................                                  1,697
                                                                                    ----------
Diluted earnings per share:
Net income and assumed conversions.....................         $      181              46,231            $         -
                                                                     =====               =====                  =====
</TABLE>

<PAGE>

             Notes to Consolidated Financial Statements (continued)

Note 5 - Stockholders' Equity

Authorized  capital stock consists of 50,000,000 shares of cumulative  preferred
stock, $0.01 par value, and 200,000,000 shares of Common Stock, $0.01 par value.

Changes in the outstanding shares of Common Stock of the Company are as follows:
<TABLE>
<CAPTION>

                                                                 2000                  1999                  1998
                                                              =========              ========              ========
<S>                                                          <C>                   <C>                   <C>

Balance at beginning of year..........................       45,348,519            44,533,519            44,533,519
Issuance of common shares.............................          860,000               815,000                     -
                                                            ------------          ------------         ------------
Balance at end of year                                       46,208,519            45,348,519            44,533,519
                                                            ===========           ============         ============
</TABLE>

Common Stock balances exclude 126,488 treasury shares at December 31, 2000, 1999
and  1998,   carried  at  an  average  cost  of  $5.12  per  share   aggregating
approximately $647,000.

The Company  issued 860,000 and 815,000 of previously  authorized  common shares
during  January 2000 and October  1999,  respectively,  in  connection  with the
exercise of employee stock options.

At December 31, 2000,  there were 5,185,000  common shares reserved for issuance
under the Company's stock option and other employee benefit plans.

Stockholder Rights Plan:

On January  29,  1986,  the  Company's  Board of  Directors  declared a dividend
distribution  of one right  for each  outstanding  share of Common  Stock of the
Company.  The rights, as amended,  which entitle the holder to purchase from the
Company a common share at a price of $75.00,  are not exercisable until either a
person or group of  affiliated  persons  acquires  25% or more of the  Company's
outstanding common shares or upon the commencement or disclosure of an intention
to  commence  a tender  offer or  exchange  offer for 20% or more of the  common
shares.  The rights are redeemable by the Company at $0.05 per right at any time
until the earlier of the tenth day following an  accumulation  of 20% or more of
the Company's shares by a single acquirer or group, or the occurrence of certain
Triggering Events (as defined in the Stockholder  Rights Plan). In the event the
rights become exercisable and,  thereafter,  the Company is acquired in a merger
or other business  combination,  or in certain other  circumstances,  each right
will  entitle the holder to purchase  from the  surviving  corporation,  for the
exercise  price,  Common Stock having a market value of twice the exercise price
of the right.  The rights are  subject to  adjustment  to prevent  dilution.  In
November  2000,  the Board of Directors  approved an amendment to the  Company's
existing  Shareholder  Rights Plan (the "Plan") to extend the expiration date of
the Plan to February 10, 2006 from February 10, 2001.



<PAGE>


             Notes to Consolidated Financial Statements (continued)

Note 6 - Pension and Savings Plans

The Company sponsors a non-qualified supplemental retirement plan ("Supplemental
Plan")  under  which only one  current  executive  officer  and  certain  former
officers of the Company are  participants.  The cost of the Supplemental Plan is
actuarially determined and is accrued but not funded.

Pension expense for the Supplemental Plan for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>

(in thousands)                                                              2000                1999               1998
                                                                            ====                ====               ====
<S>                                                                  <C>                <C>                 <C>

Service cost of current period................................       $       469        $        470        $       337
Interest cost on projected benefit obligation.................               468                 400                337
Amortization of unrecognized losses...........................                11                  56                  -
                                                                        --------            --------           --------
                                                                     $       948        $        926        $       674
                                                                           =====               =====              =====
</TABLE>

A  reconciliation  of the changes in the projected  benefit  obligation from the
beginning of the year to the end of the year is as follows:
<TABLE>
<CAPTION>

(in thousands)                                                                               2000                  1999
                                                                                             ====                  ====
<S>                                                                                     <C>                 <C>

Projected benefit obligation at beginning of year...............................        $   5,824           $     6,153
Service cost....................................................................              469                   470
Interest cost...................................................................              468                   400
Actuarial (gain) loss, including effect of change in assumptions................              869                  (739)
Benefits paid...................................................................             (460)                 (460)
                                                                                           -------              --------
Projected benefit obligation at end of year.....................................        $   7,170           $     5,824
                                                                                           ======                ======
</TABLE>


Accrued  pension costs for the  Supplemental  Plan at December 31, and the major
assumptions used to determine these amounts, are summarized below:
<TABLE>
<CAPTION>

(dollars in thousands)                                                                       2000                  1999
                                                                                             ====                  ====
<S>                                                                                      <C>                   <C>

Actuarial present value of benefit obligations:
Accumulated benefit obligations, fully vested...................................         $  5,540              $  4,941
                                                                                            =====                 =====
Projected benefit obligation for service rendered to date.......................         $  7,170              $  5,824
Unrecognized net loss...........................................................           (1,137)                 (279)
                                                                                         --------              --------
Accrued pension costs...........................................................         $  6,033              $  5,545
                                                                                            =====                 =====
Major assumptions:
Pre-retirement and postretirement discount rate.................................             7.5%                 7.75%
Rate of increase in future compensation.........................................             6.0%                  6.0%
                                                                                            =====                 =====

</TABLE>



<PAGE>


             Notes to Consolidated Financial Statements (continued)

The Company sponsors the AmBase 401(k) Savings Plan (the "Savings Plan"),  which
is a "Section  401(k) Plan"  within the meaning of the Internal  Revenue Code of
1986, as amended (the "Code").  The Savings Plan permits  eligible  employees to
make contributions of up to 15% of salary, which are matched by the Company at a
percentage  determined  annually.  The employer  match is currently  100% of the
first 3% of the employee's salary eligible for deferral.  Employee contributions
to the  Savings  Plan are  invested  at the  employee's  discretion,  in various
investment funds. The Company's matching  contributions are invested in the same
manner  as  the  salary   reduction   contributions.   The  Company's   matching
contributions to the Savings Plan, charged to expense, were $17,000, $25,000 and
$26,000 in 2000, 1999 and 1998,  respectively.  All contributions are subject to
maximum limitations contained in the Code.

Note 7 - Postretirement Benefits Other Than Pensions

The Company has assumed the  obligation to provide a portion of retiree  medical
and life  insurance  coverage to  individuals  who retired  from City  Investing
Company  ("City"),  which,  prior to September  1985,  owned all the outstanding
shares of Common Stock of the Company.  The Company and its  subsidiaries do not
provide postretirement benefits to employees currently retiring.

Retiree insurance coverage is provided to participants through group medical and
life  insurance  contracts.   Retiree  medical  coverage  provides  supplemental
Medicare  coverage for retirees and their  eligible  spouses.  Life insurance is
provided to retirees at 25% of the participant's  pre-retirement  amount, not to
exceed $50,000. All participants are required to contribute a portion, which may
be adjusted, of the cost of their postretirement  benefit coverage.  The Company
does not pre-fund these plans and retains the right to modify or terminate these
plans in the future.

