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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
                      TO

                          COMMISSION FILE NUMBER: 1-13993
                            ---------------------------

                               TUCKER ANTHONY SUTRO
              (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                  DELAWARE                                      04-3335712
       (STATE OR OTHER JURISDICTION OF               (IRS EMPLOYER IDENTIFICATION NO.)
       INCORPORATION OR ORGANIZATION)

             ONE BEACON STREET,
            BOSTON, MASSACHUSETTS                                  02108
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</TABLE>

                                 (617) 725-2000
              (Registrant's telephone number, including area code)

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

<TABLE>
<CAPTION>
               TITLE OF CLASS                    NAME OF EACH EXCHANGE ON WHICH REGISTERED
<S>                                            <C>
   Common Stock, par value $.01 per share                 New York Stock Exchange
</TABLE>

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

                                      None

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

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

     At March 9, 2001, the registrant had 24,039,708 shares of common stock
outstanding. The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant as of March 9, 2001 was
approximately $553,153,681 (based on the closing price on the New York Stock
Exchange on that date).

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive Proxy Statement for the registrant's annual
meeting of shareholders to be held May 10, 2001 are incorporated by reference
into Part III of this Form 10-K.
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                                     PART I

FORWARD-LOOKING STATEMENTS

     This annual report on Form 10-K, including without limitation "Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Item 7A Quantitative and Qualitative Disclosures About Market
Risk," contains or incorporates both historical and "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Words such as
"anticipates", "believes", "expects", "intends", "future" and similar
expressions identify forward-looking statements. Any such "forward-looking"
statements in this report reflect the Company's current views with respect to
future events and financial performance, and are subject to a variety of factors
that could cause the actual results or performance to differ materially from
historical results or from the anticipated results or performance expressed or
implied by such forward-looking statements. Because of such factors, there can
be no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will have
the anticipated results. The risks and uncertainties that may affect the
Company's business include but are not limited to: volatility in the stock
markets, economic conditions, governmental regulations, technological advances
affecting the Company's industry, pricing and competition, retention of key
personnel, the Company's ability to successfully integrate acquired businesses,
the Company's relationship with its clearing agent, the communications and
information systems of the Company and its business partners, the sufficiency of
financial resources to sustain and expand the Company's operations, civil and
enforcement liability related to operating in the securities industry, and other
factors described elsewhere in this report and in other filings with the
Securities and Exchange Commission (the "Commission" or "SEC"). Readers should
not place undue reliance on such forward-looking statements, which speak only as
of the date hereof, and should be aware that, except as may be otherwise legally
required of the Company, the Company undertakes no obligation to publicly revise
any such forward-looking statements to reflect events or circumstances that may
arise after the date hereof.

ITEM 1.  BUSINESS

COMPANY OVERVIEW

     Tucker Anthony Sutro (formerly Freedom Securities Corporation) is a holding
company which together with its wholly-owned subsidiaries (collectively, the
"Company") is a full-service retail brokerage, investment banking and asset
management firm. The Company provides a wide range of products and investment
services including securities brokerage and trading services, investment banking
and research, and asset management and other investment advisory services.

     The Company was formed in November 1996 to effect the acquisition (the
"Acquisition") of Freedom Securities Holding Corporation and its subsidiaries
(collectively, the "Predecessor Company") from John Hancock Mutual Life
Insurance Company ("Hancock"). The Acquisition was financed through purchases of
equity securities by approximately 350 employees of the Company including senior
management and investment executives as well as by affiliates of Thomas H. Lee
Company and SCP Private Equity Partners, L.P. and through borrowings under a
credit facility.

     In April 1998, the Company completed its initial public offering of 7.4
million shares plus an over allotment of 1.1 million shares, including 4.2
million shares of common stock sold by the Company.

     The Company's principal operating subsidiaries are described below:

        - Tucker Anthony Incorporated ("Tucker Anthony"), headquartered in
          Boston, is a brokerage and investment banking firm. Tucker Anthony's
          divisions include Tucker Anthony Sutro Capital Markets ("TASCM"), an
          investment banking and institutional brokerage firm; Gibraltar
          Securities Co. ("Gibraltar"), a New Jersey-based brokerage and
          investment advisory firm acquired by the Company in the third quarter
          of 1999; and Tucker Anthony MidAtlantic Division ("TA MidAtlantic"),
          formerly Hopper Soliday & Co., Inc. ("Hopper Soliday"), a
          Pennsylvania-based

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          municipal finance and underwriting brokerage firm acquired by the
          Company in the first quarter of 1999.

        - Sutro & Co. Incorporated ("Sutro"), headquartered in San Francisco, is
          a West Coast regional brokerage and investment banking firm.

        - Hill, Thompson, Magid LP ("Hill Thompson") is a New Jersey-based
          wholesale over-the-counter trading firm that the Company acquired in
          the fourth quarter of 1999.

        - Branch Cabell & Co. Inc. ("Branch Cabell"), headquartered in Richmond,
          Virginia, is a regional brokerage and investment firm that the Company
          acquired in the fourth quarter of 2000.

        - Freedom Capital Management Corporation ("Freedom Capital") is a
          Boston-based asset management firm.

     Except in the case of Branch Cabell, the consolidated financial statements
and other data included elsewhere in this report include the results of
operations of the acquired companies from their respective dates of acquisition.
The Branch Cabell acquisition was accounted for under the pooling of interests
method. Accordingly, the consolidated financial statements and other data have
been restated for all periods presented as if the Company and Branch Cabell had
always been combined.

     Tucker Anthony, Sutro, Cleary Gull Investment Management Services, Inc.
("Cleary Gull IMS") and Branch Cabell clear their securities transactions on a
fully disclosed basis through Wexford Clearing Services Corporation ("Wexford"),
a guaranteed wholly-owned subsidiary of Prudential Securities Incorporated
("Prudential"). Hill Thompson clears all proprietary securities transactions on
a self-clearing basis and substantially all customer transactions through
Schroder & Co., Inc. on a fully disclosed basis.

     The Company employed 2,876 people at December 31, 2000.

DESCRIPTION OF BUSINESS ACTIVITIES

     The Company's four main areas of business, described below, are its
full-service retail brokerage operations, equity capital markets activities,
asset management business and trading activities.

  Retail Operations

     In its retail operations, the Company focuses on maintaining and developing
strong client relationships through a dedicated community focus while providing
the breadth and quality of services and products offered by national brokerage
firms. The Company provides its retail clients with a broad range of services
delivered in a personalized, service-oriented manner. In addition to
recommending and effecting transactions in securities, the Company makes
available equity research reports prepared by TASCM, Branch Cabell, and other
research analysts and offers services such as financial and tax planning, and
trust and estate planning to its retail clients. The Company believes that the
personalized nature and range of services it provides to its clients is a key
factor in the success of its retail brokerage businesses.

     The Company's retail operations which are conducted in 20 states and the
District of Columbia, have together generated 54%, 57% and 53% of the Company's
net revenues in 2000, 1999 and 1998, respectively, and have historically
represented the Company's core business. A large portion of the Company's
revenues is generated from commissions or fees earned as a broker or dealer for
individual clients in the purchase and/or sale of equity securities, fixed
income securities, mutual funds, insurance products, options and U.S. government
and municipal securities.

     As of December 31, 2000, retail customers had approximately $49 billion of
assets in over 344,000 brokerage accounts. Management believes that the
experience of its 944 investment executives and their strong ties to their
communities help differentiate the Company from its competitors and enable the
Company to more effectively access and serve its clients. The Company's strategy
of providing its investment executives with a high level of support and the
flexibility to operate in an entrepreneurial manner has allowed the Company to
recruit and retain highly effective, motivated investment executives, many of
whom have

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significant tenure at their local branch offices. Management believes that the
Company has been able to successfully recruit and retain investment executives
for a number of reasons, including a corporate culture that rewards performance,
encourages employee ownership, and provides advanced technology, competitive
payouts, no discount sharing and a service-driven rather than a product-driven
environment.

     The Company currently offers on-line trading capabilities to certain
fee-based retail clients. The Company continues to enhance its commitment to
customer service by providing its investment executives with upgraded account
information systems and flexibility in determining fee schedules for certain
services based upon the level of customer needs, and by providing an array of
one-stop investment and financial planning services.

  Capital Markets

     The Company's equity capital markets business consists of equity research,
investment banking, institutional sales, trading and syndication services. The
Company has historically demonstrated strengths in offering various investment
banking services, including merger and acquisition services, public offerings
and private placements to clients. The research and investment banking
departments target emerging and middle-market companies within the industries in
which they specialize, such as consumer products, healthcare, financial
services, and internet/technology. Within each of these industries the Company
has focused on various niches which it believes offer the greatest
opportunities. The Company has coordinated its research, institutional sales,
corporate finance, trading and syndication functions to service these niches.
Management believes that its research will be a key factor in growing its equity
capital markets activities. Early in 2001, the Company combined Sutro's equity
research and banking businesses with Tucker Anthony Capital Markets (formerly
Tucker Anthony Clearly Gull) to form Tucker Anthony Sutro Capital Markets
("TASCM"), a division of Tucker Anthony. The Company's revenues from capital
markets activities generated 21%, 22% and 27% of the Company's net revenues in
2000, 1999 and 1998, respectively.

     The Company executes securities transactions for institutional investors
such as banks, mutual funds, insurance companies and pension and profit-sharing
plans. These investors normally purchase and sell securities in large
quantities, requiring specialized marketing and trading expertise. In order to
service these institutional accounts, the Company has established a network of
institutional offices located in New York, Boston, San Francisco, Los Angeles,
Milwaukee, Chicago, Denver and Washington, D.C.

     Institutional transactions are executed by the Company acting as agent or
principal. The Company permits discounts from its commission schedule to its
institutional customers. The amount of such discounts can vary with the size of
particular transactions and other factors. The Company believes that it receives
a significant portion of its institutional brokerage commissions as a
consequence of its research advice and services regarding specific corporations
and industries, its principal transactions business and its investment banking
activities.

     The Company's investment banking activities are performed by its corporate
finance and syndicate departments. The corporate finance groups manage and
underwrite public offerings of equity and, to a significantly lesser extent,
debt securities, arrange private placements of equity and debt securities and
provide financial advice in connection with mergers and acquisitions,
divestitures and other corporate reorganizations and restructurings. The managed
public equity offerings and merger and acquisition transactions are typically
undertaken for emerging or middle-market companies in the previously mentioned
industries that the Company specializes in or for companies located in the same
geographic regions as the Company.

     Historically, the Company's merger and acquisition advisory business has
been a significant component of the Company's investment banking revenues. The
Company believes that it has a well established merger and acquisition advisory
business and plans to capitalize on this strength by further building upon the
equity capital markets group.

     The syndicate department coordinates the distribution of managed and
co-managed corporate securities offerings and accepts invitations to participate
in underwritings managed by other investment banking firms.

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     The Company, through certain subsidiaries and employee incentive
arrangements, has participated from time to time in the past and may participate
from time to time in the future as an equity investor in connection with
specific transactions.

     The Company intends to continue to increase its equity capital markets
business by carefully focusing its research and investment banking coverage on
geographical regions and industries which management believes offer the greatest
opportunities. Management also believes that consolidations within the
investment banking industry, as a whole, will offer enhanced opportunities for
those firms which maintain their local and industry specific focus.

     Tucker Anthony, Sutro and Branch Cabell are each municipal securities
dealers in both the primary and secondary markets, buying and selling securities
for their own accounts and for clients. The public finance departments of Tucker
Anthony, Sutro and Branch Cabell provide financial consulting, advisory and
underwriting services to municipalities and public service districts. These
subsidiaries manage and underwrite offerings of municipal securities to finance
the construction and maintenance of a broad range of public-related facilities,
including healthcare, housing, education, public power, water and sewer,
airports, highways and other infrastructure needs. Over the last several years,
the public finance industry has generally experienced diminishing spreads.
Nevertheless, management believes that there can be growth in this sector by
concentrating on regionally focused community projects.

     The Company also effects transactions in blocks of securities, usually with
institutional investors and generally involving 10,000 or more shares of listed
stocks. Such transactions are handled on an agency basis to the extent possible,
although the Company may take a long or short position as principal to the
extent that no buyer or seller is immediately available. By engaging in block
positioning as a principal, the Company places a portion of its capital at risk
to facilitate transactions for clients.

     The Company provides clients access to a range of fixed income products
including municipal securities, U.S. government and agency securities, mortgage
related securities including those issued through Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association ("FNMA") and Federal
Home Loan Mortgage Corp. ("FHLMC"), and corporate investment-grade and
high-yield bonds. The Company takes positions on a principal basis in municipal,
U.S. government, agency and corporate securities to facilitate transactions for
its clients. Additionally, trading activities include the purchase of securities
under agreements to resell at future dates (reverse repurchase agreements) and
the sale of the same or similar securities under agreements to repurchase at
future dates (repurchase agreements). The Company actively participates on a
principal basis in the mortgage-backed securities markets through the purchase
or sale of GNMA, FNMA, FHLMC, mortgage pass-through securities, collateralized
mortgage obligations and other mortgage related securities in order to meet
client needs. The Company finances the majority of its trading positions as part
of its Wexford clearing arrangement, through overnight borrowings and through
repurchase agreements.

  Asset Management

     The Company provides investment advisory and portfolio management services
to institutions, pension and endowment funds, money market funds, professional
firms, individuals and trusts. The asset management business consists of Freedom
Capital, Cleary Gull IMS and the asset management business from Tucker Anthony,
Sutro and Branch Cabell. As of December 31, 2000, total assets under management
were over $13.0 billion. Asset management revenues including investment advisory
fees generated by retail operations increased 29% over 1999 and have represented
12%, 12% and 11% of the Company's net revenues in 2000, 1999 and 1998,
respectively.

     Freedom Capital, headquartered in Boston, was formed in 1930. Freedom
Capital has developed a leading position in the management of public funds for
local Massachusetts municipalities and agencies, has developed an increasing
presence in certain sectors of the union pension fund market and has expanded
its high net worth asset management business. As of December 31, 2000, Freedom
Capital had $9.1 billion in assets under management of which $4.6 billion are in
money market funds for which it acts as an investment advisor. As with other
aspects of the Company's business, Freedom Capital is focused on service and
client

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communication. To foster active and attentive management, Freedom Capital limits
the number of client relationships of each portfolio manager. This policy is
intended to provide each portfolio manager with the time necessary to foster
ongoing client relationships and the opportunity to discuss portfolio strategies
with the client. In addition, Freedom Capital provides its clients with economic
commentary and investment letters on a regular basis.

     Cleary Gull IMS is an asset management firm based in Milwaukee and a
wholly-owned subsidiary of the Company. Cleary Gull IMS provides primarily
investment management services to institutional accounts and high net worth
individuals and had over $1.0 billion in assets under management at December 31,
2000. The Company acquired Cleary Gull Reiland & McDevitt Inc. ("Cleary Gull")
in the second quarter of 1998. The investment banking, equity research and
institutional brokerage activities of Cleary Gull and Tucker Anthony were
subsequently combined and in early in 2001 were further combined with Sutro's
equity research and banking businesses to form Tucker Anthony Sutro Capital
Markets ("TASCM"), a division of Tucker Anthony. The remaining business of
Cleary Gull, now Cleary Gull IMS, is investment management services provided to
institutional accounts and high net worth individuals.

     Freedom Trust Company, a New Hampshire chartered trust company and a
subsidiary of Freedom Capital, commenced operations in early 1996 to provide
clients the opportunity to place their assets in trust so that the Company may
continue to provide asset management services to such trusts after the client's
death. Freedom Trust Company had assets under custody of $580 million as of
December 31, 2000.

  Trading and Other Broker-Dealer Activities

     The Company makes markets, buying and selling as principal, in common
stocks, convertible preferred stocks, warrants and other securities traded on
Nasdaq or other over-the-counter ("OTC") markets. As of December 31, 2000, the
Company made markets in equity securities of approximately 10,200 issuers
compared to over 9,000 issuers as of December 31, 1999. Much of the Company's
market making activity comes from Hill Thompson whose primary business is market
making in Nasdaq Small Cap, OTC Bulletin Board and Pink Sheets stocks. The
majority of Hill Thompson's trading represents dealer-to-dealer transactions
with major wire houses, wholesale market makers, discount brokerages and
internet trading firms, as well as trading on a principal basis with mutual
funds, banks, insurance companies and other financial service institutions.
TASCM's and Branch Cabell's market making activities are primarily in securities
in which there is substantial continuing client interest and include securities
which the Company has underwritten or on which it provides research reports.
Revenues derived from principal trading in OTC markets were 9%, 3% and 1% of the
Company's net revenues in 2000, 1999 and 1998, respectively.

     During 2000, the Company established a Tender Option Bond ("TOB") program
which involves the deposit of fixed rate municipal bonds into a series of
bankruptcy remote Trusts. The Trusts issue two classes of certificates, Floating
Trust Certificates which are sold to third party investors and Residual Trust
Certificates which are retained by the Company. In 2000, revenues from the TOB
program represented less than 1% of the Company's net revenues.

     Tucker Anthony engages in the purchase and sale of convertible and equity
securities to take advantage of market price differences. Tucker Anthony's
arbitrage activities include both convertible and risk arbitrage. To the extent
that purchase and sale transactions are not simultaneous, or the closing of a
position is subject to a subsequent event such as the successful consummation of
a corporate merger, Tucker Anthony places a portion of its capital at risk.
Sutro does not engage in significant arbitrage activities. In 2000, arbitrage
revenues represented less than 1% percent of the Company's net revenues.

     Tucker Anthony, Sutro and Branch Cabell hold memberships in the New York
Stock Exchange, Inc. (the "NYSE") and in other major securities exchanges in the
United States in order to provide services to their brokerage clients in the
purchase and sale of listed securities.

     The Company's wholly-owned subsidiary, Freedom Specialist Inc., has a 25%
interest in the profits and losses of a joint specialist account in which it
participates with RPM Specialist Corp. and R. Adrian & Co., two other NYSE
specialist firms. Specialists are responsible for executing transactions and
maintaining a fair

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and orderly market in securities under NYSE rules and regulations. In this
function, a specialist firm acts as an agent in executing orders entrusted to it
and/or acts as a dealer on the opposite side of public orders in the security
executed on the floor of the NYSE. As of December 31, 2000, the joint specialist
account acted as a specialist in 34 equity issues. Stock settlement and clearing
activities for the joint specialist account are provided by RPM Clearing
Corporation.

