<PAGE>   1
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1998
 
                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
 
                         FREEDOM SECURITIES CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S>                                  <C>                                  <C>
              DELAWARE                               6211                              04-3335712
  (STATE OR OTHER JURISDICTION OF        (PRIMARY STANDARD INDUSTRIAL               (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)        CLASSIFICATION CODE NUMBER)              IDENTIFICATION NO.)
</TABLE>
                               ONE BEACON STREET
                                BOSTON, MA 02108
                                 (617) 725-2000
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                               JOHN H. GOLDSMITH
                            CHIEF EXECUTIVE OFFICER
                               ONE BEACON STREET
                                BOSTON, MA 02108
                                 (617) 725-2000
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                                    Copy to:
                             JAMES WESTRA, ESQUIRE
                          HUTCHINS, WHEELER & DITTMAR
                           A PROFESSIONAL CORPORATION
                               101 FEDERAL STREET
                          BOSTON, MASSACHUSETTS 02110
                                 (617) 951-6600
 
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  As soon
as practicable after the effective date of this Registration Statement.
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [X]
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering.  [ ]
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering.  [ ]
     If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the earlier
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
------------------------
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
                            ------------------------
                        CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
                                                AMOUNT            PROPOSED MAXIMUM       PROPOSED MAXIMUM
TITLE OF EACH CLASS OF                          TO BE            OFFERING PRICE PER         AGGREGATE              AMOUNT OF
 SECURITIES TO BE REGISTERED                  REGISTERED              SHARE(1)            OFFERING PRICE        REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                    <C>                    <C>                    <C>
Common Stock, $.01 par value per
  share................................        721,324               $12.71875              $9,174,340               $2,706
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
 
(1) Estimated solely for the purpose of computing the registration fee, based
    upon the average of the high and low prices of the Company's Common Stock as
    reported on the New York Stock Exchange on August 31, 1998, in accordance
    with Rule 457(c) under the Securities Act of 1933, as amended.
                             -----------------------------
      THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
PROSPECTUS
 
          , 1998
                                 721,324 SHARES
 
                     [FREEDOM SECURITIES CORPORATION LOGO]
 
                                  COMMON STOCK
 
     This Prospectus relates to the public offering, which is not being
underwritten, of up to 721,324 shares of Common Stock, par value $0.01 per share
(the "Shares"), of Freedom Securities Corporation ("Freedom" or the "Company"),
which may be offered from time to time by certain stockholders of the Company
(the "Selling Stockholders"). The Company will receive no part of the proceeds
of such sales. All of the Shares being offered were originally issued by the
Company in connection with the Company's acquisition of Cleary Gull Reiland &
McDevitt Inc., a Delaware corporation ("Cleary Gull"), by and through a merger
of Cleary Gull with and into a wholly-owned subsidiary of Freedom, CGRM
Acquisition Corp.("Merger Corp.") (the "Cleary Gull Acquisition"). The Shares
were issued pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), provided by
Regulation D thereunder. The sale of the Shares is being registered by the
Company pursuant to the Agreement and the Plan of Merger dated as of March 9,
1998 (the "Agreement") by and among Freedom, Merger Corp. and Cleary Gull.
 
     The Shares may be offered by the Selling Stockholders from time to time in
one or more transactions as described under "Plan of Distribution." To the
extent required, the number of shares to be sold, the name of the Selling
Stockholder(s), the purchase price, the name of any agent or broker-dealer, and
any applicable commissions, discounts or other items constituting a compensation
to such agent or broker-dealer with respect to a particular offering will be set
forth in a supplement or supplements to this Prospectus (each, a "Prospectus
Supplement"). The aggregate proceeds to the Selling Stockholder(s) from the sale
of the shares offered from time to time hereby will be the purchase price of the
shares sold less commissions, discounts and other compensation, if any, paid by
the Selling Stockholder(s) to any agent or broker-dealer. The price at which any
of the Shares may be sold, and the commissions, if any paid in connection with
any such sale, are unknown and may vary from transaction to transaction. The
Company will pay all expenses incident to the offering and sale of the Shares to
the public other than any commissions and discounts of underwriters, dealers or
agents and any transfer taxes. See "Selling Stockholders" and "Plan of
Distribution."
 
     The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "FSI." On September   , 1998, the last sale price of the Company's
Common Stock was $     per share.
 
                         ------------------------------
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF RISK FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
 
                         ------------------------------
 
 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
      EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
          SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
           COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
                PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
                            IS A CRIMINAL OFFENSE.
 
                         ------------------------------
 
     The Securities and Exchange Commission (the "Commission") may take the view
that, under certain circumstances, the Selling Stockholders and any
broker-dealers or agents that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act. Commissions, discounts or concessions received by any
such broker-dealer or agent may be deemed to be underwriting commissions under
the Securities Act. The Company and the Selling Stockholders have agreed to
certain indemnification arrangements. See "Plan of Distribution."
<PAGE>   3
--------------------------------------------------------------------------------
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in the Prospectus. Unless the context otherwise requires, the terms "Freedom"
and "the Company" mean Freedom Securities Corporation and its consolidated
subsidiaries during the periods following the Acquisition described below and
its predecessor (the "Predecessor Company") during periods prior to the
Acquisition. Certain market information contained herein is based on securities
industry publications.
 
                                  THE COMPANY
 
     Freedom, through its three brokerage subsidiaries, Tucker Anthony
Incorporated ("Tucker Anthony"), Sutro & Co. Incorporated ("Sutro") and Cleary
Gull Reiland & McDevitt Inc. ("Cleary Gull"), and its asset management
subsidiary, Freedom Capital Management Corporation ("Freedom Capital"), is a
full-service, regionally focused retail brokerage and investment banking firm.
The Company was formed in November 1996 to effect the acquisition (the
"Acquisition") of Freedom Securities Holding Corporation (the "Predecessor
Company") and its subsidiaries, including Tucker Anthony, Sutro and Freedom
Capital, from John Hancock Mutual Life Insurance Company ("Hancock"). Tucker
Anthony, headquartered in Boston and focused primarily on the northeastern
United States, and Sutro, headquartered in San Francisco and focused primarily
on the western United States, are both over 100 years old and have well
established reputations in their respective regions. Cleary Gull, headquartered
in Milwaukee, Wisconsin, was founded in 1987 and is focused primarily on the
midwestern United States. On April 16, 1998, the Company closed into escrow and
funded its previously announced acquisition of Cleary Gull. The acquisition was
completed on May 1, 1998 and was accounted for under the purchase method of
accounting. The consolidated financial and other data included elsewhere in this
Prospectus include the results of Cleary Gull's operations from the date of
acquisition. Management believes that it can best serve the needs of these
distinct regions through separate, locally managed organizations, while avoiding
cost duplication through the use of shared clearing and support services. This
approach enables the Company to capitalize on each organization's name
recognition, historical areas of expertise and close community ties while
lessening the Company's reliance on a single region's economy.
 
     The Company's three primary areas of focus, described below, are (i) its
full-service retail brokerage operations; (ii) its equity capital markets
activities; and (iii) its asset management operations.
 
     Retail Operations.  The retail operations of Tucker Anthony and Sutro,
conducted in 13 states and the District of Columbia, have together generated
between 56% and 62% of the Company's operating revenues in each of the last
three calendar years and have historically represented the Company's core
business. 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. As of June 30, 1998, customers had over $29 billion of assets
in over 200,000 Tucker Anthony and Sutro brokerage accounts. Management believes
that the experience of its 707 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. Management also
believes that its 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 significant tenure at their local branch offices.
 
     Equity Capital Markets.  Each of Tucker Anthony, Sutro and Cleary Gull has
historically demonstrated strengths in offering various investment banking
services, such as merger and acquisition services, to clients within its
respective region. The Company's strategy is to develop equally strong
research-driven equity capital markets groups including equity research,
investment banking, institutional sales, trading and syndication services.
Tucker Anthony's, Sutro's and Cleary Gull's research and investment banking
departments target emerging and middle-market companies within their respective
regions and within the industries in which they specialize. Equity capital
markets activities have generated 16% to 17% of the Company's operating revenues


--------------------------------------------------------------------------------
                                        3
<PAGE>   4
--------------------------------------------------------------------------------

in each of the past three calendar years. For the first six months of 1998,
equity capital markets activities generated approximately 23% of the Company's
operating revenues.
 
     Asset Management.  Freedom Capital, headquartered in Boston, was formed in
1930 and as of June 30, 1998 managed approximately $6.2 billion of assets,
including approximately $3.4 billion of investments by public sector entities,
high net worth individuals and others, with the remainder comprised of money
market funds for the benefit of Tucker Anthony, Sutro and Cleary Gull clients.
Freedom Capital has developed a leading position in the management of public
funds for local Massachusetts municipalities and agencies, has also developed an
important presence in certain sectors of the union pension fund market and is
growing its corporate funds management business. Asset management revenues have
represented approximately 5% to 6% of the Company's operating revenues in each
of the past three calendar years.
 
     The Company's subsidiaries also engage in a number of other activities,
including trading fixed income securities, underwriting municipal securities,
and purchasing and selling securities in arbitrage transactions. Additionally,
the Company, through a subsidiary, has a 25% interest in the profits and losses
of a joint specialist account in which it participates with two other NYSE
specialist firms. See "Business" for a more complete description of the
Company's activities.
 
     The following chart depicts in simplified form the Company's corporate
structure, including its primary subsidiaries:
 
                               ------------------
                               FREEDOM SECURITIES
                                  CORPORATION
                               ------------------
                                        |
         ---------------------------------------------------------
        |                  |                 |                    |
   --------------     ------------     ---------------     ---------------
                                         CLEARY GULL       FREEDOM CAPITAL
   TUCKER ANTHONY      SUTRO & CO.        REILAND &          MANAGEMENT
    INCORPORATED      INCORPORATED      MCDEVITT INC.       CORPORATION
   --------------     ------------     ---------------     ---------------
 
BUSINESS STRATEGY
 
     Since the Acquisition, management formulated and is implementing a strategy
to (i) enhance the services the Company offers its customers; (ii) improve the
profitability of Tucker Anthony's and Sutro's retail operations; (iii) expand
the equity capital markets activities of Tucker Anthony, Sutro and Cleary Gull;
and (iv) increase Freedom Capital's money management business. Management also
plans to supplement the Company's internal growth with strategic acquisitions.
See "Business -- Business Strategy." The principal elements of the Company's
strategy are set forth below:
 
     Enhance Personalized, High-End Service.  Tucker Anthony, Sutro and Cleary
Gull have traditionally sought to attract and retain brokerage clients by
offering a high level of personal service responsive to customer needs. The
Company intends to increase its commitment to service by providing its
investment executives with advanced account information systems and flexibility
in determining appropriate 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.
 
     Improve Profitability of Retail Brokerage Operations.  The Company intends
to continue to improve the profitability of its retail operations by hiring
additional experienced and highly productive investment executives and by
providing Tucker Anthony's and Sutro's investment executives with enhanced
training, product offerings, information systems and support.
 
     Expand Regional and Speciality Equity Capital Markets Activities.  The
Company intends to continue to increase Tucker Anthony's, Sutro's and Cleary
Gull's investment banking business by committing greater


--------------------------------------------------------------------------------
                                        4
<PAGE>   5
--------------------------------------------------------------------------------
 
resources to, and by carefully focusing their research and investment banking
coverage on, companies in geographic regions and industries which management
believes offer the greatest opportunities.
 
     Increase Asset Management Business.  Management intends to grow Freedom
Capital's business by extending its public funds business from Massachusetts to
other states, by improving coordination with the Tucker Anthony and Sutro retail
brokerage networks and by increasing the assets under its management and the
number of its portfolio managers through acquisitions or recruiting. The Company
also intends to continue to encourage the growth of Cleary Gull's investment
management services.
 
     Supplement Growth With Strategic Acquisitions.  Management plans to
actively pursue opportunities to acquire other firms with complementary
businesses which would strengthen or expand the Company's geographic or product
offering base, such as the acquisition of Cleary Gull, which has allowed the
Company to expand its geographic coverage. Management believes that acquisitions
may also allow the Company to realize cost benefits by leveraging its
infrastructure.
 
THE ACQUISITION
 
     To finance the Acquisition of Freedom from Hancock in November 1996,
approximately 350 employees of the Company, including senior management and
investment executives, purchased an aggregate of approximately 28% of the
Company's equity (after giving effect to the Company's initial public offering),
with additional equity financing provided by affiliates of Thomas H. Lee Company
("THL") and SCP Private Equity Partners, L.P. ("SCP"). Incentive equity programs
have been established pursuant to which employees have acquired or may acquire
additional equity of the Company, which, when added to shares previously owned,
would result in employees owning up to approximately 45% of the shares of Common
Stock outstanding. See "Certain Relationships and Related Transactions -- The
Acquisition" for a more complete description of the Acquisition and "Management"
for a description of the Company's incentive equity programs.
 
     Management believes that the Company's independence and employee ownership
resulted in progressively higher levels of employee motivation, confidence and
commitment during 1997, as compared to 1996 when the Predecessor Company was for
sale and it was uncertain whether the Acquisition would be consummated or
whether the Predecessor Company would be sold to another organization.
Management believes that uncertainty surrounding the future of the Company
adversely affected the Company's performance in 1996 and, to a lesser extent, in
early 1997 by weakening employee motivation and the Company's ability to recruit
personnel, creating uncertainty among customers and prospective customers,
consuming management's time and inhibiting the Company's ability to pursue new
initiatives. The Company believes that the Acquisition and the strategies
instituted in connection therewith have been successful. For example, Tucker
Anthony, Sutro and Cleary Gull managed or co-managed 19 equity offerings in the
first half of 1998 compared to 17 in the first half of 1997. For the full year
1997, the Company managed or co-managed 34 equity offerings compared to 16 in
1996 and 9 in 1995. In 1997, the Company reported net income of $18.7 million, a
52% increase over net income of $12.3 million in 1996 and a 43% increase over
net income of $13.1 million in 1995. For the first six months of 1998, the
Company reported net income of $12.6 million, before extraordinary item, a 98%
increase over net income of $6.4 million for the first half of 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
INITIAL PUBLIC OFFERING
 
     On April 2, 1998, the Company completed its 7.4 million share initial
public offering, including 4.2 million shares of Common Stock sold by the
Company. The initial public offering raised approximately $76.7 million for the
Company, after deducting underwriting discounts, commissions and expenses.
 
CLEARY GULL ACQUISITION
 
     On May 1, 1998, the Company completed its previously announced acquisition
of Cleary Gull, a privately held investment banking, institutional brokerage and
investment advisory firm headquartered in Milwaukee, Wisconsin. Cleary Gull was
established in 1987 as a private investment bank focusing on the equity capital
markets through institutional research, sales and trading, and investment
banking services. Cleary Gull's

--------------------------------------------------------------------------------
                                        5
<PAGE>   6
 
research analysts cover such areas as distribution and logistics, business
services, applied technology and growth companies in the midwestern United
States. Cleary Gull's equity capital markets activities include a national
institutional sales force and over-the-counter and listed trading services.
Cleary Gull's investment banking activities are focused primarily on merger and
acquisition advisory services and financing assignments in both public and
private equity and debt markets. Cleary Gull recently established its Private
Client Group to provide retail brokerage and investment management services to
institutional accounts and high net worth individuals.
 
                                  RISK FACTORS
 
     No assurances can be given that the Company's objectives or strategies will
be achieved. Prospective investors should consider carefully the factors
discussed in detail elsewhere in this Prospectus under the caption "Risk
Factors."
 
                                  THE OFFERING
 
<TABLE>
<S>                                                      <C>
Common Stock offered by the Selling Stockholders.......  721,324 shares

Common Stock to be outstanding after the Offering......  19,993,833 shares(1)

Dividend policy........................................  The Company declared a dividend of $0.04 per
                                                         share on the outstanding shares of Common
                                                         Stock beginning with the dividend payable in
                                                         the third quarter of 1998 with respect to
                                                         the second quarter of 1998 and currently
                                                         intends to declare similar quarterly
                                                         dividends in the future. See "Dividend
                                                         Policy."

Use of proceeds........................................  The Company will not receive any proceeds
                                                         from the sale of the Common Stock offered
                                                         hereby.
                                                         See "Use of Proceeds."

NYSE symbol............................................  "FSI"
</TABLE>
 
------------------------------
(1) Excludes 2,530,769 shares of Common Stock issuable upon exercise of
    outstanding stock options under the Company's stock option plans at June 30,
    1998, with a weighted average exercise price of $6.85, of which 449,900
    shares were exercisable as of such date at a weighted average exercise price
    of $5.38, and up to 88,176 shares issuable to Hancock for no additional
    consideration upon such exercise. See "Management -- Stock Option and Stock
    Purchase Plans" and "Certain Relationships and Related
    Transactions -- Additional Share Agreement."
 