Net  periodic  postretirement  benefit  (income)  expense  for the  years  ended
December 31 was as follows:
<TABLE>
<CAPTION>

(in thousands)                                                               2000              1999                1998
                                                                             ====              ====                ====
<S>                                                                      <C>                <C>               <C>

Interest cost on accumulated postretirement benefit obligation.......    $      9           $    14           $      22
Amortization of prior service liability..............................         (82)              (75)                (66)
Amortization of unrecognized gain....................................         (42)              (43)                (41)
                                                                         --------           --------           --------
Net periodic postretirement benefit (income) expense.................    $   (115)          $  (104)          $     (85)
                                                                            ======            ======              ======
</TABLE>


A  reconciliation  of the  changes  in the  accumulated  postretirement  benefit
obligation from the beginning of the year to the end of the year is as follows:
<TABLE>
<CAPTION>

(in thousands)                                                                                  2000               1999
                                                                                                ====               ====
<S>                                                                                          <C>              <C>

Accumulated postretirement benefit obligation at beginning of year...                        $   119          $     219
Interest cost........................................................                              9                 14
Amendments...........................................................                            (35)               (68)
Actuarial gains, including effect of assumption changes..............                            (13)               (27)
Plan participant contributions.......................................                             58                 58
Benefit premiums paid................................................                            (68)               (77)
                                                                                            --------           --------
Accumulated postretirement benefit obligation at end of year.........                        $    70          $     119
                                                                                               =====              =====
</TABLE>

<PAGE>

             Notes to Consolidated Financial Statements (continued)

The accrued postretirement benefit liability at December 31 is summarized below:
<TABLE>
<CAPTION>


(in thousands)                                                                                 2000                1999
                                                                                               ====                ====
<S>                                                                                         <C>               <C>

Accumulated postretirement benefit obligation:
Retirees........................................................................            $    70           $     119
                                                                                            --------           --------
Unrecognized net gains..........................................................                405                 434
Unrecognized prior service liability............................................                578                 625
                                                                                            --------           --------
Accrued postretirement benefit liability........................................            $ 1,053           $   1,178
                                                                                              =====               =====
</TABLE>

The accumulated  benefit obligation for 2000, 1999 and 1998 was determined using
the projected  unit credit method and a discount rate of 7.5%,  7.75% and 6.75%,
respectively. The health care cost trend rates were assumed to be 6% in 2000, 7%
in 1999,  and 8% in 1998,  gradually  declining to 5.5% in 2001 and remaining at
that level, thereafter.

Assumed  health  care cost trend rates  could have a  significant  effect on the
amounts  reported.  At December 31, 2000 a 1% change in the assumed  health care
cost trend rates, while holding all other assumptions  constant,  would have the
following effects:
<TABLE>
<CAPTION>
                                                                                                1%                  1%
(in thousands)                                                                             Increase            Decrease
                                                                                             ======             =======
<S>                                                                                         <C>               <C>

Effect on net periodic postretirement benefit income................................        $     -           $      -
Effect on accumulated postretirement benefit obligation.............................              4                 (3)
                                                                                             ======             ======

</TABLE>

Note 8 - Incentive Plans

Under the Company's  1994 Senior  Management  Incentive  Compensation  Plan (the
"1994 Plan"), an executive officer of the Company whose compensation is required
to be reported to  stockholders  under the Securities  Exchange Act of 1934 (the
"Participants") and who is serving as such at any time during the fiscal year as
to which an award is granted, may receive an award of a cash bonus ("Bonus"), in
an amount  determined  by the  Personnel  Committee  of the  Company's  Board of
Directors (the  "Committee")  and payable from an annual bonus fund (the "Annual
Bonus  Pool").   The  Committee  may  award  Bonuses  under  the  1994  Plan  to
Participants  not later  than 120 days  after the end of each  fiscal  year (the
"Reference Year").

If the  Committee  grants a Bonus under the 1994 Plan,  the amount of the Annual
Bonus Pool will be an amount equal to the sum of (i) plus (ii), where:

         (i) is ten  percent  (10%) of the amount by which the  Company's  Total
Stockholders'  Equity, as defined, on the last day of a Reference Year increased
over the Company's Total  Stockholders'  Equity, as defined,  on the last day of
the immediately preceding Reference Year; and

         (ii) is five percent (5%) of the amount by which the  Company's  market
value,  as defined,  on the last day of the Reference  Year  increased  over the
Company's  market value on the last day of the immediately  preceding  Reference
Year.



<PAGE>


             Notes to Consolidated Financial Statements (continued)


Notwithstanding  the  foregoing,  the 1994 Plan  provides that in the event of a
decrease in either or both of items (i) and/or (ii) above, the Annual Bonus Pool
is  determined  by  reference to the last  Reference  Year in which there was an
increase in such item.  If the  Committee  determines  within the  120-day  time
period to award a Bonus,  the share of the Annual  Bonus Pool to be allocated to
each  Participant  shall be as  follows:  45% of the Annual  Bonus Pool shall be
allocated to the Company's Chief Executive Officer,  and 55% of the Annual Bonus
Pool  shall be  allocated  pro  rata to each of the  Company's  Participants  as
determined  by the  Committee.  The Committee in its  discretion  may reduce the
percentage of the Annual Bonus Pool to any  Participant  for any Reference Year,
and such reduction  shall not increase the share of any other  Participant.  The
1994 Plan is not the  exclusive  plan under  which the  Executive  Officers  may
receive cash or other incentive compensation or bonuses.

Under the Company's 1993 Stock Incentive Plan (the "1993 Plan"), the Company may
grant to officers  and  employees  of the Company  and its  subsidiaries,  stock
options ("Options"), stock appreciation rights ("SARs"), restricted stock awards
("Restricted Stock"), merit awards ("Merit Awards") and performance share awards
("Performance  Shares"),  through May 28, 2008. An aggregate of 5,000,000 shares
of the  Company's  Common Stock are  reserved  for issuance  under the 1993 Plan
(upon the  exercise of Options  and Stock  Appreciation  Rights,  upon awards of
Restricted  Stock  and  Performance  Shares);  however,  of  such  shares,  only
2,500,000 shares in the aggregate shall be available for issuance for Restricted
Stock  Awards and Merit  Awards.  Such shares shall be  authorized  but unissued
shares of Common  Stock.  Options  may be granted  as  incentive  stock  options
("ISOs")  intended to qualify for favorable tax treatment  under Federal tax law
or as nonqualified stock options ("NQSOs").  SARs may be granted with respect to
any  Options  granted  under  the 1993 Plan and may be  exercised  only when the
underlying Option is exercisable. The 1993 Plan requires that the exercise price
of all Options and SARs be equal to or greater than the fair market value of the
Company's Common Stock on the date of grant of that Option.  The term of any ISO
or related SAR cannot  exceed ten years from the date of grant,  and the term of
any NQSO cannot  exceed ten years and one month from the date of grant.  Subject
to the terms of the 1993 Plan and any  additional  restrictions  imposed  at the
time of grant,  Options and any related SARs ordinarily will become  exercisable
commencing  one year  after  the date of  grant.  In the  case of a  "Change  of
Control" of the Company (as defined in the 1993 Plan),  Options granted pursuant
to the 1993 Plan may become fully exercisable as to all optioned shares from and
after the date of such Change in Control in the  discretion  of the Committee or
as  may  otherwise  be  provided  in  the  grantee's  Option  agreement.  Death,
retirement,  resignation  or  absence  for  disability  will not  result  in the
cancellation of any Options.

