<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of

                       The Securities Exchange Act of 1934

 For the fiscal year ended                                       Commission file
     December 31, 2000                                            number 1-12151

                       CHASE PREFERRED CAPITAL CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                          <C>
                DELAWARE                                         13-3899576
     (State or other jurisdiction of                          (I.R.S. Employer
     incorporation or organization)                          Identification No.)

     270 Park Avenue, New York, N.Y.                               10017
(Address of principal executive offices)                         (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (212) 270-6000

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

<TABLE>
<CAPTION>
                                                                                  Name of Each Exchange on
             Title of Each Class                                                      which Registered
           -------------------------                                               ------------------------
<S>                                                                               <C>
8.10% Cumulative Preferred Stock, Series A (Par Value --$25 Per Share)          New York Stock Exchange, Inc.

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

Number of Shares of Common Stock outstanding on December 31, 2000: 1
</TABLE>

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

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

         The outstanding share of Common Stock was held by The Chase Manhattan
Bank at December 31, 2000; therefore, no Common Stock is held by nonaffiliates.

<TABLE>
<CAPTION>
                Document incorporated by reference                                  Part of Form 10-K
                        in this Form 10-K                                           which incorporated
         -------------------------------------------------                      -------------------------
         None                                                                                -
<S>                                                                             <C>
</TABLE>
<PAGE>   2
FORM 10-K

<TABLE>
<CAPTION>
PART I                                                                       PAGE

<S>       <C>                                                                <C>
Item 1    Business.........................................................  3
Item 2    Properties.......................................................  7
Item 3    Legal Proceedings................................................  7
Item 4    Submission of Matters to a Vote of Security Holders..............  7


Part II

Item 5    Market for Registrant's Common Equity and Related Stockholder
           Matters...........................................................7
Item 6    Selected Financial Data............................................8
Item 7    Management's Discussion and Analysis of Financial Condition and
           Results of Operations.............................................9
Item 7A   Quantitative and Qualitative Disclosures Regarding Market Risk....16

Item 8    Financial Statements and Supplementary Data.......................17
Item 9    Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure.............................................31

Part III

Item 10   Directors and Executive Officers of the Corporation...............31
Item 11   Executive Compensation............................................32
Item 12   Security Ownership of Certain Beneficial Owners and Management....32
Item 13   Certain Relationships and Related Transactions....................32

Part IV

Item 14   Exhibits, Financial Statement Schedules and Reports on Form 8-K...32
</TABLE>
<PAGE>   3
ITEM 1: BUSINESS

OVERVIEW

Chase Preferred Capital Corporation (the "Company") is a Delaware corporation
and a subsidiary of The Chase Manhattan Bank (the "Bank"), a banking corporation
organized under the laws of the State of New York. The Company began operations
in 1996 upon completion of an initial public offering of 22,000,000 shares of
8.10% Cumulative Preferred Stock, Series A (the "Series A Preferred Shares").
The Series A Preferred Shares are traded on the New York Stock Exchange.

The Company is a real estate investment trust ("REIT") under the Internal
Revenue Code of 1986 (the "Code"). The principal business of the Company is to
acquire, hold and manage assets that qualify as REIT real estate assets under
the Code in order to generate net income for distribution to stockholders.

As of December 31, 2000, the Company held assets, as described below, in each of
the following four categories: First Mortgage Loans, Second Mortgage Loans,
Manufactured Housing Loans and Intercompany Loans.

         First Mortgage Loans. The Company holds mortgage loans acquired from
the Bank or its affiliates that are whole loans secured by first mortgages or
deeds of trust on single family (one-to-four unit) residential or commercial
real properties ("First Mortgage Loans"). Over time, as commercial First
Mortgage Loans have prepaid or matured, the Company has replaced them with
residential First Mortgage Loans. As of December 31, 2000, approximately 96.5%
of the Company's portfolio of First Mortgage Loans was comprised of residential
First Mortgage Loans, with the balance constituting commercial First Mortgage
Loans. The Company expects the percentage of First Mortgage Loans consisting of
commercial First Mortgage Loans to continue to decline over time. The Company's
residential First Mortgage Loans consist of the following:

-  six-month prime rate adjustable rate mortgages ("ARMs");

-  six-month treasury ARMs;

-  three-year fixed rate loans with an automatic conversion to six-month,
   one-year and three-year treasury ARMs;

-  one-year, five-year, seven-year and ten-year fixed rate loans with an
   automatic conversion to one-year treasury ARMs; and

-  fixed rate loans.

The Company's commercial First Mortgage Loans consist of fixed and variable rate
loans.

         Second Mortgage Loans and Manufactured Housing Loans. In April 2000,
the Company acquired approximately $2.1 billion of loans (and related servicing
rights) that had been originated or acquired by the Bank or Chase Manhattan Bank
USA, National Association ("Chase USA") or their affiliates and that are secured
by second mortgages on single family (one-to-four unit) residential real
properties ("Second Mortgage Loans"). In May 2000, the Company acquired
approximately $1.9 billion of loans (and related servicing rights) that had been
originated or acquired by the Bank and Chase USA or their affiliates and that
are secured by first priority security interests in manufactured housing units
("Manufactured Housings Loans"). The Second Mortgage Loans and the Manufactured
Housing Loans were acquired through the transfer of 100% participation interests
by the Bank and Chase USA, as the case may be, of such loans to the Company. The
participation interests were purchased at prices equal to the estimated fair
values of the loans. On a monthly basis following the initial acquisitions of
the Second Mortgage Loans and Manufactured Housing Loans, the Company has
purchased 100% participation interests in substantially all Second Mortgage
Loans and Manufactured Housing Loans originated by the Bank and Chase USA
meeting certain specified credit criteria. (The First Mortgage Loans, Second
Mortgage Loans and Manufactured Housing Loans are hereinafter referred to as the
"Direct Loans".)

         Intercompany Loans. In April 2000, the Company also extended
approximately $2.6 billion of non-recourse intercompany loans ("Intercompany
Loans") to the Bank and Chase USA which are secured by pledges by the Bank and
Chase USA of all outstanding loans under home equity lines of credit ("HELOCs")
originated by the Bank or Chase USA, as the case may be. The initial aggregate
principal amount of the Intercompany Loans equaled approximately 80% of the
outstanding principal balance of the HELOCs pledged as security therefor. On a
quarterly basis, the Company may, but is not required to, make additional
Intercompany Loans to the Bank and/or Chase USA in an aggregate amount not to
exceed 80% of the then outstanding principal balance of HELOCs pledged by the
applicable entity. The Intercompany Loan documents also require that the
outstanding principal balance of the Intercompany Loans will at no time exceed
85% of the outstanding principal balance of the HELOCs pledged as security and
require the Bank and/or Chase USA to make prepayments of their respective
Intercompany Loans to ensure that such ceiling is not exceeded. As of December
31, 2000, the outstanding principal balance of the Intercompany Loans equaled
$2,627,193,000, representing 60.7% of the then outstanding principal balance of
the HELOCs pledged as security.

The funds required by the Company to acquire the Second Mortgage Loans and
Manufactured Housing Loans and to make the Intercompany Loans (the Second
Mortgage Loans, the Manufactured Housing Loans and the Intercompany Loans being
collectively referred to as the "Additional Assets") were obtained through the
sale by the Company to the Bank of 7,600 shares of Floating Rate Cumulative
Preferred Stock, Series B, having a par value of $25 per share and a liquidation
preference of

                                                                           3
<PAGE>   4
$1,000,000 per share (the "Series B Preferred Shares"). Proceeds obtained from
the sale or repayment of principal balances of Additional Assets will generally
be applied to acquire Additional Assets. However, the Company may issue
additional Series B Preferred Shares to the Bank from time to time as discussed
in "Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Liquidity Risk Management" below.

The Company has no foreign operations.

COMPETITION

The Company does not originate loans and currently acquires and intends to
continue to acquire its assets only from affiliates. Accordingly, the Company
does not compete with mortgage conduit programs, investment banking firms,
savings and loan associations, banks, thrift and loan associations, finance
companies, mortgage banks or insurance companies in acquiring its assets.

AGREEMENTS RELATING TO MANAGEMENT OF THE COMPANY'S OPERATIONS

Operations. The Company has entered into an agreement (the "Advisory Agreement")
with the Bank (the "Advisor") pursuant to which the Advisor administers the
Company's day-to-day operations. In performing its responsibilities, the Advisor
has a high degree of autonomy. The Board of Directors, however, has adopted
certain policies to guide the administration of the Company relating to the
Company's acquisition and disposition of assets, use of capital and leverage,
credit risk management and certain other activities. These policies may be
amended or revised from time to time at the discretion of the Board of Directors
without a vote of the Company's stockholders, including holders of the Series A
Preferred Shares and the Series B Preferred Shares (but in certain circumstances
subject to the approval of a majority of the Independent Directors (as defined
in the Certificate of Designation for the Series A Preferred Shares)).

Servicing. The First Mortgage Loans have been, and will continue to be, sold to
the Company on a servicing-retained basis. Accordingly, the servicing rights
associated with the First Mortgage Loans continue to be owned by the Bank or the
affiliate of the Bank that sold the First Mortgage Loans to the Company. The
Bank, as servicer, receives an annual servicing fee from the Company for each
First Mortgage Loan it services which (i) is equal to 0.25% of the outstanding
principal balance for residential First Mortgage Loans and (ii) ranges from
0.08% - 0.30% of the outstanding principal balances for commercial First
Mortgage Loans, depending upon the outstanding principal amount.

The Manufactured Housing Loans and the Second Mortgage Loans have been, and will
continue to be, acquired on a servicing-released basis. Accordingly, the Company
owns the servicing rights associated with the Second Mortgage Loans and
Manufactured Housing Loans. The Company has engaged Chase Manhattan Mortgage
Corporation ("CMMC"), a subsidiary of Chase USA, to service these assets on the
Company's behalf. The servicing arrangements between the Company and CMMC
provide that the Company retains the power to direct CMMC to foreclose on any
Manufactured Housing Loan or Second Mortgage Loan. CMMC as servicer, receives an
annual servicing fee from the Company for each Manufactured Housing Loan and
Second Mortgage Loan it services in the amount of $363 and $138, respectively.

Each of the servicing agreements for the First Mortgage Loans, Second Mortgage
Loans and Manufactured Housing Loans requires servicing in accordance with (i)
general industry practices, (ii) any servicing guidelines promulgated by the
Company, and (iii) in the case of the residential First Mortgage Loans and
Second Mortgage Loans, FNMA and FHLMC guidelines and procedures.

The HELOCs securing the Intercompany Loans continue to be owned by the Bank or
Chase USA, as the case may be, and will continue to be serviced in accordance
with their current servicing arrangements. However, the security agreements with
respect to the Intercompany Loans give the Company the power to direct the
servicer of the HELOCs to foreclose on HELOCs under certain circumstances
specified in the security agreements.

INVESTMENT COMPANY ACT CONSIDERATIONS

The Company intends to operate in a manner that will not subject it to
regulation under the Investment Company Act of 1940.

CERTAIN REIT REQUIREMENTS

In order to preserve its status as a real estate investment trust ("REIT") under
the Code, the Company must distribute annually at least 95% of its "REIT taxable
income" (excluding capital gains) to stockholders and meet certain capital
ownership and administrative tests as defined by the Code. The Company must also
annually satisfy three gross income requirements. First, at least 75% of the
Company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (as interest on
obligations secured by mortgages on real property, certain "rents from real
property" or as gain on the sale or exchange of
                                                                           4

<PAGE>   5
such property and certain fees with respect to agreements to make or acquire
mortgage loans), from certain types of temporary investments or certain other
types of gross income. Second, at least 95% of the Company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments as aforesaid and from dividends,
interest, and gain from the sale or other disposition of stock or securities and
certain other types of gross income (or from any combination of the foregoing).
Third, short-term gain from the sale or other disposition of stock or
securities, gain from prohibited transactions, and gain on the sale or other
disposition of real property held for less than four years from the date of
acquisition (apart from involuntary conversions and sales of foreclosure
property), must represent less than 30% of the Company's gross income (including
gross income from prohibited transactions) for each taxable year. The Company
must also satisfy three tests relating to the nature of its assets at the close
of each quarter of each taxable year. First, at least 75% of the value of the
Company's total assets must be represented by real estate assets (including
stock or debt instruments held for not more than one year that were purchased
with the proceeds of a stock offering or long-term (at least five years) debt
offering of the Company), cash, cash items, and government securities. Second,
not more than 25% of the Company's total assets may be represented by securities
other than those in the 75% asset class. Third, of the investments included in
the 25% asset class, the value of any one issuer's securities owned by the
Company may not exceed 5% of the value of the Company's total assets and the
Company may not own more than 10% of any one issuer's outstanding voting
securities.