     Securities transactions for clients are executed on either a cash or margin
basis. In most margin transactions, credit is extended to a client through the
Wexford clearing arrangement for the purchase of securities, using the
securities purchased and/or other securities in the client's account as
collateral for amounts loaned. The Company receives income from interest charged
on such extensions of credit. The financing of margin purchases can be an
important source of revenue to the Company, since the interest rate paid by the
client on funds loaned through Wexford exceeds the Company's interest costs paid
to Wexford for net customer debit balances. The amount of the Company's net
interest income is affected not only by prevailing interest rates, but also by
the volume of business conducted on a margin basis. Net interest income
generated 7%, 6% and 7% of the Company's net revenues in 2000, 1999 and 1998,
respectively. By permitting a client to purchase on margin, the Company takes
the risk that the client will not perform its obligations under the margin loan
to maintain adequate collateral in the event that market declines reduce the
value of the collateral below the principal amount loaned. Amounts loaned are
limited by margin regulations of the Board of Governors of the Federal Reserve
System and other regulatory authorities and are subject to credit review and
daily monitoring by Wexford and the Company.

STRATEGIC ACQUISITIONS

     During 2000 and 1999, the Company completed five strategic acquisitions.
Management believes these acquisitions strengthen and expand the Company's
geographic and product offering base while reducing the Company's costs by
leveraging its infrastructure. These acquisitions are summarized below.

  Branch Cabell

     On October 2, 2000, the Company acquired Branch Cabell, a regional
brokerage and investment firm based in Richmond, Virginia. Branch Cabell had
1999 revenues of approximately $19 million. Branch Cabell is part of the
Company's broker-dealer segment and will ultimately operate as a division of
Tucker Anthony.

  TA MidAtlantic (formerly Hopper Soliday)

     On January 19, 1999, the Company acquired certain assets and liabilities of
Hopper Soliday, renamed TA MidAtlantic, and transferred them to Tucker Anthony.
TA MidAtlantic is an investment and municipal banking operation founded in 1872
and based in Lancaster, Pennsylvania. The acquisition of TA MidAtlantic, which
had 1998 revenues of approximately $20 million, enhanced the Company's
investment and municipal finance business and provided greater penetration into
markets in Pennsylvania.

  Charter Investment Group, Inc.

     On February 1, 1999, the Company, through its Sutro subsidiary, acquired
the business and substantially all of the assets of Charter Investment Group,
Inc. ("Charter"), a brokerage firm based in Portland, Oregon. Charter, which had
1998 revenues of approximately $7.5 million and approximately $900 million in
brokerage accounts as of December 31, 1998, added 28 investment executives to
the Company's West Coast retail operations and provided market penetration into
Oregon.

  Gibraltar

     On September 1, 1999, the Company acquired Gibraltar, a regional brokerage
and investment advisory services firm based in New Jersey, and merged it with
Tucker Anthony. Gibraltar, which was formed in 1968, added more than 40,000
accounts to the Company's retail client base and had revenues of approximately
$38 million in 1999, including results after its acquisition by the Company.

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  Hill Thompson

     On October 29, 1999, the Company acquired The Hill Thompson Group, Ltd.
("Hill Thompson Group"), including its primary operating subsidiary, Hill
Thompson, a New Jersey based OTC trading firm founded in 1932. Hill Thompson
makes markets in almost 9,000 Nasdaq Small Cap, OTC Bulletin Board and Pink
Sheets stocks and had revenues of approximately $44 million in 1999, including
results after its acquisition by the Company.

RELATIONSHIP WITH WEXFORD

     With the exception of Hill Thompson, the Company clears all securities
transactions, and carries accounts for customers and its proprietary accounts,
with Wexford. Wexford furnishes the Company with information necessary to run
the Company's business, including commission runs, transaction summaries, data
feeds for various reports including compliance and risk management, execution
reports, trade confirmations and monthly account statements; cashiering
functions and the handling of margin accounts. As a result of its arrangement
with Wexford, the Company has achieved substantial savings in its clearing and
related operations. Under the Wexford arrangement, management believes that the
Company's cost of clearing its transactions is very competitive with the
industry's costs. The Company pays a fixed fee per trade, subject to an
aggregate annual minimum payment, for clearing trades through Wexford. The
agreement between subsidiaries of the Company and Wexford expires in April, 2002
and will automatically renew for a further 12 months unless either party
provides written notice of termination 90 days prior to termination.

     The Company has an uncommitted financing arrangement with Wexford pursuant
to which the Company finances most of its customer accounts, broker-dealer
balances and firm trading positions through Wexford. Although the customer
accounts and such broker-dealer balances are not reflected on the Company's
statements of financial condition, the Company has agreed to indemnify Wexford
for losses it may sustain in connection with accounts of the Company's customers
and therefore retains risk with respect thereto. The Company seeks to control
the risks associated with these activities by requiring customers to maintain
margin collateral in compliance with various regulatory and internal guidelines.
The Company and Wexford monitor required margin levels daily and, pursuant to
such guidelines, require customers to deposit additional collateral or reduce
securities positions when necessary.

SEGMENT REPORTING

     The Company has two reportable segments: broker-dealer and asset
management. The Company's broker-dealer segment includes its retail operations,
investment banking, research, institutional sales and syndication service
businesses as well as its OTC, fixed income and arbitrage trading activities.
The asset management segment consists of Freedom Capital, Cleary Gull IMS and
asset management business from Tucker Anthony, Sutro and Branch Cabell. For
further information, see Note 17 of the audited financial statements contained
in Item 8 of this report.

EFFECTS OF INTEREST RATES

     The Company's business is affected by general economic conditions,
including movements of interest rates. Interest rate movements may have direct
effects. For example, the Company's inventory of fixed income securities may
fluctuate as interest rates change, and the Company's interest income and
interest expense may likewise change as interest rates change. However, interest
rates have indirect effects on other aspects of the Company's business as well.

     As interest rates increase, the price of equity securities may decline,
partially reflecting the increased competition posed by more attractive rates on
fixed income securities and partially reflecting the fact that interest rate
increases may tend to dampen economic activity by increasing the cost of capital
for investment and expansion, thereby reducing corporate profits and the value
of securities. As interest rates decline, securities may tend to rise in value.
The impact of these changes may affect the Company's inventory of securities,
which may change in value, and may also affect the profitability of the
Company's investment

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banking activities. Retail commission revenue may also be affected by changes in
interest rates and any resulting indirect impact on the value of securities.

     The Company's asset management revenues are derived from fees which are
generally based on the market value of assets under management. Consequently,
significant fluctuations in the values of securities, which can occur as a
result of changes in interest rates or changes in other economic factors, may
materially affect the amount of assets under management and thus the Company's
revenues and profitability.

COMPETITION

     All aspects of the Company's business and of the securities industry in
general are highly competitive. The Company competes directly with national and
regional full-service broker-dealers, and to a lesser extent with discount
brokers and dealers, investment banking firms, investment advisors and certain
commercial banks. Also, recent and pending legislative and regulatory
initiatives intended to ease restrictions on the sale of securities by
commercial banks are already beginning to increase competition from domestic and
international banks. In addition, the Company competes indirectly for investment
assets with insurance companies and others.

     In recent years the financial services industry has undergone significant
consolidation as numerous securities firms have either ceased operations or have
been acquired by or merged into other firms. These mergers and acquisitions have
further concentrated equity capital and other financial resources in the
industry and increased competition. Many of the Company's competitors use their
greater financial capital and scope of operations to offer their customers more
product offerings, broader research capabilities, access to international
markets, and other products and services not offered by the Company.

     Entities offering electronic and/or discount brokerage services are
increasing competition in the securities industry. Competitors offering
internet-based or other electronic brokerage services may have lower costs and
offer their customers more attractive pricing than other service providers in
the industry. The Company also anticipates that additional competition may arise
from underwriters who will attempt to conduct offerings of securities for
emerging and middle-market companies through new distribution channels such as
the internet. Issuers may bypass financial intermediaries altogether and offer
their shares directly to purchasers through the internet and other electronic
channels.

     In addition, the Company faces competition for investment professionals.
Although the Company strives to maintain strong relationships with its
investment executives, the demand for investment executives has increased and
employers in the industry are offering guaranteed contracts, upfront payments
and increased compensation in an attempt to attract and retain qualified
personnel.

     The Company believes that the principal competitive factors positively
influencing the Company's business are: (1) the qualifications and experience of
its professional staff; (2) its reputation in the marketplace; (3) its existing
client relationships; (4) its ability to commit capital to client transactions;
(5) the mix of market capabilities offered by the Company; and (6) the adequacy
of its capital levels and its ability to raise additional capital.

REGULATION

     The securities and commodities industry is one of the nation's most
extensively regulated industries. Moreover, the regulations are subject to
change at any time, which can affect competition in the industry, capital
requirements and the Company's compliance costs.

     The SEC is responsible for carrying out the federal securities laws and
serves as a supervisory body over all national securities exchanges and
associations. In many respects, the regulation of broker-dealers has been
delegated by the federal securities and commodities laws to self-regulatory
organizations ("SROs"). These SROs include all the national securities and
commodities exchanges, the National Association of Securities Dealers (the
"NASD") and the Municipal Securities Rulemaking Board (the "MSRB"). Subject to
review by the SEC and the Commodity Futures Trading Commission (the "CFTC"),
these SROs adopt rules that govern the industry and conduct periodic
examinations of the operations of certain subsidiaries of the

                                        8
<PAGE>   10

Company. The NYSE has been designated as the primary regulator of certain of the
Company's subsidiaries, including Tucker Anthony and Sutro. The NASD has been
designated as the primary regulator of Hill Thompson. In addition, these
subsidiaries are subject to regulation under the laws of the 50 states, the
District of Columbia, Puerto Rico and certain foreign countries in which they
are registered to conduct securities, investment banking, insurance or
commodities business. Broker-dealers are subject to regulations which cover all
aspects of the securities business, including sales methods, trade practices,
use and safekeeping of customers' funds and securities, capital structure of
securities firms, record-keeping and the conduct of directors, officers and
employees. Violation of applicable regulations can result in the revocation of
broker-dealer licenses, the imposition of censures or fines and the suspension
or expulsion of a firm, its officers or employees.

     As registered broker-dealers or member firms of the NYSE or NASD, Tucker
Anthony, Sutro, Branch Cabell, Cleary Gull IMS, Hill Thompson and Freedom
Specialist Inc. are subject to certain net capital requirements set forth in
Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and NYSE Rule 325 ("the Net Capital Rules"). Freedom Distributors
Corporation, a subsidiary of Freedom Capital, is also subject to Rule 15c3-1.
The Net Capital Rules, which specify minimum net capital requirements for
registered broker-dealers, are designed to measure the financial soundness and
liquidity of broker-dealers. The Net Capital Rules also (1) require that
broker-dealers notify the SEC, in writing, two business days prior to making
withdrawals or other distributions of equity capital or lending money to certain
related persons if those withdrawals would exceed, in any 30-day period, 30% of
the broker-dealer's excess net capital, and that they provide such notice within
two business days after any such withdrawal or loan that would exceed, in any
30- day period, 20% of the broker-dealer's excess net capital; (2) prohibit a
broker-dealer from withdrawing or otherwise distributing equity capital or
making related party loans if after such distribution or loan, the broker-
dealer's net capital is less than 120% of its minimum net capital dollar amount
or if the aggregate indebtedness of the broker-dealer's consolidated entities
would exceed 1,000% of the broker-dealer's net capital and in certain other
circumstances; and (3) provide that the SEC may, by order, prohibit withdrawals
of capital from a broker-dealer for a period of up to 20 business days, if the
withdrawals would exceed, in any 30-day period, 30% of the broker-dealer's
excess net capital and if the SEC believes such withdrawals would be detrimental
to the financial integrity of the firm or would unduly jeopardize the
broker-dealer's ability to pay its customer claims or other liabilities. Under
NYSE Rule 326, a broker-dealer that is a NYSE member is required to reduce its
business if its net capital (after giving effect to scheduled maturities of
subordinated indebtedness or other planned withdrawals of regulatory capital
during the following six months) is less than either 125% of its minimum net
capital dollar amount or 4% of aggregate debit items (or 6% of the funds
required to be segregated pursuant to the Commodity Exchange Act) for fifteen
consecutive days. NYSE Rule 326 also prohibits the expansion of a member's
business if its net capital (after giving effect to scheduled maturities of
subordinated indebtedness or other planned withdrawals of regulatory capital
during the following six months) is less than either 150% of its minimum net
capital dollar amount or 5% of aggregate debit items (or 7% of the funds
required to be segregated pursuant to the Commodity Exchange Act) for fifteen
consecutive days. For information concerning compliance by the Company's
subsidiaries with the Net Capital Rules, see Note 11 of the audited financial
statements included in Item 8 of this report.

     The Company also is subject to "Risk Assessment Rules" imposed by the SEC
which require, among other things, that certain broker-dealers maintain and
preserve certain information, describe risk management policies and procedures
and report on the financial condition of certain affiliates whose financial and
securities activities are reasonably likely to have a material impact on the
financial and operational condition of the broker-dealers. Certain "Material
Associated Persons" (as defined in the Risk Assessment Rules) of the
broker-dealers and the activities conducted by such Material Associated Persons
may also be subject to regulation by the SEC. In addition, the possibility
exists that, on the basis of the information it obtains under the Risk
Assessment Rules, the SEC could seek authority over the Company's unregulated
subsidiaries either directly or through its existing authority over the
Company's regulated subsidiaries.

     Tucker Anthony, Sutro, Branch Cabell, Cleary Gull IMS, Freedom Capital and
other subsidiaries are registered with the SEC as investment advisors under the
Investment Advisors Act of 1940 (the "Advisors

                                        9
<PAGE>   11

Act") and are subject to the requirements of regulation pursuant to both the
Advisors Act and certain state securities laws and regulations. Such
requirements relate to, among other things, limitations on the ability of
investment advisors to charge performance-based or non-refundable fees to
clients, record-keeping and reporting requirements, disclosure requirements,
limitations on principal transactions between an advisor or its affiliates and
advisory clients, as well as general anti-fraud prohibitions. The state
securities law requirements applicable to registered investment advisors are in
certain cases more comprehensive than those imposed under federal securities
laws.

     As registered investment advisors under the Advisors Act, Tucker Anthony,
Sutro, Branch Cabell, Cleary Gull IMS, Freedom Capital and certain other
subsidiaries of the Company are subject to regulations which cover various
aspects of the Company's business, including compensation arrangements. Under
the Advisors Act, every investment advisory agreement with the Company's clients
must expressly provide that such contract may not be assigned by the investment
advisor without the consent of the client. Under the Investment Company Act of
1940 (the "Investment Company Act"), every investment advisor's agreement with a
registered investment company must provide for the agreement's automatic
termination in the event it is assigned. Under both the Advisors Act and the
Investment Company Act, an investment advisory agreement is deemed to have been
assigned when there is a direct or indirect transfer of the agreement, including
a direct assignment or a transfer of a "controlling block" of the firm's voting
securities or, under certain circumstances, upon the transfer of a "controlling
block" of the voting securities of its parent corporation. A transaction is not,
however, an assignment under the Advisors Act or the Investment Company Act if
it does not result in a change of actual control or management of the investment
advisor. Any assignment of the Company's investment advisory agreements would
require, as to any registered investment company client, the prior approval of a
majority of its shareholders, and as to the Company's other clients, the prior
consent of such clients to such assignments.

     The Company is also subject to the risk of losses as a result of employee
errors, misconduct and fraud (including unauthorized transactions by traders)
and failures in connection with the processing of securities transactions. In
the fourth quarter of 1997, the Company determined that a former employee
improperly valued securities positions of the Company over the first eleven
months of 1997 in order to conceal trading losses of $2.6 million. The Company
recognized these losses in its 1997 financial results and notified the SEC and
the NYSE of this situation. The Company has conducted an internal review of the
specific trading loss and the Company's reports and procedures relating thereto,
and the Company has enhanced procedures where appropriate. The SEC has completed
an investigation of this matter. In December 2000, the Company's subsidiary,
Tucker Anthony, without admitting or denying, consented to the entry of an
administrative order by the SEC finding that the former employee fraudulently
violated the federal securities laws. As a result, Tucker Anthony's books and
records did not accurately reflect Tucker Anthony's trading profits and income,
in violation of the federal securities laws. The SEC found that Tucker Anthony
failed reasonably to supervise the former employee with a view toward preventing
his violations. Tucker Anthony was censured, ordered to cease and desist from
committing or causing certain future securities law violations, and ordered to
pay a civil money penalty of $50,000.

ITEM 2.  PROPERTIES

     The principal executive offices of the Company are located at One Beacon
Street, Boston, Massachusetts under a lease expiring in December 2005. The
Company is currently leasing approximately 104,000 square feet at that location.

     Additionally, the Company has a number of offices in leased premises
throughout the United States. The Company's primary operating subsidiaries hold
leases for their principal offices as follows:

     - approximately 88,000 square feet (of which 18,000 square feet has been
       sublet) at One World Financial Center in New York expiring January 2005.

     - approximately 64,000 square feet (of which 8,000 square feet has been
       sublet) at 201 California Street, San Francisco, California expiring July
       2003.

                                        10
<PAGE>   12

     - approximately 13,000 square feet at 15 Exchange Place, Jersey City, New
       Jersey expiring September 2007.

     - approximately 23,000 square feet at 919 East Main Street, Richmond,
       Virginia expiring August 2002.

     The properties are shared by the Company's two reportable segments, except
for the Jersey City property which is occupied by Hill Thompson and used solely
by the Company's broker-dealer segment.

ITEM 3.  LEGAL PROCEEDINGS

     The Company and its subsidiaries are parties to various civil actions and
arbitrations incidental to its securities business. Some of these legal actions
involve claims for substantial amounts. The defense of such legal proceedings
may divert the attention of the Company's management, and the Company may incur
significant legal expenses in defending such claims or litigation. While the
ultimate outcome of these matters cannot be ascertained at this time, it is the
opinion of management, after consultation with legal counsel, that the
resolution of such suits will not have a material adverse effect on the
Company's consolidated financial position or results of operation.

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

     None.

EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth information regarding the executive officers
of the Company as of March 30, 2001. The executive officers of the Company hold
office until their successors are appointed and qualify.