                                        6
<PAGE>   7
--------------------------------------------------------------------------------

                 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
 
     The information set forth below should be read in conjunction with
"Selected Historical Consolidated Financial and Other Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's and Predecessor Company's Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
                                     PREDECESSOR COMPANY
                           ----------------------------------------
                                 YEARS ENDED          ELEVEN MONTHS    ONE MONTH
                                 DECEMBER 31,             ENDED          ENDED
                           ------------------------   NOVEMBER 29,    DECEMBER 31,
                            1993     1994     1995        1996            1996
                                (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S>                        <C>      <C>      <C>      <C>             <C>
STATEMENT OF INCOME DATA:
  Total revenues.........  $385.6   $327.1   $368.5      $347.5          $30.6
  Net revenues(2)........   364.5    296.9    332.5       321.0           28.8
  Total non-interest
    expenses.............   335.8    286.0    310.2       300.6           26.8
  Acquisition interest
    expense..............      --       --       --          --            0.6
  Income before income
    taxes................    28.7     10.9     22.3        20.4            1.4
  Extraordinary item (net
    of applicable taxes
    of $0.9)(4)..........      --       --       --          --             --
  Net income after
    extraordinary item...    16.7      6.4     13.1        11.6            0.7
  Basic earnings per
    share before
    extraordinary
    item(5)..............      --       --       --          --          $0.05
  Diluted earnings per
    share before
    extraordinary
    item(5)..............      --       --       --          --           0.05
  Basic earnings per
    share after
    extraordinary
    item(5)..............      --       --       --          --          $0.05
  Diluted earnings per
    share after
    extraordinary
    item(5)..............      --       --       --          --           0.05
 
<CAPTION>
                                                             SIX MONTHS
                           COMBINED(1)                          ENDED
                           ------------                       JUNE 30,
                            YEAR ENDED     YEAR ENDED        (UNAUDITED)
                           DECEMBER 31,   DECEMBER 31,   -------------------
                               1996           1997         1997       1998
                             (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S>                        <C>            <C>            <C>        <C>
STATEMENT OF INCOME DATA:
  Total revenues.........     $378.1         $398.2       $181.4     $235.8
  Net revenues(2)........      349.8          375.8        169.6      221.8
  Total non-interest
    expenses.............      327.4          337.3(3)     155.5      198.5(3)
  Acquisition interest
    expense..............        0.6            6.1          3.0        1.5
  Income before income
    taxes................       21.8           32.4         11.1       21.8
  Extraordinary item (net
    of applicable taxes
    of $0.9)(4)..........         --             --           --        1.2
  Net income after
    extraordinary item...       12.3           18.7          6.4       11.4
  Basic earnings per
    share before
    extraordinary
    item(5)..............         --         $ 1.31       $ 0.45     $ 0.73
  Diluted earnings per
    share before
    extraordinary
    item(5)..............         --           1.27         0.44       0.69
  Basic earnings per
    share after
    extraordinary
    item(5)..............         --         $ 1.31       $ 0.45     $ 0.66
  Diluted earnings per
    share after
    extraordinary
    item(5)..............         --           1.27         0.44       0.62

<CAPTION>
                                                                  AS OF
                                                              JUNE 30, 1998
                                                               (UNAUDITED)
                                                              -------------
                                                              (IN MILLIONS,
                                                               EXCEPT PER
                                                               SHARE DATA)
<S>                                                           <C>
STATEMENT OF FINANCIAL CONDITION DATA:
  Total assets..............................................     $655.5
  Long-term debt............................................       19.1
  Stockholders' equity......................................      212.7
  Book value per common share outstanding...................     $10.64

<CAPTION>
                                                                   PREDECESSOR                                 SIX MONTHS
                                                                     COMPANY          COMBINED(1)                 ENDED
                                                              ---------------------   -----------               JUNE 30,
                                                                        YEARS ENDED DECEMBER 31,               (UNAUDITED)
                                                              --------------------------------------------   ---------------
                                                              1993    1994    1995       1996        1997     1997     1998
<S>                                                           <C>     <C>     <C>     <C>           <C>      <C>      <C>
OTHER FINANCIAL DATA:
After-tax return on average equity(6).......................   12.6%    4.5%    8.8%      10.6%       20.6%    15.5%    15.1%
Compensation and benefits expense as a percentage of net
  revenues..................................................   64.9    66.8    65.4       65.2        65.5     64.7     66.0
Non-compensation and benefits operating expense as a
  percentage of net revenues................................   27.3    29.5    27.8       28.4        24.3     27.0     23.5
Amortization of acquisition-related intangibles (in
  millions).................................................     --      --      --     $  0.2      $  2.5   $  1.2   $  3.5(7)
Assets in retail brokerage accounts (at end of period) (in
  billions).................................................  $15.0   $17.0   $20.0     $ 23.0      $ 28.0   $ 24.6   $ 29.3
</TABLE>
 
------------------------------
(1) Year ended December 31, 1996 combined financial data refer to the
    consolidated results of the Predecessor Company for the eleven months ended
    November 29, 1996 combined with the consolidated results of the Company for
    the one month ended December 31, 1996. These periods are not directly
    comparable due to the effects of the Acquisition, including related purchase
    accounting adjustments and the Acquisition financing.
(2) Net revenues equals total revenues less interest expense other than the
    Acquisition interest expense.
(3) Includes the effect of $1.4 and $0.5 million of non-cash compensation
    expense for the year ended December 31, 1997 and for the six months ended
    June 30, 1998, respectively, resulting from issuance of Common Stock and
    stock options to employees.
(4) The extraordinary item is a write-off of capitalized debt issuance costs
    resulting from the early retirement of $77.5 million in debt with the
    proceeds from the Company's second quarter initial public offering.
(5) Basic earnings per share ("Basic EPS") is calculated by dividing net income
    by the weighted average number of outstanding shares. Diluted earnings per
    share ("Diluted EPS") also includes the effects of the issuance of stock
    options and other exercisable shares. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations -- Earnings Per
    Share" for a detailed calculation of earnings per share.
(6) After-tax return on average equity is calculated by dividing net income
    after extraordinary item by average stockholders' equity for the year or six
    month period. For the six months ended June 30, 1998, after-tax return on
    average equity before extraordinary item was 16.7%.
(7) Includes amortization of acquisition-related goodwill of $1.0 million,
    write-off of debt issuance costs of $2.4 million and amortization of
    goodwill relating to the acquisition of Cleary Gull of $0.1 million.
 

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                                        7
<PAGE>   8
 
                                  RISK FACTORS
 
     In addition to the other information contained in this Prospectus, the
following risk factors should be considered in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby.
 
ADVERSE CONSEQUENCES OF THE VOLATILE NATURE OF THE SECURITIES BROKERAGE BUSINESS
 
     The stock market has recently experienced significant volatility, including
some of the largest single day point declines in history. After the stock market
declines in October 1987 and October 1989, many firms in the industry suffered
financial losses and the level of individual investor trading activity
decreased. Reduced trading volume and lower prices generally result in reduced
transaction revenues. A severe market fluctuation in the future could have a
material adverse effect on the Company's business, financial condition and
operating results. Lower price levels of securities may result in (i) reduced
volumes of securities transactions, with a consequent reduction in commission
revenues, and (ii) reduced management fees calculated as a percentage of assets
managed. Sudden sharp declines in market values of securities and the failure of
issuers and counterparties to perform their obligations can result in illiquid
markets which, in turn, may result in the Company having difficulty selling
securities, hedging its securities positions and investing funds under its
management.
 
     The securities brokerage business is, by its nature, subject to significant
risks, particularly in volatile or illiquid markets. Risks inherent in the
securities brokerage business discussed elsewhere herein, such as the risk of
trading losses, losses resulting from the ownership or underwriting of
securities, risks associated with principal activities, the failure of
counterparties to meet commitments, customer fraud, employee fraud, issuer
fraud, litigation and errors, misconduct and failures in connection with the
processing of securities transactions, are enhanced in periods of volatility and
illiquidity. The Company's principal business activity, its retail broker-dealer
operations, as well as its investment banking, institutional sales, proprietary
trading, investment advisory and other services, are subject to these enhanced
risks present during volatile trading markets and fluctuations in the volume of
market activity.
 
     In addition, to the extent the Company, through Wexford Clearing Services
Corporation ("Wexford"), the Company's clearing broker, permits customers to
purchase securities on margin, the Company is subject to risks inherent in
extending credit, especially during periods of rapidly declining markets in
which collateral value could fall below the amount of a customer's indebtedness.
Any resulting losses could have a material adverse effect on the Company's
business, financial condition and operating results.
 
BUSINESS SUBJECT TO GENERAL ECONOMIC AND POLITICAL CONDITIONS
 
     The securities business is directly affected by many factors, including
economic and political conditions, broad trends in business and finance,
legislation and regulation affecting the national and international business and
financial communities, currency values, inflation, market conditions, the
availability and cost of short-term or long-term funding and capital, the credit
capacity or perceived creditworthiness of the securities industry in the
marketplace and the level and volatility of interest rates. Any one or more of
these factors may contribute to reduced levels of trading activity, securities
offerings and merger and acquisition activities, which would result in lower
revenues from the Company's brokerage, trading, institutional sales and
investment banking activities. In addition, these and other factors can
contribute to lower price levels for securities and illiquid markets.
 
SIGNIFICANT COMPETITION
 
     All aspects of the Company's business and of the securities business in
general are highly competitive. The principal competitive factors influencing
the Company's business are its professional staff, its reputation in the
marketplace, its existing client relationships, its ability to commit capital to
client transactions and its mix of market capabilities. The Company's ability to
compete effectively in its securities brokerage and investment banking
activities will also be influenced by the adequacy of its capital levels and by
its ability to raise additional capital.

 
                                        8
<PAGE>   9
 
     The Company competes directly with national and regional full service
broker-dealers and, to a lesser extent, with discount brokers, dealers,
investment banking firms, investment advisors and certain commercial banks. In
addition, the Company competes indirectly for investment assets with insurance
companies and others. In addition to competition from firms currently in the
securities business, domestic commercial banks and investment banking boutiques
have recently entered the business. In recent years, large international banks
have entered the markets served by United States investment banks, including the
markets in which the Company competes. The Company expects competition from
domestic and international banks to increase as a result of recent and
anticipated legislative and regulatory initiatives in the United States to
remove or relieve certain restrictions on commercial banks relating to the sale
of securities. The financial services industry has become considerably more
concentrated as numerous securities firms have either ceased operations or have
been acquired by or merged into other firms. Such mergers and acquisitions have
increased competition from these firms, many of which have significantly greater
equity capital and financial and other resources than the Company. Many of these
firms, because of their significantly greater financial capital and scope of
operations, are able to offer their customers more product offerings, broader
research capabilities, access to international markets and other products and
services not offered by the Company, which may provide such firms with
competitive advantages over the Company.
 
     The Company also faces competition from a rapidly developing industry
comprised of companies offering discount and/or electronic brokerage services.
These competitors may have lower costs and may offer their customers more
attractive pricing or other terms than those offered by the Company. The Company
also anticipates competition from underwriters who attempt to effect public
offerings for emerging and middle-market companies through new means of
distribution, including transactions effected using electronic media such as the
Internet. In addition, issuers may attempt to sell their securities directly to
purchasers, including through sales using electronic media such as the Internet.
To the extent that issuers and purchasers of securities are able to transact
business without the assistance of financial intermediaries such as the Company,
the Company's operating results could be adversely affected.
 
DEPENDENCE ON PERSONNEL
 
     The Company's business is dependent on the highly skilled and often highly
specialized individuals it employs. Retention of senior management and retail
investment executives, research, investment banking, public finance,
institutional sales and trading, money management and administrative
professionals is particularly important to the Company's prospects. The Company
generally does not have written employment agreements with its investment
professionals.
 
     The departure of an investment executive typically results in such
executive taking his or her clients with him or her. The departure of investment
executives could adversely impact the Company's operating results.
 
     The Company's strategy with respect to investment banking is to establish
relationships with the Company's prospective corporate clients in advance of any
transaction and to maintain such relationships over the long term by providing
advisory services to corporate clients in public or private offerings of equity
or debt securities and merger and acquisition transactions. Similarly, the
Company's strategy with respect to state and local government clients is to
establish long-term relationships by providing advisory services to governmental
entities as well as underwriting services. Research professionals contribute
significantly to the Company's ability to secure a role in managing public
offerings and in providing other investment banking services. From time to time,
the Company has experienced losses of equity research, investment banking,
public finance, and institutional sales and trading professionals. The loss of a
significant number of such professionals could materially adversely affect the
Company's operating results.
 
     The intense competition for skilled professionals has led to escalating
compensation packages in the industry for such individuals. Upfront payments,
increased payouts and guaranteed contracts make hiring of employees more
difficult and can be a major factor in an employee leaving the Company. There
can be no assurance that losses of key personnel due to such competition or
otherwise will not occur in the future.
 
     The Company's business, financial condition and operating results depend,
to a significant extent, on the ability of the management of the Company and its
subsidiaries to implement the Company's strategy outlined

 
                                        9
<PAGE>   10
 
in this Prospectus. See "Business -- Business Strategy." There is no guarantee,
however, that management will be able to successfully implement such strategy or
that such strategy will be effective, and the inability of management to succeed
in its efforts may have an adverse effect on the Company's business, financial
condition and operating results.
 
GEOGRAPHIC CONCENTRATION OF THE COMPANY'S BUSINESS
 
     Because of the Company's focus on investors and equity capital market
clients based in the northeastern, midwestern and western United States, a
significant economic downturn in any of those regions could adversely affect the
Company's revenues. Approximately 59% of the Company's 1997 operating revenue
(and a significantly greater percentage of the Company's operating income) was
generated by Tucker Anthony whose clients are primarily located in the
northeastern United States and approximately 35% was generated by Sutro whose
clients are primarily located in the western United States. During the second
quarter of 1998, Cleary Gull, whose clients are primarily located in the
midwestern United States, generated 8% of the Company's operating revenue. As a
result, an economic downturn in one of these regions could adversely affect the
companies in these regions, which in turn could reduce the Company's
underwriting and brokerage business relating to those companies. In addition, a
regional economic downturn in one of these regions could have an adverse effect
on the Company's retail clients in that region or emerging and middle-market
companies in that region. Any adverse effect on emerging and middle-market
companies or growth industries concentrated in the northeastern, midwestern or
western United States or, to a lesser extent, in other regions in which emerging
or middle-market technology, healthcare, financial service, consumer product,
distribution and logistics, applied technology and business services companies
are also concentrated could also reduce the Company's business relating to those
companies.
 
DEPENDENCE ON CERTAIN RELATIONSHIPS
 
     The Company has entered into an arrangement with Wexford pursuant to which
Wexford acts as the Company's clearing broker. The Company's communications and
information systems are coordinated with the clearing information systems of
Wexford. Additionally, 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, monthly account statements, cashiering
functions and the handling of margin accounts. Accordingly, the Company is
currently dependent upon Wexford's clearing capabilities and systems. The
Company and Wexford are parties to an agreement setting forth the terms and
conditions of their relationship. The initial term of the Agreement expires
April 3, 2001 and renews annually thereafter (unless either party gives notice
of its intent not to renew), subject to earlier termination by Wexford in the
event the Company fails to meet certain financial tests. The per trade charge
under the Wexford Agreement is subject to adjustment based on a consumer price
index commencing in April 1999. The Agreement provides that either Wexford or
the Company have the right to renegotiate the financial terms and services of
the contract to apply after the end of the initial term. Any interruption of
service by or at Wexford, or the inability of the Company to extend the Wexford
arrangement on acceptable terms or find an acceptable alternative for the
Company's financing or clearing arrangements could have a material adverse
effect on the Company's business, financial condition and operating results. For
1997 the Company paid clearing and financing fees to Wexford totaling
approximately $20 million, which represented approximately 5% of net revenues.
Assuming similar trading volumes in 1998, the Company expects that these charges
will continue for the remainder of 1998.
 
DEPENDENCE ON OUTSIDE SOURCES OF FINANCING
 
     The principal sources of the Company's cash and liquidity are financing
activities, commissions, collateralized repurchase agreements and collateralized
loans. The Company currently has an uncommitted financing arrangement with
Wexford through which the Company finances its customer accounts and firm
trading positions. Such financing of customer accounts is not reflected in the
Company's Statements of Financial Condition. The Company retains risk with
respect thereto, however, because the Company has agreed to indemnify Wexford
for losses it may sustain in connection with the accounts of the Company's
customers. The availability of financing to the Company may vary depending on
market conditions, the
 
                                       10
<PAGE>   11
 
volume of certain trading activities, credit ratings, credit capacity and the
overall availability of credit to the financial services industry. There can be
no assurance that the Company will be able to access the necessary lines of
credit or that financing adequate to support the Company's business will be
available in the future.
 
CONSTRAINTS IMPOSED BY BANK DEBT
 
     The Company currently maintains a senior revolving credit facility with
BankBoston, N.A. as agent for several lenders (the "Credit Facility"), with no
outstanding balance. The Company also maintains through two of its subsidiaries,
a fixed asset leasing arrangement with BancBoston Leasing Inc. (the "Fixed Asset
Facility") with an outstanding balance at June 30, 1998 of approximately $19.1
million.
 
     The terms of the Credit Facility require the Company and certain of its
subsidiaries to maintain specified financial ratios and satisfy certain tests,
including, among others, a minimum interest coverage ratio, a minimum debt
service coverage ratio and a maximum leverage ratio. The ability of the Company
to comply with the foregoing financial ratios and tests may be affected by
events beyond the control of the Company, and there can be no assurance that the
Company will achieve operating results that comply with such provisions. A
breach of any of the foregoing covenants would result in a default under the
Credit Facility. In the event of any such default, the lenders could elect to
declare all amounts borrowed under the Credit Facility, together with accrued
interest thereon, to be immediately due and payable and pursuant to a
cross-default provision in the Fixed Asset Facility, BancBoston Leasing, Inc.
may accelerate the amounts due under the Fixed Asset Facility. If the Company
were unable to repay such amounts, the lenders could proceed against the
collateral granted to them to repay the indebtedness and other obligations due
and payable under the Credit Facility. If the Credit Facility were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company. If the Company were to default under the Credit Facility and the
lenders thereunder were to foreclose on such subsidiary stock, such subsidiary
stock could be sold to a third party, which would adversely affect the Company.
 
DEPENDENCE ON TECHNOLOGY
 
     The Company's business is highly dependent on communications and
information systems. Any failure or interruption of the Company's or its
subsidiaries' systems, or of the systems of Wexford, could cause delays in the
Company's securities trading activities which could have a material adverse
effect on the Company's operating results. Such failures and interruptions may
result from the inability of certain computing systems (including those of the
Company, Wexford and other third party vendors) to recognize the Year 2000.
There can be no assurance that these Year 2000 issues can be adequately
addressed by the Company, that the costs incurred in connection therewith will
not exceed anticipated amounts or that any such additional payments would not
have a material adverse effect on the results of operations or financial
condition of the Company. In addition, there can be no assurance that the
Company, its subsidiaries or Wexford will not suffer any systems failure or
interruption, whether caused by earthquake, fire, other natural disaster, power
or telecommunications failure, act of God, act of war or otherwise, or that the
Company's or its subsidiaries' or Wexford's back-up procedures and capabilities
in the event of any such failure or interruption will be adequate. Furthermore,
any deterioration in Wexford's or its parent's financial condition could
materially adversely affect the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000
Compliance."
 
LITIGATION IN THE COMPANY'S SECURITIES BROKERAGE BUSINESS
 
     Many aspects of the Company's securities brokerage business involve
substantial risks of liability. From time to time the Company or its
subsidiaries may be named as defendants in civil litigation arising from their
business activities as retail broker-dealers. The plaintiffs in such litigation
may allege misconduct on the part of the Company's investment executives,
claiming, for example, that investments sold to such plaintiffs by the Company's
investment executives were unsuitable for their portfolios, or that such
investment executives engaged in excessive trading with respect to such
plaintiffs' accounts. Factors affecting the likelihood of such litigation
include the conduct of individual investment executives and the performance of
the investment vehicles sold by the Company's investment executives. Such
factors have resulted in the Company making payments to plaintiffs in the past,
and there can be no assurance that substantial payments in connection with the
resolution of such litigation will not occur in the future.

 
                                       11
<PAGE>   12
 
     In recent years, there has been a substantial amount of litigation
involving the securities brokerage industry, including class action lawsuits
that generally seek substantial damages and other suits seeking punitive
damages. Companies engaged in the underwriting of securities, including Tucker
Anthony Sutro and Cleary Gull, are subject to substantial potential liability,
including for material misstatements or omissions in prospectuses and other
communications with respect to underwritten offerings of securities or
statements made by securities analysts, under federal laws such as Rule 10b-5
promulgated under the Securities and Exchange Act of 1934 and Section 11 of the
Securities Act and similar state statutes and common law doctrines. See
"-- Business Subject to Significant Regulation." Like other securities brokerage
firms, the Company and its subsidiaries have been named as defendants in class
action and other lawsuits and have in the past been subject to substantial
settlements and judgments. The risk of liability may be higher for an
underwriter which, like the Company, is active in the underwriting of securities
offerings for emerging and middle-market companies due to the higher degree of
risk and volatility associated with the securities of such companies. The
defense of these or any other lawsuits or arbitrations may divert the efforts
and attention of the Company's management and staff, and the Company may incur
significant legal expense in defending such litigation or arbitration. This may
be the case even with respect to frivolous claims or litigation. The amount of
time that management and other employees may be required to devote in connection
with the defense of litigation could be substantial and might divert their
attention from other responsibilities within the Company.
 