The Company's Certificate of Incorporation contains certain restrictions on the
number of shares of Common Stock and Preferred Stock that individual
stockholders may own. For the Company to qualify as a REIT under the Code, no
more than 50% in number or value of its outstanding shares of capital stock may
be owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities) during the last half of a taxable year
(other than the first year) or during a proportionate part of a shorter taxable
year (the "Five or Fewer Test"). The capital stock of the Company must also be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year or during a proportionate part of a shorter taxable year (the "One Hundred
Persons Test"). The ownership by the Bank of 100% of the shares of Common Stock
and Series B Preferred Shares of the Company will not adversely affect the
Company's REIT qualification because each stockholder of J.P. Morgan Chase & Co.
(formerly known as The Chase Manhattan Corporation) ("JPMC"), the sole
stockholder of the Bank, counts as a separate beneficial owner for purposes of
the Five or Fewer Test and the capital stock of JPMC is widely held. Further,
the Company's Certificate of Incorporation contains restrictions on the
acquisition of Preferred Stock intended to ensure compliance with the One
Hundred Persons Test, including a provision voiding any transfer of shares of
capital stock of the Company that would cause the Company to be beneficially
owned by fewer than 100 persons.

Subject to certain exceptions specified in the Company's Certificate of
Incorporation, no holder of Preferred Stock is permitted to own (including by
virtue of the attribution provisions of the Code) more than 9.9% (the "Ownership
Limit") of any issued and outstanding class or series of Preferred Stock. The
Board of Directors is permitted but not required to waive the Ownership Limit
with respect to a holder upon receipt of an Internal Revenue Service ("IRS")
ruling or an opinion of counsel satisfactory to the Company to the effect that
the holder's ownership will not then or in the future jeopardize the Company's
status as a REIT. In accordance with such requirements, the Company's Board of
Directors, upon receipt of an opinion from counsel that the Bank's ownership of
the Series B Preferred Shares would not jeopardize the Company's status as a
REIT under the Code, waived the Ownership Limit that would otherwise have been
applicable to the Bank with respect to its ownership of the Series B Preferred
Shares.

The Company's Certificate of Incorporation also requires that any person who
beneficially owns 1% (or such lower percentage as may be required by the Code or
the Treasury Regulations) of the outstanding shares of any class or series of
Preferred Stock of the Company must provide certain information to the Company
within 30 days of June 30 and December 31 of each year. In addition, each
stockholder shall upon demand be required to disclose to the Company in writing
such information as the Company may request in order to determine the effect, if
any, of that stockholder's actual and constructive ownership on the Company's
status as a REIT and to ensure compliance with the Ownership Limit.

As of December 31, 2000, the Company believed that it was in full compliance
with the REIT tax rules and that it will continue to qualify as a REIT under the
provisions of the Code. The Company calculates that as of such date:

-    its Qualified REIT Assets, as defined in the Code, were 91.7% of its total
     assets, as compared to the federal tax requirement that at least 75% of its
     total assets must be Qualified REIT Assets.

-    90% of its revenues qualified for the 75% source of income test and 99.97%
     of its revenues qualified for the 95% source of income test under the REIT
     rules.

-    none of its revenues were subject to the 30% income limitation under the
     REIT rules.

The Company also met all REIT requirements regarding the ownership of its Common
Stock, the Series A Preferred Shares and the Series B Preferred Shares and
anticipates meeting the 2000 annual distribution and administrative
requirements.

                                                                           5
<PAGE>   6
IMPORTANT FACTORS THAT MAY AFFECT FUTURE RESULTS

From time to time, the Company has made and will make forward-looking
statements. These statements can be identified by the fact that they do not
relate strictly to historical or current facts. Forward-looking statements often
use words such as "anticipate", "expect", "estimate", "intend", "target",
"plan", "goal", "believe", or other words of similar meaning. Forward-looking
statements give the Company's current expectations or forecasts of future
events, circumstances or results. The Company's disclosure in this report
contains forward-looking statements. Any forward-looking statements made by or
on behalf of the Company speak only as of the date they are made. The Company
does not undertake to update forward-looking statements. The reader should,
however, consult any further disclosures of a forward-looking nature the Company
may make in its reports filed with the Securities and Exchange Commission
("SEC").

All forward-looking statements, by their nature, are subject to risks and
uncertainties. The Company's actual future results may differ materially from
those set forth in its forward-looking statements. Factors that might cause the
Company's future financial performance to vary from that described in its
forward-looking statements include the interest rate, credit and other risks
discussed in the "Management's Discussion and Analysis" section of this report.
In addition, set forth below are certain risks and uncertainties that the
Company believes could cause its actual future results to differ materially from
expected results. However, other factors besides those discussed in this or the
Company's other reports to the SEC could also adversely affect the Company's
results and the reader should not consider any such list of factors to be a
complete set of all potential risks and uncertainties. This discussion is
provided as permitted by the Private Securities Litigation Reform Act of 1995.

Impact of General Economic Downturn

The Company's profitability could be adversely impacted by a worsening of
general economic conditions in the United States. An economic downturn could
increase the risk that customers would refrain from obtaining mortgage loans
from JPMC and its affiliates or that a greater number of the existing obligors
with respect to the Company's assets would become delinquent on their
obligations. A higher rate of delinquencies could in turn result in more
chargeoffs and a higher level of provision for the Company, which would
adversely affect the Company's income.

Interest Rate Risk

The Company's income consists primarily of interest payments on the assets held
by it. If there is a decline in interest rates (as measured by the indices upon
which the interest rates of adjustable-rate assets are based), then the Company
may experience a decrease in interest income available for distribution to
stockholders. In addition, in such an interest rate environment, the Company may
experience an increase in prepayments on its loans and may find it more
difficult to purchase additional loans bearing rates sufficient to support
payment of dividends to stockholders. Further, certain residential mortgage
loans convert an adjustable-rate mortgage to a fixed-rate mortgage, thus
"locking in" a low fixed interest rate. There can be no assurance that a
significant decline in prevailing interest rates over an extended period of time
would not adversely affect the Company's ability to pay dividends on its
outstanding Series A Preferred Shares or Series B Preferred Shares.


Factors Affecting Allowance for Loan Losses

The Company's allowance for loan losses is based upon management's estimate of
probable losses inherent in the Company's portfolio. Estimating losses is
inherently uncertain. The estimation process assumes that past experience is a
valid indicator for estimating prospective losses, which may not always be the
case. The accuracy of estimates reflected in the allowance may be impacted by a
number of factors, ranging from external macroeconomic factors to limitations
inherent in the estimation process itself. These factors include, among others:
general economic and political developments; structural changes that may impact
particular mortgagors; changes in underwriting standards; legal and regulatory
requirements affecting reserving practices; the volatility of default
probabilities, rating migrations and loss severity; and the quality of available
data.

Dependence Upon Affiliates as Advisor and Servicer

The Company is dependent for the selection, structuring and monitoring of its
assets on the diligence and skill of its officers (all of whom are also officers
of the Bank or its affiliates) and the officers and employees of the Bank who
are acting on behalf of the Bank as Advisor to the Company. In addition, the
Company is dependent upon the expertise of the Bank and CMMC for the servicing
of its assets. In the event that the Bank or CMMC subcontract any of their
respective obligations, the Company will be dependent upon the parties to whom
those obligations are subcontracted.
                                                                           6
<PAGE>   7
Potential Conflicts of Interest with the Bank and its Affiliates

The Bank and its affiliates are involved in virtually every aspect of the
Company's existence. The Bank is the sole holder of the Company's Common Stock
and Series B Preferred Shares and administers its day-to-day activities as
Advisor. In addition, the Bank and CMMC are responsible for servicing all of the
Company's assets. The Bank and its affiliates may have interests that are not
identical to those of the Company, and conflicts of interest may arise with
respect to transactions, including acquisitions, dispositions and servicing of
assets, particularly assets placed on classified or nonaccrual status. For
example, in the case of commercial First Mortgage Loans, the Company's interest
will be limited to the loan, while the Bank may have other interests as a result
of an overall banking relationship with the mortgagor. In addition, if the Bank
acts as lender with respect to other credit facilities for a particular
mortgagor, the Bank, in its role as Advisor, may become subject to a conflict of
interest if a loan of that mortgagor owned by the Company becomes classified or
placed on nonaccrual status. The Company intends that any agreement and
transactions between the Company and the Bank or any affiliate of the Bank are
conducted on an arm's length basis and are fair to all parties. In addition,
certain actions of the Company must be approved by a majority of the Company's
independent Directors.


ITEM 2: PROPERTIES

The Company, a subsidiary of the Bank, utilizes space at the headquarters of the
Bank, located in New York City at 270 Park Avenue.


ITEM 3: LEGAL PROCEEDINGS

The Company is not currently the subject of any material litigation. None of the
Company, the Bank or any of the Bank's affiliates is currently involved in or,
to the Company's knowledge, currently threatened with any material litigation
with respect to the Company's assets which would have a material adverse effect
on the business or operations of the Company.


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

None.


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

At December 31, 2000, the Company was authorized to issue one share of Common
Stock, par value $171,750,000 per share and 50,000,000 shares of Preferred
Stock, $25 par value per share ("Preferred Stock"), of which 22,000,000 Series A
Preferred Shares had been issued and 7,600 Series B Preferred Shares had been
issued. The Bank is the owner of the Company's sole share of Common Stock and
all of the Series B Preferred Shares. Accordingly, there is no trading market
for the Company's Common Stock or Series B Preferred Shares. The Series A
Preferred Shares are traded on the New York Stock Exchange.

JPMC intends that, as long as any Series A Preferred Shares and Series B
Preferred Shares are outstanding, it will maintain direct or indirect ownership
of at least 80% of the outstanding Common Stock of the Company. Subject to the
rights, if any, of the holders of any outstanding series of Preferred Stock, all
voting rights are vested in the Common Stock. The holder of Common Stock is
entitled to receive dividends when, as and if declared by the Board of Directors
of the Company out of funds legally available therefor. However, so long as any
shares of Preferred Stock are outstanding, no dividends or other distributions
(including redemptions and purchases) may be made with respect to the Common
Stock unless full dividends on the shares of the Preferred Stock, including
accumulations in the case of cumulative Preferred Stock, have been paid. The
Company must distribute annually at least 95% of its annual "REIT taxable
income" (not including capital gains) to stockholders.
                                                                           7

<PAGE>   8
ITEM 6: SELECTED FINANCIAL DATA

                                 FINANCIAL DATA
                   (IN THOUSANDS, EXCEPT SHARE AND YIELD DATA)

<TABLE>
<CAPTION>
                                                                                                                 For the Period
                                                                                                                 from inception
                                                                                                                 (September 18,
                                                   Year Ended     Year Ended       Year Ended     Year Ended      1996) through
                                                    12/31/00       12/31/99         12/31/98        12/31/97    December 31, 1996
                                                  -----------     -----------     -----------     -----------     -----------
<S>                                               <C>             <C>             <C>             <C>             <C>
INCOME STATEMENT:

Interest income                                   $   514,072     $    73,326     $    79,428     $    82,941     $    22,830

Net interest income                                   508,267          73,326          79,428          80,308          22,156

Net income                                            484,350          70,127          76,559          79,779          22,085

Net income applicable to common shares                102,212          25,577          32,009          35,229           9,339

Income per common share                           $   102,212     $    25,577     $    32,009     $    35,229     $     9,339


BALANCE SHEET:

Mortgage loans                                    $ 6,826,846     $ 1,069,377     $ 1,021,368     $   985,068     $ 1,059,981

Intercompany Loans                                  2,627,193               0               0               0               0

Total assets                                        9,410,782       1,119,300       1,121,306       1,123,164       1,113,398

Series A Preferred stock outstanding                  550,000         550,000         550,000         550,000         550,000

Series B Preferred Stock outstanding                7,600,000               0               0               0               0

Total stockholders' equity                        $ 8,731,118     $ 1,119,174     $ 1,120,874     $ 1,119,930     $ 1,112,726



OTHER DATA:

Dividends paid on Series A Preferred Stock        $    44,550     $    44,550     $    44,550     $    44,550     $    12,746

Dividends paid on Series B Preferred Stock        $   337,588     $         0     $         0     $         0     $         0

Dividends paid on common share                    $    71,480     $    27,645     $    31,065     $    28,025     $         0

Number of Series A  preferred
      shares outstanding                           22,000,000      22,000,000      22,000,000      22,000,000      22,000,000

Number of Series B preferred
      Shares outstanding                                7,600               0               0               0               0

Number of common shares outstanding (a)                     1               1               1               1               1

Average yield on Direct Loans                             8.4%            6.9%            7.6%            7.8%            7.4%
</TABLE>

(a)  All common share amounts have been restated to reflect the change, effected
     on December 29, 1998, of the Company's outstanding Common Stock from
     572,500 shares, par value $300 per share, to one share, par value
     $171,750,000 per share.


                                                                              8
<PAGE>   9
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS


This Management's Discussion and Analysis contains certain forward-looking
statements, which are subject to risks and uncertainties. The Company's actual
results may differ materially from those included in the forward-looking
statements. Certain factors which may cause such differences to occur are
discussed in Item 1above, under the caption "Important Factors that May Affect
Future Results".