As a condition  to any award of  Restricted  Stock or Merit Award under the 1993
Plan,  the Committee may require a participant  to pay an amount equal to, or in
excess  of,  the par value of the  shares of  Restricted  Stock or Common  Stock
awarded to him or her. Restricted Stock may not be sold, assigned,  transferred,
pledged or otherwise encumbered during a "Restricted Period",  which in the case
of grants to  employees  shall not be less than one year from the date of grant.
The Restricted Period with respect to any outstanding shares of Restricted Stock
awarded to  employees  may be reduced by the  Committee  at any time,  but in no
event  shall  the  Restricted  Period be less  than one  year.  Except  for such
restrictions,  the  employee  as the owner of such  stock  shall have all of the
rights of a  stockholder  including,  but not limited to, the right to vote such
stock and to receive  dividends  thereon as and when paid.  In the event that an
employee's  employment is terminated  for any reason,  an employee's  Restricted
Stock will be forfeited;  provided,  however,  that the Committee may limit such
forfeiture in its sole  discretion.  At the end of the  Restricted  Period,  all
shares  of  Restricted  Stock  shall  be  transferred  free  and  clear  of  all
restrictions to the employee.  In the case of a Change in Control of the Company
(as defined in the 1993 Plan),  an  employee  may receive his or her  Restricted
Stock free and clear of all restrictions in the discretion of the Committee,  or
as may otherwise be provided pursuant to the employee's Restricted Stock award.

Performance  Share awards of Common Stock under the 1993 Plan shall be earned on
the basis of the Company's  performance in relation to  established  performance
measures for a specific performance period. Such measures may include, but shall
not be  limited  to,  return  on  investment,  earnings  per  share,  return  on
stockholder's  equity, or return to stockholders.  Performance Shares may not be
sold, assigned, transferred, pledged or otherwise encumbered during the relevant
performance  period.  Performance  Shares may be paid in cash,  shares of Common
Stock or  shares of  Restricted  Stock in such  portions  as the  Committee  may
determine.  An employee must be employed at the end of the performance period to
receive payments of Performance Shares; provided,  however, in the event that an
employee's employment is terminated by reason of death,  disability,  retirement
or other  reason  approved  by the  Committee,  the  Committee  may  limit  such
forfeiture  in its sole  discretion.  In the case of a Change in  Control of the
Company  (as  defined in the 1993  Plan),  an  employee  may  receive his or her
Performance  Shares in the discretion of the  Committee,  or as may otherwise be
provided in the employee's Performance Share award.

During January 2000, the Board of Directors of the Company approved the award of
incentive stock options to certain  employees to acquire 90,000 shares of AmBase
Common Stock at exercise  prices between $0.95 and $1.05 per share,  pursuant to
the 1993 Plan.



<PAGE>


             Notes to Consolidated Financial Statements (continued)

Under the  Company's  1985  Stock  Option  Plan (the  "1985  Plan"),  options to
purchase shares of Common Stock could be granted to salaried employees. The 1985
Plan  provided  for the granting of up to  2,000,000  shares as incentive  stock
options and/or  nonqualified  stock options  through May 22, 1995. No additional
stock  options  can be awarded  under the 1985 Plan.  As of December  31,  2000,
75,000 shares are reserved for issuance under the 1985 Plan.

As discussed in Note 5, stock  options  previously  awarded under the 1985 Plan,
for 860,000  common shares and 815,000  common shares were  exercised in January
2000 and October 1999, respectively.

Incentive plan activity is summarized as follows:
<TABLE>
<CAPTION>

                                                              1993 Stock                           1985 Stock
(shares in thousands)                                         Incentive Plan                       Option Plan
                                                       =========================          =============================
                                                                        Weighted                               Weighted
                                                        Shares           Average           Shares               Average
                                                         Under          Exercise            Under              Exercise
                                                        Option             Price           Option                 Price
                                                         =====           =======            =====               =======
<S>                                                   <C>               <C>              <C>                 <C>

Outstanding at December 31, 1997...................   $    105          $   2.13         $  1,750            $     0.15
Granted............................................         85              3.85                -                     -
                                                      --------           --------        --------               --------
Outstanding at December 31, 1998...................        190              2.90            1,750                  0.15
Granted............................................         90              2.69                -                     -
Exercised..........................................          -                 -             (815)                 0.11
                                                      --------           --------        --------               --------
Outstanding at December 31, 1999...................        280           $  2.83              935              $   0.18
Granted............................................         90              1.00                -                     -
Exercised..........................................          -                 -             (860)                 0.11
                                                      --------           --------        --------               -------
Outstanding at December 31, 2000...................        370           $  2.38               75              $   0.21
                                                         =====             =====            =====                 =====
Options exercisable at:
     December 31, 1998.............................        103           $  2.11            1,750              $   0.15
     December 31, 1999.............................        148              2.62              935                  0.18
     December 31, 2000.............................        235              2.86               75                  0.21
                                                         =====             =====            =====                 =====
</TABLE>

<TABLE>
<CAPTION>


                                                                          1993 Stock                         1985 Stock
                                                                      Incentive Plan                        Option Plan
                                                                         ===========                          =========
Weighted average fair value of options granted during:
<S>                                                                        <C>                                  <C>

     1998.....................................................             $ 1.89                               $    -
     1999.....................................................               1.25                                    -
     2000.....................................................               0.45                                    -
                                                                           ======                               ======
</TABLE>


<PAGE>


             Notes to Consolidated Financial Statements (continued)

The following  table  summarizes  information  about the Company's stock options
outstanding  and  exercisable  under the 1985 Plan and 1993 Plan at December 31,
2000, as follows:
<TABLE>
<CAPTION>


(shares in thousands)                         Options Outstanding                          Options Exercisable
                                      ===============================                ==================================
                                          Weighted
                                           Average           Weighted                                          Weighted
       Range of                          Remaining            Average                                           Average
       Exercise                        Contractual           Exercise                                          Exercise
         Prices         Shares                Life              Price                  Shares                     Price
         ======          =====            ========            =======                   =====                   =======
<S>                      <C>               <C>             <C>                           <C>                 <C>

          $0.21             75             4 years         $     0.21                      75                $     0.21
 $0.95 to $1.05             90             7 years               1.00                       -
                -
          $2.09            100             6 years               2.09                     100                      2.09
 $2.56 to $3.65            135             6 years               2.98                      90                      3.13
          $4.02             45             2 years               4.02                      45                      4.02
                      --------               =====              =====                --------                   =======
          Total            445                                                            310
                         =====                                                          =====
</TABLE>

The details of the Company's  incentive plans are summarized  above. The Company
has adopted the  disclosure  only  provisions of Statement 123, but continues to
apply APB 25 in accounting for employee stock options. No compensation  expense,
attributable to stock incentive plans, was charged to earnings during 2000, 1999
and 1998. The fair value of stock options  granted by the Company in 2000,  1999
and 1998 used to compute proforma net income and earnings per share  disclosures
is the estimated  fair value at date of grant,  using the  Black-Scholes  option
pricing model with the following weighted average assumptions used for grants in
2000,  1999 and 1998,  respectively:  dividend yield 0% for all years,  expected
historical volatility of 0.44, 0.46 and 0.53, risk-free interest rates of 5.80%,
6.07% and 4.65% , and weighted  average  expected  life of the options of 4 to 6
years.  If the  Company  had elected to  recognize  compensation  cost for stock
options  based on the fair  value at date of grant for stock  options  under the
1993 Plan and the 1985 Plan,  consistent with the method prescribed by Statement
123, net income  (loss) and net income  (loss) per share would have been changed
to the proforma amounts indicated below.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially  affect the fair value estimate,  and given the
substantial  changes in the price per share of the Company's Common Stock during
2000,  1999 and  1998,  in  management's  opinion,  the  existing  models do not
necessarily  provide a reliable single measure of the fair value of its employee
stock options.