     In the normal course of business, the Company and its subsidiaries are also
defendants in various civil actions and arbitrations arising out of their
activities as employers and as a result of other business activities. The
Company and its subsidiaries have in the past made substantial payments in
connection with the resolution of disputed claims, and there can be no assurance
that substantial payments in connection with the resolution of disputed claims
will not occur in the future.
 
     As of July 31, 1998, there were approximately 36 lawsuits and arbitrations
pending against the Company and its subsidiaries. The Company does not believe
that these lawsuits and arbitrations, in the aggregate, will have a material
adverse effect on the Company's results of operations or financial condition.
 
     As is common in the securities industry, the Company does not carry
insurance that would cover payments made in connection with certain types of
lawsuits. In addition, the Company's and its subsidiaries' charter documents
require indemnification of the Company's and such subsidiaries' officers,
directors and agents to the maximum extent permitted by law.
 
POTENTIAL LOSSES DUE TO FRAUD OR MISTAKES OF CUSTOMERS OR EMPLOYEES
 
     The Company is exposed to the risk of significant losses as a result of
customer fraud, employee errors, misconduct and fraud (including unauthorized
transactions by traders) and failures in connection with the processing of
securities transactions. There can be no assurance that the Company's risk
management procedures and internal controls will prevent such losses from
occurring.
 
     The Company has 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 for which such former employee was responsible.
The Company determined in the fourth quarter of 1997 that approximately $2.6
million of trading losses arose from the actions of the former employee. The
loss has been included in the Company's financial results as follows: $228,000
in the first quarter, $1,071,000 in the second quarter, $431,000 in the third
quarter and $901,000 in the fourth quarter. The Company notified the Securities
and Exchange Commission (the "Commission") 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 Commission and the NYSE are investigating this
matter. The Company does not expect that the results of these investigations
will have a material adverse effect on the Company's business, financial
condition or operating results.

 
                                       12
<PAGE>   13
 
MARKET, CREDIT AND LIQUIDITY RISKS ASSOCIATED WITH MARKET MAKING, PRINCIPAL
TRADING, ARBITRAGE AND UNDERWRITING ACTIVITIES
 
     The Company's market making, principal trading, arbitrage and underwriting
activities often involve the purchase, sale or short sale of securities as
principal. Such activities subject the Company's capital to significant risks
from markets that may be characterized by relative illiquidity or that may be
particularly susceptible to rapid fluctuations in liquidity. Such market
conditions could limit the Company's ability to resell securities purchased or
to repurchase securities sold short. Such activities subject the Company's
capital to significant risks, including market, credit, counterparty and
liquidity risks. Market risk relates to the risk of fluctuating values based on
market prices without any action on the part of the Company. Credit risk relates
generally to the ability of third parties to whom the Company has extended
credit to repay amounts owed to the Company. Counterparty risk relates to
whether a counterparty on a derivative or other transaction will fulfill its
contractual obligations, which may include delivery of securities or payment of
funds. Liquidity risk relates to the Company's inability to liquidate assets or
redirect the deployment of assets contained in illiquid investments.
 
     As a result of its underwriting and arbitrage activities, from time to time
the Company has large position concentrations in securities of, or commitments
to, a single issuer or issuers engaged in a specific industry. In addition, the
trend in all major capital markets, for competitive and other reasons, toward
larger commitments on the part of lead underwriters means that, from time to
time, an underwriter (including a co-manager) may retain significant position
concentrations in individual securities. Such concentrations increase the
Company's exposure to specific credit and market risks.
 
CONSTRAINTS IMPOSED BY NET CAPITAL REQUIREMENTS
 
     The Commission, the NYSE, and various other securities exchanges and other
regulatory bodies in the United States have rules with respect to net capital
requirements which affect each broker-dealer subsidiary of the Company. These
rules are designed to ensure that broker-dealers maintain adequate regulatory
capital in relation to their liabilities and the size of their customer
business. These rules (the "Net Capital Rules") have the effect of requiring
that a substantial portion of a broker-dealer's assets be kept in cash or highly
liquid investments. Failure to maintain the required net capital may subject a
firm to suspension or revocation of its registration by the Commission and
suspension or expulsion by the National Association of Securities Dealers (the
"NASD") and other regulatory bodies, and ultimately may require its liquidation.
Compliance by the Company's broker-dealer subsidiaries with such Net Capital
Rules could limit certain operations that require intensive use of capital, such
as underwriting or trading activities. These rules could also restrict the
ability of the Company to withdraw capital, even in circumstances where the
Company's broker-dealer subsidiaries have more than the minimum amount of
required capital, which, in turn, could limit the ability of the Company to pay
dividends, implement its strategies, pay interest on and repay the principal of
its debt and redeem or repurchase shares of outstanding capital stock. In
addition, a change in such Net Capital Rules or the imposition of new rules
affecting the scope, coverage, calculation or amount of such net capital
requirements, or a significant operating loss or any large charge against net
capital, could have similar adverse effects.
 
CONCENTRATED CONTROL OF THE COMPANY
 
     As of June 30, 1998, THL owns approximately 25%, SCP owns approximately 3%
and current or former employees of the Company and its subsidiaries own
approximately 32% of the outstanding Common Stock of the Company. This
concentration of ownership and voting power may have the effect of accelerating,
delaying or preventing a change in control of the Company or otherwise affect
the ability of any stockholder to influence the policies of the Company. See
"Certain Relationships and Related Transactions -- Stockholders Agreement."
 
BUSINESS SUBJECT TO EXTENSIVE REGULATION
 
     Each subsidiary of the Company which is registered as a broker-dealer
and/or investment advisor is, and the securities industry in general is, subject
to extensive regulation in the United States at both the federal and

 
                                       13
<PAGE>   14
 
state level. Broker-dealers are subject to regulations covering all aspects of
the securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of customers' funds and securities, capital
structure, record keeping and the conduct of directors, officers and employees.
As a result of the Cleary Gull Acquisition, Cleary Gull was required to
re-register as a broker-dealer with the NASD and each state in which it conducts
business. Cleary Gull's membership application with the NASD and various state
registration applications are currently pending.
 
     As registered investment advisors under the Investment Advisors Act of 1940
(the "Advisors Act"), Tucker Anthony, Sutro, Cleary Gull and Freedom Capital 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 advisor'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 approval of a majority of its
shareholders, and as to the Company's other clients, the consent of such clients
to such assignments.
 
     As a matter of public policy, regulatory bodies are charged with
safeguarding the integrity of the securities and other financial markets and
with protecting the interests of customers participating in those markets, not
with protecting the interests of the Company's stockholders. In addition,
self-regulatory organizations ("SROs") and other regulatory bodies in the United
States, such as the Commission, the NYSE, the NASD, the Commodities Futures
Trading Commission (the "CFTC"), the National Futures Association (the "NFA")
and the Municipal Securities Rulemaking Board (the "MSRB"), require strict
compliance with their rules and regulations. Failure to comply with any of these
laws, rules or regulations, the application of which under certain circumstances
may be unclear, could result in a variety of adverse consequences including
censure, civil penalties (including treble damages in the case of insider
trading violations), fines, the issuance of cease-and-desist orders, the
deregistration or suspension of a broker-dealer, investment adviser or futures
commission merchant, the statutory disqualification of officers or employees or
other adverse consequences which could have a material adverse effect on the
Company. Even if none of such actions is taken, such administrative or judicial
proceedings or arbitrations could have a material adverse effect on the
Company's perceived creditworthiness, reputation and competitiveness. Customers
of the Company's subsidiaries or others who allege that they have been damaged
by a violation of applicable regulations also may seek to obtain compensation
from such subsidiary, including the unwinding of any transactions with such
subsidiary. Additional legislation or regulations, or changes in the methods or
enforcement of existing regulations by governmental entities or SROs may
materially and adversely affect the Company's business, financial condition or
operating results.
 
     The Company's businesses may be materially affected not only by regulations
applicable to its subsidiaries as financial market intermediaries, but also by
regulations of general application. For example, the volume of the Company's
underwriting, merger and acquisition and principal investment business in a
given time period could be affected by, among other things, existing and
proposed tax legislation, antitrust policy and other governmental regulations
and policies (including the interest rate policies of the Federal Reserve Board)
and changes in interpretation or enforcement of existing laws and rules that
affect the business and financial communities. From time to time, various forms
of antitakeover legislation and legislation that could affect the benefits
associated with financing leveraged transactions with high-yield securities have
been proposed that, if enacted, could adversely affect the volume of merger and
acquisition business, which in turn could adversely affect the Company's
underwriting, advisory and trading revenues related thereto. The level of
business and financing activity in each of the industries on which the Company
and its subsidiaries focus can be affected not

 
                                       14
<PAGE>   15
 
only by such legislation or regulations of general applicability, but also by
industry-specific legislation or regulations.
 
     The Company's subsidiaries' ability to comply with applicable laws and
rules is dependent in large part upon the establishment and maintenance of a
compliance system designed to monitor compliance with such laws and rules, as
well as the Company's ability to attract and retain qualified compliance
personnel. The Company and its subsidiaries could in the future be subject to
disciplinary or other actions due to claimed noncompliance which could have a
material adverse effect on the Company's business, financial condition and
operating results.
 
LIMITED OPERATING HISTORY AS STAND-ALONE COMPANY
 
     The Company is a holding company formed in November 1996 to effect the
Acquisition. It conducts its business solely through its subsidiaries. Prior to
the Acquisition, Tucker Anthony, Sutro and the Company's other subsidiaries were
indirect wholly owned subsidiaries of Hancock and prior to May 1, 1998, Cleary
Gull was an independent company. Consequently, the Company has a limited history
as a stand-alone company. In the past, Hancock or its affiliates provided
certain services to the Company, particularly short term financing and various
employee benefit and insurance services, and also limited legal and other
support services. The Company and its subsidiaries no longer obtain such
services from Hancock or its affiliates. See "Certain Relationships and Related
Transactions -- Relationship Between the Company and Hancock."
 
POTENTIAL ADVERSE MARKET EFFECT OF FUTURE SALES OF COMMON STOCK
 
     Sales of a substantial number of shares of Common Stock in the public
market, whether by public stockholders or by THL, SCP or employees of the
Company, could adversely affect the prevailing market price of the Common Stock
and could impair the Company's future ability to raise capital through an
offering of its equity securities. There will be 19,993,833 shares of Common
Stock outstanding immediately after completion of this offering, of which
9,231,324 shares will be freely tradeable. All other shares will be owned by
THL, Hancock, SCP or current or former Company employees and will be "restricted
securities" for purposes of the Securities Act of 1933, as amended (the
"Securities Act"), and, subject to the volume and other limitations set forth in
Rule 144 promulgated under the Securities Act, will be eligible for sale on or
about September 30, 1998. The Company, THL, Hancock, SCP and certain employees
of the Company are parties to an agreement which provides THL, Hancock, SCP and
such employees with certain registration rights. See "Certain Relationships and
Related Transactions" and "Shares Eligible for Future Sale."
 
HOLDING COMPANY STRUCTURE
 
     Substantially all of the revenues of the Company are generated by Tucker
Anthony, Sutro, Cleary Gull and Freedom Capital, and their subsidiaries. Freedom
Securities Corporation, the issuer of the shares offered hereby, relies
exclusively on financing activities and distributions from its subsidiaries for
funds required to pay dividends, implement its strategies and redeem or
repurchase shares of outstanding capital stock. The Company's ability to receive
distributions from its subsidiaries may be limited by the Net Capital Rules,
restrictions which may be imposed by the Credit Facility or successor borrowing
arrangements of the Company's subsidiaries, or by the earnings, financial
condition and cash requirements of the Company's subsidiaries. Additionally,
there can be no assurance that the Company will be able to obtain funds through
financing activities. These factors may impose limitations on or prevent the
Company from paying dividends, implementing its strategies or repurchasing
shares of its capital stock.
 
INTEGRATION AND OTHER RISKS ASSOCIATED WITH ACQUISITION STRATEGY
 
     The Company expects to continue a strategy of identifying and acquiring
companies with complementary businesses which would strengthen or expand the
firm's geographical or product offering base. There can be no assurance that the
Company will be able to identify appropriate acquisition candidates, negotiate
appropriate acquisition terms, obtain financing which may be needed to effect
such acquisitions or integrate acquisitions

 
                                       15
<PAGE>   16
 
successfully into the Company's operations. Additionally, there can be no
assurance that any such acquisitions will contribute to the profitability of the
Company.
 
BOARD OF DIRECTORS' ABILITY TO DESIGNATE TERMS AND AUTHORIZE ISSUANCE OF BLANK
CHECK PREFERRED STOCK
 
     The Company is authorized to issue "blank check" preferred stock
("Preferred Stock"), which may be issued from time to time in one or more series
upon authorization by the Company's Board of Directors. The Board of Directors,
without further approval of the stockholders, is authorized to fix the dividend
rights, conversion rights, voting rights, redemption rights, liquidation
preferences, and any other rights, preferences, privileges and restrictions
applicable to each series of the Preferred Stock. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes could, among other things, adversely affect the voting
power and dividend rights of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Company's Common Stock at a premium or
otherwise adversely affect the market price of the Common Stock. See
"Description of Capital Stock -- Certain Certificate of Incorporation, Bylaw and
Statutory Anti-Takeover Provisions Affecting Stockholders."
 
USE OF DERIVATIVE FINANCIAL INSTRUMENTS
 
     The Company enters into derivatives transactions as part of its principal
trading activities, primarily to manage its own interest rate and price risks,
and also as an alternative to investment in the cash markets. While the use of
derivatives may allow the Company to better manage certain risks, derivatives
also have risks that are similar in type to the risks of the cash market
instruments to which their values are linked. For example, in times of market
stress, sharp price movements or reductions in liquidity in the cash markets may
be related to comparable or even greater price movements and reductions in
liquidity in the derivatives markets. Further, the risks associated with
derivatives are potentially greater than those associated with the related cash
market instruments because of the additional complexity and potential for
leverage. In addition, derivatives may create credit risk (the risk that a
counterparty on a derivative transaction will not fulfill its contractual
obligations), as well as legal, operational, reputational and other risks beyond
those associated with the underlying cash market instruments to which their
values are linked. The Company manages the risks associated with its derivative
financial instruments as part of its overall risk management policies and
procedures. There can be no assurance, however, that the Company's use of
derivatives may not have a material adverse effect on its results of operations
or financial condition in any period.
 
CONFLICTS OF INTEREST
 
     Certain key employees of the Company, including the executive officers of
the Company, make investments in, or make investments together with, certain of
the Company's equity capital markets clients through various investment
vehicles. See "Certain Relationships and Related Transactions -- Other
Transactions with Management -- Investment Partnerships." Conflicts of interest
could exist in situations where the investment objectives of such employees are
not aligned with those of such clients. The Company does not believe that any
such conflict of interest will have any adverse effect on the Company's
operations or financial condition. The Company believes that no material
conflicts of interest exist between the Company or its employees, on the one
hand, and investors in this offering, on the other.
 
RESTRICTION ON PAYMENT OF DIVIDENDS
 
     The Predecessor Company paid dividends on its Common Stock each year from
1991 to 1995. No dividends were paid by the Company in 1996 or 1997. The
Company's Board of Directors has declared a dividend of $0.04 per share on the
outstanding shares of Common Stock payable in the third quarter of 1998 with
respect to the second quarter of 1998 and currently intends to pay similar
dividends on a quarterly basis. The timing and amount of future dividends will
be determined by the Board and will depend, among other factors, upon the
Company's earnings, financial condition and cash requirements at the time such
payment is considered. Furthermore, the net capital rules of the various
regulatory bodies impose limitations on the payment of dividends by the Company.
See "Dividend Policy."

 
                                       16
<PAGE>   17
 
CERTAIN CERTIFICATE OF INCORPORATION, BYLAW AND STATUTORY ANTI-TAKEOVER
PROVISIONS AFFECTING STOCKHOLDERS
 
     The Company's Certificate of Incorporation and Bylaws and certain statutes
affecting the Company contain provisions that might diminish the likelihood that
a potential acquiror would make an offer for the Common Stock, or impede a
transaction favorable to the interests of the stockholders, or increase the
difficulty of removing the incumbent Board of Directors and management. These
provisions with respect to the Company's Certificate of Incorporation and Bylaws
include (i) the authority of the Board of Directors to issue a series of
preferred stock with such voting rights and other powers as the Board of
Directors may determine; (ii) the inability of stockholders to take any action
without a meeting or to call a special meeting of stockholders; and (iii)
certain advance notice procedures for nominating candidates for election as
directors and for submitting proposals for consideration at stockholders'
meetings. See "Description of Capital Stock -- Certain Certificate of
Incorporation, Bylaw and Statutory Anti-Takeover Provisions Affecting
Stockholders."

 
                                       17
<PAGE>   18
 
                                USE OF PROCEEDS
 
     The Company will not receive any proceeds from the sale of shares of Common
Stock offered hereby by the Selling Stockholders. See "Principal and Selling
Stockholders."
 
                                DIVIDEND POLICY
 
     The Predecessor Company paid dividends on its Common Stock each year from
1991 to 1995. No dividends were paid by the Company in 1996 or 1997. The
Company's Board of Directors has declared a dividend of $0.04 per share on the
outstanding shares of Common Stock payable in the third quarter of 1998 with
respect to the second quarter of 1998 and currently intends to pay similar
dividends on a quarterly basis. The timing and amount of future dividends will
be determined by the Board and will depend, among other factors, upon the
Company's earnings, financial condition and cash requirements at the time such
payment is considered. Furthermore, the net capital rules of the various
regulatory bodies impose limitations on the payment of dividends by the Company.
See "Risk Factors -- Restriction on Payment of Dividends" and Note 10 to the
Company's Consolidated Financial Statements included elsewhere in this
Prospectus.

 
                                       18
<PAGE>   19
 
                                 CAPITALIZATION
 
     The following table sets forth the long-term debt and total capitalization
of the Company as of June 30, 1998.
 