OVERVIEW

The Company, a Delaware corporation, is a REIT and a subsidiary of the Bank. The
Company's principal business is to acquire, hold and manage assets that qualify
as REIT real estate assets under the Code in order to generate net income for
distribution to stockholders. To date, the Company has acquired First Mortgage
Loans, Second Mortgage Loans and Manufactured Housing Loans from the Bank or its
affiliates. In addition, the Company has extended Intercompany Loans to the Bank
and Chase USA. The Company may also acquire Mortgage-Backed Securities from time
to time. The Company began operations in 1996 upon completion of an initial
public offering of 22,000,000 Series A Preferred Shares. The Series A Preferred
Shares are traded on the New York Stock Exchange. The Company's sole share of
Common Stock is held by the Bank, as are all of the Company's outstanding Series
B Preferred Shares.

The Bank administers the day-to-day activities of the Company in its role as
Advisor. CMMC sub-services the Company's First Mortgage Loans on behalf of the
Bank in the Bank's capacity as Servicer. CMMC is also the servicer of the Second
Mortgage Loans and Manufactured Housing Loans acquired by the Company.


RESULTS OF OPERATIONS

The Company reported net interest income of approximately $508,267,000 for 2000
compared with $73,326,000 for 1999 and $79,428,000 in 1998. The Company's basic
earnings per share were $102,212,000, $25,577,000 and $32,009,000 in 2000, 1999
and 1998, respectively. Approximately $432,985,000 of the increase in net
interest income in 2000 is due to the acquisition of the Second Mortgage Loans
and Manufactured Housing Loans and the extension of the Intercompany Loans. In
2000, interest income from residential First Mortgage Loans, commercial First
Mortgage Loans, Second Mortgage Loans and Manufactured Housing Loans was
$66,503,000, $4,522,000, $185,050,000 and $126,590,000, respectively. In 1999,
interest income from residential and commercial First Mortgage Loans was
$63,192,000 and $6,284,000, respectively. The total average yield on the Direct
Loans for the years ended December 31, 2000 and 1999 was 8.4% and 6.9%,
respectively. For the year ended December 31, 2000, interest income from the
Intercompany Loans was $126,224,000, which resulted in an average yield of 6.5%.
In 1998, interest income from residential and commercial First Mortgage Loans
was $64,430,000 and $7,909,000, respectively, representing a total average yield
of 7.6% for 1998. After deductions of approximately $22,435,000, $500,000, and
$1,158,000 in servicing fees, advisory fees and other administrative expenses,
respectively, the Company reported net income of approximately $484,350,000 for
2000 compared with reported net income of $70,127,000 and $76,559,000 in 1999
and 1998, respectively.

In each of 2000, 1999 and 1998, the Company paid $44,550,000 in dividends on the
Series A Preferred Shares and for 2000 paid $337,588,000 in dividends on the
Series B Preferred Shares. As of December 31, 2000, all dividend payments on the
Series A Preferred Shares and Series B Preferred Shares were current. In
addition, the Company paid Common Stock dividends of approximately $71,480,000
in 2000, compared with $27,645,000 in 1999 and $31,065,000 in 1998. Dividends on
the Common Stock are paid to the Bank when, as, and if declared by the Board of
Directors of the Company out of funds legally available therefor.

The Company expects to pay Common Stock dividends at least annually in amounts
necessary to continue to preserve its status as a REIT under the Code.
                                                                        9

<PAGE>   10
LOAN PORTFOLIO

At December 31, 2000 and December 31, 1999, the Company's loan portfolio was as
follows: ($ in thousands)

<TABLE>
<CAPTION>
                                                 LOAN AMOUNTS                   NON-ACCRUING                  NET CHARGE-OFFS
                                                                                   LOANS
                                            2000            1999            2000            1999            2000            1999
                                         ----------      ----------      ----------      ----------      ----------      ----------
<S>                                      <C>             <C>             <C>             <C>             <C>             <C>
     First Mortgage Loans
        Residential                      $1,039,913      $1,014,144      $        0      $        0      $        0      $       87
        Commercial                           37,339          55,233               0               0               0               0
     Second Mortgage Loans                3,279,021               0          21,466               0           1,879               0
     Manufactured Housing Loans           2,470,573               0          20,282               0          11,805               0
                              TOTAL      $6,826,846      $1,069,377      $   41,748      $        0      $   13,684      $       87

     Intercompany Loans                  $2,627,193      $        0             N/A             N/A             N/A             N/A
                              TOTAL      $9,454,039      $1,069,377      $   41,748      $        0      $   13,684      $       87
</TABLE>

FIRST MORTGAGE LOANS

At December 31, 2000, First Mortgage Loans consisted of both residential and
commercial mortgage loans. At that date, residential First Mortgage Loans in the
portfolio consisted of six-month prime rate adjustable mortgages ("ARMS");
six-month treasury ARMs; one-year, five-year, seven-year, and ten-year fixed
rate loans with an automatic conversion to one-year ARMs; three-year fixed rate
loans with an automatic conversion to one-year and three-year treasury ARMs; and
fixed rate loans. The commercial First Mortgage Loans consisted of fixed and
variable rate loans, a majority of which have balloon payments. As commercial
First Mortgage Loans continue to prepay or mature, they will continue to be
replaced with residential First Mortgage Loans.

For the years ended December 31, 2000 and 1999, the Company purchased First
Mortgage Loans having an outstanding principal balance of approximately
$276,496,000 and $554,561,000, respectively, from affiliates of the Bank. The
Company also sold approximately $1,863,000 of non-performing residential First
Mortgage Loans to a wholly-owned subsidiary of JPMC during the twelve months
ended December 31, 2000. In addition, for the twelve months ended December 31,
2000, the Company received approximately $278,793,000 of principal payments on
its portfolio from the Servicer (and sub-servicer).

The Company intends that each First Mortgage Loan acquired from the Bank or one
of its affiliates in the future will be a whole loan, will represent a first
lien position and will be originated by the Bank or such affiliate in the
ordinary course of its real estate lending activities based on the underwriting
standards generally applied at the time of origination for its own account by
the Bank or the affiliate of the Bank that originated the First Mortgage Loan.
The Company also intends that all First Mortgage Loans held by the Company will
be serviced pursuant to the Servicing Agreements, which require servicing in
conformity with (1) general industry practices, (2) any servicing guidelines
promulgated by the Company and (3) in the case of residential First Mortgage
Loans and Second Mortgage Loans, Federal National Mortgage Association ("FNMA")
and Federal Home Loan Mortgage Corporation ("FHLMC") guidelines and procedures.

Currently, the Company does not intend to acquire any additional commercial
First Mortgage Loans. In addition, the Company's current policy prohibits the
acquisition of any First Mortgage Loan or any interest in a First Mortgage Loan
(other than an interest resulting from the acquisition of Mortgage-Backed
Securities), that (i) is delinquent in the payment of principal or interest at
the time of proposed acquisition; (ii) is or was at any time during the
preceding 12 months (a) classified, (b) in nonaccrual status, or (c)
renegotiated due to financial deterioration of the borrower; or (iii) has been,
more than once during the preceding 12 months, more than 30 days past due in the
payment of principal or interest.

                                                                           10

<PAGE>   11
The Company may choose, at any time subsequent to its acquisition of any First
Mortgage Loan, to require the Servicer to dispose of the First Mortgage Loan,
for any reason, including as a result of the First Mortgage Loan becoming
classified or being placed in nonaccrual status or having been, more than once
during the preceding 12 months, more than 30 days past due in the payment of
principal or interest. The Bank has indicated to the Company that it will not
purchase any First Mortgage Loan of the Company that the Company chooses to
dispose of for the foregoing reasons. Accordingly, the Company currently
anticipates that the Company would continue to sell any such First Mortgage Loan
at its then current fair value only to JPMC, a nonbank subsidiary of JPMC, or an
unrelated third party.

There were no nonaccruing First Mortgage Loans at December 31, 2000 or December
31, 1999. The Company sold $1,863,000 of non-performing residential First
Mortgage Loans to a wholly-owned subsidiary of JPMC during the twelve months
ended December 31, 2000. No gain or loss was recognized from this sale.

SECOND MORTGAGE LOANS

At December 31, 2000, Second Mortgage Loans consisted of only residential
mortgage loans. At that date, Second Mortgage Loans in the portfolio consisted
of one-year treasury ARMs and 15-year and 30-year fixed rate loans. The initial
portfolio of Second Mortgage Loans was acquired from the Bank and Chase USA
through the purchase by the Company of a 100% participation interest in such
Loans, including the related servicing rights.

For the twelve months ended December 31, 2000, the Company purchased Second
Mortgage Loans having an outstanding principal balance of approximately
$3,784,617,000 from the Bank and Chase USA. In addition, for the twelve months
ended December 31, 2000, the Company received approximately $485,106,000 of
principal payments on its portfolio from the servicer of the Second Mortgage
Loans.

MANUFACTURED HOUSING LOANS

At December 31, 2000, Manufactured Housing Loans consisted of 15-year and
30-year fixed rate loans. The initial portfolio of Manufactured Housing Loans
was acquired from the Bank and Chase USA through the purchase by the Company of
a 100% participation interest in such Loans, including the related servicing
rights.

For the twelve months ended December 31, 2000, the Company purchased
Manufactured Housing Loans having an outstanding principal balance of
approximately $2,474,195,000 from the Bank and Chase USA. In addition, for the
twelve months ended December 31, 2000, the Company received approximately
$116,679,000 of principal payments on its portfolio from the servicer of the
Manufactured Housing Loans.

During the year ended December 31, 2000, approximately $6,981,000 of the
Manufactured Housing Loans purchased from the Bank and its affiliates were
reclassified to Assets Acquired as Loan Satisfactions. Collateralized loans are
reclassified to Assets Acquired as Loan Satisfactions only when the Company has
taken physical possession of the collateral regardless of whether formal
foreclosure proceedings have taken place.

INTERCOMPANY LOANS

The Intercompany Loans to the Bank and Chase USA are variable rate loans bearing
interest rates equal to the Federal funds (effective) rate. The Intercompany
Loans are secured by the pledge of the Bank and Chase USA of all loans
originated under home equity lines of credit extended by those banks. The
security agreements with respect to the Intercompany Loans provide that all
HELOCs, regardless of their credit quality, will be pledged to the Company,
although the Company has the discretion to release its security interest in any
particular HELOC or to require the Bank or Chase USA, as the case may be, to
take appropriate action with respect to the borrower under the HELOC, including,
without limitation, initiating foreclosure proceedings with respect to the
property securing the HELOC. The Intercompany Loan documents require that the
outstanding principal balance of the Intercompany Loans will at no time exceed
85% of the outstanding principal balance of the HELOCs pledged as security and
require the Bank and/or Chase USA to make prepayments of their respective
Intercompany Loans to make sure that ceiling is not exceeded. At December 31,
2000, the outstanding principal balance of the Intercompany Loans equaled 60.7%
of the then outstanding principal balance of the HELOCs pledged as security.


ALLOWANCE FOR LOAN LOSSES

The Company's allowance for loan losses is intended to cover probable credit
losses for which either the asset is not specifically identified or the size of
the loss has not been fully determined. The allowance for loan losses is based
upon management estimates, which are inherently uncertain. Factors affecting the
uncertainty of specific loss and expected loss estimates include the volatility
of default probabilities, rating migrations and loss severity. These
uncertainties also could

                                                                              11
<PAGE>   12
relate to current macroeconomic conditions, changes in underwriting standards,
unexpected correlations within the portfolio or other factors.

The allowance for loan losses is reviewed in light of the risk profile of the
portfolio and current economic conditions. The allowance is adjusted based on
that review if, in management's judgment, changes are warranted. At December 31,
2000, management of the Company deemed its allowance for loan losses to be
adequate.

The accompanying table reflects the activity in the Company's allowance for loan
losses during 2000 and 1999:

<TABLE>
<CAPTION>
ALLOWANCE FOR LOAN LOSSES                              YEAR ENDED         YEAR ENDED
    (in thousands)                                      12/31/00           12/31/99
                                                       ---------          ---------
<S>                                                    <C>                <C>
         Total allowance at beginning of period        $   4,962          $   4,120
         Acquired allowance                              140,515                929
         Provision for loan losses                           926                  0
         Charge-offs                                     (13,811)               (87)
         Recoveries                                          127                  0
                                                       ---------          ---------
              Total allowance at end of period         $ 132,719          $   4,962
                                                       =========          =========

     ALLOWANCE FOR LOAN LOSSES TO:

              Total Direct Loans at period end              1.94%               .46%
</TABLE>



INTEREST RATE RISK

The Company's income consists primarily of interest payments on the Direct Loans
and the Intercompany Loans. The Direct Loans are held for investment and are
non-trading items. Currently, the Company does not use any derivative products
to manage its interest rate risk. If there is a decline in market interest
rates, the Company may experience a reduction in interest income and a
corresponding decrease in funds available to be distributed to its stockholders.
The reduction in interest income may result from downward adjustments of the
indices upon which the interest rates on adjustable rate mortgages are based and
from prepayments of Direct Loans with fixed interest rates, resulting in
reinvestment of the proceeds in lower-yielding Direct Loans. There can be no
assurance that an interest rate environment in which there is a significant
decline in interest rates over an extended period of time would not adversely
affect the Company's ability to pay dividends on the Series A Preferred Shares
and Series B Preferred Shares.