<TABLE>
<CAPTION>
                                                                                          EXECUTIVE OFFICER
                                                                                            OF THE COMPANY
                                                                                          OR THE PREDECESSOR
NAME                              AGE                       POSITION                        COMPANY SINCE
----                              ---                       --------                      ------------------
<S>                               <C>   <C>                                               <C>
John H. Goldsmith...............  59    Chairman of the Board of Directors and Chief             1988
                                        Executive Officer of the Company and Chief
                                        Executive Officer of Tucker Anthony
Kenneth S. Klipper..............  42    Executive Vice President and Chief Financial             2000
                                        Officer of the Company
John F. Luikart.................  51    Director of the Company and Chairman and Chief           1995
                                        Executive Officer of Sutro
Kevin J. McKay..................  52    Executive Vice President, General Counsel and            1994
                                        Secretary of the Company
David P. Prokupek...............  39    Director of the Company, President of Tucker             1998
                                        Anthony Sutro Capital Markets and Chairman and
                                        Chief Executive Officer of Cleary Gull IMS
Mark T. Whaley..................  46    Director of the Company and President of                 1999
                                        Gibraltar
Robert H. Yevich................  52    Director of the Company and President of Tucker          1995
                                        Anthony
</TABLE>

     JOHN H. GOLDSMITH. Mr. Goldsmith joined the Company (previously the
Predecessor Company) in 1988 and has served as Chairman, Director and Chief
Executive Officer of the Company as well as CEO of Tucker Anthony since that
time. Prior to joining the Company, Mr. Goldsmith served in various capacities
at Prescott, Ball & Turben in Cleveland, Ohio, including as Managing Partner and
Chief Executive Officer from 1978 to 1982 and as President and Chief Executive
Officer from 1982 to 1988. Mr. Goldsmith worked in the institutional sales
department of L.F. Rothschild from 1963 to 1971.

                                        11
<PAGE>   13

     KENNETH S. KLIPPER. Mr. Klipper, a CPA, was named Executive Vice President
and Chief Financial Officer of the Company in January 2000. Prior to joining the
Company, Mr. Klipper served in various capacities at Fidelity Investments from
1994 to 2000, including most recently as Chief Financial Officer for its two
principal broker-dealer subsidiaries, Fidelity Brokerage Services, Inc. and
National Financial Services Corp. Previously, Mr. Klipper was Managing Director
and Controller of Wheat First Butcher Singer, Inc. from 1992 to 1994 and held
various positions at KPMG Peat Marwick from 1981 to 1992.

     JOHN F. LUIKART. Mr. Luikart joined Sutro in 1988 as Executive Vice
President and was responsible for directing all of the firm's capital markets
activities. Mr. Luikart became President of Sutro in 1990. Mr. Luikart was
appointed Chief Executive Officer of Sutro in October 1995 and subsequently
elected to the Board of Directors of the Company in 1996. Mr. Luikart became
Chairman of Sutro in October 1998. Prior to joining Sutro, Mr. Luikart served as
General Partner and Executive Vice President at Prescott, Ball & Turben in
Cleveland, Ohio. Mr. Luikart is a former Chairman of the NASD District Business
Conduct Committee and is a member of the New York Stock Exchange Regional Firm
Advisory Committee.

     KEVIN J. MCKAY. Mr. McKay joined the Company in 1994 and has served as
General Counsel and Secretary since that time. Prior to joining the Company, Mr.
McKay was General Counsel of Prudential Securities Incorporated from 1990 to
1994. Mr. McKay has over 20 years of experience in the legal and compliance
field of the securities industry. Mr. McKay is a past President of the
Compliance & Legal Division of the Securities Industry Association.

     DAVID P. PROKUPEK. Mr. Prokupek was appointed to the Company's Board of
Directors in May 1998, following the acquisition of Cleary Gull. He joined
Cleary Gull as Managing Director of the Investment Banking Department in 1992,
was elected a director in 1994, was named Chief Executive Officer in 1996 and
currently serves as President of Tucker Anthony Sutro Capital Markets and
Chairman and CEO of Cleary Gull IMS. Prior to joining Cleary Gull, Mr. Prokupek
was a Managing Director of American Asset Management, a New York-based
investment counselor and merchant bank, and from 1987 to 1989 he was a member of
Bankers Trust Company's Merchant Banking Group.

     MARK T. WHALEY. Mr. Whaley was appointed to the Company's Board of
Directors in September 1999, following the acquisition of Gibraltar. Mr. Whaley
joined Gibraltar in 1982, was elected Executive Vice President in 1996 and was
promoted to President of Gibraltar in 1999. Mr. Whaley has more than 18 years of
experience in the brokerage industry as a stockbroker, training manager and
director of sales.

     ROBERT H. YEVICH. Mr. Yevich joined Tucker Anthony in 1985 and became
National Sales Manager in 1988. Mr. Yevich was elected to the Board of Directors
of the Company and promoted to President of Tucker Anthony in 1995. Mr. Yevich
will serve as President until April 30, 2001. Mr. Yevich will remain as an
employee in a consulting capacity for a yet undetermined period of time. Mr.
Yevich has more than 25 years of experience in the retail brokerage business as
a stockbroker, branch manager and research associate. Prior to joining Tucker
Anthony, Mr. Yevich served as branch manager with PaineWebber.

                                        12
<PAGE>   14

                                    PART II

ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
        RELATED STOCKHOLDER MATTERS

  (a) Market Information

     The Company's common stock is listed on the NYSE under the symbol "TA." The
high and low sales prices per share of the Company's common stock by quarter for
the periods presented below were as follows:

<TABLE>
<CAPTION>
                                             2000                    1999
                                       ----------------        ----------------
               QUARTER                  HIGH      LOW           HIGH      LOW
               -------                 ------    ------        ------    ------
<S>                                    <C>       <C>           <C>       <C>
First................................  $15.75    $10.31        $18.00    $14.13
Second...............................   18.56     14.38         19.00     14.38
Third................................   25.38     16.50         17.13     12.56
Fourth...............................   26.88     17.13         15.00     10.25
</TABLE>

     As of March 6, 2001, the closing sales price per share of the Company's
common stock was $23.32.

  (b) Holders

     As of March 5, 2001, there were approximately 541 record holders of the
Company's common stock, according to the records maintained by the Company's
transfer agent. As of March 5, 2001, the Company estimates that there were over
6,000 beneficial owners of the Company's common stock.

  (c) Dividends

     Cash dividends per common share declared and paid by the Company for the
quarterly periods presented below were as follows:

<TABLE>
<CAPTION>
                          QUARTER                             2000     1999
                          -------                             -----    -----
<S>                                                           <C>      <C>
First.......................................................  $0.05    $0.04
Second......................................................   0.06     0.05
Third.......................................................   0.06     0.05
Fourth......................................................   0.06     0.05
</TABLE>

     The timing and amount of future dividends will be determined by the
Company's Board of Directors and will depend, among other factors, upon the
Company's earnings, financial condition and cash requirements at the time such
payment is considered. The Company has historically funded its quarterly
dividend payments through dividends received from its subsidiaries whose ability
to pay dividends is limited by the Net Capital Rules of various regulatory
bodies. Additionally, the Company's dividend payments are restricted by its
revolving credit agreement. See Notes 9 and 11 of the Company's audited
financial statements in Item 8 of this report.

  (d) Unregistered Securities

     During the fourth quarter of 2000, the Company issued 1,653 shares of
common stock in private placement transactions exempt under section 4(2) of the
Securities Act to John Hancock Subsidiaries, Inc. pursuant to the Additional
Share Agreement entered into in connection with the acquisition of the Company's
subsidiaries from Hancock in 1996.

     On October 2, 2000 the Company issued 854,543 shares of common stock to the
former owners of Branch Cabell to acquire their company. The shares were issued
without registration in reliance upon the private placement exemption in Section
4(2) of the Securities Act.

                                        13
<PAGE>   15

ITEM 6.  SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                           Combined
                                                     Years Ended December 31,             Year Ended
                                             -----------------------------------------   December 31,
                                             2000(a)    1999(a)    1998(a)    1997(a)     1996(a)(b)
                                             --------   --------   --------   --------   ------------
<S>                                          <C>        <C>        <C>        <C>        <C>
FINANCIAL RESULTS
Net revenues(c)............................  $757,845   $571,965   $454,857   $385,094     $362,721
Income before income taxes.................  $ 79,027   $ 50,154   $ 46,102   $ 33,784     $ 23,813
Net income before extraordinary item.......  $ 47,486   $ 31,286   $ 27,919   $ 20,047     $ 14,289
Net income after extraordinary item(d).....  $ 47,486   $ 31,286   $ 26,643   $ 20,047     $ 14,289
PER COMMON SHARE
Basic earnings before extraordinary item...  $   2.04   $   1.50   $   1.43   $   1.33           --
Basic earnings after extraordinary
  item(d)..................................  $   2.04   $   1.50   $   1.36   $   1.33           --
Diluted earnings before extraordinary
  item.....................................  $   1.94   $   1.43   $   1.36   $   1.29           --
Diluted earnings after extraordinary
  item(d)..................................  $   1.94   $   1.43   $   1.30   $   1.29           --
Cash dividends declared....................  $   0.23   $   0.19   $   0.08         --           --
Book value at end of year..................  $  13.84   $  12.26   $  10.86   $   6.79     $   5.45
FINANCIAL CONDITION
Total assets...............................  $798,202   $825,506   $612,395   $748,842     $521,449
Long-term borrowings.......................  $ 56,313   $ 61,687   $ 17,181   $101,895     $110,819
Stockholders' equity.......................  $331,309   $277,248   $227,387   $105,660     $ 82,738
Common shares outstanding at end of year...    23,930     22,607     20,934     15,559       15,168
OTHER FINANCIAL DATA
EBITDA(e)..................................  $126,513   $ 75,740   $ 62,866   $ 53,765     $ 39,026
Pre-tax margin.............................      10.4%       8.8%      10.1%       8.8%         6.6%
Return on average equity(f)................      15.3%      13.1%      15.0%      21.9%         9.0%
Assets in client accounts at end of year
  (in billions)............................  $   48.9   $   46.8   $   32.9   $   28.5     $   24.3
</TABLE>

---------------
(a) All data presented has been restated to reflect the Company's October 2,
    2000 acquisition of Branch Cabell & Co. Inc. which was accounted for as a
    pooling of interests.

(b) Based on the consolidated results of the Predecessor Company for the eleven
    months ended November 29, 1996 combined with the consolidated results of the
    Company for one month ended December 31, 1996.

(c) Certain amounts have been reclassified to conform with 2000 financial
    statement presentation.

(d) Extraordinary item of $1.2 million after tax represents the write-off of
    capitalized debt costs as a result of the retirement of $77.5 million in
    debt following the Company's April 2, 1998 initial public offering.

(e) EBITDA represents earnings before extraordinary item, acquisition interest
    expense, taxes, depreciation and amortization. EBITDA is a supplemental
    measure of operating results or cash flow from operations and is a widely
    accepted financial indicator of a Company's liquidity. It is not an
    alternative measure of operating results or cash flow from operations as
    determined in accordance with generally accepted accounting principles.

(f) Return on average equity for 1998 is before extraordinary item.

                                        14
<PAGE>   16

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

BUSINESS ENVIRONMENT

     The Company's retail securities brokerage activities, as well as its
investment banking, asset management, institutional sales and trading and equity
research services, are in highly competitive markets and subject to various
risks including volatile trading markets and fluctuations in the volume of
market activity. These markets are affected by general economic and market
conditions, including fluctuations in interest rates, volume and price levels of
securities, flows of investor funds into and out of mutual funds and pension
plans and by factors that apply to particular industries such as technological
advances and changes in the regulatory environment.

     The financial markets experienced heavy volatility during 2000. The equity
markets soared to record highs in the first quarter of 2000 and experienced a
severe correction in the latter part of the year. Going forward, the Company
plans to focus on absorbing the growth that it has accumulated in recent years,
reducing expenses and increasing productivity. It is difficult to predict where
the financial markets are headed in the future, thus the Company's financial
results may continue to be subject to fluctuations. Consequently, the results of
operations for a particular period may not be indicative of results to be
expected for other periods.

COMPANY DEVELOPMENTS

     In October 2000, the Company acquired Branch Cabell & Co. Inc. ("Branch
Cabell"), a regional brokerage and investment firm based in Richmond, Virginia.
The transaction was recorded as a pooling of interests for accounting purposes.

     During 1999, the Company completed several strategic acquisitions
summarized below:

        - In January 1999, the Company acquired certain assets and liabilities
          of Hopper Soliday & Co., Inc. ("Hopper Soliday"), renamed Tucker
          Anthony MidAtlantic Division ("TA MidAtlantic") and transferred them
          to Tucker Anthony. TA MidAtlantic is an investment and municipal
          banking operation based in Pennsylvania.

        - In February 1999, the Company, through its Sutro subsidiary, acquired
          the business and substantially all of the assets of Charter Investment
          Group, Inc. ("Charter"), a retail brokerage firm based in Oregon.

        - In September 1999, the Company acquired Gibraltar Securities Co.
          ("Gibraltar"), a regional brokerage and investment advisory service
          firm located in New Jersey which was merged with and operates as a
          division of Tucker Anthony.

        - In October 1999, the Company acquired The Hill Thompson Group, Ltd.
          ("Hill Thompson Group"), including its primary operating subsidiary
          Hill, Thompson, Magid LP ("Hill Thompson"), a New Jersey-based
          wholesale over-the-counter trading firm.

     During 1998, the Company undertook two key initiatives as highlighted
below:

        - On April 2, 1998, the Company completed its initial public offering of
          7.4 million shares plus an over-allotment of 1.1 million shares,
          including 4.2 million shares of common stock sold by the Company. The
          Company's public offering raised approximately $75.7 million for the
          Company, after deducting underwriting discounts, commissions and
          expenses. The Company used the proceeds and available cash to repay
          $77.5 million of debt.

        - In May 1998, the Company completed its acquisition of Cleary Gull
          Reiland & McDevitt Inc. ("Cleary Gull"), a privately held investment
          banking, institutional brokerage and investment advisory firm
          headquartered in Milwaukee, Wisconsin. During 1999, the investment
          banking, equity research and institutional brokerage activities of
          Cleary Gull and Tucker Anthony were combined to form Tucker Anthony
          Capital Markets ("TACM"). Early in 2001, the Company combined Sutro's
          equity research and banking businesses with TACM to form Tucker
          Anthony

                                        15
<PAGE>   17

          Sutro Capital Markets ("TASCM"), a division of Tucker Anthony. The
          remaining business of Cleary Gull, now Cleary Gull IMS, is primarily
          investment management services provided to institutional accounts and
          high net worth individuals.

COMPONENTS OF REVENUES AND EXPENSES

     REVENUES.  Commission revenues include retail and institutional commissions
received by the Company as an agent in securities transactions, including all
exchange listed, over-the-counter agency, mutual fund, insurance and annuity
transactions. Principal transactions revenues include principal sales credits as
well as gains and losses from the trading of securities by the Company.
Investment banking revenues include selling concessions, underwriting fees and
management fees received from the underwriting of corporate or municipal
securities, as well as fees earned from providing merger and acquisition and
other financial advisory services. Asset management revenues include fees
generated from providing investment advisory, portfolio management and custodial
services to clients, as well as managed account fees and 12b-1 distribution
fees. Other revenues primarily consist of retirement plan revenue, third party
correspondent clearing fees and other transaction fees. Net interest income
equals interest income less interest expense. Interest income primarily consists
of interest earned on margin loans made to customers, securities purchased under
agreements to resell and fixed income securities held in the Company's trading
accounts as well as dividends earned on proprietary arbitrage positions.
Interest expense includes interest paid under its Wexford financing arrangement
and on bank borrowings, securities sold under agreements to repurchase, fixed
asset financing and cash balances in customer accounts held by Wexford.

     EXPENSES.  Compensation and benefits expense includes sales, trading and
incentive compensation, which are primarily variable based on revenue production
and/or business unit profit contribution, and salaries, payroll taxes and
employee benefits which are relatively fixed in nature. Incentive compensation,
including bonuses for eligible employees, is accrued proratably throughout the
year based on actual or estimated annual amounts. Occupancy and equipment
expense includes rent and operating expenses for facilities, expenditures for
repairs and maintenance, and depreciation and amortization of furniture,
fixtures and leasehold improvements. Communications expense includes charges for
telecommunications, news and market data services. Brokerage and clearance
expense includes the cost of securities clearance, floor brokerage and exchange
fees. Promotional expense includes travel, entertainment and advertising. Other
expenses include general and administrative expenses, such as professional
services, litigation expenses, goodwill amortization, data processing and other
miscellaneous expenses.

                                        16
<PAGE>   18

RESULTS OF OPERATIONS

     The following table sets forth year-to-year increases (decreases) in the
major revenue and expense categories (amounts in thousands):

<TABLE>
<CAPTION>
                                                                                 2000                 1999
                                              Twelve Months Ended             Compared to         Compared to
                                                 December 31,                    1999                 1998
                                       ---------------------------------   -----------------   ------------------
                                       2000(a)   1999(a)(b)   1998(a)(b)    AMOUNT   PERCENT    AMOUNT    PERCENT
                                       --------  ----------   ----------   --------  -------   --------   -------
<S>                                    <C>       <C>          <C>          <C>       <C>       <C>        <C>
Revenues:
    Commissions......................  $301,100   $241,420     $189,244    $ 59,680    25      $ 52,176      28
    Principal transactions...........   220,574    142,669       90,760      77,905    55        51,909      57
    Investment banking...............    87,034     72,893       82,638      14,141    19        (9,745)    (12)
    Asset management.................    84,833     65,832       47,593      19,001    29        18,239      38
    Net interest income(c)...........    49,406     35,759       34,089      13,647    38         1,670       5
    Other............................    14,898     13,392       10,533       1,506    11         2,859      27
                                       --------   --------     --------    --------            --------
         Net revenues................   757,845    571,965      454,857     185,880    32       117,108      26
Non-interest expenses:
    Compensation and benefits........   492,707    374,703      296,280     118,004    31        78,423      26
    Occupancy and equipment..........    33,718     29,334       24,329       4,384    15         5,005      21
    Communications...................    27,041     22,997       18,953       4,044    18         4,004      21
    Brokerage and clearance..........    28,757     22,246       15,386       6,511    29         6,860      45
    Promotional......................    23,755     18,772       14,646       4,983    27         4,126      28
    Other............................    72,840     53,759       39,161      19,081    36        14,598      37
                                       --------   --------     --------    --------            --------
         Total non-interest
           expenses..................   678,818    521,811      408,755     157,007    30       113,056      28
Income before income taxes...........    79,027     50,154       46,102      28,873    58         4,052       9
Income taxes.........................    31,541     18,868       18,183      12,673    67           685       4
                                       --------   --------     --------    --------            --------
Net income before extraordinary
  item...............................    47,486     31,286       27,919      16,200    52         3,367      12
    Extraordinary item (net of
      tax)(d)........................        --         --       (1,276)         --   (e)         1,276      (e)
                                       --------   --------     --------    --------            --------
Net income after extraordinary
  item...............................  $ 47,486   $ 31,286     $ 26,643    $ 16,200    52      $  4,643      17
                                       ========   ========     ========    ========            ========
</TABLE>

---------------
(a) All data presented has been restated to reflect the Company's October 2,
    2000 acquisition of Branch Cabell & Co. Inc. which was accounted for as a
    pooling of interests.

(b) Certain amounts have been reclassified to conform with 2000 financial
    statement presentation.

(c) Net interest income is net of interest expense of $75,070 in 2000, $38,169
    in 1999 and $27,345 in 1998.