For purposes of proforma disclosures, the estimated fair value of the options is
amortized to expense over the options'  vesting period.  The Company's  proforma
<TABLE>
<CAPTION>
information for the years ended December 31 follows:

(in thousands, except per share data)                                       2000                1999               1998
                                                                            ====                ====               ====
<S>                                                                      <C>                <C>                 <C>

Net income (loss)
As reported.....................................................         $  5,174           $ (4,515)           $   181
Proforma........................................................            5,090             (4,651)                61
                                                                            =====              ======              =====
Per share data
As reported.....................................................         $   0.11           $  (0.10)           $     -
Proforma........................................................             0.11              (0.10)                 -
                                                                              =====             ======            =====
</TABLE>


<PAGE>


                        AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

Note 9 - Income Taxes

The  components  of income tax expense  for the years  ended  December 31 are as
follows:
<TABLE>
<CAPTION>

(in thousands)                                                              2000                1999               1998
                                                                            ====                ====               ====
<S>                                                                    <C>                  <C>               <C>

Income tax expense                                                     $    (205)           $   (235)         $    (242)
                                                                            ====                ====               ====
</TABLE>

The components of pretax income (loss) and the  difference  between income taxes
computed at the statutory  federal rate of 35% in 2000,  1999 and 1998,  and the
provision for income taxes for the years ended December 31 follows:
<TABLE>
<CAPTION>


(in thousands)                                                              2000                1999               1998
                                                                            ====                ====               ====
<S>                                                                    <C>                  <C>               <C>


Income (loss) before income taxes...............................       $   5,379            $ (4,280)         $     423
                                                                            ====                ====               ====

Tax (expense) benefit:
Tax at statutory federal rate...................................       $ ( 1,883)           $  1,498          $    (148)
Accounting loss benefit not recognized..........................               -              (1,498)                 -
Accounting loss benefit recognized..............................           1,883                   -                148
State income taxes..............................................            (205)               (235)              (242)
                                                                        --------            --------           --------

                                                                       $    (205)           $   (235)         $    (242)
                                                                            ====                ====               ====
</TABLE>

The  composition  of income tax  expense  for the year ended  December  31 is as
follows:
<TABLE>
<CAPTION>


(in thousands)                                                              2000                1999               1998
                                                                            ====                ====               ====
<S>                                                                    <C>                  <C>               <C>

Current:
Federal.........................................................       $       -            $      -          $       -
State...........................................................            (205)               (235)              (242)
                                                                        --------            --------           --------
                                                                            (205)               (235)              (242)
                                                                            ====                ====               ====
</TABLE>

<PAGE>

             Notes to Consolidated Financial Statements (continued)

In June 1998,  the Company  paid  $12,700,000  to the IRS for tax and  estimated
interest to be applied to the Company's Fresh Start tax liability, which related
to a 1987 tax dispute with the IRS. Based on the Final  Stipulation  between the
Company and the IRS on the Fresh  Start  issue,  the Company  received a $36,000
refund  of tax and  interest  on the  Fresh  Start  issue  in  August  2000.  In
connection with the Final  Stipulation,  the Company utilized  approximately $29
million of NOL's. A summary of the Company's NOL  carryforwards  remaining after
the  utilization  of the $29  million  NOL's  applied to Fresh Start is provided
below.

As a result of the Office of Thrift Supervision's  December 4, 1992 placement of
Carteret  in  receivership,   under  the  management  of  the  Resolution  Trust
Corporation ("RTC")/Federal Deposit Insurance Corporation ("FDIC"), and proposed
Treasury  Reg.  ss.1.597-4(g),  the  Company had  previously  filed its 1992 and
subsequent  federal  income tax returns  with  Carteret  disaffiliated  from the
Company's  consolidated  federal  income  tax  return.  Based upon the impact of
Treasury  Reg.  ss.1.597-4(g),  which was issued in final form on  December  20,
1995, a continuing review of the Company's tax basis in Carteret, and the impact
of prior year tax return  adjustments  on the Company's  1992 federal income tax
return as filed,  the Company decided not to make an election  pursuant to final
Treasury  Reg.   ss.1.597-4(g)  to  disaffiliate  Carteret  from  the  Company's
consolidated  federal  income tax return  effective  as of December 4, 1992 (the
"election decision").

The  Company has made  numerous  requests to the  RTC/FDIC  for tax  information
pertaining to Carteret and the resulting successor institution, Carteret Federal
Savings Bank ("Carteret FSB"); however all of the information still has not been
received.  Based on the Company not making the election  decision,  as described
above,  and the receipt of some of the requested  information from the RTC/FDIC,
the  Company  has amended  its 1992  consolidated  federal  income tax return to
include the federal income tax effects of Carteret and Carteret FSB. The Company
is still in the process of amending its consolidated  federal income tax returns
for 1993 and subsequent years.

The  Company  anticipates  that,  as a result of filing a  consolidated  federal
income tax return with  Carteret FSB, a total of  approximately  $170 million of
tax NOL  carryforwards  will be  generated  from  the  Company's  tax  basis  in
Carteret/Carteret  FSB as tax losses are  incurred by Carteret FSB of which $158
million are still available for future use. Based on the Company's recent filing
of its  amended  1992  consolidated  federal  income tax  return to include  the
federal  income tax effects of Carteret  FSB,  approximately  $56 million of NOL
carryforwards  are  generated  for tax year 1992 which expire in 2007,  with the
remaining  approximate  $102  million  of  NOL  carryforwards  to be  generated,
expiring no earlier  than 2008.  These NOL  carryforwards  would be available to
offset future taxable income,  in addition to the NOL  carryforwards  as further
detailed below.

Based upon the Company's  federal  income tax returns as filed from 1993 to 1999
(subject to IRS audit adjustments),  an estimate of year 2000 federal income tax
return,  after  utilizing $29 million of NOL  carryforwards  in connection  with
Fresh Start;  and excluding the NOL  carryforwards  generated from the Company's
tax basis in  Carteret/Carteret  FSB, as noted  above,  at December 31, 2000 the
Company has NOL carryforwards available to reduce future federal taxable income,
which expire if unused, as follows:
<TABLE>
<CAPTION>

                <S>              <C>

                2009             $2,300,000
                2010              5,300,000
                2012              1,100,000
                2018              5,400,000
                2019              4,000,000
                                  ---------
                                $18,100,000
                                ===========
</TABLE>

The Company's  federal income tax returns for years  subsequent to 1992 have not
been reviewed by the IRS. The utilization of certain carryforwards is subject to
limitations  under U.S.  federal  income tax laws. In addition,  the Company has
approximately $21 million of alternative minimum tax credit carryforwards, which
are not subject to expiration.