The following table sets forth certain information concerning the current
interest rates borne by the Loans constituting the Company's portfolio.

($ in thousands)

<TABLE>
<CAPTION>

                           PRINCIPAL BALANCES OF              PRINCIPAL BALANCES OF
                            VARIABLE RATE LOANS                 FIXED RATE LOANS


                        2000                       1999                      2000                  1999
                  $            %*            $            %*            $           %*         $         %*
              ---------      -----       ---------      -----       ---------     -----     ------      ----
<S>           <C>            <C>         <C>            <C>         <C>            <C>       <C>        <C>
DIRECT LOANS  1,043,083      15.28       1,016,006      95.01       5,783,763     84.72     53,371      4.99
INTERCOMPANY  2,627,193       --              --         --              --        --          N/A       N/A
LOANS
</TABLE>

<TABLE>
<CAPTION>
                       ESTIMATED             ESTIMATED
                       WEIGHTED               WEIGHTED
                       AVERAGE                AVERAGE
                     CONTRACTUAL             DURATION
                    INTEREST-RATE
                   2000       1999       2000       1999
                    %          %         YEARS      YEARS
                   ----       ----        ---        ---
<S>                <C>        <C>        <C>        <C>
DIRECT LOANS       9.08       7.23        3.2        2.3
INTERCOMPANY       6.50       --          N/A        N/A
LOANS
</TABLE>

-------------
* %  OF  PORTFOLIO

                                                                              12
<PAGE>   13
The Company monitors the impact that changes in market interest rates are
expected to have on its interest rate sensitive assets and liabilities. The
Company periodically performs analyses to quantify the estimated impact that
changes in market interest rates are expected to have on net interest income and
the fair value of these asset and liabilities.

A decline in market interest rates is expected to have the following impact on
net interest income:

-    Reduction in interest income on adjustable rate loans or partially fixed
     rate loans that are in interest rate reset periods

-    Reduction in interest income on the fixed or partially fixed loans that are
     not in interest rate reset periods as declines in interest rates generally
     will increase prepayments on such loans, resulting in lower interest income
     because the prepayment proceeds are reinvested in lower-yielding Direct
     Loans or other investments

-    Reduction in interest income on the Intercompany Loans

-    Reduction in interest expense on the intercompany borrowings

Conversely, an increase in market interest rates is expected to have the
following impact on net interest income:

-    Increase interest income on adjustable rate loans or partially fixed rate
     loans that are in interest rate reset periods

-    Increase in interest income on the fixed or partially fixed loans that are
     not in interest rate reset periods as increases in interest rates generally
     slow prepayments and the Company continues to earn the stated fixed rate on
     relatively higher loan portfolio balances

-    Increase in interest income on the Intercompany Loans

-    Increase interest expense on the intercompany borrowings

Using the Company's option-adjusted spread (OAS) valuation model, the Company
estimates that a decline in market interest rates of 100 basis points will
reduce net interest income by approximately 3.5% of projected 2001 net interest
income.

A decline in interest rates will increase the fair value of the fixed rate and
partially fixed rate loans in the portfolio. Conversely an increase in interest
rates will reduce the fair value of the fixed rate and partially fixed rate
loans in the portfolio. Changes in interest rates generally do not have a
significant impact on the Company's loans with variable interest rates or the
intercompany borrowings as these instruments bear interest rates that
approximate prevailing market rates.

Using the OAS valuation model, the Company estimates that an increase in market
interest rates of 100 basis points will reduce the fair value of the Direct Loan
portfolio by 3.2% of the fair value of the Direct Loan portfolio as of December
31, 2000.

The OAS valuation and modeling technique used by the Company assumes that market
interest rates will change instantaneously and that the yield curve will move in
a parallel fashion. The modeling technique assumes that prepayment proceeds are
reinvested in similar investments at then prevailing market rates. The technique
does not include the potential impact of widening or tightening of the spreads
inherent in its loan portfolio that may occur as interest rates change, or the
potential impact that changes in interest rates may have on the credit risk
inherent in the portfolio.

                                                                              13
<PAGE>   14
CREDIT RISK

Concentration of credit risk arises when a number of borrowers engage in similar
business activities, or activities in the same geographical region, or have
similar economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic conditions.
Concentration of credit risk indicates the relative sensitivity of the Company's
performance to both positive and negative developments affecting a particular
industry or geographic region. The following table shows the Company's Direct
Loan portfolio by geographic area as of December 31, 2000 and 1999:

<TABLE>
<CAPTION>
                                                  DECEMBER 31, 2000            DECEMBER 31, 1999
                                              ---------------------          --------------------
    ($ in thousands)                            AMOUNT        PERCENT        AMOUNT       PERCENT
    ----------------                          ----------      -------     ----------      -------
<S>                                           <C>              <C>        <C>              <C>
Geographic Area
California                                    $1,358,451       19.9%      $  388,166       36.3%
New York                                         537,066        7.9%          78,544        7.3%
Texas                                            478,131        7.0%          52,747        4.9%
Florida                                          343,325        5.0%          50,924        4.8%
Other States (no State has more than 5%)       4,109,873       60.2%         498,996       46.7%
                                              ----------        ---       ----------        ---
Total                                         $6,826,846        100%      $1,069,377        100%
                                              ==========        ===       ==========        ===
</TABLE>

At December 31, 2000, approximately 19.9% of the Company's total Direct Loan
portfolio consisted of loans collateralized by residential real estate
properties located in California. Consequently, these residential mortgage loans
may be subject to a greater risk of default than other comparable residential
mortgage loans in the event of adverse economic, political or business
developments or natural hazards (earthquakes, for example) in California that
may affect the ability of residential property owners in California to make
payments of principal and interest on the underlying Direct Loans.

At December 31, 2000, the HELOCs that are pledged as collateral for the
Intercompany Loans are collateralized by residential real estate properties
located in New York (43%), California (24%), Connecticut (7%) and New Jersey
(6%). No other state constituted more than 5% of the HELOC portfolio that
collateralized the Intercompany Loans on that date.


LIQUIDITY RISK MANAGEMENT

The objective of liquidity management is to ensure the availability of
sufficient cash flows to meet all of the Company's financial commitments. In
managing liquidity, the Company takes into account various legal limitations
placed on a REIT.

During 2000, the Company's principal liquidity needs have been to maintain its
current portfolio size of First Mortgage Loans, to acquire the Additional
Assets, and to pay dividends on its outstanding securities, including the Series
A Preferred Shares and Series B Preferred Shares. The initial acquisition of
First Mortgage Loans was funded by the proceeds of the sale of the Series A
Preferred Shares. Additional First Mortgage Loans are intended to be funded with
the proceeds obtained from the sale or repayment by individual borrowers of the
principal balances of First Mortgage Loans that are currently held in the
portfolio.

The acquisition of the Additional Assets was funded through the issuance to the
Bank of the Series B Preferred Shares. Following the initial acquisition of the
Additional Assets, proceeds obtained from the sale or repayment of principal
balances of the Additional Assets will be used to purchase more Additional
Assets or First Mortgage Loans. The Company may also increase the size of its
portfolio of Additional Assets from time to time. Any such increases may be
funded either through intercompany advances made by the Bank to the Company or
through the sale to the Bank of additional shares of Series B Preferred Shares.
In addition, the Bank may advance funds to the Company on a temporary basis from
time to time pending completion of a planned sale of Series B Preferred Shares.

If the Board of Directors determines that the Company requires additional
funding for any reason, the Company may raise such funds through additional
equity offerings, debt financing, retention of cash flow (after consideration of
provisions of the Code requiring the distribution by a REIT of at least 95% of
its "REIT taxable income" and taking into account taxes that would be imposed on
undistributed income), or a combination of these methods. The Company's
organizational documents do not contain any limitation on the amount or
percentage of debt, funded or otherwise, the Company might incur. However, the
Company may not, without the approval of a majority of the Independent
Directors, incur debt for borrowed money in excess of 20% of the aggregate
amount of net proceeds received in connection with the issuance of all
outstanding Preferred Stock and Common Stock of the Company. The above
limitation would also apply to any intercompany advances from the Bank to the
Company.


                                                                              14
<PAGE>   15
The Company may also issue additional series of Preferred Stock. However, the
Company may not issue additional shares of Preferred Stock senior to the Series
A Preferred Shares and Series B Preferred Shares without the consent of holders
of at least 66 2/3% of the shares of Preferred Stock outstanding at that time,
voting together as a single class. In addition, the Company may not issue
additional shares of Preferred Stock ranking on parity with the Series A
Preferred Shares without the approval of a majority of the Company's Independent
Directors. The Company's Independent Directors approved the issuance of the
Series B Preferred Shares.

The Company has entered into an intercompany line of credit with the Bank, which
is utilized to meet short term funding needs. The Company may make prepayments
towards the principal of the loan at any time without penalty. The Company may
use proceeds from any such borrowings to purchase Additional Assets or for other
corporate purposes. At December 31, 2000, the Company had borrowed approximately
$679,000,000 under the line of credit. Approximately $1,321,000,000 of the line
of credit remained unused as of December 31, 2000.

The main source of cash flows related to the Operating Activities of the Company
is derived from net income. The cash provided by Financing Activities, which
involves primarily the issuance of preferred stock, is utilized to increase the
investment portfolio of the Company.

The Company does not anticipate having any material capital expenditures.


OPERATIONAL RISK MANAGEMENT

As noted above, the Company is a subsidiary of the Bank, which is itself a
wholly owned subsidiary of JPMC. The Company has no employees. In accordance
with agreements between the Company and the Bank, the Bank manages all of the
Company's operations. In addition, the Bank and CMMC service all of the
Company's loans. Accordingly, the Company may be subject to certain operating
risks impacting the operations of JPMC, the Bank and CMMC. Such operating risks
include the risk of fraud by employees of the Bank or its affiliates or by
outsiders, unauthorized transactions by such employees and errors relating to
computer and telecommunications systems. Although JPMC, the Bank and CMMC
maintain a system of controls designed to provide management with timely and
accurate operational information and to keep operating risks at appropriate
levels, there can be no assurance that the Company will not suffer loss from
operating risk in the future.

ACCOUNTING DEVELOPMENTS

In 1998, the Financial Accounting Standards Board ("FASB") issued SFAS 133,
which establishes accounting and reporting standards for all derivative
instruments, including certain derivative instruments embedded in other
financial instruments (collectively referred to as derivatives), and for hedging
activities. SFAS 133 requires that an entity measure all derivatives at fair
value and recognize those derivatives as either assets or liabilities on the
balance sheet. The change in a derivative's fair value is generally to be
recognized in current period earnings or equity. Management of the Company
believes that the adoption of SFAS 133 will not significantly affect the
Company's earnings or financial position. Currently, the Company does not
utilize derivative products to hedge its interest rate risk, nor does it
maintain freestanding derivatives or embedded derivatives that require
bifurcation. As a result, the Company did not have a SFAS 133 transition
adjustment on January 1, 2001.

In September 2000, the FASB issued SFAS 140, which revises the standards set
forth in SFAS 125 for the accounting of securitizations and other transfers of
financial assets and collateral. Statement 140 modifies the criteria for
determining whether the transferor has relinquished control of assets and
therefore whether the transfer may be accounted for as a sale. SFAS 140 requires
new disclosures about securitization activities and incremental disclosures
about collateral in addition to maintaining the existing disclosure requirements
of SFAS 125. As issued, the disclosure provisions of SFAS 140 are effective for
the 2000 fiscal year end (December 31, 2000) and the provisions of SFAS 140
relating to the transfer of financial assets and the extinguishment of
liabilities are effective for transfers only after March 31, 2001. The Company
is currently assessing the impact of the adoption of SFAS 140, but management
believes that the adoption of SFAS 140 will not significantly affect the
Company's earnings or financial position.

In 1999, the Accounting Standard Executive Committee of the AICPA formed the
Allowance for Loan Losses Task Force ("Task Force") to research current
accounting guidance and practices as they relate to loan losses. The
expectations are that the Task Force will develop a statement of position that
will provide additional accounting and reporting guidance and clarification on
the factors to consider in determining the allowance for loan losses. The Task
Force is continuing its deliberation, and its impact is yet to be determined.

                                                                              15
<PAGE>   16
COMPARISON BETWEEN 1999 AND 1998

The Company's net interest income was $73,326,000 in 1999 compared with
$79,428,000 in 1998. Basic earnings per share were $25,577,000 and $32,009,000
for 1999 and 1998, respectively. In 1999, interest income from residential and
commercial First Mortgage Loans was $63,192,000 and $6,284,000, respectively,
representing a total average yield of 6.9%, compared with interest income from
residential and commercial First Mortgage Loans of $64,430,000 and $7,909,000,
respectively, representing a total average yield of 7.6% for 1998.