(d) Extraordinary item is related to the write-off of capitalized debt costs as
    a result of the retirement of $77.5 million in debt in conjunction with the
    Company's April 2, 1998 initial public offering.

(e) Not meaningful.

  2000 Compared to 1999

     Net revenues were $757.8 million for 2000, up $185.9 million or 32% from
$572.0 million in 1999, primarily due to the acquisitions of Hill Thompson and,
to a lesser extent, Gibraltar in late 1999, which contributed $81.4 million of
the increase in 2000 as well as growth in the Company's retail business. Net
income for the year ended December 31, 2000 was $47.5 million, a 52% increase
from $31.3 million in 1999. Earnings per common share (diluted) were $1.94
compared with $1.43 for the year ended December 31, 1999.

     Commission revenues increased 25% or $59.7 million to $301.1 million in
2000 from $241.4 million in 1999. The higher commission revenues stem from an
increase in new investment executives as a result of acquisitions and the
Company's recruiting efforts. In addition, productivity per investment executive
increased in part due to strong market conditions in the first half of the year.

     Principal transactions revenues were $220.6 million in 2000, up $77.9
million or 55% when compared to $142.7 million in 1999. These revenues increased
$69.2 million in 2000 as a result of Hill Thompson and Gibraltar acquisitions.
Of the $69.2 million increase attributable to Hill Thompson and Gibraltar, $51.8

                                        17
<PAGE>   19

million or 75% stems from Hill Thompson, which benefited from high levels of
market activity in OTC traded securities during the first quarter of 2000.

     Investment banking revenues were $87.0 million in 2000, up 19% from $72.9
million in 1999, primarily due to increased advisory and merger/acquisition fees
in the first half of 2000 and, to a lesser extent, from private transactions.

     Asset management revenues rose 29% to $84.8 million in 2000 from $65.8
million in 1999, mainly due to growth in assets under management. Assets under
management grew to $13.4 billion at year end 2000 from $11.1 billion in 1999, a
21% increase over 1999 as a result of both new money added to the funds and
asset appreciation.

     Net interest income was $49.4 million in 2000, up $13.6 million or 38% from
$35.8 million in 1999, primarily due to higher customer margin balances.

     Compensation and benefits expense was $492.7 million in 2000 compared to
$374.7 million in 1999, up $118.0 million or 31% of which $43.1 million was
attributable to Hill Thompson and Gibraltar. The remainder of the increase was
due to higher production related compensation based on the Company's improved
operating results and to costs of recruiting new investment executives.
Compensation and benefits expense as a percentage of net revenues was 65% in
2000 down slightly from 66% a year ago.

     Non-compensation operating expenses were $186.1 million in 2000, an
increase of $39.0 million or 27% when compared with $147.1 million in 1999 due
in part to $14.2 million of costs from Hill Thompson and Gibraltar as well as
growth in the Company's net revenues. Non-compensation related operating
expenses as a percentage of net revenues were 25% for 2000 compared with 26% in
1999. Occupancy and equipment expense increased $4.4 million or 15% in 2000
primarily due to expansion within the Company's retail business and $1.4 million
of costs from Hill Thompson and Gibraltar. Communications expense was $27.0
million in 2000 compared to $23.0 million in 1999, an increase of 18%, or $4.0
million, of which $2.0 million stems from Hill Thompson and Gibraltar. Brokerage
and clearance expense was $28.8 million in 2000, up $6.5 million or 29%
(including $4.3 million from Hill Thompson and Gibraltar) compared with $22.2
million in 1999 primarily due to additional execution and clearing costs
resulting from higher business volumes. Promotional expense increased $5.0
million or 27% (including $1.3 million from acquired companies) to $23.8 million
in 2000 from $18.8 million in 1999 due to increased spending on business
development, advertising and travel. Other expenses, which include information
systems, professional fees, data processing, printing, postage,
license/registration fees, and amortization of goodwill, increased $19.0 million
(including $4.0 million from Hill Thompson and Gibraltar) to $72.8 million in
2000 from $53.8 million in 1999. This increase partly stems from investments in
technology, increased professional fees associated with new hiring and
additional goodwill amortization resulting from companies acquired in late 1999.

     The Company's income tax provisions for 2000 and 1999 were $31.5 million
and $18.9 million, respectively. The effective tax rate was 40% for 2000, up
from 38% in 1999. The effective rate increase for 2000 is due primarily to
transactions that are not subject to preferential tax treatment.

  1999 Compared to 1998

     Net revenues were $572.0 million for 1999, up $117.1 million or 26% from
$454.9 million in 1998. The Company's net revenue growth primarily stems from
the expansion of its retail business combined with growth through new
acquisitions. Net revenues increased $48.9 million in 1999 as a result of the
acquisitions of Hopper Soliday, Charter, Gibraltar and Hill Thompson in 1999 and
Cleary Gull in the second quarter of 1998 (collectively, the "acquired
companies"). Net income for the year ended December 31, 1999 was $31.3 million,
a 17% increase from $26.6 million in 1998 and a 12% increase from 1998 net
income before extraordinary item of $27.9 million. Earnings per common share
(diluted) before extraordinary item were $1.43 compared with $1.36 for the year
ended December 31, 1998.

     Commission revenues increased 28% or $52.2 million to $241.4 million in
1999 from $189.2 million in 1998. The increase is primarily due to higher
average productivity from existing investment executives

                                        18
<PAGE>   20

combined with production from new investment executives as a result of the
Company's expansion of its retail business.

     Principal transactions revenues were $142.7 million in 1999, up $51.9
million or 57% when compared to $90.8 million in 1998. The revenue increase is
primarily attributable to a significant rise in fixed income related revenues as
well as higher over-the-counter and arbitrage trading revenues when compared
with 1998 which was adversely affected by turbulent financial market conditions
during the 1998 third quarter.

     Investment banking revenues were $72.9 million in 1999, down 12% from $82.6
million in 1998. Despite a significant improvement in municipal finance fees,
investment banking revenues were down due to reduced equity underwriting
activity and to the transitional effects of realigning much of the Company's
equity capital markets businesses.

     Asset management revenues rose 38% to $65.8 million in 1999 from $47.6
million in 1998, primarily due to increased revenues earned on assets under
management. Assets under management grew to $11.1 billion at year end 1999 from
$9.1 billion in 1998 as a result of both new money added to the funds and asset
appreciation.

     Net interest income was $35.8 million in 1999, up $1.7 million or 5% from
$34.1 million in 1998. The increase in net interest income was mainly due to
higher average customer margin balances resulting from growth in the Company's
retail businesses.

     Compensation and benefits expense was $374.7 million in 1999 compared to
$296.3 million in 1998, an increase of $78.4 million or 26% of which $28.7
million was attributable to acquired companies. The remainder of the increase
was due to higher production related compensation based on the Company's
improved operating results and to costs of recruiting new investment executives.
Compensation and benefits as a percentage of net revenues were 66% in 1999 and
65% in 1998.

     Non-compensation related operating expenses were $147.1 million in 1999, an
increase of $34.6 million or 31% when compared with $112.5 million in 1998.
Included in 1999 operating expenses are costs from acquired companies of $15.5
million which were not included in 1998. Non-compensation related operating
expenses as a percentage of net revenues was 26% for 1999 compared with 25% in
1998. Occupancy and equipment expense increased $5.0 million or 21% in 1999
primarily due to additional office space, expansion within the Company's retail
business and $2.6 million of costs from acquired companies. Communications
expense was $23.0 million in 1999 compared to $19.0 million in 1998, an increase
of 21% or $4.0 million of which $2.3 million stems from acquired companies with
the remainder mostly related to new retail branches. Brokerage and clearance
expense was $22.2 million in 1999, up $6.9 million or 45% (including $2.6
million from acquired companies) compared with $15.4 million in 1998 mainly
reflecting additional execution and clearing costs resulting from higher
business volumes. Promotional expense increased $4.2 million or 28% (including
$1.8 million from acquired companies) to $18.8 million in 1999 from $14.6
million in 1998 due to increased spending on business development, advertising
and travel. Other expenses, which include information systems, professional
fees, data processing, printing, postage, license/registration fees, and
amortization of goodwill, increased $14.6 million (including $6.2 million from
acquired companies) to $53.8 million in 1999 from $39.2 million in 1998. This
increase partly stems from investments in technology, increased professional
fees associated with new hiring and additional goodwill amortization resulting
from acquisitions.

     The Company's income tax provisions for 1999 and 1998 were $18.9 million
and $18.2 million, respectively. The effective tax rate was 38% for 1999, down
from 39% in 1998 primarily due to the increase in tax exempt interest income and
a reduction in state tax liability.

LIQUIDITY AND CAPITAL RESOURCES

     The Company receives dividends, interest on loans and other payments from
its subsidiaries, which are the Company's main sources of funds to pay expenses,
service debt and pay dividends. Distributions and interest payments to the
Company from its registered broker-dealer subsidiaries, the Company's primary
sources of liquidity, are restricted as to amounts which may be paid by
applicable law and regulations. The Net Capital Rules are the primary regulatory
restrictions regarding capital resources. The Company's rights to
                                        19
<PAGE>   21

participate in the assets of any subsidiary are also subject to prior claims of
the subsidiary's creditors, including customers of the broker-dealer
subsidiaries.

     The assets of the Company's primary operating subsidiaries are highly
liquid with the majority of their assets consisting of securities inventories
and collateralized receivables, both of which fluctuate depending on the levels
of customer business. Collateralized receivables consist mainly of securities
purchased under agreements to resell, which are secured by U.S. government and
agency securities.

     The majority of the subsidiaries' assets are financed through Wexford, by
securities sold under repurchase agreements and by securities sold, not yet
purchased. The Company's principal source of short-term financing stems from its
clearing arrangement with Wexford under which the Company can borrow on an
uncommitted collateralized basis against its proprietary inventory positions.
This financing generally is obtained from Wexford at rates based upon prevailing
market conditions. The Company monitors overall liquidity by tracking the extent
to which unencumbered marketable assets exceed short-term unsecured borrowings.

     Repurchase agreements are used primarily for customer accommodation
purposes and to finance the Company's inventory positions in U.S. government and
agency securities. These positions provide products and liquidity for customers
and are not maintained for the Company's investment or market speculation. The
level of activity fluctuates depending on customer and inventory needs; however,
these fluctuations have not materially affected liquidity or capital resources.
The Company monitors the collateral position and counterparty risk on these
transactions daily.

     The subsidiaries' total assets and short-term liabilities and the
individual components thereof may vary significantly from period to period
because of changes relating to customer needs and economic and market
conditions. The Company's total assets at December 31, 2000 and December 31,
1999 were $798.2 million and $825.5 million, respectively. The Company's
operating activities generate cash resulting from net income earned during the
period and fluctuations in its current assets and liabilities. The most
significant fluctuations have resulted from changes in the level of customer
activity and securities inventory changes resulting from proprietary arbitrage
trading strategies dictated by prevailing market conditions and the effects of
acquired companies.

     In addition to normal operating requirements, capital is required to
satisfy financing and regulatory requirements. The Company's overall capital
needs are continually reviewed to ensure that its capital base can appropriately
support the anticipated capital needs of the subsidiaries. The excess regulatory
net capital of the Company's broker-dealer subsidiaries may fluctuate throughout
the year reflecting changes in inventory levels and/or composition, investment
banking commitments and balance sheet components. For a description of the
Company's net capital requirements, see Note 11 of the audited financial
statements contained in Item 8 of this report. Management believes that existing
capital, funds provided by operations, the credit arrangements with Wexford and
funds available from a revolving credit agreement will be sufficient to finance
the operating subsidiaries' ongoing businesses.

     During 1999, the Company amended its $50 million revolving credit agreement
(the "Credit Agreement") to increase the total commitments of participating
banks to $100 million. At December 31, 2000, the Company had borrowings
outstanding of $50 million, the proceeds of which were used to finance the
acquisitions of Gibraltar and Hill Thompson Group in 1999. The Credit Agreement
matures in November 2003 with all outstanding loans payable at that date.

     The Company maintains, through two subsidiaries, a fixed asset credit
facility (the "Fixed Asset Facility") secured by certain of the Company's fixed
assets. During 1999, the Company refinanced a portion of the Fixed Asset
Facility and secured additional financing which was used to upgrade its computer
systems. At December 31, 2000, the Company had borrowings outstanding under the
Fixed Asset Facility of $6.3 million, of which $4.7 million is payable in
monthly installments until December 2001 and $1.6 million is payable in monthly
installments through June 2003. The Company has historically financed capital
expenditures through internal cash generation and through the Fixed Asset
Facility. For the years ended December 31, 2000, 1999 and 1998, the Company had
capital expenditures of approximately $19.5 million, $9.7 million and $5.6
million, respectively, which were funded from operations.

                                        20
<PAGE>   22

     In September 1998, the Board of Directors approved a stock repurchase
program that permitted purchases of up to five percent of the Company's common
stock outstanding or approximately one million shares. In April 1999, the Board
of Directors authorized the purchase of an additional one million shares. To
date, the Company has funded its stock repurchases from internal sources. In
September 2000, the Company rescinded its stock repurchase program as part of
its acquisition of Branch Cabell & Co. Inc. under the pooling of interests
accounting method.

CASH FLOWS

     For the year ended December 31, 2000, cash and cash equivalents decreased
$4.8 million. Funds generated from operating activities were $23.4 million.
During 2000, the Company invested cash of $19.5 million for fixed asset
purchases and leasehold improvements. Cash used in financing activities in 2000
amounted to $8.7 million comprised principally of $5.1 million of repayments of
bank borrowings and $7.9 million of dividend payments, partially offset by $4.7
million in proceeds from sale of common stock.

RISK MANAGEMENT

     The Company's primary risk exposures are market risk (particularly equity
price and interest rate risk) and credit risk. Market risk refers to the risk
that a change in the level of equity prices, interest rates or other factors
could result in trading losses. Credit risk refers to the risk that a
counterparty to a transaction might fail to perform under its contractual
commitment resulting in the Company incurring losses. The Company's risk
management focuses on the trading of securities, extension of credit to
counterparties and investment banking activities, as well as the extension of
credit to retail and institutional customers. The Company monitors its market
and credit risks daily through a number of control procedures designed to
identify and evaluate the various risks to which it is exposed.

  Market Risk

     The Company's broker-dealer subsidiaries may act as a principal to
facilitate customer-related transactions in financial instruments which expose
the firm to market risks. They may make markets in equity and debt securities or
trade in its own account in arbitrage-related trading activities. Whether acting
as principal to facilitate customer transactions or trading in its own account,
market risk is monitored very closely.

     Managing market risk exposure includes: limiting firm commitments by
position levels both long and short for every product that is traded; limiting
the type of trade that can occur in each inventory account; and tactically
employing certain hedging techniques that reduce the level of risk taken.
Management believes that the risk management practices of the Company's
broker-dealer subsidiaries aid in managing the Company's market exposure.

     The Company's broker-dealer subsidiaries manage daily risk exposure in
their firm inventory accounts by requiring various levels of management review
of these accounts. The primary purpose of risk management is to participate in
the establishment of position limits, as well as to monitor both the buy and
sell activity in the firm's trading accounts. Position and exposure reports
indicating positions by product or trader are prepared, distributed and reviewed
each day. These reports enable the Company's broker-dealer subsidiaries to
control inventory levels, monitor daily trading results by product, as well as
review inventory aging, pricing and concentration.

                                        21
<PAGE>   23

     In accordance with the Securities and Exchange Commission's risk disclosure
requirements, the following table categorizes the Company's interest sensitive
instruments (amounts in thousands):

<TABLE>
<CAPTION>
                                                            YEARS TO MATURITY
                                                           PAR / NOTIONAL VALUE
                                                            DECEMBER 31, 2000
                                     ----------------------------------------------------------------
                                                     GREATER       GREATER
                                                       THAN         THAN
                                     1 YR OR LESS   1 TO 5 YRS   5 TO 10 YRS   OVER 10 YRS    TOTAL     FAIR VALUE
                                     ------------   ----------   -----------   -----------   --------   ----------
<S>                                  <C>            <C>          <C>           <C>           <C>        <C>
Assets:
  Rate Sensitive Securities
     U. S. Government and
       Agencies....................     $  550       $27,576       $20,684      $  7,724     $ 56,534    $ 49,367
     State and Municipal
       Obligations.................        740         5,422        17,900       100,270      124,332     124,567
     Corporate Debt................      4,292        12,901        16,678        25,969       59,840      53,359
                                        ------       -------       -------      --------     --------    --------
          Total....................     $5,582       $45,899       $55,262      $133,963     $240,706    $227,293
                                        ======       =======       =======      ========     ========    ========
  Weighted Average Coupon Rates
     U. S. Government and
       Agencies....................       6.06%         6.51%         7.13%         7.63%
     State and Municipal
       Obligations.................       6.05%         5.15%         5.48%         5.50%
     Corporate Debt................       6.03%         6.59%         6.97%         7.12%
</TABLE>

<TABLE>
<CAPTION>
                                                          GREATER       GREATER
                                                           THAN          THAN
                                         1 YR OR LESS   1 TO 5 YRS    5 TO 10 YRS   OVER 10 YRS    TOTAL    FAIR VALUE
                                         ------------   -----------   -----------   -----------   -------   ----------
<S>                                      <C>            <C>           <C>           <C>           <C>       <C>
Liabilities:
  Rate Sensitive Securities
     U. S. Government and Agencies.....      $ --         $24,084       $12,672       $   28      $36,784    $39,190
     State and Municipal Obligations...        15              55         2,050        1,835        3,955      2,068
     Corporate Debt....................       294           4,332         4,417          116        9,159     10,245
                                             ----         -------       -------       ------      -------    -------
          Total........................      $309         $28,471       $19,139       $1,979      $49,898    $51,503
                                             ====         =======       =======       ======      =======    =======
  Weighted Average Coupon Rates
     U. S. Government and Agencies.....        --            6.06%         6.10%        5.80%
     State and Municipal Obligations...      6.10%           5.97%         6.20%        5.81%
     Corporate Debt....................      6.78%           6.98%         7.31%        7.07%
</TABLE>

<TABLE>
<CAPTION>
                                                         GREATER       GREATER
                                                          THAN          THAN
                                        1 YR OR LESS   1 TO 5 YRS    5 TO 10 YRS   OVER 10 YRS    TOTAL     FAIR VALUE
                                        ------------   -----------   -----------   -----------   --------   ----------
<S>                                     <C>            <C>           <C>           <C>           <C>        <C>
Rate Sensitive Derivative
  Financial Instruments
     Residual interest certificates
       (Pay variable/receive fixed)...     $  --          $  --        $8,150       $118,225     $126,375     $9,886
     Average pay rate.................                                   7.15%          5.68%
     Average receive rate.............                                   8.64%          6.24%
     Interest rate swaps
       (Pays fixed/receive
          variable)...................     $  --          $  --        $8,185       $ 86,730     $ 94,915     $5,998
     Average pay rate.................                                   7.05%          7.25%
     Average receive rate.............                                   6.76%          6.77%
</TABLE>

     The preceding table shows the notional value of securities within their
maturing time bands. With the exception of the rate sensitive derivative
financial instruments, the majority of the Company's holdings are not held until
maturity. Typically, fixed income securities are sold within a few days of
purchase. Management reviews any position held over thirty days. Additionally,
while some securities may have call provisions, the table displays all
securities extended out to final maturity date.