<TABLE>
<CAPTION>
                                                                AS OF JUNE 30, 1998
                                                                -------------------
                                                                  (IN THOUSANDS)
<S>                                                             <C>
Long-term debt:
  Credit Facility...........................................         $     --
  Fixed Asset Facility......................................           19,125
                                                                     --------
          Total long-term borrowings........................           19,125
Stockholders' equity:
  Common Stock, $.01 par value; 60,000,000 shares
     authorized; 19,993,833 shares issued and outstanding...              200
  Additional paid-in capital................................          181,645
  Retained earnings.........................................           30,826
                                                                     --------
          Total stockholders' equity........................          212,671
                                                                     --------
                      Total capitalization..................         $231,796
                                                                     ========
</TABLE>

 
                                       19
<PAGE>   20
 
           SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
 
     The selected consolidated financial data set forth below for the six months
ended June 30, 1998 and 1997 are derived from consolidated financial statements
not included in this Prospectus and have not been audited by Ernst & Young, LLP,
independent accountants. The selected consolidated financial data set forth
below as of December 31, 1996 and 1997 and for the one month period ended
December 31, 1996 and year ended December 31, 1997 are derived from the
consolidated financial statements of the Company included elsewhere in this
Prospectus which have been audited by Ernst & Young LLP, independent
accountants. The selected consolidated financial data set forth below for the
year ended December 31, 1995 and for the eleven months ended November 29, 1996
are derived from the consolidated financial statements of the Predecessor
Company included elsewhere in this Prospectus which have been audited by Ernst &
Young LLP, independent accountants. The selected consolidated financial data as
of December 31, 1993, 1994 and 1995 and for the years ended December 31, 1993
and 1994 are derived from financial statements of the Predecessor Company, also
audited by Ernst & Young LLP, not included in this Prospectus. The historical
results are not necessarily indicative of the results of operations to be
expected in the future. The following financial data are qualified in their
entirety by, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
                                                 PREDECESSOR COMPANY                              COMBINED(1)
                                      ------------------------------------------                  ------------
                                                                      ELEVEN        ONE MONTH
                                       YEARS ENDED DECEMBER 31,    MONTHS ENDED       ENDED        YEAR ENDED     YEAR ENDED
                                      --------------------------   NOVEMBER 29,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                       1993      1994      1995        1996            1996           1996           1997
                                                           (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S>                                   <C>       <C>       <C>      <C>             <C>            <C>            <C>
STATEMENT OF INCOME DATA:
  Revenues:
    Commissions.....................  $131.1    $122.9    $140.2      $139.0           $12.5         $151.5         $167.2
    Principal transactions..........   125.3      85.3     105.8        95.5            8.4           103.9           99.3
    Investment banking..............    63.0      40.1      34.8        34.0            4.1            38.1           55.2
    Asset management................    12.6      13.0      14.9        17.3            1.7            19.0           19.9
    Other...........................    12.9      13.7      12.7        15.2            0.6            15.8           12.5
                                      ------    ------    ------      ------          -----          ------         ------
        Total operating revenues....   344.9     275.0     308.4       301.0           27.3           328.3          354.1
    Interest income.................    40.7      52.1      60.1        46.5            3.3            49.8           44.1
                                      ------    ------    ------      ------          -----          ------         ------
        Total revenues..............   385.6     327.1     368.5       347.5           30.6           378.1          398.2
    Interest expense................    21.1      30.2      36.0        26.5            1.8            28.3           22.4
                                      ------    ------    ------      ------          -----          ------         ------
        Net revenues(2).............   364.5     296.9     332.5       321.0           28.8           349.8          375.8
  Non-interest expenses:
    Compensation and benefits.......   236.4     198.3     217.6       209.2           18.9           228.1          245.9(3)
    Occupancy and equipment.........    26.0      25.8      26.1        31.0            2.2            33.2           24.3
    Communications..................    15.8      16.4      18.1        16.6            1.3            17.9           17.0
    Brokerage and clearance.........     7.9       7.5       7.3        10.5            1.0            11.5           11.3
    Promotional.....................     9.2       7.9       9.5         9.1            0.8             9.9           10.3
    Other...........................    40.5      30.1      31.6        24.2            2.6            26.8           28.5
                                      ------    ------    ------      ------          -----          ------         ------
        Total non-interest
          expenses..................   335.8     286.0     310.2       300.6           26.8           327.4          337.3
                                      ------    ------    ------      ------          -----          ------         ------
  Acquisition interest expense......      --        --        --          --            0.6             0.6            6.1
                                      ------    ------    ------      ------          -----          ------         ------
  Income before income taxes........    28.7      10.9      22.3        20.4            1.4            21.8           32.4
  Income taxes......................    12.0       4.5       9.2         8.8            0.7             9.5           13.7
                                      ------    ------    ------      ------          -----          ------         ------
  Net income before extraordinary
    item............................    16.7       6.4      13.1        11.6            0.7            12.3           18.7
  Extraordinary item (net of
    applicable taxes of $0.9)(4)....      --        --        --          --             --              --             --
                                      ------    ------    ------      ------          -----          ------         ------
  Net income after extraordinary
    item............................  $ 16.7    $  6.4    $ 13.1      $ 11.6          $ 0.7          $ 12.3         $ 18.7
                                      ======    ======    ======      ======          =====          ======         ======
  Basic earnings per share before
    extraordinary item(5)...........      --        --        --          --          $0.05              --         $ 1.31
                                                                                      =====                         ======
  Diluted earnings per share before
    extraordinary item(5)...........      --        --        --          --           0.05              --           1.27
                                                                                      =====                         ======
  Basic earnings per share after
    extraordinary item(5)...........      --        --        --          --          $0.05              --         $ 1.31
                                                                                      =====                         ======
  Diluted earnings per share after
    extraordinary item(5)...........      --        --        --          --           0.05              --           1.27
                                                                                      =====                         ======
 
<CAPTION>
 
                                         SIX MONTHS
                                            ENDED
                                          JUNE 30,
                                      -----------------
                                       1997      1998
                                         (UNAUDITED)
<S>                                   <C>       <C>
STATEMENT OF INCOME DATA:
  Revenues:
    Commissions.....................    $77.7     $94.5
    Principal transactions..........     44.6      50.9
    Investment banking..............     22.0      45.8
    Asset management................      9.5      11.9
    Other...........................      6.4       6.9
                                      -------   -------
        Total operating revenues....    160.2     210.0
    Interest income.................     21.2      25.8
                                      -------   -------
        Total revenues..............    181.4     235.8
    Interest expense................     11.8      14.0
                                      -------   -------
        Net revenues(2).............    169.6     221.8
  Non-interest expenses:
    Compensation and benefits.......    109.7     146.4(3)
    Occupancy and equipment.........     12.9      13.1
    Communications..................      8.6       9.0
    Brokerage and clearance.........      5.6       6.2
    Promotional.....................      4.5       6.5
    Other...........................     14.2      17.3
                                      -------   -------
        Total non-interest
          expenses..................    155.5     198.5
                                      -------   -------
  Acquisition interest expense......      3.0       1.5
                                      -------   -------
  Income before income taxes........     11.1      21.8
  Income taxes......................      4.7       9.2
                                      -------   -------
  Net income before extraordinary
    item............................      6.4      12.6
  Extraordinary item (net of
    applicable taxes of $0.9)(4)....       --       1.2
                                      -------   -------
  Net income after extraordinary
    item............................  $   6.4   $  11.4
                                      =======   =======
  Basic earnings per share before
    extraordinary item(5)...........  $  0.45   $  0.73
                                      =======   =======
  Diluted earnings per share before
    extraordinary item(5)...........     0.44      0.69
                                      =======   =======
  Basic earnings per share after
    extraordinary item(5)...........  $  0.45   $  0.66
                                      =======   =======
  Diluted earnings per share after
    extraordinary item(5)...........     0.44      0.62
                                      =======   =======
</TABLE>

 
                                       20
<PAGE>   21
 
<TABLE>
<CAPTION>
                                            PREDECESSOR COMPANY
                                  ----------------------------------------                  COMBINED(1)
                                    YEARS ENDED DECEMBER        ELEVEN        ONE MONTH
                                            31,              MONTHS ENDED       ENDED        YEAR ENDED     YEAR ENDED
                                  ------------------------   NOVEMBER 29,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                   1993     1994     1995        1996            1996           1996           1997
                                                      (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S>                               <C>      <C>      <C>      <C>             <C>            <C>            <C>

STATEMENT OF FINANCIAL
  CONDITION DATA (AT END OF
  PERIOD):
  Total assets(6)..............   $1,159.8 $1,037.9 $1,214.0                                   $517.0         $727.6
  Long-term debt(7)............       --       --       --                                      110.8          101.4
  Stockholders' equity(7)......    140.0    145.4    152.7                                       79.5          102.3
  Book value per share of
    Common Stock outstanding...       --       --       --                                     $ 5.55         $ 6.96
OTHER FINANCIAL DATA:
  After-tax return on average
    equity(8)..................     12.6%     4.5%     8.8%                                      10.6%          20.6%
  Compensation and benefits
    expense as a percentage of
    net revenues...............     64.9     66.8     65.4                                       65.2           65.5
  Non-compensation and benefits
    operating expense as a
    percentage of net
    revenues...................     27.3     29.5     27.8                                       28.4           24.3
  Amortization of
    acquisition-related
    intangibles (in
    millions)..................       --       --       --          --          $ 0.2           $ 0.2          $ 2.5
  Assets in retail brokerage
    accounts (at end of period)
    (in billions)..............    $15.0    $17.0    $20.0                                      $23.0          $28.0
 
<CAPTION>
 
                                   SIX MONTHS
                                      ENDED
                                    JUNE 30,
                                 ---------------
                                  1997     1998
                                   (UNAUDITED)
<S>                              <C>      <C>
STATEMENT OF FINANCIAL
  CONDITION DATA (AT END OF
  PERIOD):
  Total assets(6)..............  $542.6   $655.5
  Long-term debt(7)............   108.7     19.1
  Stockholders' equity(7)......    85.6    212.7
  Book value per share of
    Common Stock outstanding...  $ 6.03   $10.64
OTHER FINANCIAL DATA:
  After-tax return on average
    equity(8)..................    15.5%    15.1%
  Compensation and benefits
    expense as a percentage of
    net revenues...............    64.7     66.0(3)
  Non-compensation and benefits
    operating expense as a
    percentage of net
    revenues...................    27.0     23.5
  Amortization of
    acquisition-related
    intangibles (in
    millions)..................   $ 1.2    $ 3.5(9)
  Assets in retail brokerage
    accounts (at end of period)
    (in billions)..............   $24.6    $29.3
</TABLE>
 
------------------------------
 
(1) Year ended December 31, 1996 combined financial data refer to the
    consolidated results of the Predecessor Company for the eleven months ended
    November 29, 1996 combined with the consolidated results of the Company for
    the one month ended December 31, 1996. These periods are not directly
    comparable due to the effects of the Acquisition, including related purchase
    accounting adjustments and the Acquisition financing.
 
(2) Net revenues equals total revenues less interest expense other than the
    Acquisition interest expense.
 
(3) Includes the effect of $1.4 million and $0.5 million of non-cash
    compensation expense for the year ended December 31, 1997 and for the six
    months ended June 30, 1998, respectively, resulting from issuance of Common
    Stock and stock options to employees.
 
(4) The extraordinary item is a write-off of capitalized debt issuance costs
    resulting from the early retirement of $77.5 million in debt with proceeds
    from the Company's second quarter initial public offering.
 
(5) Basic earnings per share ("Basic EPS") is calculated by dividing net income
    by the weighted average number of outstanding shares. Diluted earnings per
    share ("Diluted EPS") also includes the effects of the issuance of stock
    options and other exercisable shares. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations -- Earnings Per
    Share" for a detailed calculation of earnings per share.
 
(6) The decline in total assets from December 31, 1995 to December 31, 1996 is
    primarily attributable to the initiation of the Wexford clearing arrangement
    pursuant to which certain customer and broker-dealer balances are no longer
    included on the Company's Statements of Financial Condition.
 
(7) The decrease in stockholders' equity and increase in long-term debt from
    December 31, 1995 to December 31, 1996 was primarily a result of the
    Acquisition. The decrease in long-term debt and increase in stockholders'
    equity from December 31, 1997 to June 30, 1998 was related to the early
    retirement of debt with proceeds from the Company's second quarter initial
    public offering.
 
(8) After-tax return on average equity is calculated by dividing net income
    after extraordinary item by average stockholders' equity for the year or six
    month period. For the six months ended June 30, 1998, after-tax return on
    average equity before extraordinary item was 16.7%.
 
(9) Includes amortization of acquisition-related goodwill of $1.0 million,
    write-off of debt issuance costs of $2.4 million and amortization of
    goodwill relating to the acquisition of Cleary Gull of $0.1 million.

 
                                       21
<PAGE>   22
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion should be read in conjunction with "Selected
Historical Consolidated Financial and Other Data" and the Company's Consolidated
Financial Statements and Notes thereto, each appearing elsewhere in this
Prospectus. In addition to historical information, the following Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ significantly from those anticipated in
these forward-looking statements as a result of certain factors, including those
discussed in "Risk Factors" contained elsewhere in this Prospectus.
 
BUSINESS ENVIRONMENT
 
     The Company's retail securities brokerage activities, as well as its
investment banking, investment advisory, institutional sales and trading and
equity research services, are highly competitive 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
and 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. Declining interest rates and a
favorable economic environment contributed to a significant increase in activity
in the equity markets in the United States since the latter part of 1995. The
Company's financial results have been and may continue to be subject to
fluctuations due to these and other factors. Consequently, the results of
operations for a particular period may not be indicative of results to be
expected for other periods.
 
EQUITY PARTICIPATION OF EMPLOYEES
 
     In connection with the Company's April 1998 initial public offering,
employees sold no shares of the Company's Common Stock and purchased their
entire allocation of 335,000 shares. As of June 30, 1998, the Company's
employees, including senior management and investment executives, owned in
excess of 31% of the Company's outstanding Common Stock. Management believes
that significant employee ownership has resulted in progressively higher levels
of employee motivation, confidence and commitment.
 
     Incentive equity programs have been established pursuant to which employees
have acquired or may acquire additional equity of the Company, which when added
to the shares currently owned would result in employees owning approximately 45%
of the Company's outstanding Common Stock.
 
THE ACQUISITION
 
     The Acquisition of the Company occurred in November 1996. Discussions
herein with respect to 1996 refer to the consolidated results of the Predecessor
Company for the eleven months ended November 29, 1996 combined with the
consolidated results of the Company for the one month period ended December 31,
1996. As a result of purchase accounting in connection with the Acquisition, the
Company's goodwill, which is amortized over a period of 15 years, increased by
$14.7 million dollars in 1996. As part of the Acquisition, the Company increased
its level of long-term indebtedness and experienced an attendant increase in
annual interest expense. The net proceeds of the initial public offering to the
Company, together with available cash, were used to repay this indebtedness and,
as a result, the Company recorded an extraordinary item of $2.2 million ($1.2
million on an after-tax basis) for the write-off of capitalized debt issuance
costs during the period in which the initial public offering was consummated.
The effects of the Acquisition impact the comparability of the Company's
financial results with those of the Predecessor Company.
 
     The Company believes that, especially during the months prior to the
Acquisition and to some extent immediately thereafter, uncertainty regarding a
change in ownership of the Company and the subsequent transition adversely
affected the business of the Company. In management's opinion, employee
purchases of equity of the Company in conjunction with the Acquisition and the
consummation of the Acquisition have

 
                                       22
<PAGE>   23
 
significantly enhanced employee motivation and the Company's ability to retain
existing employees and improved its ability to recruit additional investment
professionals.
 
CONTRIBUTION OF PRINCIPAL SUBSIDIARIES
 
     During 1996 and 1997, Tucker Anthony contributed 62% and 59%, respectively,
of the Company's total operating revenues while Sutro contributed 32% and 35%,
respectively, of total operating revenues and Freedom Capital contributed 6% of
total operating revenues in each of 1996 and 1997. During these periods, Tucker
Anthony and Freedom Capital contributed a significantly greater percentage of
the Company's net operating income than their respective contributions to total
operating revenues. As a result of initiatives to improve the productivity of
Sutro, its profit margins have been improving since 1995.
 
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 ("OTC") agency, mutual fund, insurance, and
annuity transactions. Principal transactions revenues include gains and losses
from the trading of securities by the Company as principal including principal
sales credits and dividends. 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
and portfolio management services to institutional and high net worth investors.
Other revenues primarily consist of transaction fees, retirement plan revenue
and third party correspondent clearing fees. 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. Net revenues equal total revenues less interest expense. 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.
 
     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. Brokerage and clearance
expense includes the cost of securities clearance, floor brokerage and exchange
fees. Communications expense includes service charges for telecommunications,
news and market data services. Occupancy and equipment expense includes rent and
operating expenses for facilities, expenditures for repairs and maintenance, and
depreciation of furniture, fixtures, leasehold improvements, business equipment
and computer equipment. Promotional expense includes travel, entertainment and
advertising. Other expenses include general and administrative expenses,
including professional services, litigation expenses, goodwill amortization,
data processing and other miscellaneous expenses. Acquisition interest expense
represents the interest expense incurred under the Credit Facility.

 
                                       23
<PAGE>   24
 
RESULTS OF OPERATIONS
 
     The following table sets forth certain financial data as a percentage of
net revenues:
 
<TABLE>
<CAPTION>
                                                                            SIX MONTHS
                                                                              ENDED
                                            YEARS ENDED DECEMBER 31,         JUNE 30,
                                           ---------------------------    --------------
                                           1995(1)    1996(2)    1997     1997     1998
<S>                                        <C>        <C>        <C>      <C>      <C>
Revenues:
  Commissions............................    42.1%      43.3%     44.5%    45.8%    42.6%
  Principal transactions.................    31.8       29.7      26.4     26.3     23.0
  Investment banking.....................    10.5       10.9      14.7     13.0     20.6
  Asset management.......................     4.5        5.4       5.3      5.6      5.4
  Other..................................     3.8        4.5       3.3      3.8      3.1
                                            -----      -----     -----    -----    -----
     Total operating revenues............    92.7       93.8      94.2     94.5     94.7
  Interest income........................    18.1       14.2      11.7     12.5     11.7
                                            -----      -----     -----    -----    -----
     Total revenues......................   110.8      108.0     105.9    107.0    106.4
  Interest expense.......................    10.8        8.0       5.9      7.0      6.4
                                            -----      -----     -----    -----    -----
     Net revenues........................   100.0      100.0     100.0    100.0    100.0
Non-interest expenses:
  Compensation and benefits..............    65.4       65.2      65.5(3)  64.7     66.0(3)
  Occupancy and equipment................     7.9        9.5       6.5      7.6      5.9
  Communications.........................     5.4        5.1       4.5      5.0      4.1
  Brokerage and clearance................     2.2        3.3       3.0      3.3      2.8
  Promotional............................     2.9        2.8       2.7      2.6      2.9
  Other..................................     9.5        7.7       7.6      8.4      7.8
                                            -----      -----     -----    -----    -----
     Total non-interest expenses.........    93.3       93.6      89.8     91.6     89.5
                                            -----      -----     -----    -----    -----
Acquisition interest expense.............      --        0.2       1.6      1.8      0.7
                                            -----      -----     -----    -----    -----
Income before income taxes...............     6.7        6.2       8.6      6.6      9.8
Income taxes.............................     2.8        2.7       3.6      2.8      4.1
                                            -----      -----     -----    -----    -----
Net income before extraordinary item.....     3.9        3.5       5.0      3.8      5.7
Extraordinary item (net of applicable
  taxes).................................      --         --        --       --      0.6
                                            -----      -----     -----    -----    -----
Net income after extraordinary item......     3.9%       3.5%      5.0%     3.8%     5.1%
                                            =====      =====     =====    =====    =====
</TABLE>
 
------------------------------
(1) Predecessor Company.
 
(2) 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 the one month ended December 31, 1996.
 
(3) Includes the effect of $1.4 million and $0.5 million of non-cash
    compensation expense for the year ended December 31, 1997 and for the six
    months ended June 30, 1998, respectively, resulting from issuance of Common
    Stock and stock options to employees.
 
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
 
     The Company experienced strong operating results in the first six months of
1998 compared to the first six months of 1997. Revenues increased in all of the
Company's operating subsidiaries and total non-interest expenses declined as a
percentage of net revenues. Net income increased $5.0 million or 78% to $11.4
million in the first half of 1998 from net income of $6.4 million in the
comparable 1997 period, including the effect of deducting an after-tax
extraordinary item of $1.2 million in the 1998 period related to the early
retirement of $77.5 million in debt with proceeds from the Company's second
quarter initial public offering. Excluding this extraordinary item, net income
increased 97% to $12.6 million in the first half of 1998.
 