After deductions of $2,604,000 in servicing fees and $595,000 for advisory and
other administrative expenses, the Company reported net income of $70,127,000 in
1999 after deductions of $2,249,000 in servicing fees and $620,000 for advisory
fees and other administrative expenses, the Company reported net income of
$76,559,000 in 1998.


ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK

For information related to interest rate risk, see the Interest Rate Risk
section on page 12.
<PAGE>   17
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                        Report of Independent Accountants



To the Board of Directors and Stockholders
of Chase Preferred Capital Corporation

In our opinion, the accompanying balance sheet and the related statements of
income, of changes in stockholders' equity and of cash flows present fairly, in
all material respects, the financial position of Chase Preferred Capital
Corporation (the "Company") at December 31, 2000 and 1999, and the results of
its operations and its 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 for the opinion expressed
above.



/s/ PricewaterhouseCoopers LLP
New York, New York
March 21, 2001
<PAGE>   18
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                       CHASE PREFERRED CAPITAL CORPORATION
                                  BALANCE SHEET
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                               12/31/00                12/31/99
                                                                                              -----------             -----------
<S>                                                                                           <C>                     <C>
ASSETS:

Residential First Mortgage Loans                                                              $ 1,039,913             $ 1,014,144
Commercial First Mortgage Loans                                                                    37,339                  55,233
Residential Second Mortgage Loans                                                               3,279,021                       0
Residential Manufactured Housing Loans                                                          2,470,573                       0
Intercompany Loans                                                                              2,627,193                       0
                                                                                              -----------             -----------
                                                                                                9,454,039               1,069,377
   Less: allowance for loan losses                                                               (132,719)                 (4,962)
                                                                                              -----------             -----------
                                                                                                9,321,320               1,064,415

Cash and cash equivalents                                                                          31,982                  47,703
Accrued interest receivable due from affiliates                                                    14,580                     225
Accrued interest receivable due from third parties                                                 35,910                   6,957
Accounts receivable due from third parties                                                              9                       0
Assets acquired as loan satisfaction                                                                6,981                       0
                                                                                              -----------             -----------
            TOTAL ASSETS                                                                      $ 9,410,782             $ 1,119,300
                                                                                              ===========             ===========
LIABILITIES:

Due to affiliates                                                                                     594                       0
Intercompany borrowings                                                                           679,000                       0
Accounts payable and accrued liabilities                                                               70                     126
                                                                                              -----------             -----------
             TOTAL LIABILITIES                                                                    679,664                     126
                                                                                              -----------             -----------
Commitments and contingencies (See Note 7)


STOCKHOLDERS' EQUITY:

Preferred stock, par value $25 per share; 50,000,000 shares authorized
   22,000,000 shares Series A issued and outstanding; stated value $25 per share                  550,000                 550,000
   7,600 shares Series B issued and outstanding; stated value $1,000,000 per share              7,600,000                       0
Common stock, par value $171,750,000 per share; one share
   authorized and outstanding                                                                     171,750                 171,750
Capital surplus                                                                                   382,005                 382,005
Retained earnings *                                                                                27,363                  15,419
                                                                                              -----------             -----------
             TOTAL STOCKHOLDERS' EQUITY                                                         8,731,118               1,119,174
                                                                                              -----------             -----------
             TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                       $ 9,410,782             $ 1,119,300
                                                                                              ===========             ===========
</TABLE>

* No retained earnings related to property sales

  The Notes to Financial Statements are an integral part of these Statements.

                                                                              18

<PAGE>   19
                       CHASE PREFERRED CAPITAL CORPORATION
                               STATEMENT OF INCOME
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                      YEAR ENDED          YEAR ENDED          YEAR ENDED
                                                                       12/31/00            12/31/99            12/31/98
                                                                       --------            --------            --------
<S>                                                                    <C>                 <C>                 <C>
INTEREST INCOME:

Residential first mortgage loans                                       $ 66,503            $ 63,192            $ 64,430
Commercial first mortgage loans                                           4,522               6,284               7,909
Second mortgage loans                                                   185,050                   0                   0
Manufactured housing loans                                              126,590                   0                   0
Intercompany loans                                                      126,224                   0                   0
Interest on overnight investments                                         5,183               3,850               7,089
                                                                       --------            --------            --------
      Total interest income                                             514,072              73,326              79,428

Interest expense on intercompany borrowings                               4,879                   0                   0
                                                                       --------            --------            --------
      Net interest income                                               509,193              73,326              79,428

Provision for credit losses                                                 926                   0                   0
                                                                       --------            --------            --------

      Net interest income after provision for credit losses             508,267              73,326              79,428
                                                                       --------            --------            --------

Other revenue                                                               176                   0                   0


NONINTEREST EXPENSE:

Servicing fees                                                           22,435               2,604               2,249
Advisory fees                                                               500                 250                 250
Foreclosure and other expenses                                            1,158                 345                 370
                                                                       --------            --------            --------

      Total noninterest expense                                          24,093               3,199               2,869
                                                                       --------            --------            --------

NET INCOME                                                             $484,350            $ 70,127            $ 76,559
                                                                       ========            ========            ========

NET INCOME APPLICABLE TO COMMON SHARE                                  $102,212            $ 25,577            $ 32,009
                                                                       ========            ========            ========

BASIC AND FULLY DILUTED
  NET INCOME PER COMMON SHARE(a)                                       $102,212            $ 25,577            $ 32,009
                                                                       ========            ========            ========
</TABLE>

(a)  All per share amounts have been restated to reflect the change, effected on
     December 29, 1998, of the Company's outstanding Common Stock from 572,500
     shares, par value $300 per share, to one share, par value $171,750,000 per
     share.

  The Notes to Financial Statements are an integral part of these Statements.

                                                                              19
<PAGE>   20
                       CHASE PREFERRED CAPITAL CORPORATION
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                  YEAR ENDED               YEAR ENDED              YEAR ENDED
                                                                   12/31/00                 12/31/99                12/31/98
                                                                  -----------             -----------             -----------
<S>                                                               <C>                     <C>                     <C>
SERIES A PREFERRED STOCK:

Balance at beginning of period                                    $   550,000             $   550,000             $   550,000
                                                                  -----------             -----------             -----------
Balance at end of period                                          $   550,000             $   550,000             $   550,000
                                                                  ===========             ===========             ===========

SERIES B PREFERRED STOCK:

Balance at beginning of period                                    $         0             $         0             $         0
4,800 shares issued April 7, 2000 at $1,000,000 stated
         value per share                                            4,800,000                       0                       0
2,800 shares issued May 16, 2000 at $1,000,000 stated
         value per share                                            2,800,000                       0                       0
                                                                  -----------             -----------             -----------
Balance at end of period                                          $ 7,600,000             $         0             $         0
                                                                  ===========             ===========             ===========

COMMON STOCK:

Balance at beginning of period                                    $   171,750             $   171,750             $   171,750
                                                                  -----------             -----------             -----------
Balance at end of period                                          $   171,750             $   171,750             $   171,750
                                                                  ===========             ===========             ===========

CAPITAL SURPLUS:

Balance at beginning of period                                    $   382,005             $   381,637             $   381,637
Other                                                                       0                     368                       0
                                                                  -----------             -----------             -----------
Balance at end of period                                          $   382,005             $   382,005             $   381,637
                                                                  ===========             ===========             ===========

RETAINED EARNINGS:

Balance at beginning of period                                    $    15,419             $    17,487             $    16,543
Net Income                                                            484,350                  70,127                  76,559
Capital distribution to affiliate                                     (18,788)                      0                       0
Common dividends                                                      (71,480)                (27,645)                (31,065)
Series A Preferred dividends                                          (44,550)                (44,550)                (44,550)
Series B Preferred dividends                                         (337,588)                      0                       0
                                                                  -----------             -----------             -----------
Balance at end of period                                               27,363                  15,419                  17,487
                                                                  ===========             ===========             ===========
TOTAL STOCKHOLDERS' EQUITY                                        $ 8,731,118             $ 1,119,174             $ 1,120,874
                                                                  ===========             ===========             ===========
</TABLE>

  The Notes to Financial Statements are an integral part of these Statements.

                                                                              20

<PAGE>   21
                       CHASE PREFERRED CAPITAL CORPORATION
                             STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED          YEAR ENDED          YEAR ENDED
                                                                                  12/31/00            12/31/99            12/31/98
                                                                                -----------         -----------         -----------
<S>                                                                             <C>                 <C>                 <C>
OPERATING ACTIVITIES:

Net income                                                                      $   484,350         $    70,127         $    76,559

Adjustments to reconcile net income to net cash provided by operating
activities:

      Amortization of deferred costs                                                 15,248               4,764               2,140
      Provision for loan losses                                                         926                   0                   0

      Net change in:
      Accrued interest receivable due from affiliates                               (14,355)             70,915             (30,476)
      Accrued interest receivable due from third parties                               (355)              2,634               1,896
      Accounts receivable due from third parties                                         (9)                  0                   0
      Accounts payable and accrued liabilities                                          (56)                 62                  65
      Due to affiliates                                                                 594                   0              (2,867)
                                                                                -----------         -----------         -----------

Net cash provided by operating activities                                           486,343             148,502              47,317
                                                                                -----------         -----------         -----------

INVESTING ACTIVITIES:
      Intercompany loans issued                                                  (2,627,193)                  0                   0
      Purchase of residential first mortgage loans                                 (276,496)           (554,561)           (642,854)
      Purchase of second mortgage loans                                          (3,784,617)                  0                   0
      Purchase of manufactured housing loans                                     (2,474,195)                  0                   0
      Principal payments received                                                   880,578             501,795             603,920
      Purchase of accrued interest receivable                                       (28,598)             (1,888)             (2,618)
      Other                                                                           1,863                 835               1,146
                                                                                -----------         -----------         -----------

Net cash used by investing activities                                            (8,308,658)            (53,819)            (40,406)
                                                                                -----------         -----------         -----------

FINANCING ACTIVITIES:
      Net capital distribution to affiliate                                         (18,788)                  0                   0
      Intercompany borrowings                                                       679,000                   0                   0
      Issuance of Series B Preferred Stock                                        7,600,000                   0                   0
      Dividends paid                                                               (453,618)            (72,195)            (75,615)
                                                                                -----------         -----------         -----------

Net cash provided (used) by financing activities                                  7,806,594             (72,195)            (75,615)
                                                                                -----------         -----------         -----------

NET(DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS                                  (15,721)             22,488             (68,704)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                     47,703              25,215              93,919

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $    31,982         $    47,703         $    25,215
                                                                                ===========         ===========         ===========

Supplemental disclosure of non-cash investing activities
   Assets acquired as loan satisfaction                                         $     8,844         $         0         $         0
Supplemental disclosure of cash flow information:
   Cash paid during the year for:
   Interest                                                                     $     4,511         $         0         $         0
   Taxes (State)                                                                         22                 118                 121
</TABLE>

  The Notes to Financial Statements are an integral part of these Statements.

                                                                              21

<PAGE>   22

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Chase Preferred Capital Corporation (the "Company") is a Delaware corporation
incorporated on June 28, 1996 and created for the purpose of acquiring, holding
and managing real estate assets. The Company is a subsidiary of The Chase
Manhattan Bank (the "Bank"), a banking corporation organized under the laws of
the State of New York.

On December 29, 1998, the Bank, as sole common stockholder, approved an
amendment to the Company's Certificate of Incorporation that reduced the
Company's authorized Common Stock from 5,000,000 shares to one share and changed
the outstanding Common Stock from 572,500 shares having a par value of $300 per
share ($171,750,000 in the aggregate) to one share having a par value of
$171,750,000. All references to numbers of shares of common stock, per common
share amounts and common stock par values have been restated to reflect the
effects of the amendment.

The Company is authorized to issue 50,000,000 shares of Preferred Stock, $25 par
value per share, and one share of Common Stock, $171,750,000 par value per
share. At December 31, 2000, 22,000,000 shares of 8.10% Cumulative Preferred
Stock, Series A ("Series A Preferred Shares") were outstanding and 7,600 shares
of Floating Rate Cumulative Preferred Stock, Series B ("Series B Preferred
Shares") were outstanding. The Series A Preferred Shares are traded on the New
York Stock Exchange. The Common Stock and Series B Preferred Shares of the
Company are held by the Bank.

The accounting and financial reporting policies of the Company conform to
generally accepted accounting principles and prevailing industry practices. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period.

Certain amounts in the accompanying prior year financial statements have been
reclassified to conform to the current year presentation.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Loans:

Loans secured by first mortgages on residential and commercial properties
("First Mortgage Loans"), loans secured by second mortgages on single family
(one-to-four unit) residential real estate properties ("Second Mortgage Loans")
and loans secured by first priority security interests in manufactured housing
units ("Manufactured Housing Loans") are carried at the principal amount
outstanding, net of any premium or discount associated with these loans.
Interest income, including amortization of premiums and accretion of discounts
on loans held for investment, is recognized using the interest method or on a
basis approximating a level rate of return over the term of the loan. Loans
acquired from the Bank are initially recorded at the historical cost basis in
the accompanying balance sheet. Any difference between the amount paid by the
Company and the historical cost basis is treated as an adjustment to equity.
Loans acquired from the Chase Manhattan Bank USA, National Association ("Chase
USA") and Chase Mortgage Holdings Inc., a subsidiary of the Bank, are initially
recorded at fair value. The First Mortgage Loans, Second Mortgage Loans and
Manufactured Housing Loans are collectively referred to as the "Direct Loans".
The Direct Loans are held for investment and are non-trading items.