     In addition to the financial instruments included in the table, the Company
has long-term debt. The Company is exposed to changes in interest rates as a
result of its borrowings under its Credit Agreement. The amount of the Company's
long-term debt may vary as a result of future business requirements, market
conditions and other factors. For a description of the Company's long-term debt,
see Note 9 in Item 8 of this report.

                                        22
<PAGE>   24

     For comparative purposes, December 31, 1999 data is shown in the following
table (amounts in thousands):

<TABLE>
<CAPTION>
                                                                YEARS TO MATURITY
                                                               PAR / NOTIONAL VALUE
                                                                DECEMBER 31, 1999
                                         ----------------------------------------------------------------
                                                         GREATER       GREATER
                                                           THAN         THAN
                                         1 YR OR LESS   1 TO 5 YRS   5 TO 10 YRS   OVER 10 YRS    TOTAL     FAIR VALUE
                                         ------------   ----------   -----------   -----------   --------   ----------
<S>                                      <C>            <C>          <C>           <C>           <C>        <C>
Assets:
  Rate Sensitive Securities
     U. S. Government and Agencies.....     $  757       $16,796       $ 8,929      $  4,227     $ 30,709    $ 28,935
     State and Municipal Obligations...      1,280         8,105        25,715        80,900      116,000     116,111
     Corporate Debt....................      2,618        10,735        12,779        29,020       55,152      40,554
                                            ------       -------       -------      --------     --------    --------
          Total........................     $4,655       $35,636       $47,423      $114,147     $201,861    $185,600
                                            ======       =======       =======      ========     ========    ========
  Weighted Average Coupon Rates
     U. S. Government and Agencies.....       6.38%         6.24%         6.41%         7.63%
     State and Municipal Obligations...       5.74%         5.10%         5.20%         5.50%
     Corporate Debt....................       5.93%         7.82%         7.01%         7.12%
</TABLE>

<TABLE>
<CAPTION>
                                                      GREATER       GREATER
                                                        THAN         THAN
                                      1 YR OR LESS   1 TO 5 YRS   5 TO 10 YRS   OVER 10 YRS    TOTAL    FAIR VALUE
                                      ------------   ----------   -----------   -----------   -------   ----------
<S>                                   <C>            <C>          <C>           <C>           <C>       <C>
Liabilities:
  Rate Sensitive Securities
     U. S. Government and
       Agencies.....................      $  5        $31,330       $11,934       $   84      $43,353    $42,649
     State and Municipal
       Obligations..................        25            365            70        8,260        8,720      9,139
     Corporate Debt.................       134          3,754         1,551          263        5,702      5,320
                                          ----        -------       -------       ------      -------    -------
          Total.....................      $164        $35,449       $13,555       $8,607      $57,775    $57,108
                                          ====        =======       =======       ======      =======    =======
  Weighted Average Coupon Rates
     U. S. Government and
       Agencies.....................      6.00%          6.00%         6.46%        6.40%
     State and Municipal
       Obligations..................      6.95%          5.83%         5.95%        5.29%
     Corporate Debt.................      6.07%          6.29%         6.97%        6.45%
</TABLE>

     During the year, the Company replaced its traditional market risk
disclosures (based on the statistical technique known as Value-at-Risk) with the
tabular presentation shown above. The change more accurately reflects the tools
and techniques utilized by management to assess market exposures.

  Credit Risk

     The Company deals with counterparties or other broker-dealers in conducting
business for their clients or for their own accounts. Financing extended to
counterparties is provided against collateral through Wexford. The Company
reviews counterparties to establish appropriate exposure levels on an account by
account basis. Daily credit exposure is managed by monitoring the level of
collateral and creditworthiness of counterparties and their related trading
limits.

     The Company, through Wexford, extends credit to retail customers. Amounts
loaned are limited by the margin regulations of the Board of Governors of the
Federal Reserve System and other regulatory authorities and are subject to
credit review and daily monitoring by Wexford and the Company.

     Risks associated with investment banking activities are controlled through
a capital commitment committee within the Company. The commitment committee
reviews every significant proposed investment banking transaction prior to its
acceptance by the Company. The capital committee reviews major proposed
transactions in order to determine the effect of such transactions on regulatory
capital prior to their approval. Only after acceptance by the committee will the
commitment to underwrite a specific security be extended to the investment
banking client.

     ITEM 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information required by this item is contained in "Item 7 Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
the caption "Risk Management" and is incorporated by reference herein.

                                        23
<PAGE>   25

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
         AUDITED CONSOLIDATED FINANCIAL STATEMENTS            PAGE
         -----------------------------------------            ----
<S>                                                           <C>
Report of Independent Auditors..............................   25
Consolidated Statements of Financial Condition -- December
  31, 2000 and 1999.........................................   26
Consolidated Statements of Income -- For the years ended
  December 31, 2000, 1999 and 1998..........................   27
Consolidated Statements of Changes in Stockholders' Equity
  -- For the years ended December 31, 2000, 1999 and 1998...   28
Consolidated Statements of Cash Flows -- For the years ended
  December 31, 2000, 1999 and 1998..........................   29
Notes to Consolidated Financial Statements..................   30
</TABLE>

                                        24
<PAGE>   26

                         REPORT OF INDEPENDENT AUDITORS

TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF
TUCKER ANTHONY SUTRO:

     We have audited the accompanying consolidated statements of financial
condition of Tucker Anthony Sutro (the "Company") as of December 31, 2000 and
1999 and the related consolidated statements of income, changes in stockholders'
equity, and cash flows for the years ended December 31, 2000, 1999 and 1998.
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 in accordance with auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tucker Anthony
Sutro at December 31, 2000 and 1999 and the consolidated results of its
operations and its cash flows for the years ended December 31, 2000, 1999 and
1998 in conformity with accounting principles generally accepted in the United
States.

                                            /s/ ERNST & YOUNG, LLP

New York, New York
January 22, 2001

                                        25
<PAGE>   27

                              TUCKER ANTHONY SUTRO

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 2000 AND 1999
                   (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                2000        1999
                                                              --------    --------
<S>                                                           <C>         <C>
                                      ASSETS
Cash and cash equivalents...................................  $ 19,932    $ 24,713
Receivables from brokers and dealers........................   108,524     106,371
Securities purchased under agreements to resell.............    51,391      41,250
Securities owned, at market.................................   344,659     416,518
Fixed assets, net of accumulated depreciation and
  amortization..............................................    35,195      25,223
Deferred income taxes.......................................    14,655      10,936
Goodwill, net of accumulated amortization...................    80,763      87,083
Other receivables...........................................    79,522      64,128
Other assets................................................    63,561      49,284
                                                              --------    --------
          Total assets......................................  $798,202    $825,506
                                                              ========    ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Payables to brokers and dealers...........................  $ 94,741    $ 88,811
  Securities sold under agreements to repurchase............    19,758      10,983
  Securities sold, not yet purchased, at market.............   127,535     234,134
  Accrued compensation and benefits.........................   106,689      95,843
  Accounts payable and accrued expenses.....................    61,195      56,427
  Notes payable to banks....................................    56,602      61,687
                                                              --------    --------
                                                               466,520     547,885
                                                              --------    --------

Liabilities subordinated to the claims of general
  creditors.................................................       373         373

Stockholders' equity:
  Common stock (60,000,000 shares authorized, 23,931,638 and
     22,628,384 shares issued in 2000 and 1999,
     respectively, $.01 par value)..........................       239         226
  Additional paid-in capital................................   226,318     209,941
  Retained earnings.........................................   104,778      67,392
  Treasury stock (1,688 and 21,967 shares in 2000 and 1999,
     respectively, at cost).................................       (26)       (311)
                                                              --------    --------
          Total stockholders' equity........................   331,309     277,248
                                                              --------    --------
          Total liabilities and stockholders' equity........  $798,202    $825,506
                                                              ========    ========
</TABLE>

                See Notes to Consolidated Financial Statements.

                                        26
<PAGE>   28

                              TUCKER ANTHONY SUTRO

                       CONSOLIDATED STATEMENTS OF INCOME
                 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                             --------------------------------
                                                               2000        1999        1998
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Revenues
     Commissions...........................................  $301,100    $241,420    $189,244
     Principal transactions................................   220,574     142,669      90,760
     Investment banking....................................    87,034      72,893      82,638
     Asset management......................................    84,833      65,832      47,593
     Net interest income (including interest expense of
       $75,070 in 2000, $38,169 in 1999 and $27,345 in
       1998)...............................................    49,406      35,759      34,089
     Other.................................................    14,898      13,392      10,533
                                                             --------    --------    --------
          Net revenues.....................................   757,845     571,965     454,857
Non-interest expenses
     Compensation and benefits.............................   492,707     374,703     296,280
     Occupancy and equipment...............................    33,718      29,334      24,329
     Communications........................................    27,041      22,997      18,953
     Brokerage and clearance...............................    28,757      22,246      15,386
     Promotional...........................................    23,755      18,772      14,646
     Other.................................................    72,840      53,759      39,161
                                                             --------    --------    --------
          Total expenses...................................   678,818     521,811     408,755
Income before income taxes.................................    79,027      50,154      46,102
Income taxes...............................................    31,541      18,868      18,183
                                                             --------    --------    --------
Net income before extraordinary item.......................    47,486      31,286      27,919
Extraordinary item (net of tax of $922)....................        --          --      (1,276)
                                                             --------    --------    --------
Net income after extraordinary item........................  $ 47,486    $ 31,286    $ 26,643
                                                             ========    ========    ========
Net income per share:
     Basic before extraordinary item.......................  $   2.04    $   1.50    $   1.43
                                                             ========    ========    ========
     Basic after extraordinary item........................  $   2.04    $   1.50    $   1.36
                                                             ========    ========    ========
     Diluted before extraordinary item.....................  $   1.94    $   1.43    $   1.36
                                                             ========    ========    ========
     Diluted after extraordinary item......................  $   1.94    $   1.43    $   1.30
                                                             ========    ========    ========

Cash dividends declared per share..........................  $   0.23    $   0.19    $   0.08
Weighted-average common shares outstanding:
     Basic.................................................    23,297      20,925      19,521
     Diluted...............................................    24,456      21,827      20,525
</TABLE>

                See Notes to Consolidated Financial Statements.

                                        27
<PAGE>   29

                              TUCKER ANTHONY SUTRO

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                        COMMON STOCK
                                   -----------------------   ADDITIONAL
                                   OUTSTANDING                PAID-IN     RETAINED   SUBSCRIBED   TREASURY
                                     SHARES      PAR VALUE    CAPITAL     EARNINGS     STOCK       STOCK      TOTAL
                                   -----------   ---------   ----------   --------   ----------   --------   --------
<S>                                <C>           <C>         <C>          <C>        <C>          <C>        <C>
Balance at December 31, 1997 as
  previously reported............    14,704        $147       $ 83,654    $ 19,438     $(913)     $     --   $102,326
Adjustment for pooling of
  interests......................       855           9          2,493         832        --            --      3,334
                                     ------        ----       --------    --------     -----      --------   --------
Balance at December 31, 1997 as
  restated.......................    15,559         156         86,147      20,270      (913)           --    105,660
                                     ------        ----       --------    --------     -----      --------   --------
Sale of common stock.............       110           1          1,423          --        --            --      1,424
Issuance of subscribed stock.....       136           1             --          --       913            --        914
Initial public offering..........     4,200          42         75,699          --        --            --     75,741
Shares issued to acquire
  companies......................       876           9         19,932          --        --            --     19,941
Stock options exercised..........       129           1            687          --        --            --        688
Income tax benefit associated
  with stock options.............        --          --            397          --        --            --        397
Net income.......................        --          --             --      26,643        --            --     26,643
Dividends declared...............        --          --             --      (2,618)       --            --     (2,618)
Acquisition and retirement of
  treasury stock.................       (76)         --           (201)        (30)       --        (1,172)    (1,403)
                                     ------        ----       --------    --------     -----      --------   --------
Balance at December 31, 1998.....    20,934         210        184,084      44,265        --        (1,172)   227,387
                                     ------        ----       --------    --------     -----      --------   --------
Sale of common stock.............        29          --          1,155          --        --            --      1,155
Shares issued to acquire
  companies......................     2,812          14         23,576      (2,120)       --        21,601     43,071
Stock options exercised..........       161           2            884          --        --            --        886
Income tax benefit associated
  with stock options.............        --          --            528          --        --            --        528
Net income.......................        --          --             --      31,286        --            --     31,286
Dividends declared...............        --          --             --      (4,983)       --            --     (4,983)
Acquisition and retirement of
  treasury stock.................    (1,778)         --           (286)        (85)       --       (27,726)   (28,097)
Reissuance of treasury shares
  primarily for employee benefit
  and incentive plans............       449          --             --        (971)       --         6,986      6,015
                                     ------        ----       --------    --------     -----      --------   --------
Balance at December 31, 1999.....    22,607         226        209,941      67,392        --          (311)   227,248
                                     ------        ----       --------    --------     -----      --------   --------
Sale of common stock.............       642           7          9,172          --        --            --      9,179
Shares issued to acquired
  companies......................       245           2          3,721          --        --            --      3,723
Issuance of restricted stock
  (net)..........................       336           3          1,350          --        --            --      1,353
Stock options exercised..........       145           2            776          --        --            --        778
Income tax benefit associated
  with stock options and
  restricted stock grants........        --          --          1,176          --        --            --      1,176
Net income.......................        --          --             --      47,486        --            --     47,486
Dividends declared...............        --          --             --      (7,885)       --            --     (7,885)
Reissuance of treasury stock.....        20          --             --        (285)       --           285         --
Retirement of stock..............       (65)         (1)        (1,615)       (133)       --            --     (1,749)
Capitalization of undistributed
  earnings of Subchapter S
  corporation....................        --          --          1,797      (1,797)       --            --         --
                                     ------        ----       --------    --------     -----      --------   --------
Balance at December 31, 2000.....    23,930        $239       $226,318    $104,778     $  --      $    (26)  $331,309
                                     ======        ====       ========    ========     =====      ========   ========
</TABLE>

                See Notes to Consolidated Financial Statements.
                                        28
<PAGE>   30

                              TUCKER ANTHONY SUTRO

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                           ----------------------------------
                                                             2000         1999        1998
                                                           ---------    --------    ---------
<S>                                                        <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...............................................  $  47,486    $ 31,286    $  26,643
Adjustments to reconcile net income to net cash provided
  by operating activities:
     Depreciation and amortization.......................     39,076      25,002       13,952
     Deferred income taxes...............................     (3,719)       (459)      (1,214)
     Non-cash compensation...............................        164         164          632
     Loss on sale of fixed assets........................         --          13           12
     Extraordinary item; write off of capitalized debt
       costs.............................................         --          --        2,198
Changes in assets and liabilities, net of effects of
  acquisitions:
  (Increase) decrease in operating assets:
     Receivables from brokers and dealers................     (2,132)     (3,423)      (9,343)
     Securities purchased under agreements to resell.....    (10,141)     78,811       (5,022)
     Securities owned....................................     71,857     (96,490)     175,553
     Other receivables...................................    (11,327)    (23,106)     (12,305)
     Other assets........................................    (38,627)    (13,959)      (9,378)
  Increase (decrease) in operating liabilities:
     Payables to brokers and dealers.....................      5,930     (35,566)      26,244
     Securities sold under agreements to repurchase......      8,775     (17,599)      28,582
     Securities sold, not yet purchased..................   (106,600)    104,063     (233,485)
     Accrued compensation and benefits...................     15,775       9,882       12,784
     Accounts payable and accrued expenses...............      6,920        (970)       1,327
                                                           ---------    --------    ---------
Net cash provided by operating activities................     23,437      57,649       17,180
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets................................    (19,534)     (9,682)      (5,641)
Proceeds from sale of fixed assets.......................         --          --           59
Acquisitions, net of cash acquired.......................         --     (52,495)      (3,072)
                                                           ---------    --------    ---------
Net cash used in investing activities....................    (19,534)    (62,177)      (8,654)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net..................      4,693       1,861        2,392
Proceeds from initial public offering, net...............         --          --       75,741
Purchases and retirement of treasury stock, net..........       (402)    (22,082)      (1,403)
Payment of dividends.....................................     (7,890)     (4,983)      (2,618)
Proceeds from (repayments of) bank borrowings, net.......     (5,085)     43,138      (84,280)
                                                           ---------    --------    ---------
Net cash provided by (used in) financing activities......     (8,684)     17,934      (10,168)
Increase (decrease) in cash and cash equivalents.........     (4,781)     13,406       (1,642)
Cash and cash equivalents, beginning of year.............     24,713      11,307       12,949
                                                           ---------    --------    ---------
Cash and cash equivalents, end of year...................  $  19,932    $ 24,713    $  11,307
                                                           =========    ========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
     Income taxes........................................  $  36,266    $ 17,303    $  11,641
     Interest............................................  $  71,609    $ 37,846    $  26,910
</TABLE>

                See Notes to Consolidated Financial Statements.

                                        29
<PAGE>   31

                              TUCKER ANTHONY SUTRO

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION

     Tucker Anthony Sutro (formerly Freedom Securities Corporation) is a holding
company which together with its wholly-owned subsidiaries (collectively, the
"Company") is a full-service retail brokerage, asset management and investment
banking firm. The Company is engaged primarily in the retail and institutional
brokerage business including corporate finance and underwriting services. The
consolidated financial statements include the accounts of the Company including
its primary operating subsidiaries:

     - Tucker Anthony Incorporated ("Tucker Anthony"), headquartered in Boston,
       is a brokerage and investment banking firm. Tucker Anthony's divisions
       include Tucker Anthony Capital Markets ("TACM"), an investment banking
       and institutional brokerage firm; Gibraltar Securities Co. ("Gibraltar"),
       a New Jersey-based brokerage and investment advisory firm acquired by the
       Company in the third quarter of 1999; and Tucker Anthony MidAtlantic
       Division ("TA MidAtlantic"), formerly Hopper Soliday & Co., Inc. ("Hopper
       Soliday"), a Pennsylvania-based municipal finance and underwriting
       brokerage firm acquired by the Company in the first quarter of 1999.

     - Sutro & Co.  Incorporated ("Sutro"), headquartered in San Francisco, is a
       West Coast regional brokerage and investment banking firm.