<PAGE>


             Notes to Consolidated Financial Statements (continued)

Under  Statement 109, the Company has calculated a net deferred tax asset of $27
million and $28 million as of December 31, 2000 and 1999, respectively,  arising
primarily  from  NOL's,  alternative  minimum tax credits and the excess of book
over tax  reserves  (not  including  the  anticipated  tax  effects of the NOL's
expected to be generated  from the  Company's  tax basis in Carteret,  resulting
from  the  election  decision,  as more  fully  described  above).  A  valuation
allowance  has been  established  for the entire  net  deferred  tax  asset,  as
management,  at the current time,  has no basis to conclude that  realization is
more likely than not.

Note 10 - Commitments and Contingencies

Future   minimum  rental   payments,   principally   for  office  space,   under
noncancellable  operating leases at December 31, 2000, are: 2001, $20,000.  Rent
expense charged to earnings was $67,000, $67,000 and $66,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.

The Company is currently in negotiations to purchase a 14,000 square foot office
building in Greenwich,  CT for  approximately  $2,400,000.  Approximately  3,000
square  feet will be used by the  Company  for its  executive  offices  with the
remaining square footage leased to unaffiliated third parties.

Note 11 - Legal Proceedings

(a)   The Company is or has been a defendant in a number of lawsuits or
      proceedings, including the following:

Marshall  Manley v. AmBase  Corporation.  On November 14, 1996,  Marshall Manley
("Manley"),  a former  President,  Chief  Executive  Officer and Director of the
Company,  commenced an action against the Company,  seeking indemnification from
the Company pursuant to a May 27, 1993 employment  settlement  agreement between
Manley and the Company.  Manley seeks  reimbursement of certain alleged payments
he made to the Trustee in the bankruptcy  proceedings of the law firm of Finley,
Kumble, Wagner, Heine, Underberg,  Manley & Casey (the "Manley action"), arguing
that he served at such firm at the request of the Company.  The Manley action is
pending in the United  States  District  Court for the Southern  District of New
York.  The Company  filed its answer on January 21,  1997,  raising  substantial
affirmative  defenses which the Company intends to vigorously pursue. On October
30,  1997,  AmBase  amended its Answer and  Counterclaims  to include a claim of
fraud against Manley. In December 1997,  Manley moved for summary judgment.  The
Company raised substantial  opposition to the motion and moved to strike certain
of Manley's  affirmative  defenses  which Manley raised in  connection  with the
Company's  fraud claim  against  Manley.  Oral  argument on Manley's  Motion for
Summary  Judgment  and the  Company's  motion  to  strike  Manley's  affirmative
defenses was held on May 15, 1998. The court denied both motions. The jury trial
of the  plaintiff's  breach  of  contract  claims  took  place in May,  2000 and
resulted in a verdict against the Company. The Company's counterclaims for fraud
and  reformation  were  tried to the  Court  immediately  following  the  jury's
verdict.  In December,  2000, the Court, in response to the Company's motion for
judgment as a matter of law and/or for a new trial,  vacated the jury's  earlier
verdict (therefore nullifying it) and ordered a new trial. The Court has not yet
fixed a date for the new trial.  Subsequent to the Court's vacatur of the jury's
verdict in January,  2001 the Court  dismissed the Company's  courterclaims  for
fraud and reformation. The Company intends to vigorously defend against Manley's
contract claims on retrial.

Dispute with Internal Revenue Service over Withholding Obligations  (Netherlands
Antilles). In connection with the liquidation of City Investing Company ("City")
the Company,  among others,  contractually  assumed  certain tax  liabilities of
City, which, prior to September 1985, owned all the outstanding shares of Common
Stock of the Company.  Other  liabilities  were assumed by, among  others,  City
Investing Company  Liquidating Trust (the "Trust").  The only issue that remains
in  dispute  between  City  and the  IRS is  with  respect  to  obligations  for
withholding  of  taxes  in  connection  with  a  Netherlands   Antilles  finance
subsidiary of City (the "Withholding Issue").

With respect to the Withholding Issue, in connection with a Netherlands Antilles
finance  subsidiary  of City,  on May 11,  1995,  the IRS  issued  a  Notice  of
Deficiency for the  withholding  of tax on interest  payments for the years 1979
through 1985. In the Notice of  Deficiency,  the IRS contends that City's wholly
owned  Netherlands  Antilles  finance  subsidiary  should be disregarded for tax
purposes.  The  Company,  on  behalf  of City,  vigorously  contested  the IRS's
position in accordance with the IRS's internal  appeals  procedures.  In January
1992,  the National  Office of the IRS issued  technical  advice  supporting the
auditing agent's position.  In October 1992, the Company appealed this technical
advice to the National  Office.  The National Office advised the Company that it
expected to issue technical  advice  supporting the auditing  agent's  position,
whereupon  the Company  advised the IRS that it was  withdrawing  its  technical
advice request.

<PAGE>

             Notes to Consolidated Financial Statements (continued)


On June 30, 1995, the Company, on behalf of City, filed a petition in the United
States Tax Court ("Tax  Court")  contesting  the Notice of  Deficiency.  The IRS
filed its answer on August 23,  1995.  The  Company  filed a motion for  summary
judgment in its favor on February 13, 1996.  On April 17, 1996,  the IRS filed a
Notice of Objection to the Company's motion for summary judgment.  The Tax Court
requested,  and the Company filed,  on July 3, 1996, a reply to the IRS's Notice
of Objection.  On September 19, 1996, the Court denied the Company's  motion for
summary judgment without prejudice.  Based on the Tax Court's examination of the
record and the status of the discovery  process,  the Tax Court  concluded  that
summary adjudication at that time was inappropriate.  The Tax Court directed the
parties to engage in full and complete discovery as expeditiously as possible. A
trial was held in this case on March 24,  1997,  after which the Judge asked the
IRS and the Company to submit post-trial briefs, which were submitted to the Tax
Court in August  1997.  If the IRS were to prevail on this  issue,  the  Company
could be liable for City's withholding obligation plus interest in excess of the
Company's financial resources. A significant factor in determining the amount of
the  Company's  ultimate  liability  for this issue is whether  pursuant  to the
contractual  arrangement  between the Company and City, the Company is primarily
liable for the withholding  obligation and interest.  See AmBase  Corporation v.
City Investing Company Liquidating Trust, et al., below.

In a case dealing with a similar withholding issue, the Tax Court ruled in favor
of the taxpayer,  Northern Indiana Public Service Co. ("Northern  Indiana"),  in
November 1995. The Tax Court rejected the IRS's contention that interest paid to
Northern  Indiana's foreign  subsidiary was subject to United States withholding
of tax. The IRS appealed this decision  (Northern  Indiana Public Service Co. v.
Commissioner)  to the United  States  Court of Appeals for the 7th Circuit  (the
"Appeals Court"). In June 1997 the Appeals Court affirmed the Tax Court's ruling
in favor of  Northern  Indiana.  Although  the  Appeals  Court  decision  in the
Northern  Indiana case could be beneficial to the case involving City, it is not
necessarily  indicative  of the ultimate  result of the final  settlement of the
Netherlands Antilles issue involving City.

Based on an evaluation of the IRS's contention,  counsel has advised the Company
that, although the outcome in litigation can by no means be assured, the Company
has a very strong case and should prevail. Notwithstanding counsel's opinion and
the Tax Court's ruling in the Northern  Indiana case, it is not possible at this
time to determine the final  disposition of this issue,  when the issues will be
resolved,  or their final financial effect. A final disposition of this issue in
the  Company's  favor  would have a material  positive  effect on the  Company's
Consolidated Statement of Operations and Financial Condition.