Nonaccrual loans are those loans on which the accrual of interest has ceased.
Loans are placed on nonaccrual status immediately if, in the opinion of
management, full payment of principal or interest is in doubt, or when principal
or interest is past due 90 days or more and collateral, if any, is insufficient
to cover principal and interest. Interest accrued but not collected at the date
a loan is placed on nonaccrual status is reversed against interest income. In
addition, the amortization of net deferred loan fees and costs are suspended
when a loan is placed on nonaccrual status. Interest income on nonaccrual loans
is recognized only to the extent received in cash. However, where there is doubt
regarding the ultimate collectibility of the loan principal, cash receipts,
whether designated as principal or interest, are thereafter applied to reduce
the carrying value of the loan. Loans are restored to accrual status only when
interest and principal payments are brought current and future payments are
reasonably assured.

A loan is considered impaired when, based on current information, it is probable
that the borrower will be unable to pay contractual interest or principal
payments as scheduled in the loan agreement. The Company accounts for and
discloses nonaccrual commercial First Mortgage Loans and Intercompany Loans as
impaired. Impaired loans are carried at the present value of expected future
cash flows discounted at the loan's effective interest rate or, as a practical
expedient, at the loan's observable market price, or the fair value of the
collateral, if the loan is collateral dependent. The Company recognizes interest
income on impaired loans in the manner set forth above for nonaccrual loans. The
Company excludes from impaired loans its residential First Mortgage Loans,
Second Mortgage Loans and Manufactured Housing Loans.



                                                                              22
<PAGE>   23
A collateralized loan is reclassified to Assets Acquired as Loan Satisfactions
only when the Company has taken physical possession of the collateral regardless
of whether formal foreclosure proceedings have taken place.

Allowance for Loan Losses:

The Company's allowance for loan losses is intended to cover probable credit
losses for which either the asset is not specifically identified or the size of
the loss has not been fully determined. The allowance for loan losses is
reviewed at least quarterly in light of the risk profile of the portfolio and
current economic conditions. The allowance is adjusted based on that review if,
in management's judgment, changes are warranted.

The allowance for loan losses is increased by allowances related to purchased
Direct Loan portfolios at amounts equal to the predecessor's historical cost
basis, and by provisions for losses charged against income and is reduced by
charge-offs, net of recoveries. Direct Loans, other than commercial First
Mortgage Loans, are generally charged to the allowance for loan losses upon
reaching specified stages of delinquency in accordance with the Federal
Financial Institutions Examination Council's ("FFIEC") policy. For example,
residential First Mortgage Loans and Second Mortgage Loans are generally charged
off to net realizable value at 180 days past due, while Manufactured Housing
Loans are generally charged off (to net realizable value if collateralized) at
120 days past due.

Cash and Cash Equivalents:

The Company considers all short-term, highly liquid investments that are both
readily convertible to cash and have a maturity of generally three months or
less at the time of purchase to be cash equivalents. At December 31, 2000, the
Company's cash was held in custody at a third party financial institution, and
cash equivalents (overnight deposits) were held in custody at the Bank.

Dividends:

Preferred Stock. Dividends on the Series A Preferred Shares are cumulative and
are payable quarterly on the last day of March, June, September and December at
a rate of 8.10% per annum of the initial liquidation preference ($25.00 per
share). Dividends on the Series B Preferred Shares are cumulative and are
payable quarterly on the last day of March, June, September and December at a
variable rate equal to the Federal funds (effective) rate.

Common Stock. The common shareholder is entitled to receive dividends when, as
and if declared by the Board of Directors out of funds legally available after
all preferred dividends have been paid.

Net Income Per Common Share:

Net income per share is computed by dividing net income after preferred
dividends by the weighted average number of shares of Common Stock outstanding.

Income Taxes:

The Company has elected to be treated as a Real Estate Investment Trust ("REIT")
pursuant to provisions of the Internal Revenue Code of 1986, as amended (the
"Code"). As a result, the Company will not be subject to federal income tax on
its taxable income to the extent it distributes at least 95% of its taxable
income to its shareholders and it meets certain other requirements set forth in
the Code. The Company intends to maintain its qualification as a REIT for
federal income tax purposes. The Company intends to pay qualifying dividends
(for federal income tax purposes) on all of its taxable income to the holders of
its Common Stock, Series A Preferred Shares and Series B Preferred Shares, a
portion of which may be in the form of "consent" dividends or "subsequent year"
dividends, pursuant to the Code. As a result, the Company has made no provision
for income taxes in the accompanying financial statements.

Statement of Cash Flows:

The main source of cash flows related to the Operating Activities of the Company
is derived from Net Income. The cash provided by the Financing Activities, which
is primarily provided by the issuance of preferred stock, is utilized to
increase the investment portfolio of the Company.


                                                                              23
<PAGE>   24
NOTE 3 - LOAN PORTFOLIO

First Mortgage Loans:

First Mortgage Loans consist of both residential and commercial First Mortgage
Loans. Residential First Mortgage Loans consist of six-month prime rate
adjustable rate mortgages ("ARMs"); six-month treasury ARMs; three-year fixed
rate loans with an automatic conversion to six-month, one-year and three-year
treasury ARMs; one-year, five-year, seven-year and ten-year fixed rate loans
with an automatic conversion to one-year treasury ARMs; and fixed rate loans.
The commercial First Mortgage Loans consist of fixed and variable rate loans, a
majority of which have balloon payments.

Second Mortgage Loans:

Second Mortgage Loans consist of one-year treasury ARMs and 15-year and 30-year
fixed rate loans. The initial portfolio of Second Mortgage Loans was acquired
from the Bank and Chase USA through the purchase by the Company of a 100%
participation interest in such Loans, including the related servicing rights.

Manufactured Housing Loans:

Manufactured Housing Loans consist of 15-year and 30-year fixed rate loans. The
initial portfolio was acquired from the Bank and Chase USA through the purchase
by the Company of a 100% participation interest in such Loans, including the
related servicing rights.

Intercompany Loans:

The Intercompany Loans to the Bank and Chase USA are variable rate loans bearing
interest rates equal to the Federal funds (effective) rate. The Intercompany
Loans are secured by the pledge of the Bank and Chase USA of all loans
originated under home equity lines of credit extended by those banks. The
security agreements with respect to the Intercompany Loans provide that all
HELOCs, regardless of their credit quality, will be pledged to the Company,
although the Company has the discretion to release its security interest in any
particular HELOC or to require the Bank or Chase USA, as the case may be, to
take appropriate action with respect to the borrower under the HELOC, including,
without limitation, initiating foreclosure proceedings with respect to the
property securing the HELOC. As of December 31, 2000, the outstanding principal
balance of the Intercompany Loans equaled $2,627,193,000, representing 60.7% of
the then outstanding principal balance of the HELOCs pledged as security.


The following represents the Loan portfolio before allowance for loan losses as
of the dates indicated:


                                             12/31/00           12/31/99
                                           (in thousands)     (in thousands)

   Residential First Mortgage Loans         $   1,039,913      $   1,014,144
   Commercial First Mortgage Loans                 37,339             55,233
   Second Mortgage Loans                        3,279,021                  0
   Manufactured Housing Loans                   2,470,573                  0
   Intercompany Loans                           2,627,193                  0
                                            -------------      -------------
     Total portfolio                        $   9,454,039      $   1,069,377
                                            =============      =============

                                                                              24
<PAGE>   25
NOTE 4 - ALLOWANCE FOR LOAN LOSSES

The table below summarizes the changes in the allowance for loan losses during
2000, 1999, and 1998:

ALLOWANCE FOR LOAN LOSSES
    (in thousands)
<TABLE>
<CAPTION>

                                                           12/31/00          12/31/99            12/31/98
                                                         ------------------------------------------------
    <S>                                                  <C>               <C>               <C>
    Total allowance at beginning of period               $    4,962        $    4,120        $      3,468
    Acquired allowance                                      140,515               929               1,092
    Provision for loan losses                                   926                 0                   0
    Charge-offs                                             (13,811)              (87)               (440)
    Recoveries                                                  127                 0                   0
                                                         ----------        ----------        ------------
    Total allowance at end of period                       $132,719        $    4,962        $      4,120
                                                         ==========        ==========        ============
</TABLE>

At December 31, 2000, 1999 and 1998, the Company's allowance for loan losses as
a percentage of Direct Loans was 1.94%, .46% and .40%, respectively.


NOTE 5 - DIVIDENDS

For each of the years ended December 31, 2000, 1999 and 1998, the Company paid
$44,550,000 in dividends on the Series A Preferred Shares and in 2000 paid
$337,588,000 in dividends on the Series B Preferred Shares. In addition, the
Company paid Common Stock dividends of approximately $71,480,000 in 2000,
compared with $27,645,000 in 1999 and $31,065,000 in 1998.

NOTE 6 - RELATED PARTY TRANSACTIONS

At March 31, 2000, the Company's loan portfolio consisted solely of First
Mortgage Loans that it had acquired from the Bank or its affiliates.

In April 2000, the Company acquired approximately $2.1 billion of Second
Mortgage Loans (and related servicing rights) that had been originated or
acquired by the Bank or Chase USA or their affiliates. In May 2000, the Company
acquired approximately $1.9 billion of Manufactured Housing Loans (and related
servicing rights) that had been originated or acquired by the Bank of Chase USA
or their affiliates. The Second Mortgage Loans and the Manufactured Housing
Loans were acquired through sales by the Bank and Chase USA of 100%
participation interests of such loans to the Company. The participation
interests were purchased at prices equal to the estimated fair values of the
loans. On a monthly basis following the initial acquisitions of the Second
Mortgage Loans and Manufactured Housing Loans, the Company has purchased 100%
participation interest in substantially all Second Mortgage Loans and
Manufactured Housing Loans originated by the Bank and Chase USA meeting certain
specified credit criteria.

In April 2000, the Company also extended approximately $2.6 billion of
non-recourse intercompany loans ("Intercompany Loans") to the Bank and Chase USA
which are secured by a pledge by the Bank and Chase USA of all outstanding loans
under home equity lines of credit ("HELOCS") originated by the Bank or Chase
USA, as the case may be. The initial aggregate principal amount of the
Intercompany Loans equaled approximately 80% of the outstanding principal
balance of the HELOCs pledged as security therefor. On a quarterly basis, the
Company may, but is not required to, make additional Intercompany Loans to the
Bank and/or Chase USA, subject to certain limits.

The funds required by the Company to make the initial acquisitions of the Second
Mortgage Loans and Manufactured Housing Loans and to make the Intercompany Loans
(collectively, the "Additional Assets") were obtained through the issuance and
sale to the Bank of the Series B Preferred Shares. The Bank, as holder of the
Series B Preferred Shares, is entitled to receive cumulative dividends at a
variable dividend rate equal to the Federal funds (effective) rate. The Series B
Preferred Shares rank junior to the Series A Preferred Shares with respect to
the payment of dividends and rank on a parity with the Series A Preferred Shares
upon liquidation, dissolution or winding up of the Company. The Series B
Preferred Shares are redeemable at the option of the Company on or after
September 18, 2001 or at any time upon the occurrence of certain events relating
to the tax treatment of the Company or the Series B Preferred Shares. The Series
B Preferred Shares do not have any voting rights, other than the right to
approve the issuance of senior preferred stock or certain amendments to the
Company's certificate of incorporation that would adversely affect the Series B
Preferred Shares. In approving the acquisition of the Additional Assets, the
Independent Directors (as defined in the Certificate of Designation), upon
receipt of

                                                                              25
<PAGE>   26
an opinion of counsel, waived all Ownership Limits (as defined in the Company's
Certificate of Incorporation) with respect to the Series B Preferred Shares. The
Company has also entered into an intercompany line of credit with the Bank. The
Company may make prepayments towards the principal of the loan at any time
without penalty. The Company may use proceeds from any such borrowings to
purchase Additional Assets or for other corporate purposes. At December 31,
2000, the Company had borrowed approximately $679,000,000 under the line of
credit. The weighted average interest rate paid by the Company to the Bank on
the borrowings outstanding during 2000 was 6.69%. Approximately $1,321,000,000
of the line of credit remained unused as of December 31, 2000.

The Company is a party to an agreement (the "Advisory Agreement") with the Bank
(the "Advisor") pursuant to which the Advisor provides advice to the Board of
Directors and manages the operations of the Company in accordance with the
parameters established in the Advisory Agreement. The Advisory Agreement has an
initial term of five years commencing on September 18, 1996 and automatically
renews for an additional five years unless the Company delivers a notice of
nonrenewal to the Advisor. The Advisory Agreement was amended effective April
2000 to increase the Advisor's annual fee from $250,000 to $500,000 in
connection with the acquisition by the Company of the Additional Assets.