     - Hill, Thompson, Magid LP ("Hill Thompson"), based in New Jersey, is a
       wholesale over-the-counter trading firm.

     - Branch Cabell & Co.  Inc. ("Branch Cabell"), headquartered in Richmond,
       Virginia, is a regional brokerage and investment firm.

     - Freedom Capital Management Corporation ("Freedom Capital") is a
       Boston-based asset management firm.

     Tucker Anthony, Sutro, Cleary Gull Investment Management Services, Inc.
("Cleary Gull IMS") and Branch Cabell clear their securities transactions on a
fully disclosed basis through Wexford Clearing Services Corporation ("Wexford"),
a guaranteed wholly-owned subsidiary of Prudential Securities Incorporated
("Prudential"). Hill Thompson clears all proprietary securities transactions on
a self-clearing basis and substantially all customer transactions through
Schroder & Co. Inc. on a fully disclosed basis.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Pooling of Interests

     On October 2, 2000, the Company acquired Branch Cabell in a transaction
that was accounted for as a pooling of interests. The pooling of interests
method of accounting requires the restatement of all periods presented as if the
Company and Branch Cabell had always been combined. The Company's shareholders'
equity data reflects the accounts of the Company as if the common stock had been
issued during all of the periods presented. The separate results of operations
for the Company and Branch Cabell during the periods

                                        30
<PAGE>   32
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

preceding the acquisition that are included in the Company's Consolidated
Statements of Income are as follows (amounts in thousands):

<TABLE>
<CAPTION>
                                               NINE MONTHS ENDED     YEARS ENDED DECEMBER 31,
                                               SEPTEMBER 30, 2000    ------------------------
                                                  (UNAUDITED)           1999          1998
                                               ------------------    ----------    ----------
<S>                                            <C>                   <C>           <C>
Net Revenues:
  Tucker Anthony Sutro.......................       $574,486          $552,524      $438,914
  Branch Cabell..............................         18,718            19,441        15,943
                                                    --------          --------      --------
     Combined................................       $593,204          $571,965      $454,857
                                                    ========          ========      ========
Net income before extraordinary item:
  Tucker Anthony Sutro.......................       $ 40,134          $ 29,117      $ 26,411
  Branch Cabell..............................          2,364             2,169         1,508
                                                    --------          --------      --------
     Combined................................       $ 42,498          $ 31,286      $ 27,919
                                                    ========          ========      ========
Net income after extraordinary item:
  Tucker Anthony Sutro.......................       $ 40,134          $ 29,117      $ 25,135
  Branch Cabell..............................          2,364             2,169         1,508
                                                    --------          --------      --------
     Combined................................       $ 42,498          $ 31,286      $ 26,643
                                                    ========          ========      ========
</TABLE>

  Principles of Consolidation

     All significant intercompany accounts and transactions have been eliminated
in consolidation. The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect amounts reported in the
consolidated financial statements and accompanying notes. Management believes
that the estimates utilized in preparing its financial statements are reasonable
and prudent. Actual results could differ from these estimates. Certain prior
period amounts have been reclassified to conform with the current period's
financial statement presentation.

  Securities Transactions

     Securities transactions and related revenues and expenses are recorded on a
trade date basis. Securities owned and securities sold, not yet purchased are
stated at market value with related changes in unrealized appreciation or
depreciation reflected in principal transactions revenues. Market value is
generally based on listed market prices. If listed market prices are not
available, fair value is determined based on other relevant factors, including
broker or dealer price quotations. Securities sold, not yet purchased represent
obligations to deliver specified securities at predetermined prices. The Company
is obligated to acquire the securities sold short at prevailing market prices in
the future to satisfy these obligations. Arbitrage positions included in
securities owned and securities sold, not yet purchased result from buying or
selling a security subject to exchange, conversion or reorganization and selling
or buying the security or securities to be received upon completion of the
exchange, conversion or reorganization. The Company may from time to time enter
into options and futures contracts. These contracts are valued at market with
related changes in unrealized appreciation or depreciation reflected in
principal transactions revenues.

                                        31
<PAGE>   33
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Investment Banking

     Investment banking revenues are recorded as follows: management fees as of
the offering date, sales commissions on the trade date and underwriting fees at
the time the underwriting is completed and the income is reasonably
determinable.

  Asset Management Fees

     The Company earns fees for investment advisory and custodial services
rendered to its clients. Fees are based on a percentage of the average market
value of net assets managed, a percentage of quarter-end market value of assets
managed or on a fee for account basis, depending on the type of client account.
These fees are recorded as earned and billed monthly or quarterly.

  Fixed Assets

     Furniture and fixtures are depreciated on a straight-line basis over their
estimated useful lives, generally three to ten years. Leasehold improvements are
amortized on a straight-line basis over the lesser of the economic useful lives
of the improvements or the terms of the respective leases. Fixed assets are
stated at cost net of accumulated depreciation and amortization of $16.4 million
and $10.1 million at December 31, 2000 and 1999, respectively.

  Intangibles

     Goodwill is stated at cost net of accumulated amortization and is amortized
on a straight-line basis over fifteen years. The accumulated amortization of
intangibles totaled $15.1 million and $8.6 million at December 31, 2000 and
1999, respectively.

  Stock Based Compensation

     The Company accounts for its stock-based compensation in accordance with
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees" and, accordingly, recognizes no compensation expense related to
stock option grants issued at market value. The Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," which encourages, but does not
require, companies to recognize compensation expense for grants of stock and
stock options based on the fair value of those instruments. The Company has
elected, as permitted by SFAS No. 123, to adopt the disclosure requirement of
SFAS No. 123 and to continue to account for stock-based compensation under APB
Opinion No. 25.

  Income Taxes

     The Company accounts for income taxes using the asset and liability method
required by SFAS No. 109, "Accounting for Income Taxes." Under this method, the
Company recognizes taxes payable or refundable for the current year and deferred
tax liabilities and assets based on temporary differences between the carrying
amounts of assets and liabilities for book purposes versus tax purposes.

  Cash Flows

     For purposes of reporting cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.

                                        32
<PAGE>   34
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Accounting Pronouncements

     Statement of Financial Accounting Standards (SFAS) No. 137, which amended
the effective date of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued in June 1999. SFAS No. 138, which also amended
SFAS No. 133, was issued in June 2000. The Company is required to adopt SFAS No.
133 by January 1, 2001. This statement establishes accounting and reporting
standards requiring that all derivative instruments are recorded on the balance
sheet as either an asset or a liability, measured at its fair value. The
statement requires that changes in the derivative's fair value are recognized
currently in earnings unless specific hedge accounting criteria are met and such
hedge accounting treatment is elected. The adoption of this statement is not
expected to have a material impact on the Company's financial position, results
of operations, earnings per share or cash flows.

     SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," which replaces SFAS No. 125, was issued in
September 2000. This statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
The Company has adopted SFAS No. 140 as of December 31, 2000 for recognition and
reclassification of collateral and for disclosures relating to securitization
transactions and collateral. The Company is required to adopt SFAS No. 140 by
the second quarter of 2001 for transfers and servicing of financial assets and
extinguishments of liabilities. The adoption of this statement is not expected
to have a material impact on the Company's financial position, results of
operations, earnings per share or cash flows.

3.  INITIAL PUBLIC OFFERING

     On April 2, 1998, the Company completed its initial public offering of 7.4
million shares plus an over-allotment of 1.1 million shares (the "Offering"),
including 4.2 million shares of $.01 par value common stock sold by the Company.
The Offering raised approximately $75.7 million for the Company after deducting
underwriting discounts, commissions and expenses. The Company used the proceeds
and available cash to repay $77.5 million of existing debt (See Note 9). Also,
the Company wrote-off related debt issuance costs which resulted in an after-tax
extraordinary item of $1.2 million in the consolidated statement of income for
the year ended December 31, 1998.

4.  ACQUISITIONS

  Branch Cabell

     On October 2, 2000, the Company acquired Branch Cabell, a Richmond,
Virginia based regional brokerage and investment firm, in an all-stock
transaction valued at approximately $19.6 million. In connection with the
acquisition, the Company entered into employment agreements with certain
employees of Branch Cabell and established a retention program totaling
approximately $4.5 million. Branch Cabell will ultimately operate as a division
of Tucker Anthony Incorporated and within the Company's broker-dealer segment.
The transaction was accounted for as a pooling of interests.

  Hopper Soliday (renamed TA MidAtlantic)

     On January 19, 1999, the Company acquired certain assets and liabilities of
Hopper Soliday, renamed TA MidAtlantic, and transferred them to Tucker Anthony.
TA MidAtlantic is an investment and municipal banking operation based in
Pennsylvania and its results are included in the consolidated financial
statements from the date of acquisition. The purchase price was $9.0 million
paid in cash and the acquisition was accounted for using the purchase method of
accounting. The excess of the purchase price over the estimated fair value of
net assets acquired, which was recorded as goodwill, was $1.5 million and is
being amortized over 15 years using the straight-line method of amortization. In
addition, the Company agreed to make certain incentive and retention payments
with a total value of $2.0 million.

                                        33
<PAGE>   35
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Charter

     On February 1, 1999, the Company, through its Sutro subsidiary, acquired
the business and substantially all of the assets of Charter Investment Group,
Inc. ("Charter"), a brokerage firm based in Portland, Oregon. The consolidated
financial statements include the results of Charter from the date of acquisition
and the acquisition was accounted for using the purchase method of accounting.
The purchase price was $3.6 million which included 203,665 shares of the
Company's common stock valued at $3.1 million and $0.5 million paid in cash. The
excess of the purchase price over the estimated fair value of net assets
acquired, which was recorded as goodwill, was $2.4 million and is being
amortized over 15 years using the straight-line method of amortization.

  Gibraltar

     On September 1, 1999, the Company acquired Gibraltar Securities, Inc., a
regional brokerage and investment advisory service firm based in New Jersey. The
acquisition was accounted for using the purchase method of accounting and the
consolidated financial statements include Gibraltar's results from the
acquisition date. The purchase price was $40.6 million which included 1,380,626
shares of the Company's common stock, valued at $19.5 million, and $19.6 million
in cash. In addition, stock options to purchase shares of Gibraltar common stock
were converted into options with a net value of $1.5 million to purchase shares
of the Company's common stock. The excess of the purchase price over the
estimated fair value of net assets acquired, which was recorded as goodwill, was
$26.5 million and is being amortized over 15 years using the straight-line
method of amortization. In addition, the Company agreed to make certain
retention payments over a four year period with a total value of $6.75 million.

  Hill Thompson

     On October 29, 1999, the Company acquired The Hill Thompson Group, Ltd.
("Hill Thompson Group"), including its primary operating subsidiary Hill
Thompson, a New Jersey-based wholesale over-the-counter trading firm. The
acquisition was accounted for using the purchase method of accounting and the
consolidated financial statements include the results of Hill Thompson Group
from the date of acquisition. The purchase price was $47.3 million which
includes 1,295,895 shares of the Company's common stock valued at $19.4 million
and $27.9 million in cash. The excess of the purchase price over the estimated
fair value of net assets acquired, which was recorded as goodwill, was $25.7
million and is being amortized over 15 years using the straight-line method of
amortization. Additionally, the Company agreed to issue 666,667 shares of the
Company's common stock valued at $10 million to retain Hill Thompson employees.
These shares will be issued over a four year period beginning one year from the
date of the acquisition.

  Cleary Gull

     On May 1, 1998, the Company completed its acquisition of Cleary Gull
Reiland & McDevitt Inc. ("Cleary Gull"), a privately held, investment banking,
institutional brokerage and investment advisory firm headquartered in Milwaukee,
Wisconsin. The acquisition was accounted for under the purchase method of
accounting and the consolidated financial statements include the results of
Cleary Gull's operations from the date of acquisition. The purchase price was
$24.7 million which included 875,910 shares of the Company's common stock (a
portion of which is subject to a four year vesting period) valued at $17.4
million and $4.6 million in cash. In addition, stock options to purchase shares
of Cleary Gull common stock with a value of $2.7 million were converted into
options to purchase shares of the Company's common stock. The excess of the
purchase price over the estimated fair value of net assets acquired, which was
recorded as goodwill, was $12.5 million and is being amortized over 15 years
using the straight-line method of amortization. The Company also granted options
to Cleary Gull employees to purchase an additional 239,250 shares of the

                                        34
<PAGE>   36
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's common stock, and in October 1998 canceled these options and re-issued
options to purchase 242,910 shares with an exercise price of $13.00 per share.

     During 1999 the investment banking, equity research and institutional
brokerage activities of Cleary Gull and Tucker Anthony were combined to form
Tucker Anthony Capital Markets. Early in 2001, the Company combined Sutro's
equity research and banking businesses with TACM to form Tucker Anthony Sutro
Capital Markets ("TASCM"), a division of Tucker Anthony. The remaining business
of Cleary Gull, now Cleary Gull IMS, is primarily investment management services
provided to institutional accounts and high net worth individuals.

5.  RECEIVABLES FROM AND PAYABLES TO BROKERS AND DEALERS

     Included in the receivables from brokers and dealers are unsettled
proprietary trades, cash on deposit with Hill Thompson's clearing broker and
certain overnight funds with Prudential. Included in payables to brokers and
dealers are the amounts due to Wexford for collateralized financing of
proprietary positions and to the custodian of Freedom Capital's money market
funds. The Company's principal source of short-term financing is provided by
Wexford, from which the Company can borrow on an uncommitted basis against its
proprietary inventory positions, subject to collateral maintenance requirements.

     The Company conducts business with brokers and dealers that are members of
the major securities exchanges. The Company monitors the credit standing of such
brokers and dealers, monitors the market value of collateral and requests
additional collateral as deemed appropriate.

     Amounts receivable from and payable to brokers and dealers consist of the
following (amounts in thousands):

<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                     --------------------
                                                       2000        1999
                                                     --------    --------
<S>                                                  <C>         <C>
Receivables from brokers and dealers:
     Receivable from Prudential....................  $ 69,395    $ 63,676
     Unsettled proprietary trades, net.............    17,439      28,332
     Receivables from other brokers and dealers....    21,690      14,363
                                                     --------    --------
                                                     $108,524    $106,371
                                                     ========    ========
Payables to brokers and dealers:
     Payable to Wexford............................  $ 27,250    $ 28,204
     Payable to custodian..........................    66,428      60,166
     Payables to other brokers and dealers.........     1,063         441
                                                     --------    --------
                                                     $ 94,741    $ 88,811
                                                     ========    ========
</TABLE>

6.  TRANSACTIONS WITH CUSTOMERS

     For transactions in which the Company, through Wexford, extends credit to
customers, the Company seeks to control the risks associated with these
activities by requiring customers to maintain margin collateral in compliance
with various regulatory and internal guidelines. The Company and Wexford monitor
required margin levels daily and, pursuant to such guidelines, require customers
to deposit additional collateral or reduce the amount of credit extended when
necessary.

     The Company has agreed to indemnify Wexford for losses that it may sustain
in connection with customer accounts introduced by the Company. At December 31,
2000 there were no amounts known to the Company to be indemnified to Wexford for
these customer accounts.

                                        35
<PAGE>   37
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7.  SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER
    AGREEMENTS TO REPURCHASE

     Securities purchased under agreements to resell and securities sold under
agreements to repurchase are treated as collateralized financing transactions,
and are carried at amounts at which the securities will be subsequently resold
or reacquired plus accrued interest. It is the Company's policy to take
possession or control of securities purchased under agreements to resell. The
Company is required to provide securities to counterparties in order to
collateralize repurchase agreements. The Company minimizes credit risk
associated with these activities by monitoring credit exposure and collateral
values on a daily basis and requiring additional collateral to be deposited or
returned when deemed appropriate.

     In the normal course of business, the Company obtains securities under
resale agreements on terms which permit it to repledge or resell the securities
to others. At December 31, 2000, the Company obtained approximately $51 million
of securities on such terms, substantially all of which have been either pledged
or otherwise transferred to others in connection with the Company's financing
activities or to satisfy its commitments under proprietary short sales.

8.  SECURITIES

     Securities owned and securities sold, not yet purchased are recorded at
market value and consist of the following (amounts in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                2000        1999
                                                              --------    --------
<S>                                                           <C>         <C>
Securities Owned:
     Obligations of the U.S. government and agencies........  $ 49,367    $ 28,935
     State and municipal obligations........................   124,567     116,111
     Corporate debt.........................................    53,359      40,554
     Corporate equities.....................................   117,366     230,918
                                                              --------    --------
                                                              $344,659    $416,518
                                                              ========    ========
Securities Sold, Not Yet Purchased:
     Obligations of the U.S. government and agencies........  $ 39,190    $ 42,649
     State and municipal obligations........................     2,068       9,139
     Corporate debt.........................................    10,245       5,320
     Corporate equities.....................................    76,032     177,026
                                                              --------    --------
                                                              $127,535    $234,134
                                                              ========    ========
</TABLE>

     All securities owned are pledged to either repurchase counterparties or the
clearing broker on terms which permit those parties to sell or repledge the
securities to others subject to certain limitations.

9.  NOTES PAYABLE TO BANKS

     Included in notes payable to banks are the Company's borrowings for fixed
asset financing of approximately $6.3 million and $11.3 million at December 31,
2000 and 1999, respectively. Of the total borrowings, $4.7 million bears
interest at 8.02% annually and is payable in equal monthly installments through
December 2001. During 1999, the Company refinanced a portion of its debt
outstanding under its Fixed Asset Facility. As a result, the remainder of the
fixed asset borrowings outstanding of $1.6 million bears interest at 5.00%
annually and is payable in equal monthly installments through June 2003. These
notes are collateralized by furniture, fixtures and leasehold improvements.

     The Company maintains a revolving agreement (the "Credit Agreement")
whereby participating banks have made commitments totaling $100 million. At
December 31, 2000, the Company had borrowings outstanding of $50.0 million at
interest rates ranging from 1% to 1.45% above the federal funds rate. In

                                        36
<PAGE>   38
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

addition, the Company must pay a commitment fee of 0.20% on the unused available
credit. The Credit Agreement matures in November 2003 with all outstanding notes
payable at that date. The Company must comply with certain financial covenants
under the Credit Agreement and was in compliance with such covenants at December
31, 2000. The Credit Agreement also restricts dividend payments that can be made
by the Company. In accordance with provisions of the Credit Agreement, several
of the Company's subsidiaries have executed agreements to guarantee the
borrowings of the Company to the benefit of participating banks.

     Prior to August 1998, the Company maintained a revolving credit agreement
with certain participating banks and at December 31, 1997 had $80 million in
borrowings outstanding. On April 7, 1998, the $77.5 million balance then
outstanding under this revolving credit agreement was repaid in full with the
Company's net proceeds from the Offering and available cash.