The  actions  against  the  Company  are in various  stages.  Nevertheless,  the
allegations  and  claims  are  material  and,  if  successful,  could  result in
substantial  judgments  against the Company.  To the extent the aggregate of any
such judgments were to exceed the resources available,  these matters would have
a material  adverse effect on the Company's  financial  condition and results of
operations. Due to the nature of these proceedings,  the Company and its counsel
are unable to express any opinion as to their probable outcome.

<PAGE>
             Notes to Consolidated Financial Statements (continued)

 (b)  Supervisory Goodwill Litigation:

During the third  quarter of 1993,  the Company filed a claim against the United
States,  in the United  States  Court of Federal  Claims  (the "Court of Federal
Claims"),  based upon the impact of the Financial Institutions Reform,  Recovery
and Enforcement  Act of 1989 ("FIRREA") on the Company's  investment in Carteret
Savings  Bank   ("Carteret").   Approximately   120  other   similar   so-called
"supervisory  goodwill"  cases,  commenced  in recent  years by other  financial
institutions  and/or  their  shareholders,  are  pending in the Court of Federal
Claims. Three of these cases,  Winstar Corp. v. United States,  Glendale Federal
Bank, FSB v. United States, and Statesman Savings Holding Corp. v. United States
(the "consolidated  cases"), which involve many of the same issues raised in the
Company's  suit,  were appealed to the United States Supreme Court (the "Supreme
Court").  On  July  1,  1996,  the  Supreme  Court  issued  a  decision  in  the
consolidated  cases.  The Supreme  Court's  decision  affirmed the lower Court's
grant of summary  judgment in favor of the  plaintiffs on the issue of liability
and remanded the cases for a determination of damages.  Although the decision in
the  consolidated  cases  is  beneficial  to  the  Company's  case,  it  is  not
necessarily indicative of the ultimate outcome of the Company's action.

On  September  18,  1996,  the Court of Federal  Claims  entered an Omnibus Case
Management  Order that will govern further  proceedings in the Company's  action
and most of the other so-called  "Winstar-related" cases. On March 14, 1997, the
Court entered an order permitting the Federal Deposit Insurance Company ("FDIC")
to intervene as an  additional  plaintiff in  forty-three  cases,  including the
Company's  case,  but not  allowing  the  FDIC  to be  substituted  as the  sole
plaintiff in those cases.

On April 9, 1999 and April  16,1999,  respectively,  the Court issued  decisions
addressing damage claims in two of the Winstar-related  cases,  Glendale Federal
Bank, FSB v. United States, and California Federal Bank v. United States. In the
Glendale case,  the Court awarded  Glendale  $908.9  million in restitution  and
non-overlapping  reliance  damages,  representing  the benefit  conferred on the
government  as a result of the  contract  at issue in that  case,  plus  certain
non-overlapping  damages  suffered by  Glendale as a result of the  government's
breach of contract. The Court declined to award expectation damages as requested
by Glendale.  In the  California  Federal  case,  the Court  awarded  California
Federal $23.4 million in damages,  representing  expenses incurred by California
Federal in raising  new capital to replace the  supervisory  goodwill  lost as a
result of the  government's  breach of  contract.  The Court  declined  to award
expectation  damages,  restitution,  or other  reliance  damages as requested by
California Federal. On February 16, 2001, the United States Court of Appeals for
the Federal Circuit issued a decision in the case of Glendale  Federal Bank, FSB
v. United States, which involves certain damages issues related to the Company's
case.  The decision  vacated in part the decision of the United  States Court of
Federal  Claims dated April 9, 1999,  and remanded the case back to the Court of
Federal Claims for a determination  of total reliance  damages.  The trial court
and appellate decisions in Glendale and California Federal as well as other case
decisions,  may be relevant to the  Company's  claims,  but are not  necessarily
indicative of the ultimate outcome of the Company's action.

On March 20, 1998, the FDIC filed a motion for partial summary  judgment against
the United  States on certain  liability  issues,  and the  Company  has filed a
memorandum  in support of that  motion.  The FDIC's  motion is  currently  under
submission to the court.

Fact  discovery for the Company was completed  November  30,1999  pursuant to an
extension of time granted by the Court.  On September 9, 1999, the Company filed
a Motion For Partial  Summary  Judgment  on  liability  under a Fifth  Amendment
Takings claim theory of recovery.  On November 24, 1999,  the FDIC, as successor
to the  rights of  Carteret  and as  Plaintiff-Intervenor  in the case,  filed a
response  brief  opposing  the  Company's  Motion.  On  December  6,  1999,  the
Department of Justice (the "DOJ") (on behalf of the United States) filed a brief
opposing the  Company's  Motion For Partial  Summary  Judgment On Liability  And
Cross-Moved for Summary Judgment On the Company's  Takings claim. On January 25,
2000, the Company  responded to the DOJ's brief and the FDIC's brief by filing a
Brief (i) In Reply To Defendant's  Opposition To Plaintiffs'  Motion For Partial
Summary  Judgment,  (ii) In Opposition To Defendant's  Cross-Motion  For Summary
Judgment,  And (iii) In Reply To  FDIC's  Response  To  Plaintiffs'  Motion  For
Partial Summary Judgment. On February 22, 2000 the DOJ filed a brief in Reply To
Plaintiffs' Opposition To Defendant's Cross-Motion For Summary Judgment.

<PAGE>

             Notes to Consolidated Financial Statements (continued)


On February 18, 2000, the Court issued an Order granting the Company's motion to
suspend the expert discovery  period until after the Company's  Summary Judgment
Motion has been decided.  The expert discovery period will now commence with the
Company's  identification  of its experts  within 30 days of the decision of the
Court on the Company's  pending  Summary  Judgment  Motion.  On October 2, 2000,
Senior Judge Loren Smith of the Court of Federal  Claims heard oral arguments in
the Company's  supervisory  goodwill case against the United States  government.
The court heard  arguments  both as to the  contractual  liability of the United
States to Carteret  Savings  Bank,  and as to the  Company's  claim  against the
United States under the Takings Clause of the Fifth Amendment.  No assurance can
be given regarding the ultimate outcome of the litigation.

 (c) Other - AmBase Corporation v. City Investing Company Liquidating
             Trust, et al.

         The  Delaware  Court  Action - In  August  2000,  the  Company  filed a
         complaint  against  City  Investing  Company   Liquidating  Trust  (the
         "Trust") seeking  determination by the Delaware Chancery Court that the
         Trust,  as successor to City Investing  Company,  (as opposed to AmBase
         Corporation),  should be primarily liable for amounts,  if any, owed to
         the IRS in connection  with the NV  Withholding  Obligation  Issue,  as
         further  discussed  herein  above.  The Company is also  seeking  other
         relief and certain other  damages from the Trust and its  Trustees.  On
         September 29, 2000, the Trust moved to dismiss the Company's  complaint
         on the grounds  that it fails to state a claim for which  relief can be
         granted  and  the  Company's  claims  are  barred  by  the  statute  of
         limitations.  The Company subsequently filed a brief in response to the
         Trust's motion.