The Company is also party to servicing agreements with the Bank, as servicer,
for the servicing of the commercial and residential First Mortgage Loans. The
Bank has entered into sub-servicing agreements with Chase Manhattan Mortgage
Corporation ("CMMC"), a wholly-owned subsidiary of Chase USA and an indirect
wholly-owned subsidiary of J.P. Morgan Chase & Co. (formerly, The Chase
Manhattan Corporation ("JPMC")), with respect to the servicing of the First
Mortgage Loans. CMMC is also the servicer of the Second Mortgage Loans and
Manufactured Housing Loans acquired by the Company. Pursuant to each servicing
agreement, the Bank and CMMC, as the case may be, perform the servicing of the
Direct Loans owned by the Company in accordance with (i) general industry
practices, (ii) any servicing guidelines promulgated by the Company, and (iii)
in the case of residential First Mortgage Loans and Second Mortgage Loans, FNMA
and FHLMC guidelines and procedures.

For the years ended December 31, 2000, 1999 and 1998, the Company purchased
First Mortgage Loans having an outstanding principal balance of approximately
$276,496,000, $554,561,000 and $642,855,000, respectively, from the Bank or its
affiliates. For the year ended December 31, 2000, the Company purchased Second
Mortgage Loans and Manufactured Housing Loans having outstanding principal
balances of $3,784,617,000 and $2,474,195,000, respectively. The Company also
sold $1,863,000 of non-performing residential First Mortgage Loans to a
wholly-owned subsidiary of JPMC during the year ended December 31, 2000. No gain
or loss was recognized from this sale.

Advisory fees and servicing fees incurred in 2000, 1999 and 1998 totaled
approximately $22,935,000, $2,854,000 and $2,499,000, respectively.

The Company maintains its cash in an overnight deposit account with the Bank and
earns a market rate of interest. Interest income on these deposits amounted to
approximately $5,183,000, $3,850,000 and $7,089,000 for the years ended December
31, 2000, 1999 and 1998, respectively.


NOTE 7 - COMMITMENTS AND CONTINGENCIES

Legal Proceedings:

At December 31, 2000, the Company was not subject to any material litigation.
None of the Company, the Bank nor any of the Bank's' affiliates is currently
involved in any material litigation with respect to the Company's assets that
would, in the opinion of the Company's management, have a material adverse
effect on the financial condition of the Company.










                                                                              26
<PAGE>   27
Credit Risk Concentrations:

Concentration of credit risk arises when a number of borrowers engage in similar
business activities, or activities in the same geographical region, or have
similar economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic conditions.
Concentration of credit risk indicates the relative sensitivity of the Company's
performance to both positive and negative developments affecting a particular
industry or geographic region. The following table shows the Company's Direct
Loan portfolio by geographic area as of December 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                 DECEMBER 31, 2000                   DECEMBER 31, 1999
    ($ in thousands)                                         AMOUNT            PERCENT             AMOUNT       PERCENT
------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                      <C>         <C>                   <C>
Geographic Area
---------------
California                                              $     1,358,451          19.9%       $     388,166         36.3%
New York                                                        537,066           7.9%              78,544          7.3%
Texas                                                           478,131           7.0%              52,747          4.9%
Florida                                                         343,325           5.0%              50,924          4.8%
Other States (no State has more than 5%)                      4,109,873          60.2%             498,996         46.7%
                                                        ---------------          ----        -------------         -----
Total                                                   $     6,826,846           100%       $   1,069,377          100%
                                                        ===============          ====        =============         =====
</TABLE>


At December 31, 2000, approximately 19.9% of the Company's Direct Loan portfolio
consisted of loans collateralized by residential real estate properties located
in California. Consequently, these residential mortgage loans may be subject to
a greater risk of default than other comparable residential mortgage loans in
the event of adverse economic, political or business developments or natural
hazards (earthquakes, for example) in California that may affect the ability of
residential property owners in California to make payments of principal and
interest on the underlying Direct Loans.

At December 31, 2000, the HELOCs that are pledged as collateral for the
Intercompany Loans are collateralized by residential real estate properties
concentrated in New York (43%), California (24%), Connecticut (7%) and New
Jersey (6%). No other state constituted more than 5% of the HELOC portfolio that
collateralized the Intercompany Loans on that date.

NOTE 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, entitled "Disclosures About
Fair Value of Financial Instruments" ("SFAS 107"), requires the Company to
disclose fair value information about financial instruments for which it is
practicable to estimate the value, whether or not such financial instruments are
recognized on the balance sheet. Fair value is defined as the amount at which a
financial instrument could be exchanged in a current transaction between willing
parties, other than in a forced sale or liquidation, and is best evidenced by a
quoted market price, if one exists. The calculation of estimated fair value is
based on market conditions at a specific point in time and may not be reflective
of future fair values.

Certain financial instruments and all nonfinancial instruments are excluded from
the scope of SFAS 107. Accordingly, the fair value disclosures that are required
by SFAS 107 provide only a partial estimate of the fair value of the Company.
Fair values among REITs are not comparable due to the wide range of valuation
techniques and numerous estimates that must be made. This lack of objective
valuation standard introduces a great degree of subjectivity to these derived or
estimated fair values. Therefore, readers are cautioned in using this
information for purposes of evaluating and comparing the financial condition of
the Company with other REITs.

First Mortgage Loans:

First Mortgage Loans were valued using methodologies suitable for each loan
type.

The fair value of the Company's commercial First Mortgage Loans was estimated by
assessing the two main risk components of the portfolio: credit and interest.
The estimated cash flows were adjusted to reflect the inherent credit risk and
then discounted, using rates appropriate for each maturity that incorporate the
effects of interest rate changes.

For residential First Mortgage Loans the fair values were estimated by
discounting cash flows, adjusted for prepayments. The discount rates used for
residential First Mortgage Loans were secondary market yields for comparable
instruments, adjusted for credit risk. The discount rates used incorporated the
effects of interest rate changes only, since the estimated cash flows were
already adjusted for credit risk.







                                                                              27
<PAGE>   28
Manufactured Housing, Second Mortgage and Intercompany Loans:

The fair values for the Manufactured Housing and fixed rate Second Mortgage
Loans were estimated by discounting cash flows, adjusted for prepayments. The
discount rates used were market yields for comparable instruments, adjusted for
credit risk. The discount rates used incorporated the effects of interest rate
changes only, since the estimated cash flows were already adjusted for credit
risk. The fair values for the adjustable rate Second Mortgage Loans are
considered to approximate carrying value due to the variable note rate. The fair
value of the Intercompany Loans is considered to approximate carrying value due
to the variable note rate.

The carrying value and fair value of the Direct Loans at December 31, 2000 and
1999 were as follows (in thousands):
<TABLE>
<CAPTION>

                                                             12/31/00                            12/31/99
                                                                     Estimated                           Estimated
                                                   Carrying Value    Fair Value        Carrying Value    Fair Value
                                                   --------------    ----------        --------------    ----------
<S>                                                  <C>             <C>                <C>             <C>
First Mortgage Loans, net of allowance for           $1,071,313      $1,084,659         $ 1,064,415     $ 1,070,843
                  loan losses
Second Mortgage Loans, net of allowance              $3,259,063      $3,281,203                   0               0
                for loan losses
Manufactured Housing Loans, net of                   $2,363,751      $2,505,510                   0               0
      allowance for loan losses
</TABLE>

Assets and liabilities for which fair value approximates carrying value:

The fair values of certain financial assets and liabilities carried at cost,
including cash and cash equivalents, intercompany loans, accrued interest
receivable due from affiliates, accrued interest receivable due from third
parties, accounts receivable due from third parties, assets acquired as loan
satisfaction, due to affiliates, intercompany borrowings and accounts payable
and accrued liabilities, are considered to approximate their respective carrying
value due to their short-term nature and negligible credit losses.


                                                                              28
<PAGE>   29
SUPPLEMENTARY INFORMATION

                       CHASE PREFERRED CAPITAL CORPORATION
                              AVERAGE BALANCE SHEET
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                             2000                              1999
                                                              -----------------------------       ----------------------------
                                                               BALANCE      INTEREST   RATE        BALANCE     INTEREST   RATE
<S>                                                           <C>          <C>          <C>      <C>            <C>       <C>
   ASSETS:

   Residential Mortgage Loans                                 $  976,944      66,503    6.8%     $  938,334     63,192    6.7%
   Commercial Mortgage Loans                                      48,531       4,522    9.3%         68,175      6,284    9.2%
   Residential Second Mortgage Loans                           2,162,764     185,050    8.6%              0          0      0%
   Residential Manufactured Housing Loans                      1,349,224     126,590    9.4%              0          0      0%
   Intercompany Loans                                          1,930,915     126,224    6.5%              0          0      0%
   Cash                                                           89,638       5,183    5.8%         72,801      3,850    5.3%
                                                               ---------     -------    ----      ---------     ------    ----
        TOTAL INTEREST-EARNING ASSETS                          6,558,016     514,072    7.8%      1,079,310     73,326    6.8%
                                                               ---------     -------    ----      ---------     ------    ----

    Cash - Noninterest-earning                                     9,548                             16,694
    Allowance for credit losses                                  (55,686)                            (4,567)
   Due from affiliates                                               398                             28,287
   Accrued interest receivable due from affiliates                 5,168                                  0
   Accrued interest receivable due from third parties             20,012                              6,801
   Accounts receivable due from third parties                      7,116                                  0
   Assets acquired as loan satisfaction                            1,961                                  0
                                                              ----------                         ----------
        TOTAL ASSETS                                          $6,546,533                         $1,126,525
                                                              ==========                         ==========

    LIABILITIES:

    Accounts payable                                          $    4,793                         $    4,496
    Due to affiliates                                             33,264                                  0
    Intercompany borrowings                                       72,947       4,879    6.7%              0
                                                              ----------     -------    ----     ----------
        TOTAL LIABILITIES                                        111,004                              4,496
                                                              ----------                         ----------

   STOCKHOLDERS' EQUITY:

   Preferred stock, par value $25 per share;
        50,000,000 shares authorized, 22,000,000
        issued and outstanding                                   550,000                            550,000
   Series B Preferred stock, par value $25 per share;
        7,600 shares issued and outstanding                    5,287,432                                  0
   Common stock, one share authorized and
        outstanding, par value $171,750,000 per share            171,750                            171,750
   Capital surplus                                               382,131                            381,732
   Retained earnings                                              44,216                             18,547
                                                              ----------                         ----------
        TOTAL STOCKHOLDERS' EQUITY                             6,435,529                          1,122,029
                                                              ----------                         ----------
        TOTAL LIABILITIES AND STOCKHOLDERS'                   $6,546,533                         $1,126,525
           EQUITY
                                                              ==========                         ==========
</TABLE>

                                                                              29

<PAGE>   30
                       CHASE PREFERRED CAPITAL CORPORATION
                         QUARTERLY FINANCIAL INFORMATION
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                         2000                                           1999
                                       ----------------------------------------       ------------------------------------------
                                         FOURTH      THIRD      SECOND      FIRST        FOURTH     THIRD      SECOND      FIRST
                                         QUARTER    QUARTER    QUARTER    QUARTER       QUARTER    QUARTER    QUARTER    QUARTER

<S>                                    <C>        <C>        <C>        <C>           <C>        <C>        <C>        <C>
INTEREST INCOME:

Residential mortgage loans             $  16,902  $  16,817  $  16,814  $  15,970     $  16,829  $  15,823  $  15,209  $  15,331
Commercial mortgage loans                    890      1,006      1,334      1,292         1,528      1,300      1,730      1,726
Second mortgage loans                     69,087     65,852     50,111          0             0          0          0          0
Manufactured housing loans                54,017     48,245     24,328          0             0          0          0          0
Intercompany loans                        43,472     43,771     38,981          0             0          0          0          0
Interest on overnight investments            186        942      3,325        730           101        968      1,913        868
                                       ---------  ---------  ---------  ---------     ---------  ---------  ---------  ---------
      Interest Income                    184,554    176,633    134,893     17,992        18,458     18,091     18,852     17,925
Interest expense on borrowings             4,824         55          0          0             0          0          0          0
                                       ---------  ---------  ---------  ---------     ---------  ---------  ---------  ---------
      Net interest income                179,730    176,578    134,893     17,992        18,458     18,091     18,852     17,925
Provision for credit losses                 (545)         0      1,471          0             0          0          0          0
         Net interest income after
         provision for credit losses     180,275    176,578    133,422     17,992        18,458     18,091     18,852     17,925
                                       ---------  ---------  ---------  ---------     ---------  ---------  ---------  ---------
         Other revenue                        61         66         49          0             0          0          0          0
      NON INTEREST EXPENSE:

Servicing fees                             9,148      8,670      3,949        668           674        657        639        634
Advisory fees                                145        146        146         63            62         62         63         63
Other administrative expenses                491        456        155         56           104         58        102         81
                                       ---------  ---------  ---------  ---------     ---------  ---------  ---------  ---------
         Total noninterest expense         9,784      9,272      4,250        787           840        777        804        778
                                       ---------  ---------  ---------  ---------     ---------  ---------  ---------  ---------

NET INCOME:                            $ 170,552  $ 167,372  $ 129,221  $  17,205     $  17,618  $  17,314   $ 18,048   $ 17,147
                                       =========  =========  =========  =========     =========  =========  =========  =========
NET INCOME APPLICABLE TO
    COMMON SHARE                       $  35,620 $   32,258 $   28,266  $   6,068     $   6,480  $   6,177    $ 6,910    $ 6,010
                                       =========  =========  =========  =========     =========  =========  =========  =========
BASIC AND FULLY DILUTED
      NET INCOME PER COMMON
     SHARE (A)                         $  35,620   $ 32,258   $ 28,266  $   6,068     $   6,480  $   6,177    $ 6,910    $ 6,010
                                       =========  =========  =========  =========     =========  =========  =========  =========
</TABLE>

(a)      All per share amounts have been restated to reflect the change,
         effected on December 29, 1998, of the Company's outstanding Common
         Stock from 572,500 shares, par value $300 per share, to one share, par
         value $171,750,000 per share.