                                       24
<PAGE>   25
 
     Total operating revenues increased $49.8 million or 31% to $210.0 million
in the six months ended June 30, 1998 from $160.2 million in the same period in
1997. Net revenues increased $52.2 million or 31% to $221.8 million in the 1998
period compared with 1997.
 
     Commission revenues increased $16.8 million or 22% to $94.5 million in the
first six months of 1998 from $77.7 million in the first six months of 1997, due
to increased volume in the Company's retail businesses, reflecting a higher
level of market activity, a greater number of investment executives and
increased average production per retail investment executive. During the first
half of 1998 the Company added 57 new investment executives averaging over
$450,000 of trailing twelve month production which is above the Company's
existing overall average retail production levels.
 
     Principal transactions revenues increased $6.3 million or 14% to $50.9
million in the first half of 1998 from $44.6 million in the comparable 1997
period primarily due to higher risk arbitrage and fixed income trading profits
in 1998. In addition, the first half 1997 trading results were negatively
impacted by a mortgage-backed securities trading loss of $1.3 million.
 
     The Company had strong investment banking results in the first half of 1998
evidenced by an increase in revenues of $23.8 million or 108% to $45.8 million
from $22.0 million in the first half of 1997. The improved investment banking
revenues resulted from higher public offering fees, increased fees from merger
and acquisition activities and the first time inclusion of financial results of
Cleary Gull.
 
     Asset management revenues increased $2.4 million or 25% to $11.9 million in
the first six months of 1998 from $9.5 million in the first six months of 1997.
This revenue increase reflected an overall growth in assets under management,
which resulted from both new money added to the funds as well as asset
appreciation arising from equity market performance.
 
     Interest income increased $4.6 million or 22% to $25.8 million in the first
six months of 1998 from $21.2 million in the first six months of 1997, due
primarily to the combination of higher interest income on customer balances and
greater stock borrow activity. Interest expense, excluding those expenses
associated with financing the Acquisition, increased $2.2 million or 19% to
$14.0 million in the first half of 1998 from $11.8 million in the comparable
1997 period primarily reflecting higher average inventory balances.
 
     In 1998 the Company has shown considerable improvement in overall
productivity, as well as expense management, evidenced by the increased
operating pre-tax margin of 11% in the first half of 1998 from 8% in the first
half of 1997. On the expense side, total non-interest expenses increased $43.0
million or 28% to $198.5 million in the first half of 1998 from $155.5 million
in the comparable 1997 period primarily due to higher compensation expenses. The
Company experienced a lower non-compensation expense growth rate of 14% compared
to net revenue growth of 31% in 1998 versus the first six months of 1997.
 
     Compensation and benefits expense increased $36.7 million or 33% to $146.4
million in the six months ended June 30, 1998 from $109.7 million in the same
period in 1997, primarily due to increased incentive and production-related
compensation attributable to higher revenues. Compensation and benefits as a
percentage of net revenues increased to 66% in the first six months of 1998
compared to 65% the first six months of 1997 reflecting aggressive new hiring in
the Company's retail and equity capital markets groups and provisions for
non-cash compensation related to employee stock purchases.
 
     All other operating expenses increased an aggregate of $6.3 million or 14%
to $52.1 million for the first six months of 1998 from $45.8 million in the
first six months of 1997. In addition, all other operating expenses as a
percentage of net revenues declined to 23% in 1998 from 27% in 1997. Promotional
expenses increased $2.0 million or 45% to $6.5 million in the first half of 1998
from $4.5 million in the comparable 1997 period due to increased spending on
research conferences, advertising, business development and travel in 1998.
Other expenses increased $3.1 million or 22% to $17.3 million for the six months
ended June 30, 1998 from $14.2 million in the comparable 1997 period.
 
     The Company's income tax provisions for the six months ended June 30, 1998
and 1997 were $9.2 million and $4.7 million, respectively, which represented a
42% effective tax rate in each six month period.

 
                                       25
<PAGE>   26
 
  1997 COMPARED TO 1996
 
     The Company experienced strong operating results in 1997 compared to 1996.
Revenues increased in all of the Company's core businesses, with the exception
of principal transaction revenues, and expenses declined as a percentage of net
revenues. Net income increased $6.4 million or 52% to $18.7 million in 1997 from
net income of $12.3 million in 1996, even after deducting after-tax expenses of
$5.9 million in 1997 related to the Acquisition (primarily amortization of
goodwill and interest and other expenses related to the Credit Facility).
 
     Total operating revenues increased $25.8 million or 8% to $354.1 million in
1997 from $328.3 million in 1996. During 1996 and 1997, Tucker Anthony
contributed 62% and 59%, respectively, of the Company's total operating revenues
while Sutro contributed 32% and 35%, respectively, and Freedom Capital
contributed 6% in each year. Net revenues, including the effect of interest
income and interest expense, other than the Acquisition interest expense,
increased $26.0 million or 7% to $375.8 million in 1997 versus $349.8 million in
1996.
 
     Commission revenues increased $15.7 million or 10% to $167.2 million in
1997 from $151.5 million in 1996, due to increased business in the Company's
retail systems, reflecting the growth in listed share volume on all the major
equity exchanges and higher mutual fund commission revenue. During 1997, Tucker
Anthony and Sutro increased average production per retail investment executive
by 15% and 13%, respectively, over the prior year.
 
     Principal transaction revenues declined $4.6 million or 4% to $99.3 million
in 1997 from $103.9 million in 1996, mainly due to the combined result of
management's decision to discontinue certain institutional fixed income business
resulting in a decline of $1.5 million, the $1.3 million net effect of a
decrease in convertible arbitrage trading profits as interest rates declined
during the period partially offset by improvement in risk arbitrage trading, a
$0.8 million improvement in the trading of equities and a mortgage-backed
securities trading loss of $2.6 million caused by a former employee.
 
     Investment banking revenues increased $17.1 million or 45% to $55.2 million
in 1997 from $38.1 million in the prior year. The higher investment banking
revenues resulted from increased underwriting activity, similar to that
experienced in the securities industry generally, and due to the Company's
refocused and increased emphasis on the public offering business at Tucker
Anthony and Sutro. Tucker Anthony or Sutro collectively managed or co-managed 34
public equity offerings during 1997 compared to 16 during 1996 and generated an
increase in private placement, advisory and merger and acquisition fees of 17%
over 1996.
 
     Asset management revenues increased $0.9 million or 5% to $19.9 million in
1997 from $19.0 million in 1996. This revenue increase arose primarily in the
institutional area where assets grew 14% to $1.7 billion and related revenues
increased 21% or $1.0 million in 1997, reflecting the full year effect of new
accounts at year-end 1996 and asset appreciation arising from equity market
performance which produced higher fee income. Revenues from other areas of the
asset management business were essentially unchanged from 1996 as higher money
market fee income in 1997 was largely offset by lower revenues in the taxable
advisory business which discontinued its tax preparation services at year-end
1996. Total assets under management grew to $5.6 billion at year end 1997 from
$5.1 billion at year end 1996.
 
     Other income decreased $3.3 million or 21% to $12.5 million in 1997 from
$15.8 million in 1996. This decrease resulted primarily from the mid-1997
expiration of a five year contract with John Hancock Broker Distribution
Services under which the Company recovered mutual fund sales charges.
 
     Interest income decreased a net of $5.7 million or 11% to $44.1 million in
1997 from $49.8 million in 1996, due primarily to the combination of $4.4
million of higher interest income on customer balances more than offset by a
$10.1 million decline in interest income mainly on lower average government bond
inventories. Interest expense, excluding those expenses associated with
financing the Acquisition, decreased $5.9 million or 21% to $22.4 million in
1997 from $28.3 million in 1996, reflecting lower average inventory balances.
 
     Total non-interest expenses increased $9.9 million or 3% to $337.3 million
in 1997 from $327.4 million in 1996. This increase was the result of higher
production-related compensation principally attributable to higher revenues
partially offset by reduced operating expenses mainly resulting from the
Company's outsourcing of its

 
                                       26
<PAGE>   27
 
clearing function to Wexford and other cost efficiencies. Although the Company's
income statement refers to brokerage and clearance as a specific category of
expense, the compensation, occupancy and other expense categories also included
costs associated with the Company's clearing activity, both while self clearing
and after its conversion to Wexford. The Company achieved substantial savings in
these expense categories as a result of the Wexford clearing arrangement, even
after the incurrence of $4.5 million of one-time occupancy expense in
conjunction with entering into the Wexford clearing arrangement. The Company
began to clear through Wexford in April 1996; consequently, comparisons between
1996 and 1997 do not reflect the full cost savings experienced as a result of
the new clearing arrangement.
 
     Compensation and benefits expense increased $17.8 million or 8% to $245.9
million in 1997 from $228.1 million in 1996, primarily due to increased
incentive and production-related compensation, offset by lower fixed expenses
resulting from back office support personnel reductions associated with the
outsourcing of the Company's clearing function in 1996 and substantial
organizational changes in the fixed income area. Compensation and benefits as a
percentage of net revenues remained virtually unchanged at 65% in 1997 as
compared to 1996. During 1997, the Company incurred $1.4 million of non-cash
compensation expense resulting from issuance of Common Stock and stock options
to its employees.
 
     Despite substantially increased clearing activity, brokerage and clearance
expenses declined slightly to $11.3 million in 1997 compared to $11.5 million in
1996, primarily as a result of the cost effective Wexford clearing arrangement.
 
     All other operating expenses decreased an aggregate of $7.7 million or 9%
to $80.1 million for 1997 from $87.8 million in 1996, primarily due to the
realization of benefits from outsourcing and other cost efficiencies initiated
by management. All other expenses as a percentage of net revenues declined to
21% in 1997 from 25% in 1996. Specifically, communications expense decreased
$0.9 million, or 5%, and occupancy and equipment expense decreased $8.9 million,
or 27% (including a one-time charge of $4.5 million in 1996 related to entering
into the Wexford clearing arrangement). These decreases were partially offset by
an increase in promotional expense of $0.4 million or 4% and an increase in
other expenses which totaled $28.5 million in 1997 (including $1.9 million in
goodwill amortization relating to the Acquisition), as compared to 1996 when
other expenses totaled $26.8 million (including a one-time credit of $6.3
million due to an insurance recovery associated with litigation expenses
incurred during a prior period). Without giving effect to such amortization
expense and insurance recovery, other expenses decreased $6.5 million or 20%
compared to 1996, primarily as a result of the Wexford clearing arrangement.
 
     The Company's income tax provisions in 1997 and 1996 were $13.7 million and
$9.5 million, respectively, which represented a 42% effective tax rate in 1997
and a 44% effective tax rate in 1996. The lower effective tax rate in 1997 was
due mainly to an increase in non-taxable dividend income.
 
  1996 COMPARED TO 1995
 
     Total operating revenues increased $19.9 million or 6% to $328.3 million in
1996 from $308.4 million in 1995. The Company, along with the rest of the
securities industry, benefited during 1996 from continued strength in the equity
markets and resultant higher trading volumes. In particular, agency commission
income, OTC principal sales credits and asset management fee income increased
substantially over the prior year. Revenues from fixed income trading and
institutional sales declined, partially offsetting these gains. Net income
decreased $0.8 million or 6% to $12.3 million in 1996 from $13.1 million in
1995.
 
     Commission revenues increased $11.3 million or 8% to $151.5 million in 1996
from $140.2 million in 1995 reflecting higher sales of both listed and OTC
securities and increased mutual fund business.
 
     Principal transaction revenues decreased $1.9 million or 2% to $103.9
million in 1996 from $105.8 million in 1995, primarily as a result of a $0.6
million decline in certain institutional fixed income business and a $1.4
million decline in over the counter trading activity, particularly in the
municipal bond business of Tucker Anthony. Accordingly, management took steps in
1996 to curtail further such losses by downsizing the fixed income group and
redirecting the municipal bond trading business away from institutional sales
and trading towards support of retail operations.

 
                                       27
<PAGE>   28
 
     Investment banking revenues increased $3.3 million or 9% to $38.1 million
in 1996 from $34.8 million in 1995, primarily due to an increase in underwriting
and management fees of $4.3 million partially offset by lower public finance
fees which decreased $0.9 million.
 
     Asset management revenues increased $4.1 million or 28% to $19.0 million in
1996 from $14.9 million in 1995, due to growth in fees from the Company's asset
management subsidiary, Freedom Capital. Assets under management grew from $4.6
billion at the end of 1995 to $5.1 billion at the end of 1996, reflecting
increases of approximately $300 million in money market funds and $200 million
in institutional funds.
 
     Other income increased $3.1 million or 24% to $15.8 million in 1996 from
$12.7 million in 1995, primarily reflecting an increase of $1.0 million in
Hancock mutual fund distribution fees and $1.5 million from the sale of
securities obtained from litigation settlements.
 
     Interest income decreased $10.3 million or 17% to $49.8 million in 1996
from $60.1 million in 1995 reflecting the combined effects of a reduced level of
bond inventories ($5.3 million lower interest income), and decreased stock
borrowing activity ($5.0 million). Interest expense, excluding those expenses
associated with financing the Acquisition in 1996, decreased $7.7 million or 21%
to $28.3 million in 1996 from $36.0 million in 1995 due in part to reduced stock
loan activity.
 
     Total non-interest expenses increased $17.2 million or 6% to $327.4 million
in 1996 from $310.2 million in 1995, largely as a result of increased
production-based compensation. During 1996, the Company incurred a one-time
charge of $4.5 million, included in occupancy and equipment expense, in
conjunction with entering into its Wexford clearing arrangement and the related
abandonment of certain properties previously leased for the Company's clearing
operations.
 
     Compensation and benefits expenses increased $10.5 million or 5% to $228.1
million in 1996 from $217.6 million in 1995, primarily due to payment of higher
commissions, resulting from higher retail revenues, and increased
production-based compensation.
 
     Brokerage and clearance expenses increased $4.2 million or 58% to $11.5
million in 1996 from $7.3 million in 1995. This increase is primarily
attributable to the costs associated with clearing through Wexford. Clearing
expenses in 1995, while the Predecessor Company was self-clearing, were also
reported in compensation, occupancy and other expense categories of the income
statement.
 
     Occupancy and equipment expense increased $7.1 million or 27% to $33.2
million in 1996 from $26.1 million in 1995 primarily due to a $4.5 million
provision for future lease obligations pertaining to New York office space which
was previously occupied by the Company's clearing and cash management
operations, which operations are now performed by Wexford effective April 1,
1996.
 
     All other expenses declined $4.6 million or 8% to $54.6 million in 1996
from $59.2 million in 1995. Specifically, communications expense decreased $0.2
million or 1%, promotional expense increased $0.4 million or 4%, and other
expenses decreased $4.8 million or 15%, attributable in large part to a $6.3
million insurance recovery related to litigation during a prior period.
 
     The Company's income tax provision for 1996 and 1995 was $9.5 million and
$9.2 million, respectively, which represented a 44% effective tax rate in 1996
and a 41% effective tax rate in 1995. The higher effective tax rate for 1996 was
due primarily to decreases in tax-exempt interest income and non-taxable
dividend income.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company receives dividends, interest on loans and other payments from
its subsidiaries which are the Company's primary source of funds to pay
expenses, service debt, and pay dividends. Distributions and interest payments
to the Company from its registered broker-dealer subsidiaries, which are
expected to be 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 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.

 
                                       28
<PAGE>   29
 
     On April 2, 1998, the Company completed a 7,400,000 share initial public
offering of its common stock, including 4,200,000 shares sold by the Company.
 
     Borrowings under the Credit Facility were repaid in full with the net
proceeds of the initial public offering to the Company, leaving the Company with
$19.1 million of indebtedness under a fixed asset credit facility secured by the
Company's fixed assets.
 
     The assets of the Company's primary operating subsidiaries, are highly
liquid with the majority 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. A relatively small percentage of total assets is fixed or held for a
period of longer than one year.
 
     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 is based on
its clearing arrangement with Wexford under which the Company can borrow on an
uncommitted collateralized basis against its proprietary inventory positions.
This financing is generally 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 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 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, 1994, December 31, 1995, December 31,
1996, December 31, 1997 and June 30, 1998 were $1,037.9 million, $1,214.0
million, $517.0 million, $727.6 million and $655.5 million, respectively. The
decline in total assets from December 31, 1995 to December 31, 1996 is primarily
attributable to the initiation of the Wexford clearing arrangement pursuant to
which certain customer and broker-dealer balances are no longer included in the
Company's Statements of Financial Condition.
 
     The Company's operating activities generate cash resulting from net income
earned during the period and fluctuations in the Company's current assets and
liabilities. The most significant fluctuations have resulted from changes in the
level of customer activity and changes in proprietary arbitrage trading
strategies dictated by prevailing market conditions.
 
     The Acquisition was funded through proceeds from the sale of Common Stock
and borrowings under the Credit Facility. The acquisition of Cleary Gull was
funded through the issuance of shares of the Company's Common Stock and with
funds generated from operating activities.
 
     The Company has historically financed capital expenditures through internal
cash generation and through the Fixed Asset Facility, established in 1996, which
matures in 2001. For the year ended December 31, 1997 and the six months ended
June 30, 1998, the Company had capital expenditures of approximately $2 million
and $1.8 million, respectively, which were funded from operations.
 
     In addition to normal operating requirements, capital is required to
satisfy financing and regulatory requirements on securities inventories and
investment banking commitments. 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. Management believes that
existing capital funds provided from operations, the current credit arrangements
with Wexford and unutilized credit facilities will be sufficient to finance the
operating subsidiaries' ongoing businesses.