         On  December  14, 2000 oral  argument on Trust's  motion to dismiss was
         heard before the Delaware  Court.  On January 3, 2001,  Vice Chancellor
         Strine of the Court of Chancery  of the State of  Delaware  granted the
         Motion to Dismiss this action filed by the  defendants.  On February 7,
         2001, Vice  Chancellor  Strine denied AmBase's Motion for Reargument of
         this  dismissal.  On March 8, 2001 the Company filed a Notice of Appeal
         of the  February 7, 2001 denial,  to the Supreme  Court of the State of
         Delaware,  but has  subsequently  withdrawn  this  appeal  in  order to
         proceed more directly with its New York Court action against the Trust,
         described below.

         The New York Court  Action - On January 31, 2001,  the Company  filed a
         Complaint in the United States District Court for the Southern District
         of New York (the "NY Court") seeking  determination  that the Trust, as
         successor to City  Investing  Company,  should be primarily  liable for
         amounts,  if any, owed to the IRS in connection with the NV Withholding
         Obligation  Issue. The Company is also seeking other relief and certain
         other  damages from the Trust and its  Trustees.  On February 23, 2001,
         the Trust filed a Motion to Dismiss  the  Company's  Complaint  in this
         action.  On March 9,  2001 the  Company  filed  its  opposition  to the
         Trust's  Motion to Dismiss.  No assurances  can be given  regarding the
         ultimate outcome of the litigation.

Note 12 - Fair Value of Financial Instruments

The  carrying   amounts  reported  in  the  balance  sheet  for  cash  and  cash
equivalents, and accounts payable and accrued liabilities approximate fair value
due to the short-term nature of these instruments.  The fair value of investment
securities  - held to maturity  are based on current  market  quotations.  Other
investment  securities  are based upon the December 2000 and 1999 cost for these
privately  placed  shares.  The carrying value of applicable  other  liabilities
approximates their fair value.

<PAGE>

             Notes to Consolidated Financial Statements (continued)


Note 13 - Supplemental Disclosure of Cash Flow Information

Additional information regarding cash flow for the years ended December 31 is as
follows:
<TABLE>
<CAPTION>

(in thousands)                                                              2000               1999                1998
                                                                            ====               ====                ====
<S>                                                                    <C>               <C>                <C>

Cash paid during the period:
Income tax ...............................................             $     170         $      233         $    12,940
                                                                          ======             ======              ======
</TABLE>

For the years ended December 31, 2000, 1999 and 1998 no cash interest was paid.
<PAGE>


Note 14 - Quarterly Financial Information (unaudited)

Summarized quarterly financial information follows:
<TABLE>
<CAPTION>


                                                First            Second            Third            Fourth         Full
(in thousands, except per share data)         Quarter           Quarter          Quarter           Quarter         Year
                                                =====             =====            =====             =====        =====
<S>                                          <C>              <C>                <C>              <C>          <C>
2000:
Operating expenses......................     $  1,303         $   2,040          $ 1,171          $  1,338     $  5,852
                                             ----------       ----------         ----------       ----------   ----------
Operating loss..........................       (1,303)           (2,040)          (1,171)           (1,338)      (5,852)
Interest income.........................          582               676              766               771        2,795
Other income............................           50             8,308               50                28        8,436
                                            ----------       ----------         ----------       ----------     ---------
Income (loss) before income taxes.......         (671)            6,944             (355)             (539)       5,379
Income tax expense .....................          (55)              (55)             (44)              (51)        (205)
                                            ----------       ----------         ----------       ----------    ----------
Net income (loss).......................     $   (726)       $    6,889          $  (399)         $   (590)    $  5,174
                                                =====             =====            =====             =====        =====
Earnings per common share:
Net income (loss) - basic...............     $  (0.02)       $     0.15          $  (0.01)        $  (0.01)    $  0.11
Net income (loss) - assuming dilution...        (0.02)             0.15             (0.01)           (0.01)       0.11
                                                =====             =====            =====             =====        =====


1999:
Operating expenses......................     $  1,038         $   2,245          $ 1,482          $  1,875     $  6,640
                                             ----------       ----------         ----------       ----------   ----------
Operating loss..........................       (1,038)           (2,245)          (1,482)           (1,875)      (6,640)
Interest income.........................          531               523              544               568        2,166
Other income............................           43                61               50                40          194
                                            ----------       ----------         ----------       ----------     ----------
Loss before income taxes................         (464)           (1,661)            (888)           (1,267)      (4,280)
Income tax expense .....................          (55)              (68)             (46)              (66)        (235)
                                            ----------       ----------         ----------       ----------    ----------
Net loss................................     $   (519)        $  (1,729)         $  (934)         $ (1,333)    $ (4,515)
                                                =====             =====            =====             =====        =====
Earnings per common share:
Net loss - basic........................     $  (0.01)        $   (0.04)         $ (0.02)         $  (0.03)    $  (0.10)
Net loss - assuming dilution............        (0.01)            (0.04)           (0.02)            (0.03)       (0.10)
                                                =====             =====            =====             =====        =====
</TABLE>

<PAGE>


ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
             AND FINANCIAL DISCLOSURE.
None.

PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  concerning  executive  officers  required by this item is set forth
following Item 4 of Part I of this report under the caption "Executive  Officers
of the  Registrant",  pursuant to General  Instruction  G to Form 10-K.  For the
information  required  to be set forth by the  Company in  response to this item
concerning  directors  of  the  Company,  see  the  Company's  definitive  Proxy
Statement  for its Annual  Meeting of  Shareholders  to be held on June 1, 2001,
under the caption "Information  Concerning the Board and its Committees",  which
is incorporated herein by reference,  which the Company intends to file with the
Securities  and Exchange  Commission  not later than 120 days after the close of
its fiscal year.

ITEM 11.     EXECUTIVE COMPENSATION

For the information  required to be set forth by the Company in response to this
item,  see the Company's  definitive  Proxy  Statement for its Annual Meeting of
Shareholders  to  be  held  on  June  1,  2001,  under  the  caption  "Executive
Compensation",  which is  incorporated  herein by  reference,  which the Company
intends to file with the Securities  and Exchange  Commission not later than 120
days after the close of its fiscal year.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

For the information  required to be set forth by the Company in response to this
item,  see the Company's  definitive  Proxy  Statement for its Annual Meeting of
Shareholders  to be held on June 1, 2001,  under the caption "Stock  Ownership",
which is  incorporated  herein by reference,  which the Company  intends to file
with the  Securities  and Exchange  Commission not later than 120 days after the
close of its fiscal year.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For the information  required to be set forth by the Company in response to this
item,  see the Company's  definitive  Proxy  Statement for its Annual Meeting of
Shareholders  to  be  held  on  June  1,  2001,   under  the  caption   "Certain
Relationships  and  Related  Transactions",  which  is  incorporated  herein  by
reference,  which the Company  intends to file with the  Securities and Exchange
Commission not later than 120 days after the close of its fiscal year.

<PAGE>

PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents filed as a part of this report:
<TABLE>
<CAPTION>


1.   Index to Financial Statements:                                                                            Page
<S>      <C>                                                                                                   <C>

         AmBase Corporation and Subsidiaries:
              Report of Independent Accountants.................................................................11
              Consolidated Statements of Operations.............................................................12
              Consolidated Balance Sheets.......................................................................13
              Consolidated Statements of Changes in Stockholders' Equity........................................14
              Consolidated Statements of Cash Flows.............................................................15
              Notes to Consolidated Financial Statements........................................................16
</TABLE>


2.   Index to Financial Statements Schedules:

         All schedules have been omitted because they are not applicable.