                                                                              30

<PAGE>   31
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.


ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION

The following persons are directors of the Company as of the date hereof:
<TABLE>
<CAPTION>

<S>                                        <C>      <C>
Richard J. Boyle                           57       Director. Retired as Vice Chairman of the Board of The Chase Manhattan
                                                    Corporation ("Heritage Chase") and The Chase Manhattan Bank, N.A. upon
                                                    consummation of the merger of Heritage Chase with Chemical Banking Corporation
                                                    on March 31,1996. Mr. Boyle served in such positions since 1987. Mr. Boyle is
                                                    Chairman of the Board and Chief Executive Officer of The Buck Hill Falls
                                                    Company.

Peter Gleysteen                            49       Chairman and Director. The Chief Credit Officer of J.P. Morgan Chase & Co. Prior
                                                    to the merger between J.P. Morgan & Co. Incorporated and The Chase Manhattan
                                                    Corporation ("Chase") on December 31, 2000, Mr. Gleysteen had been responsible
                                                    for Chase's worldwide loan syndications business and the corporate loan
                                                    portfolio.

Thomas Jacob                               62       Director. The Chief Executive Officer of Chase Manhattan Mortgage Corporation,
                                                    the mortgage subsidiary of JPMC. Mr. Jacob is also the President of Chase USA
                                                    and an Executive Vice President of JPMC.

William C. Langley                         62       Director. Retired as an Executive Vice President and Chief Credit and Risk
                                                    Policy Officer of Chemical Banking Corporation and Chemical Bank, effective July
                                                    31, 1996. Mr. Langley had served as Chief Credit Officer since 1990. Mr. Langley
                                                    is a Director of Singer N.V., the reorganized parent corporation of various
                                                    Singer sewing machine enterprises that were the subject of reorganization
                                                    proceedings under Chapter 11 of the Bankruptcy Code.

Louis M. Morrell                           54       Treasurer and Director. A Managing Director of the Bank and JPMC. Mr. Morrell
                                                    joined the Bank in 1970 and, since joining, has held various corporate finance
                                                    and corporate treasury-related positions with the Bank.

Neila B. Radin                             47       Secretary. A Senior Vice President and Associate General Counsel of the Bank.
                                                    Ms. Radin joined the Bank in 1987 and has been a member of its legal department
                                                    since 1988.

Peter R. Schleif                           53       President and Director. The Financial Management Executive for JPMC's Retail and
                                                    Middle Market Financial Services businesses and a Senior Vice President of the
                                                    Bank.

Joseph L. Sclafani                         52       Director. An Executive Vice President of JPMC and the Bank and Controller of
                                                    JPMC since August 1992.


</TABLE>

                                                                              31
<PAGE>   32
ITEM 11:  EXECUTIVE COMPENSATION

The Company does not pay any compensation to its officers or to directors who
are not Independent Directors. The Independent Directors (Messrs. Boyle and
Langley) each receive annual compensation of $10,000 plus a fee of $750 for
attendance (in person or by telephone) at each meeting of the Board of
Directors.


ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

None.


ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reference is hereby made to "Item 1. Business" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" for a
discussion of the Company's various relationships with the Bank, the sole holder
of all its outstanding Common Stock.


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

No Current Reports on Form 8-K were filed during the fourth quarter of 2000.

<TABLE>
<CAPTION>

EXHIBIT NO.                         EXHIBITS
-----------                         --------
<S>                             <C>
3(a)                            Form of Amended and Restated Certificate of Incorporation of
                                the Company.

3(b)                            Form of Amended and Restated By-laws of the Company
                                (Incorporated by reference to Exhibit 3(b) (ii) to the
                                Registration Statement on Form S-11 (File No. 333-08001) of
                                Chase Preferred Capital Corporation).

4                               Specimen of certificate representing Series A Preferred Shares
                                (Incorporated by reference to Exhibit 4 to the Registration
                                Statement on Form S-11 (File No. 333-08001 of Chase Preferred
                                Capital Corporation).

10(a)                           Form of Residential Mortgage Loan Purchase and Warranties
                                Agreement between the Company and The Chase Manhattan Bank
                                (Incorporated by reference to Exhibit 10(a) to the
                                Registration Statement on Form S-11 (File No. 333-08001) of
                                Chase Preferred Capital Corporation).

10(b)                           Form of Commercial Mortgage Loan Purchase and Warranties
                                Agreement between the Company and The Chase Manhattan Bank
                                (Incorporated by reference to Exhibit 10(b) to the
                                Registration Statement on Form S-11 (File No. 333-08001) of
                                Chase Preferred Capital Corporation).

10(c)                           Form of Residential Mortgage Loan Servicing Agreement between
                                the Company and The Chase Manhattan Bank (Incorporated by
                                reference to Exhibit 10(c) to the Registration Statement on
                                Form S-11 (File No. 333-08001) of Chase Preferred Capital
                                Corporation).

10(d)                           Form of Commercial Mortgage Loan Servicing Agreement between
                                the Company and The Chase Manhattan Bank (Incorporated by
                                reference to Exhibit 10(d) to the Registration Statement on
                                Form S-11 (File No. 333-08001) of Chase Preferred Capital
                                Corporation).

10(e)                           Form of Advisory Agreement between the Company and The Chase
                                Manhattan Bank (Incorporated by reference to Exhibit 10(e) to
                                The Registration Statement on Form S-11 (File No. 333-08001)
                                of Chase Preferred Capital Corporation).

10(f)                           Form of Hypothecation Loan Agreement, dated as of April 7,
                                2000, between the Company and each of The Chase Manhattan Bank
                                and Chase Manhattan Bank USA, National Association.

</TABLE>

                                                                              32

<PAGE>   33
<TABLE>
<CAPTION>

<S>                             <C>
10(g)                           Form of Security and Assignment Agreement, dated as of April
                                7, 2000, between the Company and each of The Chase Manhattan
                                Bank and Chase Manhattan Bank USA, National Association.

10(h)                           Form of Amended and Restated Account Control Agreement, dated
                                as of April 7, 2000, among the Company, Chase Manhattan Bank
                                USA, National Association, Chase Manhattan Mortgage
                                Corporation and The Chase Manhattan Bank.

10(i)                           Form of Master Participation Agreement, dated as of April 7,
                                2000, among the Company and each of The Chase Manhattan Bank
                                and Chase Manhattan Bank USA, National Association relating to
                                Second Mortgage Loans.

10(j)                           Form of Master Participation Agreement, dated as of May 12,
                                2000, among the Company and each of Chase Manhattan Bank USA,
                                National Association and The Chase Manhattan Bank relating to
                                the Manufactured Housing Loans.

11                              Computation of net income per share

12(a)                           Computation of ratio of earnings to fixed charges

12(b)                           Computation of ratio of earnings to fixed charges and
                                preferred stock dividend requirements



</TABLE>

                                                                              33

<PAGE>   34
                                   SIGNATURES



     Pursuant to the requirements of Sections 13 and 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.


                                             CHASE PREFERRED CAPITAL CORPORATION
                                                         (Registrant)



     Date: March 21, 2001                    By /s/  Louis M. Morrell
                                               ---------------------------------
                                               Louis M. Morrell
                                               Treasurer




     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 and on the dates indicated.

<TABLE>
<CAPTION>


    Signature                              Title                                         Date
    ---------                              -----                                         ----
<S>                              <C>                                                <C>
  /s/  Peter Gleysteen           Chairman and Director                              March 21, 2001
----------------------
  Peter Gleysteen                (Principal Executive Officer)

 /s/  Peter R. Schleif           President and Director                             March 21, 2001
----------------------
 Peter R. Schleif

 /s/  Louis M. Morrell           Treasurer and Director                             March 21, 2001
----------------------
  Louis M. Morrell               (Principal Financial and Accounting Officer)

 /s/  Richard J. Boyle           Director                                           March 21, 2001
----------------------
  Richard J. Boyle

 /s/  Thomas Jacob               Director                                           March 21, 2001
----------------------
 Thomas Jacob

 /s/  William C. Langley         Director                                           March 21, 2001
----------------------
   William C. Langley

/s/  Joseph L. Sclafani          Director                                           March 21, 2001
----------------------
  Joseph L. Sclafani


</TABLE>

                                                                              34

<PAGE>   35
                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>


EXHIBIT NO.                         EXHIBITS
-----------                         --------
<S>                             <C>
3(a)                            Form of Amended and Restated Certificate of Incorporation of
                                the Company.

3(b)                            Form of Amended and Restated By-laws of the Company
                                (Incorporated by reference to Exhibit 3(b) (ii) to the
                                Registration Statement on Form S-11 (File No. 333-08001) of
                                Chase Preferred Capital Corporation).

4                               Specimen of certificate representing Series A Preferred Shares
                                (Incorporated by reference to Exhibit 4 to the Registration
                                Statement on Form S-11 (File No. 333-08001 of Chase Preferred
                                Capital Corporation).

10(a)                           Form of Residential Mortgage Loan Purchase and Warranties
                                Agreement between the Company and The Chase Manhattan Bank
                                (Incorporated by reference to Exhibit 10(a) to the
                                Registration Statement on Form S-11 (File No. 333-08001) of
                                Chase Preferred Capital Corporation).

10(b)                           Form of Commercial Mortgage Loan Purchase and Warranties
                                Agreement between the Company and The Chase Manhattan Bank
                                (Incorporated by reference to Exhibit 10(b) to the
                                Registration Statement on Form S-11 (File No. 333-08001) of
                                Chase Preferred Capital Corporation).

10(c)                           Form of Residential Mortgage Loan Servicing Agreement between
                                the Company and The Chase Manhattan Bank (Incorporated by
                                reference to Exhibit 10(c) to the Registration Statement on
                                Form S-11 (File No. 333-08001) of Chase Preferred Capital
                                Corporation).

10(d)                           Form of Commercial Mortgage Loan Servicing Agreement between
                                the Company and The Chase Manhattan Bank (Incorporated by
                                reference to Exhibit 10(d) to the Registration Statement on
                                Form S-11 (File No. 333-08001) of Chase Preferred Capital
                                Corporation).

10(e)                           Form of Advisory Agreement between the Company and The
                                Chase Manhattan Bank (Incorporated by reference to Exhibit
                                10(e) to The Registration Statement on Form S-11 (File No.
                                333-08001) of Chase Preferred Capital Corporation).

10(f)                           Form of Hypothecation Loan Agreement, dated as of April
                                7, 2000, between the Company and each of The Chase Manhattan
                                Bank and Chase Manhattan Bank USA, National Association.

10(g)                           Form of Security and Assignment Agreement, dated as of
                                April 7, 2000, between the Company and each of The Chase
                                Manhattan Bank and Chase Manhattan Bank USA, National
                                Association.

10(h)                           Form of Amended and Restated Account Control Agreement,
                                dated as of April 7, 2000, among the Company, Chase Manhattan
                                Bank USA, National Association, Chase Manhattan Mortgage
                                Corporation and The Chase Manhattan Bank.

10(i)                           Form of Master Participation Agreement, dated as of
                                April 7, 2000, among the Company and each of The Chase
                                Manhattan Bank and Chase Manhattan Bank USA, National
                                Association relating to Second Mortgage Loans.

10(j)                           Form of Master Participation Agreement, dated as of May
                                12, 2000, among the Company and each of Chase Manhattan Bank
                                USA, National Association and The Chase Manhattan Bank
                                relating to the Manufactured Housing Loans.

</TABLE>

                                                                              35

<PAGE>   36
11                             Computation of net income per share

12(a)                          Computation of ratio of earnings to fixed charges

12(b)                          Computation of ratio of earnings to fixed charges
                               and preferred stock dividend requirement



                                                                              36