 
                                       29
<PAGE>   30
 
QUARTERLY RESULTS
 
    The information set forth below is derived from unaudited quarterly results
of operations of the Company for each quarter of 1996, 1997 and 1998. The data
have been prepared by the Company on a basis consistent with the Consolidated
Financial Statements included elsewhere in this Prospectus and includes all
adjustments, consisting principally of normal recurring accruals, that the
Company considers necessary for a fair presentation thereof. These operating
results are not necessarily indicative of the Company's future performance.
<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                   ---------------------------------------------------------------------------------
                                     MARCH 31,    JUNE 30,    SEPTEMBER 30,   DECEMBER 31,    MARCH 31,    JUNE 30,
                                       1996         1996          1996           1996(1)        1997         1997
                                                                    (IN THOUSANDS)
<S>                                <C>           <C>          <C>             <C>           <C>           <C>
Revenues:
Commissions.......................    $41,313     $38,621        $32,823         $38,783       $40,098     $37,592
Principal transactions............     26,224      27,062         24,614          25,931        22,009      22,561
Investment banking................      7,266       9,567         10,107          11,161         9,569      12,416
Asset management..................      4,473       4,640          4,819           5,066         4,880       4,660
Other.............................      3,868       3,676          3,349           4,898         3,387       3,058
                                      -------     -------        -------         -------       -------     -------
  Total operating revenues........     83,144      83,566         75,712          85,839        79,943      80,287
Interest income...................     14,911      12,490         11,358          11,088        10,411      10,725
                                      -------     -------        -------         -------       -------     -------
  Total revenues..................     98,055      96,056         87,070          96,927        90,354      91,012
Interest expense..................      8,774       7,888          6,036           5,585         5,906       5,883
                                      -------     -------        -------         -------       -------     -------
  Net revenues....................     89,281      88,168         81,034          91,342        84,448      85,129
Non-interest expenses:
Compensation and benefits.........     58,363      56,566         52,358          60,759        54,476      55,261
Occupancy and equipment...........      6,826       7,235          7,303          11,860(3)      6,519       6,321
Communications....................      4,539       4,976          4,341           4,057         4,189       4,362
Brokerage and clearance...........      2,024       3,308          3,084           3,064         2,704       2,914
Promotional.......................      2,378       2,509          2,562           2,525         2,094       2,378
Other.............................      8,711       8,213          6,906           2,984(4)      6,929       7,314
                                      -------     -------        -------         -------       -------     -------
  Total non-interest expenses.....     82,841      82,807         76,554          85,249        76,911      78,550
Acquisition interest expense......         --          --             --             567         1,494       1,539
                                      -------     -------        -------         -------       -------     -------
Income before income taxes........      6,440       5,361          4,480           5,526         6,043       5,040
Income taxes......................      2,763       2,332          1,963           2,466         2,550       2,122
                                      -------     -------        -------         -------       -------     -------
Net income before extraordinary
  item............................      3,677       3,029          2,517           3,060         3,493       2,918
Extraordinary item (net of
  applicable taxes of $.922)(5)...         --          --             --              --            --          --
                                      -------     -------        -------         -------       -------     -------
Net income after extraordinary
  item............................    $ 3,677     $ 3,029        $ 2,517         $ 3,060       $ 3,493     $ 2,918
                                      =======     =======        =======         =======       =======     =======
 
<CAPTION>
                                                     THREE MONTHS ENDED
                                    ----------------------------------------------------
                                    SEPTEMBER 30,   DECEMBER 31,    MARCH 31,   JUNE 30,
                                        1997            1997          1998        1998
                                                       (IN THOUSANDS)
<S>                                 <C>             <C>             <C>         <C>
Revenues:
Commissions.......................     $45,948         $43,546      $ 46,306    $ 48,176
Principal transactions............      28,553          26,146        25,253      25,690
Investment banking................      15,018          18,256        13,712      32,047
Asset management..................       5,115           5,295         5,813       6,078
Other.............................       2,952           3,068         2,681       4,222
                                       -------         -------      --------    --------
  Total operating revenues........      97,586          96,311        93,765     116,213
Interest income...................      10,989          11,931        13,267      12,603
                                       -------         -------      --------    --------
  Total revenues..................     108,575         108,242       107,032     128,816
Interest expense..................       4,996           5,643         7,014       7,032
                                       -------         -------      --------    --------
  Net revenues....................     103,579         102,599       100,018     121,784
Non-interest expenses:
Compensation and benefits.........      68,196          68,006(2)     66,452(2)   79,885
Occupancy and equipment...........       6,378           5,113         6,187       6,942
Communications....................       4,385           4,012         4,123       4,920
Brokerage and clearance...........       2,872           2,772         2,756       3,420
Promotional.......................       2,783           3,053         2,756       3,728
Other.............................       6,956           7,281         7,798       9,521
                                       -------         -------      --------    --------
  Total non-interest expenses.....      91,570          90,237        90,072     108,416
Acquisition interest expense......       1,545           1,474         1,350         130
                                       -------         -------      --------    --------
Income before income taxes........      10,464          10,888         8,596      13,238
Income taxes......................       4,497           4,568         3,567       5,603
                                       -------         -------      --------    --------
Net income before extraordinary
  item............................       5,967           6,320         5,029       7,635
Extraordinary item (net of
  applicable taxes of $.922)(5)...          --              --            --       1,276
                                       -------         -------      --------    --------
Net income after extraordinary
  item............................     $ 5,967         $ 6,320      $  5,029    $  6,359
                                       =======         =======      ========    ========
</TABLE>
 
------------------------------
 
(1) Represents the consolidated results of the Predecessor Company for the two
    months ended November 29, 1996 combined with the consolidated results of the
    Company for the one month ended December 31, 1996.
 
(2) Includes $1.2 million of the $1.4 million non-cash compensation expense
    resulting from issuance of Common Stock and stock options to employees
    during 1997. Non-cash compensation for first quarter 1998 was $0.5 million.
 
(3) Includes $4.5 million in provisions for lease obligations pertaining to
    abandoned New York office space.
 
(4) Includes an insurance recovery in the amount of $6.3 million relating to
    litigation expenses incurred during prior periods.
 
(5) The extraordinary item is a write off of capitalized debt issuance costs
    resulting from the early retirement of $77.5 million in debt with proceeds
    from the Company's second quarter initial public offering.
 
                                       30
<PAGE>   31
 
     The following table sets forth certain financial data as a percentage of
net revenues for the periods presented:
<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED
                                     --------------------------------------------------------------------------------------------
                                     MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,    MARCH 31,   JUNE 30,    SEPTEMBER 30,
                                       1996        1996         1996           1996(1)        1997        1997          1997
<S>                                  <C>         <C>        <C>             <C>             <C>         <C>         <C>
Revenues:
Commissions........................     46.3%      43.8%         40.5%           42.5%         47.5%       44.2%         44.4%
Principal transactions.............     29.4       30.7          30.4            28.4          26.1        26.5          27.6
Investment banking.................      8.1       10.9          12.5            12.2          11.3        14.6          14.5
Asset management...................      5.0        5.3           5.9             5.5           5.8         5.5           4.9
Other..............................      4.3        4.2           4.1             5.4           4.0         3.5           2.9
                                       -----      -----         -----           -----         -----       -----         -----
  Total operating revenues.........     93.1       94.9          93.4            94.0          94.7        94.3          94.3
Interest income....................     16.7       14.2          14.0            12.1          12.3        12.6          10.6
                                       -----      -----         -----           -----         -----       -----         -----
  Total revenues...................    109.8      109.1         107.4           106.1         107.0       106.9         104.9
Interest expense...................      9.8        9.1           7.4             6.1           7.0         6.9           4.9
                                       -----      -----         -----           -----         -----       -----         -----
  Net revenues.....................    100.0      100.0         100.0           100.0         100.0       100.0         100.0
Non-interest expenses:
Compensation and benefits..........     65.4       64.2          64.6            66.5          64.5        64.9          65.8
Occupancy and equipment............      7.6        8.2           9.0            13.0(3)        7.7         7.4           6.2
Communications.....................      5.1        5.6           5.4             4.4           5.0         5.1           4.2
Brokerage and clearance............      2.3        3.8           3.8             3.4           3.2         3.4           2.8
Promotional........................      2.7        2.8           3.2             2.8           2.5         2.8           2.7
Other..............................      9.7        9.3           8.5             3.3(4)        8.2         8.6           6.7
                                       -----      -----         -----           -----         -----       -----         -----
  Total non-interest expenses......     92.8       93.9          94.5            93.4          91.1        92.2          88.4
Acquisition interest expense.......       --         --            --             0.6           1.8         1.8           1.5
Income before income taxes.........      7.2        6.1           5.5             6.0           7.1         6.0          10.1
Income taxes.......................      3.1        2.6           2.4             2.7           3.0         2.5           4.3
                                       -----      -----         -----           -----         -----       -----         -----
Net income before extraordinary
  item.............................      4.1        3.5           3.1             3.3           4.1         3.5           5.8
Extraordinary item (net of
  applicable taxes)(5).............       --         --            --              --            --          --            --
                                       -----      -----         -----           -----         -----       -----         -----
Net income after extraordinary
  item.............................      4.1%       3.5%          3.1%            3.3%          4.1%        3.5%          5.8%
 
<CAPTION>
                                              THREE MONTHS ENDED
                                     ------------------------------------
                                     DECEMBER 31,    MARCH 31,   JUNE 30,
                                         1997          1998        1998
<S>                                  <C>             <C>         <C>
Revenues:
Commissions........................       42.4%         46.3%      39.6%
Principal transactions.............       25.5          25.2       21.1
Investment banking.................       17.8          13.7       26.3
Asset management...................        5.2           5.8        5.0
Other..............................        3.0           2.7        3.5
                                         -----         -----      -----
  Total operating revenues.........       93.9          93.7       95.5
Interest income....................       11.6          13.3       10.3
                                         -----         -----      -----
  Total revenues...................      105.5         107.0      105.8
Interest expense...................        5.5           7.0        5.8
                                         -----         -----      -----
  Net revenues.....................      100.0         100.0      100.0
Non-interest expenses:
Compensation and benefits..........       66.3(2)       66.4(2)    65.6
Occupancy and equipment............        5.0           6.2        5.7
Communications.....................        3.9           4.1        4.0
Brokerage and clearance............        2.7           2.8        2.8
Promotional........................        3.0           2.8        3.1
Other..............................        7.1           7.8        7.8
                                         -----         -----      -----
  Total non-interest expenses......       88.0          90.1       89.0
Acquisition interest expense.......        1.4           1.3        0.1
Income before income taxes.........       10.6           8.6       10.9
Income taxes.......................        4.5           3.6        4.6
                                         -----         -----      -----
Net income before extraordinary
  item.............................        6.1           5.0        6.3
Extraordinary item (net of
  applicable taxes)(5).............         --            --        1.1
                                         -----         -----      -----
Net income after extraordinary
  item.............................        6.1%          5.0%       5.2%
</TABLE>
 
---------------
(1) Based on the consolidated results of the Predecessor Company for the two
    months ended November 29, 1996 combined with the consolidated results of the
    Company for the one month ended December 31, 1996.
 
(2) Includes 1.2% of non-cash compensation expense resulting from issuance of
    Common Stock and stock options to employees during the fourth quarter of
    1997. Non-cash compensation for first quarter 1998 was $0.
 
(3) Includes 4.9% in provisions for lease obligations pertaining to abandoned
    New York office space.
 
(4) Includes an insurance recovery of 6.9% relating to litigation expenses
    incurred during prior periods.
 
(5) The extraordinary item is a write off of capitalized debt issuance costs
    resulting from the early retirement of $77.5 million in debt with proceeds
    from the Company's second quarter initial public offering.
 
                                       31
<PAGE>   32
 
RISK MANAGEMENT
 
     Tucker Anthony's, Sutro's and Cleary Gull's exposure to risk includes items
that are fundamental to the securities industry, such as trading of securities,
extension of credit to counterparties and investment banking activities, as well
as other risks, such as extension of credit to retail and institutional
customers. Tucker Anthony, Sutro and Cleary Gull monitor their market and credit
risk daily through a number of control procedures designed to identify and
evaluate the various risks to which Tucker Anthony, Sutro and Cleary Gull are
exposed.
 
     Tucker Anthony, Sutro and Cleary Gull may act as a principal to facilitate
customer-related transactions in financial instruments which expose the firm to
market risks. Tucker Anthony and Sutro make markets for dealers in certain
equity and debt securities and Tucker Anthony trades for its own account in
arbitrage trading activities. Whether acting as principal to facilitate customer
transactions or trading for their own account, Tucker Anthony, Sutro and Cleary
Gull undertake a variety of measures to manage against losses which may be
incurred through market risk.
 
     Methods of managing exposure to market risk include: 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;
limiting the number of days inventory is held; using third party security
pricing services to enhance market price testing and variance analysis; and
tactically employing certain hedging techniques that reduce the amount of risk
taken by Tucker Anthony and Sutro. Management believes that the subsidiaries'
risk management and hedging practices aid in managing their market exposure and
reducing volatility of the Company's earnings. Cleary Gull utilizes similar risk
management techniques including the use of third party security pricing
services. Cleary Gull does not limit the number of days inventory is held,
however, it does impose an overall position limit which is monitored by the
over-the-counter trading manager.
 
     At December 31, 1996, December 31, 1997 and June 30, 1998, the Company's
securities owned and securities sold, not yet purchased consisted of the
following:
 
<TABLE>
<CAPTION>
                                                 DECEMBER 31,        JUNE 30,
                                             --------------------    --------
                                               1996        1997        1998
                                             --------    --------    --------
                                                      (IN THOUSANDS)
<S>                                          <C>         <C>         <C>
OWNED:
Obligations of the U.S. government or its
  agencies.................................  $ 23,650    $ 27,396    $ 27,395
State and municipal obligations............    56,057      38,222      49,067
Arbitrage securities.......................    84,967     291,023     219,827
Other corporate obligations................    73,127      51,709      26,357
Other corporate stocks and warrants........    15,305      15,172      26,571
                                             --------    --------    --------
                                             $253,106    $423,522    $349,217
                                             ========    ========    ========
SOLD, NOT YET PURCHASED:
Obligations of the U.S. government or its
  agencies.................................  $ 37,663    $ 22,890    $ 23,349
State and municipal obligations............     1,476       1,519       1,076
Arbitrage securities.......................    51,671     322,316     203,416
Other corporate obligations................     6,055       1,356       1,661
Other corporate stocks and warrants........     4,275       6,484      11,870
                                             --------    --------    --------
                                             $101,140    $354,565    $241,372
                                             ========    ========    ========
</TABLE>
 
     Tucker Anthony and Sutro manage their daily risk exposure in their firm
inventory accounts by requiring various levels of management to participate in
review of these accounts. The primary purpose of the risk management function is
to participate in the establishment of position limits and to monitor both the
buy and sell activity in the firm's trading accounts relative to the established
position limits. Tucker Anthony's, Sutro's

 
                                       32
<PAGE>   33
 
and Cleary Gull's trading activities result in the creation of inventory
positions. Position and exposure reports indicating both long and short exposure
are prepared, distributed and reviewed each day by Tucker Anthony's and Sutro's
risk management personnel as well as by certain members of senior management.
These reports enable Tucker Anthony and Sutro to control their inventory levels,
monitor trading results on a product-by-product basis and review inventory
aging, pricing and concentration. Cleary Gull monitors trading activity on a
monthly basis unless the overall position limit is exceeded.
 
     In addition to position and exposure reporting, Tucker Anthony, Sutro and
Cleary Gull each produce a daily revenue report which summarizes trading,
interest and commission revenue items for each product area. Daily revenues are
reviewed independently for various risk factors that could adversely affect
certain trading decisions. The daily revenue reports are produced by their
accounting departments and distributed to various levels of management together
with the position and exposure reports. The combined use of these reports
enables senior management to monitor and control firm trading activity on a
product-by-product basis.
 
     Tucker Anthony and Sutro deal with counterparties or other broker-dealers
in conducting business for their clients or for their own account. Credit and
trading limits extended to counterparties are controlled and managed by Tucker
Anthony's and Sutro's credit and risk management functions. Financing extended
to counterparties is provided against collateral. Tucker Anthony and Sutro
monitor their exposure to counterparty risk on a daily basis through the use of
internally generated credit exposure information and the monitoring of
collateral values. The risk management function participates in the review of
counterparties to establish appropriate exposure limits on a product-by-product
basis. Tucker Anthony and Sutro manage their daily credit exposure by monitoring
on an ongoing basis the creditworthiness of counterparties and their related
trading limits, requesting additional collateral when deemed necessary and
limiting the amount and duration of counterparty exposure.
 
     Tucker Anthony and Sutro, through Wexford, also extend credit to their
retail customers. 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 Wexford's, Tucker Anthony's and Sutro's credit review and daily
monitoring procedures.
 
     Risks associated with investment banking activities are controlled through
committees within Tucker Anthony and Sutro. Their respective commitment
committees review every significant proposed investment banking transaction
prior to its acceptance by Tucker Anthony and Sutro. Their respective capital
committees review major proposed transactions in order to determine the effect
of such transactions on regulatory capital prior to their acceptance. Only after
acceptance by both committees within a firm will that firm's commitment to
underwrite a specific security be extended to the investment banking client.
Cleary Gull's commitment committee performs the dual function of analyzing
proposed transactions as well as assessing their impact on regulatory capital.
 
     Tucker Anthony's and Sutro's compliance department professionals monitor
customer and employee transactions, conduct periodic and other examinations and
communicate with the various regulatory agencies that have jurisdiction over
Tucker Anthony, Sutro and Cleary Gull and their businesses. Additionally, Cleary
Gull is in the process of integrating certain risk management procedures already
in place at Tucker Anthony and Sutro and expect the process to be completed in
the near future.
 
YEAR 2000 COMPLIANCE
 
     The securities industry is, to a significant extent, technologically driven
and dependent. In addition to internally utilized technological applications,
the Company's financial services businesses are materially dependent upon the
performance of exchanges, market centers, counterparties, customers and vendors
(collectively "the Company's material third parties") who, in turn, may be
heavily reliant on technological applications. In sum, the securities industry
is pervasively interdependent with each "link of the chain" strengthened or
weakened by the quality and performance of its attendant information and
embedded technology.

 
                                       33
<PAGE>   34
 
     The Company is aware that the Year 2000 provides potential problems with
the programming code in existing computer systems. The "Year 2000 problem" is
extensive and complex as virtually every computer operation will be affected to
some degree by the change of the two digit year value to 00. The issue is
whether computer systems will properly recognize date-sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or fail.
 
     The failure or faulty performance of computer systems could potentially
have a far ranging impact on the Company's businesses such as a diminution in
its ability to (a) ascertain information vital to strategic decision making by
both the Company and its customers; (b) perform interest rate and pricing
calculations; (c) execute and settle proprietary and customer transactions; (d)
undertake regulatory surveillance and risk management; (e) maintain accurate
books and records and provide timely reports; (f) maintain appropriate internal
financial operations and accounting; and (g) access credit facilities for both
the Company and its customers. Accordingly it is necessary for the Company, to
the extent reasonably practicable, to identify the internal computer systems and
software which are likely to have a critical impact on its operations, make an
assessment of its Year 2000 readiness and modify or replace information and
embedded technology as needed. In addition, the Company must make a Year 2000
readiness assessment for the Company's material third parties.
 
     In the fourth quarter of 1995, the Company began to strategically assess
the need for renovation, replacement or retirement of all business applications.
This assessment was coincident with the conversion of the Company's principal
broker-dealer subsidiaries to clear securities transactions through Wexford, an
unaffiliated broker-dealer. During the first half of 1996, in connection with
the conversion to Wexford, a substantial portion of all application and vendor
code were modified to be Year 2000 compliant and these changes were tested and
verified in 1998 to be materially effective.
 
     Although Wexford is the contracting party for the provision of clearing
services, it in fact delivers those services through the operations of its
guaranteeing parent company, Prudential Securities Incorporated ("Prudential"),
a leading registered broker and dealer. Consequently, it is the readiness of
Prudential that is critical when assessing the Year 2000 compliance of the
clearing and operations capacity of the Company's active broker-dealer
subsidiaries. Prudential has been assessed, by internal industry standards
established by the Securities Industry Association, to be within the top tier of
Year 2000 readiness. In recent industry-wide testing conducted by the Securities
Industry Association, in which Prudential took part, Prudential and other
participants were able to input transactions and send them to the appropriate
markets for execution, confirmation and clearance under simulated Year 2000
conditions.
 
     Additionally, the Company has assessed the state of readiness of all known
technologically oriented service vendors and believes, based on letters of
certification, that the vast majority of these vendors are Year 2000 compliant
with the remainder expected to be compliant by December 1998. This determination
does not mean that the vast majority of the Company's material third parties
pose no Year 2000 risk to the Company. First, the Company is relying in large
measure on these parties' assessments of their readiness. Second, there are
several vendors, which account for a substantial portion of the Company's
mission critical operations, which may be partially or largely, but not fully,
Year 2000 compliant. Finally, certain critical third parties, such as exchanges,
clearing houses, depositories and other service vendors have no direct
functional contact with the Company (as they operate directly with Wexford) but
may impact the Company's operations.
 