     The aggregate amount of principal repayment requirements on notes payable
at December 31, 2000 is as follows by year (amounts in thousands):

<TABLE>
<CAPTION>
YEAR
----
<S>                                                           <C>
2001........................................................  $ 5,426
2002........................................................      766
2003........................................................   50,410
                                                              -------
Total.......................................................  $56,602
                                                              =======
</TABLE>

10.  INCOME TAXES

     The components of income tax expense (benefit) are as follows (amounts in
thousands):

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                              -----------------------------
                                                               2000       1999       1998
                                                              -------    -------    -------
<S>                                                           <C>        <C>        <C>
Federal:
     Current................................................  $25,977    $14,260    $13,358
     Deferred...............................................   (1,534)      (348)      (575)
State:
     Current................................................    7,631      5,067      5,847
     Deferred...............................................     (533)      (111)      (447)
                                                              -------    -------    -------
                                                              $31,541    $18,868    $18,183
                                                              =======    =======    =======
</TABLE>

     The effective income tax rate differs from the amount computed by applying
the Federal statutory income tax rate as follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                              -----------------------------
                                                               2000       1999       1998
                                                              -------    -------    -------
<S>                                                           <C>        <C>        <C>
Federal statutory income tax................................  $26,832    $16,795    $15,608
State and local income taxes, net of federal tax benefits...    4,614      3,222      3,510
Tax exempt interest, net....................................   (1,958)    (1,244)      (702)
Other, net..................................................    2,053         95       (233)
                                                              -------    -------    -------
Effective income tax........................................  $31,541    $18,868    $18,183
                                                              =======    =======    =======
</TABLE>

                                        37
<PAGE>   39
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The temporary differences which created deferred tax assets and liabilities
are as follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            ------------------
                                                             2000       1999
                                                            -------    -------
<S>                                                         <C>        <C>
Deferred tax assets:
     Deferred compensation................................  $ 6,781    $ 4,918
     Reserves.............................................    5,097      3,645
     Other................................................    5,270      3,796
                                                            -------    -------
          Total deferred tax assets.......................   17,148     12,359
                                                            -------    -------
Deferred tax liabilities:
     Deferred rent........................................    1,275        971
     Other................................................    1,218        452
                                                            -------    -------
          Total deferred tax liabilities..................    2,493      1,423
                                                            -------    -------
Net deferred tax asset....................................  $14,655    $10,936
                                                            =======    =======
</TABLE>

     The Company has determined that a valuation allowance for the deferred tax
asset is not required since it is likely that the deferred tax asset will be
realized primarily through future reversals of existing taxable temporary
differences.

     As described in Note 2, effective October 2, 2000 the Company merged with
Branch Cabell in a transaction accounted for as pooling of interests. Until the
merger, Branch Cabell was taxed as a Subchapter S corporation. In general, the
income or loss of a Subchapter S corporation is passed through to its
stockholders rather than being subjected to taxes at the corporate level. Pro
forma net income presented below reflects a provision for income taxes on a pro
forma basis for all periods presented as if Branch Cabell was liable for Federal
and State income taxes as a taxable corporate entity (amounts in thousands):

<TABLE>
<CAPTION>
                                                                YEARS ENDED DECEMBER 31,
                                                              -----------------------------
                                                               2000       1999       1998
                                                              -------    -------    -------
<S>                                                           <C>        <C>        <C>
Income before income taxes..................................  $79,027    $50,154    $46,102
Pro forma income tax expense................................   32,449     19,698     18,757
                                                              -------    -------    -------
Pro forma net income before extraordinary item..............  $46,578    $30,456    $27,345
                                                              =======    =======    =======
</TABLE>

11.  NET CAPITAL REQUIREMENTS

     Certain subsidiaries of the Company are subject to the net capital
requirements of the New York Stock Exchange, Inc. ("Exchange") and the Uniform
Net Capital requirements of the Securities and Exchange Commission
("Commission") under Rule 15c3-1. The Exchange and the Commission requirements
also provide that equity capital may not be withdrawn or cash dividends paid if
certain minimum net capital requirements are not met. The Company's principal
regulated subsidiaries are discussed below.

     Tucker Anthony is a registered broker and dealer. At December 31, 2000,
Tucker Anthony had net capital of approximately $44.8 million which was $43.8
million in excess of the $1.0 million amount required to be maintained at that
date.

     Sutro is a registered broker and dealer. At December 31, 2000, Sutro had
net capital of approximately $14.9 million which was $13.9 million in excess of
the $1.0 million amount required to be maintained at that date.

                                        38
<PAGE>   40
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Cleary Gull IMS is a registered broker and dealer. At December 31, 2000,
Cleary Gull IMS had net capital of approximately $0.4 million which was $0.1
million in excess of the $0.25 million amount required to be maintained at that
date.

     Hill Thompson is a registered broker and dealer. At December 31, 2000, Hill
Thompson had net capital of approximately $18.5 million which was $17.5 million
in excess of the $1.0 million amount required to be maintained at that date. In
addition, at December 31, 2000, Hill Thompson had $0.2 million in cash
segregated in a special reserve bank account for the exclusive benefit of
customers pursuant to the reserve formula requirements of Rule 15c3-3.

     Freedom Trust Company ("FTC") is a subsidiary of Freedom Capital and is a
limited purpose trust company. Pursuant to state regulations, FTC is required to
meet and maintain certain capital ratios and minimums. At December 31, 2000,
FTC's regulatory capital, as defined, was $1.5 million and FTC was in compliance
with all such requirements.

     Branch Cabell is a registered broker and dealer. At December 31, 2000,
Branch Cabell had net capital of approximately $3.4 million which was $3.1
million in excess of the $0.25 million amount required to be maintained at that
date.

     Under the clearing arrangement with Wexford, Tucker Anthony, Sutro, Cleary
Gull IMS and Branch Cabell are required to maintain certain minimum levels of
net capital and comply with other financial ratio requirements. At December 31,
2000, Tucker Anthony, Sutro, Cleary Gull IMS and Branch Cabell were in
compliance with all such requirements.

12.  COMMITMENTS AND CONTINGENCIES

     The Company leases office space and various types of equipment under
noncancelable leases generally varying from one to ten years, with certain
renewal options for like terms. Occupancy and equipment expense includes net
rentals of $25.4 million, $21.7 million and $18.9 million for the years ended
December 31, 2000, 1999 and 1998, respectively.

     At December 31, 2000, the Company's future minimum rental commitments based
upon original terms (including escalation provisions) under noncancelable leases
which have an initial or remaining term of one year or more are as follows
(amounts in thousands):

<TABLE>
<CAPTION>
YEAR
----
<S>                                                           <C>
2001........................................................  $ 23,581
2002........................................................    23,168
2003........................................................    21,713
2004........................................................    20,813
2005........................................................    19,060
Thereafter..................................................    26,279
                                                              --------
          Sub-total.........................................   134,614
Less aggregate sublease income..............................    (3,384)
                                                              --------
                                                              $131,230
                                                              ========
</TABLE>

     The Company is a defendant or co-defendant in legal actions primarily
relating to its broker-dealer activities. It is the opinion of management, after
consultation with legal counsel, that the resolution of these legal actions will
not have a material adverse effect on the consolidated financial position or
results of operations of the Company.

     The Company has outstanding underwriting agreements and when-issued
contracts which commit it to purchase securities at specified future dates and
prices. The Company presells such issues to manage risk

                                        39
<PAGE>   41
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

exposure related to these off-balance sheet commitments. Transactions which were
open at December 31, 2000 have subsequently settled and had no material effect
on the consolidated statements of income or financial condition.

13.  BENEFITS

     Certain subsidiaries of the Company have 401(k) and qualified
profit-sharing plans which cover substantially all of their full-time employees.
The plans include employee contributions and matching contributions by the
Company subject to certain limitations. In addition, a subsidiary may contribute
additional amounts to its plans, at its discretion, based upon its profits for
the year.

     The aggregate contributions to these plans for the years ended December 31,
2000, 1999 and 1998 were $6.3 million, $5.5 million and $5.2 million,
respectively.

     Freedom Capital has a noncontributory defined benefit pension plan covering
substantially all of its employees. Effective August 1, 1997, the plan was
amended to provide that no new pension benefits would accrue and no new
participants would be admitted after August 1, 1997. Amounts related to the plan
are not material to the consolidated financial statements.

     Compensation costs recognized for common stock and stock options issued to
employees during 2000, 1999 and 1998 were $3.8 million, $0.2 million and $0.6
million, respectively.

14.  FINANCIAL INSTRUMENTS

     Substantially all of the Company's financial instruments are carried at
fair value or amounts approximating fair value. Assets, including cash and cash
equivalents, securities owned, securities purchased under agreements to resell
and certain receivables are carried at fair value or contracted amounts which
approximate fair value. Similarly, liabilities including securities sold, not
yet purchased, securities sold under agreements to repurchase and certain
payables are carried at fair value or contracted amounts approximating fair
value.

     The fair value of the fixed asset financing, estimated using the Company's
incremental borrowing rate, approximated its carrying value at December 31, 2000
and 1999. The carrying value of the Company's debt under the Credit Agreement at
December 31, 2000 approximated its fair value.

     In the normal course of business, the Company may enter into transactions
in financial instruments to manage its exposure to market risks. At December 31,
2000 and 1999, the Company had equity options outstanding approximating $14.4
million and $13.2 million, respectively (notional amounts). The notional amounts
are not reflected on the consolidated statements of financial condition and are
indicative only of the volume of activity at December 31, 2000 and 1999. They do
not represent amounts subject to market risks, and in many cases, limit the
Company's overall exposure to market losses by hedging other on-balance sheet
and off-balance sheet transactions. The volume of activity in these contracts
was not significant during the years ended December 31, 2000, 1999 and 1998.

     During 2000, the Company established a Tender Option Bond ("TOB") program
which involves the deposit of fixed rate municipal bonds into a series of
bankruptcy remote Trusts. The Trusts issue two classes of certificates, Floating
Trust Certificates ("FTC") which are sold to third party investors and Residual
Trust Certificates ("RTC"), which are retained by the Company. Generally, the
FTCs represent between 95 percent and 99 percent of the principal amount of the
municipal bonds deposited in the Trusts. The FTCs and RTCs are ranked pari-passu
in the event of default of the underlying bonds. The term of the FTCs is the
same as the underlying bonds with the holders entitled to the return of
principal as repaid on the underlying bonds (on a pro-rata basis with the RTCs)
at the end of the term plus a variable interest rate, which resets frequently.
The holders of the FTCs also have an option to tender the certificates to a
third party liquidity

                                        40
<PAGE>   42
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

provider on each interest-reset date. Under a separate agreement, the Company
has agreed to reimburse the liquidity provider for any costs or losses it may
sustain as a result of its repurchase and resale of FTCs.

     During 2000, the Company transferred six municipal bond issues into the TOB
program with a total par value of $128.9 million and recognized net pre-tax
unrealized gains of $4.0 million ($10.0 million unrealized gain on RTC
investments less $6.0 million unrealized loss on related swap hedges). In
addition, for the year ended December 31, 2000, the Company recognized net
interest income of $0.2 million ($0.3 million interest income from RTC
investments less $0.1 million interest expense on related swap hedges).

     The Company utilizes a discounted expected cash flow valuation model to
mark the RTC investments and swap hedges to market. The model takes into
consideration time value and volatility factors underlying the cash flows.

     At December 31, 2000, the key economic assumptions used in determining the
fair value of the RTC investments and related swap hedges include the following:

<TABLE>
<S>                                    <C>
Weighted Average Life................  12 years
Expected Credit/Liquidity Losses.....  None
Discount Factor (applied to both RTC
  and swap cash flows)...............  10%(a)
Variable Returns to Floating Trust
  Certificate Holders................  Weekly BMA Municipal Swap Index
Variable Receive Rate on Swap
  Hedge..............................  Three month LIBOR
</TABLE>

---------------
(a) The discount factor is based on three elements: (1) market yields on similar
    assets, (2) the taxability of expected cash flows, and (3) the risk
    associated with the TOB program. The Company regularly monitors market
    conditions and adjusts the discount factor if necessary.

     At December 31, 2000, key economic assumptions and the sensitivity of the
current fair value of the RTC investments and related swap hedges to immediate
changes in those assumptions are as follows (amounts in thousands):

              SHIFT IN LIBOR FORWARD RATES/MUNICIPAL FORWARD RATES

<TABLE>
<CAPTION>
                                                    CHANGE IN RTC    CHANGE IN SWAP    NET CHANGE IN
                                                     FAIR VALUE        FAIR VALUE       FAIR VALUE
                                                    -------------    --------------    -------------
<S>                                                 <C>              <C>               <C>
Impact on fair value of 10% increase in rates.....     $(2,017)         $ 4,660           $ 2,643
Impact on fair value of 20% increase in rates.....     $(5,178)         $ 9,320           $ 4,142
Impact on fair value of 10% decrease in rates.....     $ 4,304          $(4,660)          $  (356)
Impact on fair value of 20% decrease in rates.....     $ 7,465          $(9,320)          $(1,855)
</TABLE>

                      CHANGE IN MUNICIPAL/LIBOR SWAP RATIO

<TABLE>
<CAPTION>
                                                    CHANGE IN RTC    CHANGE IN SWAP    NET CHANGE IN
                                                     FAIR VALUE        FAIR VALUE       FAIR VALUE
                                                    -------------    --------------    -------------
<S>                                                 <C>              <C>               <C>
Impact on fair value of 5% increase in ratio......      $(382)          $(1,069)          $(1,451)
Impact on fair value of 10% increase in ratio.....      $(765)          $(2,040)          $(2,805)
</TABLE>

     A 17% increase in the Municipal/LIBOR Swap Ratio represents the maximum
change from the mean ratio since January 1990. The ratio has not exceeded 84%
since January 1990. A shift in the current ratio by 20% would have resulted in a
new ratio of 86.40% and a net loss of $5.3 million, which falls outside of a 99%
confidence interval.

                                        41
<PAGE>   43
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

                           CHANGE IN DISCOUNT FACTOR

<TABLE>
<CAPTION>
                                                    CHANGE IN RTC    CHANGE IN SWAP    NET CHANGE IN
                                                     FAIR VALUE        FAIR VALUE       FAIR VALUE
                                                    -------------    --------------    -------------
<S>                                                 <C>              <C>               <C>
Impact on fair value of 10% increase in discount
  factor..........................................      $(257)            $ 99             $(158)
Impact on fair value of 20% increase in discount
  factor..........................................      $(520)            $213             $(307)
</TABLE>

     At December 31, 2000, the weighted average life used in the Company's fair
value estimate of RTC investments and related swap hedges is based on the lesser
of the underlying municipal bond's call date, if applicable, or stated maturity.
The management of the Company does not believe that an earlier termination date
is likely.

     These sensitivities are hypothetical and should be used with caution. As
the figures indicate, changes in fair value based on various percentage
assumptions generally cannot be extrapolated because the relationship of the
change in assumptions to the change in fair value may not be linear. Also, in
these tables, the effect of a variation in a particular assumption on the fair
value of the RTC investments and related swap hedges is calculated without
changing any other assumption; in reality, changes in one factor may result in
changes in another, which may magnify or counteract the sensitivities.

15.  EARNINGS PER COMMON SHARE

     The Company computes its earnings per share in accordance with SFAS No.
128, "Earnings Per Share." The following table sets forth the computation for
basic and diluted earnings per share (amounts in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                              YEAR ENDED            YEAR ENDED            YEAR ENDED
                                           DECEMBER 31, 2000     DECEMBER 31, 1999     DECEMBER 31, 1998
                                           -----------------     -----------------     -----------------
                                            BASIC    DILUTED      BASIC    DILUTED      BASIC    DILUTED
                                            -----    -------      -----    -------      -----    -------
<S>                                        <C>       <C>         <C>       <C>         <C>       <C>
Numerator:
     Net income before extraordinary
       item..............................  $47,486   $47,486     $31,286   $31,286     $27,919   $27,919
     Less: extraordinary item (net of
       tax)..............................       --        --          --        --      (1,276)   (1,276)
                                           -------   -------     -------   -------     -------   -------
     Net income after extraordinary
       item..............................  $47,486   $47,486     $31,286   $31,286     $26,643   $26,643
Denominator:
     Weighted-average shares
       outstanding.......................   23,297    23,297      20,925    20,925      19,521    19,521
     Dilutive effect of:
          Stock options and other
            exercisable shares(a)........       --     1,159          --       902          --     1,004
                                           -------   -------     -------   -------     -------   -------
          Adjusted weighted-average
            shares outstanding...........   23,297    24,456      20,925    21,827      19,521    20,524
Earnings Per Share:
     Earnings per share before
       extraordinary item................  $  2.04   $  1.94     $  1.50   $  1.43     $  1.43   $  1.36
     Less: extraordinary item (net of
       tax)..............................       --        --          --        --       (0.07)    (0.06)
                                           -------   -------     -------   -------     -------   -------
     Earnings per share after
       extraordinary item................  $  2.04   $  1.94     $  1.50   $  1.43     $  1.36   $  1.30
</TABLE>

---------------
(a) Options to purchase 50,625 shares and 239,553 shares of the Company's common
    stock were outstanding at December 31, 1999 and 1998, respectively, but were
    not included in the computation of diluted earnings per share. Also excluded
    from the 1999 computation were 738,428 shares of restricted stock that were
    not vested at December 31, 1999. The inclusion of such options and
    restricted stock would have had an antidilutive effect on the diluted
    earnings per share calculation because the options' exercise prices and
    restricted stock prices were greater than the average market price of the
    Company's common shares for 1999 and 1998.

                                        42
<PAGE>   44
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16.  INCENTIVE PLANS

     The Company has adopted a number of compensation plans to attract, retain
and motivate officers and other key employees to compensate them for their
contributions to growth and profits of the Company and to encourage employee
stock ownership.

  Stock Option and Restricted Stock Plans

     The Company has three plans under which officers and other key employees
can be granted stock options, stock appreciation rights, restricted stock and
long-term performance awards at the fair market value of the stock on the date
of the grant or on such terms as the administrators, a committee of non-employee
directors, may select.

     During 2000, the Company granted 346,620 shares of restricted stock, and
12,000 of these shares were forfeited. The remaining shares granted vest mainly
over the next three to four years.