3.   Exhibits:

         3A.      Restated  Certificate of Incorporation  of AmBase  Corporation
                  (as  amended  through  February  12,  1991)  (incorporated  by
                  reference to Exhibit 3A to the Company's Annual Report on Form
                  10-K for the year ended December 31, 1990).

         3B.      By-Laws of AmBase  Corporation  (as amended  through March 15,
                  1996),  (incorporated  by  reference  to  Exhibit  3B  to  the
                  Company's  Annual  Report  on Form  10-K  for the  year  ended
                  December 31, 1995).

         4.       Rights  Agreement  dated as of February  10, 1986  between the
                  Company and American  Stock Transfer and Trust Co. (as amended
                  March 24, 1989,  November 20, 1990, February 12, 1991, October
                  15, 1993, February 1, 1996 and November 1, 2000) (incorporated
                  by reference to Exhibit 4 to the  Company's  Annual  Report on
                  Form 10-K for the year ended  December 31, 1990, the Company's
                  Quarterly  Report on Form 10-Q for the quarterly  period ended
                  September 30, 1993,  the Company's  Annual Report on Form 10-K
                  for the  year  ended  December  31,  1995  and  the  Company's
                  Quarterly  Report on Form 10-Q for the Quarterly  period ended
                  September 30, 2000, respectively).

         10A.     1985 Stock  Option  Plan for Key  Employees  of AmBase and its
                  Subsidiaries  (incorporated by reference to Exhibit 10B to the
                  Company's  Annual  Report  on Form  10-K  for the  year  ended
                  December 31, 1989).

         10B.     1993  Stock  Incentive  Plan  as  amended   (incorporated   by
                  reference to Exhibit A to the  Company's  Proxy  Statement for
                  the Annual Meeting of Stockholders held on May 28, 1998).

         10C.     1994   Senior   Management    Incentive    Compensation   Plan
                  (incorporated by reference to Exhibit A to the Company's Proxy
                  Statement for the Annual Meeting of  Stockholders  held on May
                  27, 1994).

         10D.     AmBase Officers and Key Employees Stock Purchase and Loan Plan
                  (incorporated  by  reference  to Exhibit 10E to the  Company's
                  Annual  Report on Form 10-K for the year  ended  December  31,
                  1989).

         10E.     AmBase Supplemental Retirement Plan (incorporated by reference
                  to Exhibit 10C to the Company's Annual Report on Form 10-K for
                  the year ended December 31, 1989).

         10F.     Assignment  and  Assumption  Agreement  dated as of August 30,
                  1985,  between the Company and City (incorporated by reference
                  to  Exhibit  28 to the  Company's  Current  Report on Form 8-K
                  dated September 12, 1985).
<PAGE>

         10G.     Employment  Agreement dated as of June 1, 1991 between Richard
                  A.  Bianco and the  Company,  as  amended  December  30,  1992
                  (incorporated  by  reference  to Exhibit 10G to the  Company's
                  Annual  Report on Form 10-K for the year  ended  December  31,
                  1992), as amended February 24, 1997 (incorporated by reference
                  to Exhibit 10G to the Company's Annual Report on Form 10-K for
                  the year ended  December 31,  1996) and as amended March 6,
                  2001 included herein.

         21.      Subsidiaries of the Registrant.

         23.      Consent of Independent Accountants.

Exhibits, except as otherwise indicated above, are filed herewith.

(b)   Form 8-K

      The Company was not  required to file a Current  Report on Form 8-K during
the quarter ended December 31, 2000.


<PAGE>


Signatures

Pursuant to the  requirements of Section 13 or 15(d) 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,  on the 29th day of March
2001.

AMBASE CORPORATION



RICHARD A. BIANCO
Chairman, President and Chief Executive
Officer (Principal Executive Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities indicated, on the 29th day of March 2001.





RICHARD A. BIANCO                       JOHN P. FERRARA
Chairman, President and                 Vice President, Chief Financial Officer
Chief Executive Officer                 and Controller
                                        (Principal Financial and Accounting
                                          Officer)





JOHN B. COSTELLO                         ROBERT E. LONG
Director                                 Director





MICHAEL L. QUINN
Director

<PAGE>

DIRECTORS AND OFFICERS

Board of Directors
Richard A. Bianco               John B. Costello         Robert E. Long
Chairman, President and         Private Investor         Managing Director
Chief Executive Officer                                  Goodwyn, Long & Black
AmBase Corporation

Michael Quinn
Private Investor

AmBase Officers
Richard A. Bianco                     John P. Ferrara
Chairman, President and               Vice President, Chief Financial Officer
Chief Executive Officer               and Controller

INVESTOR INFORMATION

Annual Meeting of Stockholders                    Corporate Headquarters
==============================                    ======================

The 2001 Annual  Meeting is currently             AmBase Corporation
scheduled to be held at 9:00 a.m.  Eastern        51 Weaver Street, Bldg. 2
Daylight  Time,  on Friday,  June 1, 2001, at:    Greenwich, CT  06831-5155
                                                  (203) 532-2000
    Greenwich Library, the Cole Auditorium
    101 West Putnam Avenue
    Greenwich, CT  06830                          Stockholder Inquiries
                                                  =====================

Common Stock Trading                              Stockholder inquiries,
====================                              including requests for the
                                                  following: (i) change of
AmBase stock is traded  through one or            address; (ii) replacement of
more market-makers  (ii)  replacement of          lost stock certificates;
lost stock  certificates;  with                   (iii) Common Stock name
quotations made available in the "pink            registration changes; (iv)
sheets" (iii)  Common  Stock  name                Quarterly Reports on Form
registration changes; published  by  the          10-Q; (v) Annual Reports on
National Quotation Bureau, Inc.                   Form 10-K; (vi)proxy material;
                                                  and (vii) information regard-
                                                  ing stock holdings, should be
                                                  directed to:

Issue         Abbreviation   Ticker Symbol        American Stock Transfer and
=====         ============   =============        Trust Company
                                                  40 Wall Street - 46th Floor
Common Stock  AmBase         ABCP                 New York, NY  10005
                                                  Attn:  Shareholder Services
                                                  (800) 937-5449 or
Transfer Agent and Registrar                      (718) 921-8200
============================
                                                  In addition, the Company's
American Stock Transfer and                       public reports, including
    Trust Company                                 Quarterly Report on Form 10-Q,
40 Wall Street - 46th Floor                       Annual Report on Form 10-K
New York, NY  10005                               and Proxy Statements, can be
Attn:  Shareholder Services                       Obtained through the
(800) 937-5449 or (718) 921-8200                  Securities and Exchange
                                                  Commission EDGAR Database
Independent Accountants                           over the World Wide Web at
=======================                           www.sec.gov.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas                       Number of Stockholders
New York, NY  10036                               ======================
                                                  As of January 31, 2001, there
                                                  were approximately 17,700
                                                  stockholders.

<PAGE>
                     EXHIBITS ATTACHED WITH THIS FORM 10-K
<TABLE>
<CAPTION>
Exhibit No.                   Description
-----------                   -----------
<S>                           <C>
     21                       Subsidiaries of the Registrant
     23                       Consent of Independent Accountants
     10 G.                    Employment Amendment
</TABLE>