     At this juncture the Company is in the process of establishing a strategic
plan for the remainder of its Year 2000 remediation efforts which would include
(1) identification, modification and testing of any remaining non-compliant Year
2000 code; (2) identification, inventory, assessment and, if necessary,
modification of internal ad hoc systems or applications that may be material to
the Company's operations; (3) with the exception of counterparties and
customers, documentation of the assessment of the readiness of the Company's
material third parties; and (4) a timetable for completion of the plan. The
Company intends to complete its written plan by December 1998 while
concomitantly proceeding to assess, and taking measures to enhance, Year 2000
readiness. To date, the Company's Year 2000 costs have been minimal. The Company
believes that, going forward, it will incur Year 2000 costs of approximately
$500,000 which will be funded out

 
                                       34
<PAGE>   35
 
of its working capital. Provided there is an absence of unanticipated critical
events, the Company does not expect Year 2000 costs to have a material effect on
its operating results, financial condition or cash flows.
 
     Currently, the Company has not developed any Year 2000 contingency plans
because of the following reasons: (1) the Company has substantially modified, to
the extent it can ascertain the problem, most mission critical code and embedded
technology; (2) the Company's vendors have represented that they are either
currently Year 2000 compliant or will become so by the second quarter of 1999;
(3) there are no alternatives in the event the exchanges or other market centers
fail to perform; and (4) the Company believes it is highly likely that the
factors which may prevent a particular clearing firm from performing would
similarly affect all other clearing firms which would either preclude the
availability of alternative clearing service providers or overwhelm the
resources of surviving alternative clearing services providers. In other words,
the Year 2000 presents a problem which is not likely to be susceptible to
remediation at a future date if it is not fixed in advance. The Company will,
however, continue to consider the viability of a contingency plan.
 
     The Company is cautiously optimistic about its current state of readiness
and its ability to make any further necessary modifications to internal systems
in time for the Year 2000. The Company also believes that its major third party
service provider, Prudential, has undertaken a systematic approach to the Year
2000 problem and will complete its plan which is designed to achieve a state of
readiness. However, there are factors outside the control of the Company which
make certainty impossible such as: (1) the inability to access the readiness of
market counterparties and customers; (2) the inability to achieve assurance as
to any material third parties' representations of readiness; (3) the global
exposure of the Company's material third parties to Year 2000 problems outside
the United States which have a "knock-on" effect within the domestic securities
markets and operations; and (4) the limitations in anticipating all aspects of a
problem with which there is no prior historical experience. The presence of any
or all of these and other factors may well have a material adverse effect on the
Company's businesses, operating results, financial condition and cash flows.
 
EARNINGS PER SHARE
 
     The Company computes its earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") 128 "Earnings Per Share." The following
table sets forth the computation for basic and diluted earnings per share (in
thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS        SIX MONTHS
                                                             ENDED JUNE 30,     ENDED JUNE 30,
                                                             ---------------   ----------------
                                                              1998     1997     1998      1997
                                                              ----     ----     ----      ----
<S>                                                          <C>      <C>      <C>       <C>
NUMERATOR
---------
Net income before extraordinary item.......................  $7,635   $2,918   $12,664   $6,411
Extraordinary item.........................................   1,276       --     1,276       --
                                                             ------   ------   -------   ------
Net income after extraordinary item........................  $6,359   $2,918   $11,388   $6,411
 
DENOMINATOR
-----------
Weighted average shares outstanding........................  19,792   14,244    17,322   14,273
Dilutive effect of:
     Stock options and exercisable shares..................   1,398      220     1,156      172
                                                             ------   ------   -------   ------
Adjusted weighted average shares outstanding...............  21,190   14,464    18,478   14,445
 
Basic earnings per share before extraordinary item.........  $ 0.39   $ 0.20   $  0.73   $ 0.45
Less: Extraordinary item...................................    0.07       --      0.07       --
                                                             ------   ------   -------   ------
Basic earnings per share after extraordinary item..........  $ 0.32   $ 0.20   $  0.66   $ 0.45
 
Diluted earnings per share before extraordinary item.......  $ 0.36   $ 0.20   $  0.69   $ 0.44
Less: Extraordinary item...................................    0.06       --      0.07       --
                                                             ------   ------   -------   ------
Diluted earnings per share after extraordinary item........  $ 0.30   $ 0.20   $  0.62   $ 0.44
</TABLE>
 
                                       35
<PAGE>   36
 
                                    BUSINESS
 
INDUSTRY BACKGROUND
 
     In recent years, the financial markets have grown in size and complexity,
characterized by a proliferation of investment products and services, frequent
innovations, increased globalization, strong capital flows and heavy trading
volume. These trends have increased the number and variety of choices available
to investors and the range of financing alternatives available to businesses and
other issuers of securities. Management believes these trends will continue in
the future and consequently believes that the needs of both investors and
issuers for high quality professional financial advice and services, such as
those offered by the Company, will continue to increase.
 
     Demand for investment products has increased significantly as large numbers
of "baby boomers" have begun to invest for their children's education and for
their own retirement. In 1996, the first 3.4 million baby boomers turned 50; the
impact of this generation on the capital markets is expected to continue to
build through the year 2010, when 57 million people will be in what has
historically been their prime investing years (ages 50 through 65).
Additionally, it is estimated that these individuals will inherit over $10
trillion (adjusted for inflation) from the previous generation between 1990 and
2040, representing the largest absolute transference of wealth in history.
 
     Changes in household investing patterns have also contributed to the
increase in demand for investment products. In 1980, households owned $1.3
trillion of marketable securities, representing 48% of their liquid financial
assets. By September 30, 1997, the household sector's ownership of marketable
securities had risen by more than 660% to $9.9 trillion, or 76% of household
liquid financial assets. Over the same period, bank deposits decreased from 52%
to 24% of household liquid financial assets.
 
     The volume of equity securities offered to the public illustrates the
growth in supply of investment products. Initial public offerings ("IPOs")
underwritten and total common equity issued in the United States public market
grew from $1.4 billion and $12.8 billion, respectively, in 1980, to $10.2
billion and $19.2 billion, respectively, in 1990, to $43.9 billion and $118.4
billion, respectively, in 1997. California and Massachusetts (the headquarters
states of Sutro and Tucker Anthony, respectively) ranked first and eighth,
respectively, among the 50 states in dollar volume of IPOs for locally
headquartered companies in 1997 and first and seventh, respectively, in dollar
volume of public offerings of common stock. Management believes that a
significant portion of the growth in equity offerings has come from emerging and
middle-market companies and that the increase in emerging and middle-market
issuers has been facilitated by large increases in the flow of cash into equity
mutual funds and other managed funds as a result of these changes in household
investing patterns.
 
     The combination of increasing flows of funds into the equity markets and
new issuance activity has contributed to significantly higher trading volumes.
From 1980 to 1997, average daily trading volume grew at a compound annual rate
of 15.6% on the NYSE and 20.7% on the Automated Quotation System of the NASD
(the "Nasdaq"). More recently, the combined NYSE and Nasdaq average daily
trading volumes grew at a compound annual rate of 22.2% for the five years ended
1997 and increased 22.9% in 1997 over 1996.
 
COMPANY OVERVIEW
 
     Freedom, through its three brokerage subsidiaries, Tucker Anthony, Sutro
and Cleary Gull and its asset management subsidiary, Freedom Capital, is a
full-service, regionally focused retail brokerage and investment banking firm.
Tucker Anthony, headquartered in Boston and focused primarily on the
northeastern United States, and Sutro, headquartered in San Francisco and
focused primarily on the western United States, are both over 100 years old and
have well established reputations in their respective regions. Cleary Gull,
headquartered in Milwaukee, Wisconsin, was founded in 1987 and is focused
primarily on the midwestern United States. On April 16, 1998, the Company closed
into escrow and funded its previously announced acquisition of Cleary Gull. The
acquisition was completed on May 1, 1998 and was accounted for under the
purchase method of accounting. The consolidated financial and other data
included elsewhere in this Prospectus include the results of Cleary Gull's
operations from the date of acquisition. Management believes that it can best
serve the needs of these distinct regions through separate, locally managed
organizations, while

 
                                       36
<PAGE>   37
 
avoiding cost duplication through the use of shared clearing and support
services. This approach enables the Company to capitalize on each organization's
name recognition, historical areas of expertise and close community ties while
lessening the Company's reliance on a single region's economy.
 
     The Company believes that its primary strengths are (i) the experience and
tenure of its investment executives, which have often led to long-term
relationships with clients in their respective communities; (ii) its high level
of employee commitment, evidenced by significant employee ownership in the
Company; (iii) its personalized, service-oriented culture emphasizing
responsiveness to client and regional market demands; (iv) its focus on emerging
and middle-market companies in targeted industries in which the Company has
specialized expertise or regional presence; and (v) its ability to manage and
control operating costs through centralization of certain services and other
cost effective solutions, including its clearing and processing arrangements
with Wexford.
 
     The Company's three primary areas of focus, described below, are (i) its
full-service retail brokerage operations; (ii) its equity capital markets
activities; and (iii) its asset management operations.
 
     Retail Operations.  The retail operations of Tucker Anthony and Sutro
conducted in 13 states and the District of Columbia, have together generated
between 56% and 62% of the Company's operating revenues in each of the last
three calendar years and have historically represented the Company's core
business. 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. As of June 30, 1998, customers had over $29 billion of assets
in over 200,000 Tucker Anthony and Sutro brokerage accounts. Management believes
that the experience of its 707 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. Management also
believes that its 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 significant tenure at their local branch offices.
 
     Equity Capital Markets.  Each of Tucker Anthony, Sutro and Cleary Gull has
historically demonstrated strengths in offering various investment banking
services, such as mergers and acquisition services, to clients within its
respective region. The Company's strategy is to develop equally strong
research-driven equity capital markets groups including equity research,
investment banking, institutional sales, trading and syndication services.
Tucker Anthony's, Sutro's and Cleary Gull's respective research and investment
banking departments target emerging and middle-market companies within their
respective regions and within the industries in which they specialize, such as
consumer products, healthcare, financial services and technology industries.
Equity capital markets activities have represented 16% to 17% of the Company's
operating revenues in each of the past three calendar years. For the first six
months of 1998, equity capital markets activities generated approximately 23% of
the Company's operating revenues.
 
     Asset Management.  Freedom Capital, headquartered in Boston, was formed in
1930 and as of June 30, 1998 managed approximately $6.2 billion of assets,
including approximately $3.4 billion of investments by public sector entities,
high net worth individuals and others, with the remainder comprised of money
market funds for the benefit of Tucker Anthony, Sutro and Cleary Gull clients.
Freedom Capital has developed a leading position in the management of public
funds for local Massachusetts municipalities and agencies, has also developed an
important presence in certain sectors of the union pension fund market and is
growing its corporate funds management business. Asset management revenues have
represented approximately 5% to 6% of the Company's total operating revenues in
each of the past three calendar years. Cleary Gull recently established its
Private Client Group to provide retail brokerage and investment management
services to institutional accounts and high networth individuals.
 
     The Company's subsidiaries also engage in a number of other activities,
including trading fixed income securities, underwriting municipal securities,
and purchasing and selling securities in arbitrage transactions. Additionally,
the Company, through a subsidiary, has a 25% interest in the profits and losses
of a joint specialist account in which it participates with two other NYSE
specialist firms.

 
                                       37
<PAGE>   38
 
BUSINESS STRATEGY
 
     Since the Acquisition, management formulated and is implementing a strategy
to (i) enhance the services the Company offers its customers; (ii) improve the
profitability of Tucker Anthony's and Sutro's retail operations; (iii) expand
each firm's equity capital markets activities; and (iv) increase Freedom
Capital's money management business. Management also plans to supplement the
Company's internal growth with strategic acquisitions. The principal elements of
the Company's strategy are set forth below.
 
     Enhance Personalized, High-End Service.  Tucker Anthony and Sutro have
traditionally sought to attract and retain brokerage clients by offering a high
level of personal service responsive to customer needs. The Company intends to
increase its commitment to service by providing its investment executives with
advanced account information systems and flexibility in determining appropriate
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.
 
     Improve Profitability of Retail Brokerage Operations.  The Company intends
to continue to improve the profitability of its retail operations primarily by
hiring additional experienced and highly productive investment executives and by
providing Tucker Anthony's and Sutro's investment executives with enhanced
training, product offerings, information systems and support. Average production
per retail investment executive increased 15% in 1997 compared to 1996 and 18%
in 1996 compared to 1995 at Tucker Anthony, while average production per retail
investment executive increased 13% in 1997 compared to 1996 and 8% in 1996
compared to 1995 at Sutro. Management believes that the implementation of this
strategy will be aided by the Company's entrepreneurial culture and strategy of
providing a high level of support for its investment executives.
 
     Expand Regional and Specialty Equity Capital Markets Activities.  Tucker
Anthony, Sutro and Cleary Gull maintain separate and independent investment
banking groups. Each investment banking group is supported by its own regionally
and industry focused research department, institutional sales group and equity
trading. The Company intends to continue to increase Tucker Anthony's, Sutro's
and Cleary Gull's investment banking business by committing greater resources
to, and by carefully focusing their research and investment banking coverage on,
geographic regions and industries which management believes offer the greatest
opportunities. Management believes that this independent and regional focus is
particularly well suited to the northeastern, western and midwestern regions
currently served by Tucker Anthony, Sutro and Cleary Gull, respectively. In
1997, for example, Massachusetts and California ranked seventh and first,
respectively, in dollar volume of public offerings of common stock of locally
headquartered companies. 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.
 
     Increase Asset Management Business.  Management intends to grow Freedom
Capital's business by extending its public funds business from Massachusetts to
other states, by improving coordination with the Tucker Anthony and Sutro retail
brokerage networks, and by increasing the assets under its management and the
number of its portfolio managers through acquisitions or recruiting. Management
also intends to continue to encourage the growth of Cleary Gull's investment
management services.
 
     Supplement Growth with Strategic Acquisitions.  Management plans to
actively pursue opportunities to acquire other firms with complementary business
which would strengthen or expand the firm's geographic or product offering base,
such as the acquisition of Cleary Gull, which has allowed the Company to expand
its geographic coverage. Management believes that attractive acquisition
opportunities exist particularly among smaller regional firms that want to
affiliate with a larger firm while still retaining their regional identity and
focus and entrepreneurial culture, as Tucker Anthony and Sutro have been able to
do. In addition, the Company believes that the consolidation trends in the
brokerage and asset management businesses will allow it to hire proven
investment professionals who prefer the culture and opportunities inherent in a
smaller, entrepreneurial and independent firm. Management believes that
acquisitions may also allow the Company to realize cost benefits by leveraging
its infrastructure.

 
                                       38
<PAGE>   39
 
THE ACQUISITION
 
     To finance the Acquisition of Freedom from Hancock in November 1996,
approximately 350 employees of the Company, including senior management and
investment executives, purchased an aggregate of approximately 28% of the
Company's equity (after giving effect to the Company's initial public offering),
with additional equity financing provided by THL and SCP. Incentive equity
programs have been established pursuant to which employees have acquired or may
acquire additional equity of the Company, which, when added to shares previously
owned, would result in employees owning up to approximately 45% of the shares of
Common Stock outstanding. See "Certain Relationships and Related
Transactions -- The Acquisition" for a more complete description of the
Acquisition and "Management" for a description of the Company's incentive equity
programs.
 
     Management believes that the Company's independence and employee ownership
have resulted in progressively higher levels of employee motivation, confidence
and commitment during 1997, as compared to 1996 when the Predecessor Company was
for sale and it was uncertain whether the Acquisition would be consummated or
whether the Predecessor Company would be sold to another organization.
Management believes that uncertainty surrounding the future of the Company
adversely affected the Company's performance in 1996 and, to a lesser extent, in
early 1997 by weakening employee motivation and the Company's ability to recruit
personnel, creating uncertainty among customers and prospective customers,
consuming management's time and inhibiting the Company's ability to pursue new
initiatives. The Company believes that the Acquisition and the strategies
instituted in connection therewith have been successful. For example, during the
first six months of 1998, Tucker Anthony, Sutro and Cleary Gull managed or
co-managed 19 equity offerings compared to 17 during the first six months of
1997. During 1997, the Company managed or co-managed 34 equity offerings in 1997
compared to 16 in 1996 and 9 in 1995. In 1997, the Company reported net income
of $18.7 million, a 52% increase over net income of $12.3 million in 1996 and
43% increase over net income of $13.1 million in 1995. For the first six months
of 1998, the Company reported net income of $12.6 million, before extraordinary
item, a 98% increase over net income of $6.4 million for the first six months of
1997. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
 
INITIAL PUBLIC OFFERING
 
     On April 2, 1998, the Company completed its 7.4 million shares initial
public offering, including 4.2 million shares of Common Stock sold by the
Company. The initial public offering raised approximately $76.7 million for the
Company, after deducting underwriting discounts, commissions and expenses.
 
CLEARY GULL ACQUISITION
 
     On May 1, 1998, the Company completed its previously announced acquisition
of Cleary Gull, a privately held investment banking, institutional brokerage and
investment advisory firm headquartered in Milwaukee, Wisconsin. Cleary Gull was
established in 1987 as a private investment bank focusing on the equity capital
markets through institutional research, sales and trading, and investment
banking services. Cleary Gull's research analysts cover such areas as
distribution and logistics, business services, applied technology and growth
companies in the upper midwestern United States. Cleary Gull's equity capital
markets activities include a national institutional sales force and
over-the-counter and listed trading services. Cleary Gull's investment banking
activities are focused primarily on merger and acquisition advisory services and
financing assignments in both public and private equity and debt markets. Cleary
Gull recently established its Private Client Group to provide retail brokerage
and investment management services to institutional accounts and high net worth
individuals.

 
                                       39
<PAGE>   40
 
GENERAL
 
     A chart depicting in simplified form the corporate structure of the Company
and its primary subsidiaries is set forth below, together with a brief
description of the business undertaken by each of the entities shown:
 
                    ----------------------------------------
                               FREEDOM SECURITIES
                                  CORPORATION
                    ----------------------------------------
 
<TABLE>
<S>                       <C>                       <C>                       <C>
------------------------------------------------------------------------------------------------------
------------------------  ------------------------  ------------------------  ------------------------
     TUCKER ANTHONY             SUTRO & CO.           CLEARY GULL REILAND         FREEDOM CAPITAL
      INCORPORATED              INCORPORATED            & MCDEVITT INC.        MANAGEMENT CORPORATION
------------------------  ------------------------  ------------------------  ------------------------
</TABLE>
 
     Freedom Securities Corporation: Issuer of the shares offered hereby,
Freedom Securities Corporation is a holding company formed in 1996 to acquire
Freedom Securities Holding Corporation from Hancock.
 
     Tucker Anthony Incorporated: One of the Company's primary operating
subsidiaries, Tucker Anthony engages in the securities brokerage and investment
banking businesses and transacts business primarily in the northeastern United
States.
 