     Some of the options are currently exercisable and others vest in the future
if certain individual and Company performance-based goals are met. The options
expire within approximately seven to ten years from the date of the grant. The
activity during the years ended December 31, 1998, 1999 and 2000 is set forth
below:

<TABLE>
<CAPTION>
                                                             EXERCISE PRICE   WEIGHTED-AVERAGE
                                          NUMBER OF SHARES     PER SHARE       EXERCISE PRICE
                                          ----------------   --------------   ----------------
<S>                                       <C>                <C>              <C>
Options outstanding at December 31, 1997
  (276,247 exercisable).................     2,133,888       $         5.50        $ 5.50
Granted.................................     1,119,066         4.95 - 20.00         13.21
Exercised...............................      (128,618)        4.95 -  5.70          5.35
Terminated..............................      (327,291)        5.50 - 20.00         16.10
                                             ---------
Options outstanding at December 31, 1998
  (633,669 exercisable).................     2,797,045       $ 4.95 - 13.00        $ 7.35
Granted.................................       227,218         3.02 - 17.13          8.00
Exercised...............................      (160,567)        3.02 -  5.50          5.42
Terminated..............................      (198,864)        5.04 - 17.13          6.86
                                             ---------
Options outstanding at December 31, 1999
  (771,324 exercisable).................     2,664,832       $ 3.02 - 17.13        $ 7.56
Granted.................................       382,551        11.00 - 21.38         14.66
Exercised...............................      (144,834)        3.02 -  5.50          5.28
Terminated..............................      (249,423)        5.04 - 17.13          9.69
                                             ---------
Options outstanding at December 31, 2000
  (833,467 exercisable).................     2,653,126       $ 3.02 - 21.38        $ 8.51
                                             =========
</TABLE>

                                        43
<PAGE>   45
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes information about stock options outstanding
at December 31, 2000:

<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                       ------------------------------------------------------   -----------------------------------
                                                             WEIGHTED-AVERAGE
                                             WEIGHTED-          REMAINING
  RANGE OF EXERCISE    NUMBER OF SHARES       AVERAGE        CONTRACTUAL LIFE   NUMBER OF SHARES   WEIGHTED-AVERAGE
  PRICES PER SHARE       OUTSTANDING       EXERCISE PRICE        (YEARS)          EXERCISABLE       EXERCISE PRICE
  -----------------    ----------------    --------------    ----------------   ----------------   ----------------
<S>                    <C>                <C>                <C>                <C>                <C>
$ 3.02 -  5.49.......       143,543            $ 4.02              7.55             111,701             $4.03
  5.50 - 12.99.......     1,711,380              6.23              5.93             721,766              5.50
 13.00 - 15.99.......       712,178             13.44              8.00                  --                --
 16.00 - 21.38.......        86,025             20.50              9.43                  --                --
                          ---------                                                 -------
$ 3.02 - 21.38.......     2,653,126            $ 8.51              6.69             833,467             $5.30
                          =========                                                 =======
</TABLE>

     The Company accounts for stock option grants in accordance with APB Opinion
No. 25. Pro forma information regarding net income and earnings per share is
required under SFAS No. 123 and has been determined as if the Company had
accounted for all 2000, 1999 and 1998 stock option grants based on the fair
value method. The pro forma information presented below is not representative of
the effect stock options will have on pro forma net income or earnings per share
for future years. The pro forma information for the years ended 2000, 1999 and
1998 was as follows (amounts in thousands, except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                                 2000        1999        1998
-----------------------                                 ----        ----        ----
<S>                                       <C>          <C>         <C>         <C>
Net income..............................  As reported  $47,486     $31,286     $26,643
                                          Pro forma    $45,428     $29,518     $25,118
Earnings per common share:
     Basic after extraordinary item.....  As reported  $  2.04     $  1.50     $  1.36
     Basic after extraordinary item.....  Pro forma    $  1.95     $  1.41     $  1.29
     Diluted after extraordinary item...  As reported  $  1.94     $  1.43     $  1.30
     Diluted after extraordinary item...  Pro forma    $  1.91     $  1.37     $  1.25
</TABLE>

     The fair value of each option granted during the years ended December 31,
2000, 1999 and 1998 is the estimated present value at grant date. The fair value
of 2000 and 1999 options was estimated using the Black-Scholes option pricing
model whereby the expected volatility for 2000 was based on the Company's weekly
historical stock prices and for 1999 on the average volatilities of similar
companies. The fair value of 1998 options was estimated using the minimum value
model. The following weighted-average assumptions were used for 2000, 1999 and
1998, respectively:

        - dividend yield of 1.3%, 1.6% and 1.4%, respectively

        - expected life of 6, 6 and 8 years, respectively

        - risk free interest rate of 5.1%, 6.8% and 5.1%, respectively

        - expected volatility of 54.2%, 28.7% and 56.2%, respectively

     The weighted-average fair value of options granted during 2000, 1999 and
1998 whose exercise price equals the fair market value of the Company's stock on
grant date was $7.40, $5.82 and $7.47, respectively. There were no options
granted during 2000 whose exercise price was less than the fair market value of
the Company's stock on grant date. The weighted-average fair value of options
granted during 1999 and 1998 whose exercise price was less than the fair market
value of the Company's stock on grant date was $3.80 and $7.71, respectively.

  Employee Stock Purchase Plan

     The Employee Stock Purchase Plan (the "ESPP") allows eligible employees to
invest from 1% to 10% of their compensation to purchase shares of the Company's
common stock at a price equal to 85% of its fair

                                        44
<PAGE>   46
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

market value. The Company has reserved 1,750,000 shares for purchase by
employees under the ESPP and 559,020 shares have been purchased through December
31, 2000.

17.  SEGMENT REPORTING DATA

     In 1998, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company has two reportable segments:
broker-dealer and asset management. The Company's broker-dealer segment includes
the retail operations, equity capital markets and trading businesses of Tucker
Anthony, Sutro, Hill Thompson and Branch Cabell since they generally offer
similar products and services and are subject to uniform regulatory
requirements. The Company offers its broker-dealer clients a wide range of
products and services, including retail brokerage, investment banking,
institutional sales and fixed income products. The asset management segment
includes Freedom Capital, Cleary Gull IMS and asset management business from
Tucker Anthony, Sutro and Branch Cabell. The Company offers its asset management
clients investment advisory, portfolio management and custodial services.
Substantially all of the Company's business is transacted in the United States.
The following table presents information about reported segments (amounts in
thousands):

<TABLE>
<CAPTION>
                                                                       ASSET
                                                     BROKER-DEALER   MANAGEMENT   OTHER(a)    TOTAL
                                                     -------------   ----------   --------   --------
<S>                                                  <C>             <C>          <C>        <C>
Year ended December 31, 2000
     Net revenues..................................    $663,933       $85,171     $ 8,741    $757,845
     Income (loss) before income taxes.............      66,794        19,636      (7,403)     79,027
     Total assets..................................     634,210        81,966      82,026     798,202
Year ended December 31, 1999
     Net revenues..................................    $500,959       $68,973     $ 2,033    $571,965
     Income (loss) before income taxes.............      38,782        15,509      (4,137)     50,154
     Total assets..................................     682,094        69,937      73,475     825,506
Year ended December 31, 1998
     Net revenues..................................    $405,794       $45,587     $   476    $454,857
     Income (loss) before income taxes.............      37,741        10,435      (2,074)     46,102
     Total assets..................................     469,738        92,143      50,514     612,395
</TABLE>

---------------
(a) Other reflects the activities of the Company's holding companies. Income
    (loss) before income taxes principally includes amortization of goodwill and
    acquisition interest expense. Total assets primarily consist of goodwill and
    deferred taxes of Tucker Anthony Sutro.

                                        45
<PAGE>   47
                              TUCKER ANTHONY SUTRO
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18.  QUARTERLY INFORMATION (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED):

<TABLE>
<CAPTION>
                                                FIRST QUARTER                  SECOND QUARTER
                                         ----------------------------   ----------------------------
                                          TUCKER                         TUCKER
                                         ANTHONY    BRANCH              ANTHONY    BRANCH
                                          SUTRO     CABELL   COMBINED    SUTRO     CABELL   COMBINED
                                         --------   ------   --------   --------   ------   --------
<S>                                      <C>        <C>      <C>        <C>        <C>      <C>
2000
Net revenues...........................  $242,727   $6,954   $249,681   $172,074   $6,101   $178,175
Income before income taxes.............    34,989    1,217     36,206     17,493      880     18,373
Net income.............................    20,404    1,217     21,621     10,604      880     11,484
Basic earnings per share(a)............  $   0.93   $ 0.02   $   0.95   $   0.47   $ 0.02   $   0.49
Diluted earnings per share(a)..........      0.90     0.02       0.92       0.45     0.02       0.47
1999
Net revenues...........................  $122,639   $4,322   $126,961   $130,531   $4,694   $135,225
Income before income taxes.............    11,457      404     11,861     12,253      483     12,736
Net income.............................     6,798      404      7,202      7,452      483      7,935
Basic earnings per share...............  $   0.34   $ 0.01   $   0.35   $   0.38   $ 0.01   $   0.39
Diluted earnings per share.............      0.33       --       0.33       0.36     0.01       0.37
</TABLE>

<TABLE>
<CAPTION>
                                                THIRD QUARTER                  FOURTH QUARTER
                                         ----------------------------   ----------------------------
                                          TUCKER                         TUCKER
                                         ANTHONY    BRANCH              ANTHONY    BRANCH
                                          SUTRO     CABELL   COMBINED    SUTRO     CABELL   COMBINED
                                         --------   ------   --------   --------   ------   --------
<S>                                      <C>        <C>      <C>        <C>        <C>      <C>
2000
Net revenues...........................  $159,685   $5,662   $165,347                       $164,642
Income before income taxes.............    15,778      267     16,045                          8,403
Net income.............................     9,126      267      9,393                          4,988
Basic earnings per share(a)............  $   0.40   $   --   $   0.40                       $   0.21
Diluted earnings per share(a)..........      0.38       --       0.38                           0.20
1999
Net revenues...........................  $133,707   $4,856   $138,563   $165,647   $5,569   $171,216
Income before income taxes.............    10,834      503     11,337     13,441      779     14,220
Net income.............................     7,004      503      7,507      7,863      779      8,642
Basic earnings per share...............  $   0.36   $ 0.01   $   0.37   $   0.37   $ 0.02   $   0.39
Diluted earnings per share.............      0.34     0.01       0.35       0.36     0.02       0.38
</TABLE>

---------------
(a) Summation of the quarters' earnings per share may not equal the annual
    amounts due to the averaging effect of the number of shares and share
    equivalents throughout the year. Also see Note 10.

                                        46
<PAGE>   48

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required in Item 10 will be contained in the Company's
proxy statement to be filed pursuant to Regulation 14A within 120 days after the
close of the fiscal year for which this Report is filed and is incorporated
herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required in Item 11 will be contained in the Company's
proxy statement to be filed pursuant to Regulation 14A within 120 days after the
close of the fiscal year for which this Report is filed and is incorporated
herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required in Item 12 will be contained in the Company's
proxy statement to be filed pursuant to Regulation 14A within 120 days after the
close of the fiscal year for which this Report is filed and is incorporated
herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required in Item 13 will be contained in the Company's
proxy statement to be filed pursuant to Regulation 14A within 120 days after the
close of the fiscal year for which this Report is filed and is incorporated
herein by reference.

                                    PART IV

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

     (a) (1) Financial Statements

        A listing of all financial statements filed as part of this Annual
Report on Form 10-K is included in Item 8.

     (2) Financial Statement Schedules

        All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

     (3) Exhibits

        The exhibits listed on the accompanying Index to Exhibits below are
filed as part of this Annual Report on Form 10-K.

     (b) (1) Reports on Form 8-K

        None.

                                        47
<PAGE>   49

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                  /s/ JOHN H. GOLDSMITH
                                            ------------------------------------
                                            JOHN H. GOLDSMITH
                                            CHAIRMAN OF THE BOARD,
                                            CHIEF EXECUTIVE OFFICER AND DIRECTOR

Date: March 30, 2001

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 30th day of March, 2001.

<TABLE>
<C>                                                    <S>

               /s/ JOHN H. GOLDSMITH                   Chairman of the Board, Chief Executive Officer
---------------------------------------------------    (Principal Executive Officer) and Director
                 JOHN H. GOLDSMITH

              /s/ KENNETH S. KLIPPER                   Executive Vice President, Chief Financial
---------------------------------------------------    Officer (Principal Financial and Accounting
                KENNETH S. KLIPPER                     Officer)

                /s/ JOHN F. LUIKART                    Director
---------------------------------------------------
                  JOHN F. LUIKART

               /s/ DAVID P. PROKUPEK                   Director
---------------------------------------------------
                 DAVID P. PROKUPEK

                /s/ MARK T. WHALEY                     Director
---------------------------------------------------
                  MARK T. WHALEY

               /s/ ROBERT H. YEVICH                    Director
---------------------------------------------------
                 ROBERT H. YEVICH

                /s/ C. HUNTER BOLL                     Director
---------------------------------------------------
                  C. HUNTER BOLL

             /s/ WINSTON J. CHURCHILL                  Director
---------------------------------------------------
               WINSTON J. CHURCHILL

               /s/ THOMAS M. HAGERTY                   Director
---------------------------------------------------
                 THOMAS M. HAGERTY

               /s/ DAVID V. HARKINS                    Director
---------------------------------------------------
                 DAVID V. HARKINS

                /s/ HUGH R. HARRIS                     Director
---------------------------------------------------
                  HUGH R. HARRIS

                 /s/ SETH W. LAWRY                     Director
---------------------------------------------------
                   SETH W. LAWRY
</TABLE>

                                        48
<PAGE>   50

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                          DESCRIPTION OF DOCUMENT
----------                      -----------------------
<C>           <S>
      +3.1    Restated Certificate of Incorporation of the Company
      +3.2    Bylaws of the Company
     ++3.3    Certificate of Ownership and Merger Merging Tucker Anthony
              Sutro, Inc. into Freedom Securities Corporation
     +10.1    Contribution Agreement by and among the Company, Hancock,
              THL and SCP Private Equity Partners, L.P., dated as of
              October 4, 1996
     +10.2    Stockholders Agreement by and among the Company and the
              persons listed on the signature pages thereof as the Initial
              Investors, SCP Initial Investor, Employee Investors and
              Seller Initial Investor dated as of November 30, 1996
     +10.3    Additional Share Agreement by and between the Company and
              Hancock, dated as of November 29, 1996
     +10.4    Tax Matters Agreement by and between the Company and
              Hancock, dated as of November 29, 1996
     +10.8    1996 Stock Option Plan
     +10.9    Employment Agreement by and between the Company and John H.
              Goldsmith, dated as of November 29, 1996
    +10.11    Agreement, by and among Prudential Securities Incorporated,
              John Hancock Clearing Corporation, Tucker Anthony
              Incorporated and Sutro & Co. Incorporated
    +10.12    Form of TAMP Incentive Plan Limited Partnership Limited
              Partnership, Agreement, dated as of July 1, 1989
    +10.13    Form of TAMP II Incentive Plan Limited Partnership Limited
              Partnership, Agreement, dated as of February 28, 1995
    +10.14    Form of TAMM II Incentive Plan Limited Partnership Limited
              Partnership, Agreement, dated April 8, 1984
    +10.15    Form of Sutro Venture Partners I, L.P. Limited Partnership
              Agreement, dated as of March 21, 1996
    +10.16    Form of Sutro Venture Partners II, L.P. Limited Partnership
              Agreement, dated as of March 21, 1996
    +10.17    Form of Operating Agreement for Sutro Investment Partners
              IV, LLC dated as of June 30, 1997
  +++10.20    Chattel Leasing Security Agreement by and between T.A.
              Leasing, Inc. and BancBoston Leasing, Inc., dated November
              29, 1996.
  +++10.21    Amended and Restated Chattel Leasing Promissory Note, by and
              between T.A. Leasing, Inc. and BancBoston Leasing, Inc.,
              dated February 28, 1997.
  +++10.22    Chattel Leasing Security Agreement by and between Sutro
              Leasing Inc. and BancBoston Leasing, Inc., dated February
              28, 1997
  +++10.23    Chattel Leasing Promissory Note by and between Sutro Leasing
              Inc. and BancBoston Leasing, Inc., dated February 28, 1997.
  +++10.24    1998 Long-Term Incentive Plan
  +++10.25    1998 Executive Performance Bonus Plan
  +++10.26    Amendment No. 1 to the Stockholders Agreement dated January
              30, 1998
  +++10.27    Form of Amendment No. 2 to the Stockholders Agreement
  +++10.28    Form of Amendment No. 3 to the Stockholders Agreement
  +++10.29    David P. Prokupek Employment Agreement
  +++10.30    Revolving Credit Agreement, by and among the Company,
              BankBoston, N.A., and the other banks party thereto, dated
              as of August 21, 1998
</TABLE>

                                        49
<PAGE>   51

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                          DESCRIPTION OF DOCUMENT
----------                      -----------------------
<C>           <S>
  +++10.31    John F. Luikart Employment Agreement
  +++10.32    Kevin J. McKay Employment Agreement
 ++++10.33    Form of Sutro Venture Partners III, L.P. Limited Partnership
              Agreement
++++10.33a    John F. Luikart -- Renewal of Employment Agreement
 ++++10.34    Form of Sutro Venture Partners IV, L.P. Limited Partnership
              Agreement
++++10.34a    Kevin J. McKay -- Renewal of Employment Agreement
 ++++10.35    Amendment to Clearing Agreement (September 8, 1995), dated
              as of April 23, 1998
+++++10.36    Master Agreement by and between BancBoston Leasing Inc. and
              Tucker Anthony Incorporated dated as of January 21, 1999
+++++10.37    Master Agreement by and between BancBoston Leasing Inc. and
              Sutro Leasing dated as of January 21, 1999.
+++++10.38    First Amendment to Revolving Credit Agreement, dated as of
              November 12, 1999
+++++10.39    Second Amendment to Revolving Credit Agreement, dated as of
              February 11, 2000
+++++10.40    Kenneth S. Klipper Employment Agreement
+++++10.41    Form of TACS III Incentive Plan Limited Partnership, Limited
              Partnership Agreement, dated as of July 1, 1989
+++++10.42    Form of TACS IV Incentive Plan Limited Partnership, Limited
              Partnership Agreement, dated as of March 22, 1995
+++++10.43    Form of Operating Agreement for Sutro Investment Partners V,
              LLC dated as of March 19, 1998
+++++10.44    Form of CGRM Investment Partnership General Partnership
              Agreement
      21      Subsidiaries of the Company
      23      Consent of Ernst & Young, LLP, Independent Auditors
</TABLE>

---------------
+      Incorporated by reference to the Company's registration statement on Form
       S-1 (File No. 333-44938)

++     Incorporated by reference to the Company's quarterly Report on Form 10-Q
       for the quarter ended June 30, 2000.

+++   Incorporated by reference to the Company's registration statement on Form
      S-1 (File No. 333-62857)

++++  Incorporated by reference to the Company's Annual Report on Form 10-K for
      the year ended December 31, 1998.

+++++ Incorporated by reference to the Company's Annual Report on Form 10-K for
      the year ended December 31, 1999.

     Schedules and exhibits to certain exhibits to this Form 10-K have been
omitted, which schedules shall be furnished to the Commission upon request.

                                        50