     Sutro & Co. Incorporated: One of the Company's primary operating
subsidiaries, Sutro engages in the securities brokerage and investment banking
businesses and transacts business primarily in the western United States.
 
     Cleary Gull Reiland & McDevitt Inc.: One of the Company's primary operating
subsidiaries, Cleary Gull engages in the securities brokerage and investment
banking businesses and transacts business primarily in the midwestern United
States.
 
     Freedom Capital Management Corporation: One of the Company's primary
operating subsidiaries, Freedom Capital engages in the investment advisory and
asset management businesses.
 
     The Company's business is described in more detail below.
 
TUCKER ANTHONY, SUTRO AND CLEARY GULL
 
     Most of the Company's business activities are conducted through Tucker
Anthony, Sutro and Cleary Gull, and its asset management business is conducted
through Freedom Capital. Tucker Anthony's, Sutro's and Cleary Gull's principal
business activities are summarized below.
 
     Retail Brokerage
 
     A large portion of the Company's revenues are generated from commissions or
fees earned as a broker 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. The Company also earns
commissions or fees for services provided in the areas of managed accounts and
personal trusts. As of June 30, 1998, Tucker Anthony had 476 investment
executives located in 10 states and the District of Columbia, and Sutro had 231
investment executives located in 3 states. For the years ended December 31,
1995, 1996 and 1997, commissions and sales credits from individual investors
constituted approximately 77%, 82% and 84%, respectively, of total commissions
and sales credits and 46%, 52% and 54%, respectively, of the Company's total
revenues. Management believes that such retail services will continue to be the
Company's primary source of revenue for the foreseeable future. Tucker Anthony
and Sutro charge retail commissions on both exchange and OTC transactions in
accordance with commission rate tables which they have formulated. Discounts
from the commission rate tables are granted in certain cases and the commission
rate tables may

 
                                       40
<PAGE>   41
 
change from time to time. Each firm also offers certain account arrangements
under which a single fee is charged based on a percentage of the assets held in
a customer's account and no commissions are charged on a transaction by
transaction basis. Tucker Anthony and Sutro have also adopted the "Beacon
Account" and "Sutro Asset Value Account" programs, respectively, through which
clients may be charged negotiated fees based upon the level of services
provided.
 
     Tucker Anthony and Sutro provide their 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 Tucker Anthony, Sutro, Cleary Gull
and other research analysts and offers services such as financial planning and
tax, trust and estate advice to its retail clients. The Company believes that
the personalized nature and range of services it provides to its retail clients
is a key factor in the success of its retail brokerage units.
 
     The following table sets forth the locations and number of investment
executives in the Company's retail offices as of June 30, 1998:
 
        TUCKER ANTHONY                                      SUTRO
 
<TABLE>
<S>                         <C>                 <C>                         <C>
MASSACHUSETTS
Andover...................       3              CALIFORNIA
Boston....................      74              Beverly Hills.............      27
Burlington................       7              Big Bear..................       2
Franklin..................       6              Fresno....................       9
New Bedford...............       6              Hollywood.................       1
Springfield...............      12              La Jolla..................       8
Worcester.................       5              Los Angeles...............      16
                            ------              Newport Beach.............      20
  Total...................     113              Oakland...................      17
CONNECTICUT                                     Sacramento................      14
Hartford..................      27              San Francisco.............      35
New Haven.................      16              San Jose..................      13
Stamford..................      15              San Luis Obispo...........       4
                            ------              Santa Maria...............       5
  Total...................      58              Santa Rosa................      15
MAINE                                           West Los Angeles..........       2
Bangor....................       6              Woodland Hills............      12
Portland..................      16                                          ------
                            ------                Total...................     200
  Total...................      22              ARIZONA
RHODE ISLAND                                    Scottsdale................      13
Providence................      21              Tucson....................       8
NEW HAMPSHIRE                                                               ------
Concord...................       1                Total...................      21
Nashua....................       4              NEVADA
Peterborough..............       3              Las Vegas.................      10
Portsmouth................       2              TOTAL SUTRO...............     231
                            ------                                          ------
  Total...................      10              TOTAL COMPANY.............     707
NEW YORK                                                                    ======
Garden City...............       4
New York City
  Fifth Avenue............      34
  World Financial
    Center................      61
Rochester.................       8
Rome......................       8
Schenectady...............       6
Southampton...............       8
Syracuse..................       9
Watertown.................       5
                            ------
  Total...................     143
NEW JERSEY
Fairhaven.................      18
Morristown................      15
Princeton.................      17
                            ------
  Total...................      50
PENNSYLVANIA
Philadelphia..............      21
ILLINOIS
Chicago...................      21
DISTRICT OF COLUMBIA
Washington................       7
DELAWARE
Wilmington................      10
                            ------
TOTAL TUCKER ANTHONY......     476
 
</TABLE>
 
                                       41
<PAGE>   42
 
     The Tucker Anthony and Sutro retail sales forces are comprised of an
experienced and productive group of investment executives. Management believes
that its 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 productive and experienced investment
executives. Tucker Anthony's and Sutro's investment executives average more than
10 and 6 1/2 years, respectively, of tenure with the Company and 19 and 17 1/2
years, respectively, of experience in the securities brokerage industry.
Management believes that Tucker Anthony and Sutro have been able to successfully
recruit and retain investment executives for a number of reasons including a
corporate culture which supports and encourages performance, employee ownership,
advanced technology, competitive payouts, no discount sharing and a
service-driven rather than a products-driven environment.
 
     The following table illustrates the improved production of the Company's
retail investment executives.
 
               AVERAGE PRODUCTION PER RETAIL INVESTMENT EXECUTIVE
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                TUCKER ANTHONY                                             SUTRO
-----------------------------------------------        ----------------------------------------------
                          AVERAGE                                               AVERAGE
                          ANNUAL        ANNUAL                                  ANNUAL        ANNUAL
YEAR                   PRODUCTION(1)   INCREASE        YEAR                  PRODUCTION(1)   INCREASE
<S>                    <C>             <C>             <C>                   <C>             <C>
1994.................      $208                        1994................      $271
1995.................       242          16.3%         1995................       289           6.6%
1996.................       285          17.8          1996................       312           8.0
1997.................       327          14.7          1997................       352          12.8
1997 (first half)....       301            --          1997 (first half)...       333            --
1998 (first half)....       357          18.6          1998 (first half)...       338           1.5
</TABLE>
 
---------------
 
(1) Calculated by dividing total retail commissions and managed account fees by
    the average of the number of investment executives at the beginning and end
    of each period (excluding non-producing managers and trainees). First half
    of 1997 and 1998 is annualized.
 
     Tucker Anthony and Sutro together had over 200,000 accounts representing
approximately $28 billion in client assets as of December 31, 1997. The Company
maintains insurance provided by the Securities Investors Protection Corporation
(the "SIPC") for up to $500,000 (coverage of cash is limited to $100,000) per
customer account, as well as excess SIPC coverage for an additional $9.5 million
per client account. Clients who have established a Freedom Asset Account are
provided protection up to a maximum of $60 million, which is included in the
Freedom Asset Account annual fee. The excess SIPC coverage of $9.5 million and
$59.5 million is provided under an insurance policy arranged through Wexford.
 
  Institutional Equity Sales and Research
 
     Tucker Anthony, Sutro and Cleary Gull execute 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, which transactions require 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, Washington, D.C.
and Paris, France.
 
     Institutional transactions are executed by the Company acting as broker or
principal. The Company permits discounts from its commission schedule to its
institutional customers. The size of such discounts varies with the size of
particular transactions and other factors. For the fiscal years ended December
31, 1995, 1996 and 1997, commissions and sales credits from institutional
investors constituted approximately 11%, 10% and 10%, respectively, of total
commissions and sales credits and 6% of the Company's total revenues in each
year. 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 activity.

 
                                       42
<PAGE>   43
 
     Historically, Tucker Anthony and Sutro combined their institutional equity
sales and research forces under a joint venture, which was intended to create
efficiencies in institutional account coverage and research development costs.
In order to better coordinate the respective institutional sales, investment
banking, equity research and trading departments of Tucker Anthony and Sutro,
the research joint venture was disbanded following the Acquisition, and each of
Tucker Anthony and Sutro established their own targeted regional and industry
equity research and institutional equity sales programs.
 
     Tucker Anthony, Sutro and Cleary Gull have each focused their equity
research on selected sectors of the consumer products, healthcare, financial
services and technology industries primarily concentrated in their respective
regions. Within each of these industries, Tucker Anthony, Sutro and Cleary Gull
have focused on various industry niches which each believes offers it the
greatest opportunities. Each firm focuses its equity capital markets group on
integrating its research, institutional sales, corporate finance, trading and
syndication functions. Management believes that its research will be a key
factor in growing its equity capital markets activities.
 
  Principal Transactions and Trading
 
     The Company conducts its principal transactions and trading business
through Tucker Anthony and Sutro, with each firm's business focused on the
activities summarized below, except for arbitrage activities which are engaged
in primarily by Tucker Anthony.
 
     Tucker Anthony and Sutro make markets, buying and selling as principal, in
common stocks, convertible preferred stocks, warrants and other securities
traded on Nasdaq or in other OTC markets. As of June 30, 1998, the Company made
markets in equity securities of over 500 issuers. Such securities are
principally those in which there is substantial continuing client interest and
include securities which the Company has underwritten or on which it provides
research opinions. 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, but 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, 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. Profits or losses are recognized from fluctuations in the value of
securities in which it maintains positions. The Company's capital can be at risk
to the extent significant adverse price fluctuations occur. Additionally,
trading activities include the purchase of securities under agreements to resell
at future dates (resale agreements) and the sale of the same or similar
securities under agreements to repurchase at future dates (repurchase
agreements). Profits and losses on the repurchase transactions result from the
interest rate differentials. 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 its trading positions as part of its Wexford
clearing arrangement, by overnight borrowing and by repurchase agreements. See
"Risk Factors -- Market, Credit and Liquidity Risks Associated with Principal
Trading Arbitrage and Underwriting Activities."
 
     Tucker Anthony and Sutro are each municipal securities dealers in both the
primary and secondary markets, buying and selling securities for their own
account and for clients. Revenues derived from these activities include
underwriting and management fees, selling concessions and trading profits.
 
     Tucker Anthony engages in the purchase and sale of convertible and equity
securities to take advantage of price differences prevailing in separate
markets. These 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

 
                                       43
<PAGE>   44
 
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.
 
  Underwriting Activities and Investment Banking
 
     The Company's investment banking and underwriting activities are performed
by Tucker Anthony's, Sutro's and Cleary Gull's corporate finance, public 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. Tucker Anthony's, Sutro's
and Cleary Gull's managed public equity offerings and merger and acquisition
transactions are typically undertaken for emerging or middle-market companies in
the consumer products, healthcare, financial services, technology, distribution
and logistics, applied technology and business services sectors or companies
located in each firm's respective geographic region.
 
     Historically, the Company's merger and acquisition advisory business has
been responsible for a majority 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 in further building
upon Tucker Anthony's, Sutro's and Cleary Gull's equity capital markets groups.
 
     Through the Company's renewed focus on its equity capital markets groups,
Tucker Anthony's, Sutro's and Cleary Gull's corporate finance and syndicate
departments coordinate closely with their respective research and institutional
sales departments in order to enhance marketing and provide integrated services
to emerging and middle-market companies and institutional clients. As the
following chart indicates, the Company has been successful in increasing the
underwriting activities of Tucker Anthony.
 
                  PUBLIC EQUITY OFFERINGS LED OR CO-MANAGED(1)
                            (DOLLARS IN MILLIONS)(2)
 
<TABLE>
<CAPTION>
                                                                                        FIRST HALF
                                                                             ---------------------------------
                            1995              1996              1997              1997              1998
                       ---------------   ---------------   ---------------   ---------------   ---------------
                       NUMBER   AMOUNT   NUMBER   AMOUNT   NUMBER   AMOUNT   NUMBER   AMOUNT   NUMBER   AMOUNT
<S>                    <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Issues managed by
  Tucker Anthony.....     5      $171      10      $229      10     $ 419       7      $274      11     $  499
Issues managed by
  Sutro..............     3       118       5       251      20     1,124       8      419        3        205
Issues managed by
  Cleary Gull(3).....   N/A       N/A     N/A       N/A     N/A       N/A     N/A      N/A        4        331
Issues managed by
  Tucker Anthony and
  Sutro jointly......     1        24       1        50       4       200       2       68        1        148
                        ---      ----     ---      ----     ---     ------    ---      ----      --     ------
Total................     9      $313      16      $530      34     $1,743     17      $761      19     $1,183
                        ===      ====     ===      ====     ===     ======    ===      ====      ==     ======
</TABLE>
 
------------------------------
(1) Including public common or preferred stock issues and rights offerings;
    excluding closed-end funds.
 
(2) Shares offered by entire syndicate (excluding over-allotment shares)
    multiplied by offering price.
 
(3) Includes only those offerings completed after the acquisition of Cleary Gull
    by the Company.
 
     The public finance departments of Tucker Anthony and Sutro provide
financial consulting, advisory and underwriting services to cities and public
service districts. The Company's 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 sector has generally
experienced diminishing spreads and a lower level of publicly financed projects.
Nevertheless, both firms have experienced increasing profitability in this
sector in 1997 by concentrating on smaller local community projects.
 
     The syndicate departments coordinate the distribution of managed and
co-managed corporate securities offerings and accept invitations to participate
in underwritings managed by other investment banking firms.

 
                                       44
<PAGE>   45
 
     The Company, through certain subsidiaries, has from time to time in the
past and may from time to time in the future participate as an equity investor
in connection with specific transactions.
 
  Other Activities
 
     Tucker Anthony and Sutro hold memberships in major securities exchanges in
the United States (including the NYSE) in order to provide services to their
brokerage clients in the purchase and sale of listed securities.
 
     Additionally, the Company's wholly owned subsidiary, Freedom Specialist
Inc. ("FSI"), has a 25% interest in the profits and losses of a joint specialist
account in which it participates with two other NYSE specialist firms, RPM
Specialist Corp. and R. Adrian & Co. Specialists are responsible for executing
transactions and maintaining a fair and orderly market in securities under NYSE
rules and regulations. In this function, the 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 June 30,
1998, the specialist firm acted as a specialist in 36 equity issues. FSI's
specialist stock settlement and clearing activities are provided by RPM Clearing
Corporation.
 
     Retail client securities transactions are executed on either a cash or
margin basis. Under the current clearing arrangement with Wexford, in a retail
margin transaction, credit is extended to a client through Wexford 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 for net customer debit balances paid to Wexford. The
amount of the Company's gross interest revenues is affected not only by
prevailing interest rates, but also by the volume of business conducted on a
margin basis. By permitting a client to purchase on margin, the Company takes
the risk that market declines could reduce the value of the collateral below the
principal amount loaned, plus accrued interest, before the collateral can be
sold. 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 Wexford's, Tucker Anthony's and Sutro's credit review and daily monitoring
procedures.
 
FREEDOM CAPITAL
 
     The Company's asset management activities are conducted principally by
Freedom Capital. Freedom Capital is a Massachusetts corporation, formerly named
Tucker Anthony Management Corp. organized in 1930. As of June 30, 1998, Freedom
Capital had 58 employees located in Massachusetts and New York. Freedom Capital
provides investment advisory and portfolio management services to individuals,
corporations, public funds, professional firms, endowments and pension funds,
and money market funds. As of June 30, 1998, total assets under management were
approximately $6.2 billion, comprised of approximately $3.4 billion of
investments by public sector entities, high net worth individuals and others,
with the remainder in money market funds for the benefit of Tucker Anthony,
Sutro and Cleary Gull clients.
 
     The Company intends to enhance the profitability of Freedom Capital by
acquiring other money management businesses to increase both assets under
management and the number of investment professionals providing services and by
creating products to be marketed by Freedom Capital. Freedom Capital had offered
proprietary mutual funds to its clients until 1992, when the Company assigned
its investment advisory contracts to Hancock. The Company also intends to
increase the productivity and profitability of Freedom Capital through improved
coordination with the Tucker Anthony and Sutro retail brokerage networks and
other initiatives intended to allow Freedom Capital to manage a larger
percentage of funds held by Tucker Anthony and Sutro clients.
 
     As with other aspects of the Company's business, Freedom Capital is focused
on service and client 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

 
                                       45
<PAGE>   46
 
client. Freedom Capital offers comprehensive client statements which include
portfolio appraisals, performance analyses and statements of transactions. In
addition, Freedom Capital provides its clients with economic commentary and
investment letters on a regular basis. Freedom Capital believes that its many
strong, long-term client relationships attest to its attention to service and
client communication.
 
     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 $699 million, of which
$22 million was under management, as of June 30, 1998.
 
RELATIONSHIP WITH WEXFORD
 
     The Company clears all transactions, and carries accounts for customers and
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, 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 is entitled to pay a set fee
per trade, subject to an aggregate annual minimum payment for clearing trades
through Wexford. The Company's current trading volume allows the Company to
realize substantially all of the benefit of the per trade price, although the
Company believes that the Wexford arrangement provides substantial cost
advantages to the Company even during periods with reduced trading volumes.
 
     Consistent with its strategy of providing its investment executives with a
high level of support, following the April 1996 conversion to the Wexford
clearing arrangement, the Company retained approximately 50 of its clearing
operation employees to serve as an interface between Wexford and the Company's
investment executives. The Company's retention of these employees allows its
investment executives to deal exclusively with Company employees in connection
with any client inquiries or problems. In addition to providing the Company and
its investment executives with access to advanced technology without substantial
capital investment by the Company, the Company's relationship with Wexford will
allow the Company to provide its clients with benefits resulting from this
technology. The Company allows clients, for a fee, to access information
concerning their accounts and other market information from their own personal
computers and has acquired technology that will enable its investment executives
to communicate with its customers through electronic mail, subject to rules and
procedures in compliance with Commission and SRO guidelines. The agreement
between the Company and Wexford has a fixed term of five years, with provisions
for negotiated extensions. See "Risk Factors -- Dependence on Certain
Relationships" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
 
     The Company currently has an uncommitted financing arrangement with Wexford
pursuant to which the Company finances its customer accounts, certain
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 for financial accounting reporting
purposes, 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,
request customers to deposit additional collateral or reduce securities
positions when necessary.
 
     See "Risk Factors -- Dependence on Certain Relationships and Technology"
for a discussion of certain risks associated with the Company's Wexford
relationship.

 
                                       46
<PAGE>   47
 
PROPERTIES
 
     The principal executive offices of the Company are located at One Beacon
Street, Boston, Massachusetts under a lease expiring December 31, 2005. The
Company is currently leasing approximately 104,000 square feet at that location,
including an additional 15,000 feet commencing July 1, 1998. The Company also
leases approximately 88,000 square feet (of which 18,000 square feet has been
sublet) at One World Financial Center, 200 Liberty Street, New York, New York,
under a lease expiring in January 2005; 64,000 square feet (of which 8,000
square feet has been sublet) at 201 California Street, San Francisco, California
under a lease expiring July 31, 2003; 25,000 square feet at 555 South Flower
Street, Los Angeles, California under a lease expiring July 31, 2002; and 24,000
square feet at 100 East Wisconsin Avenue, Milwaukee, Wisconsin under a lease
expiring January 31, 2006. For the year ended December 31, 1997, the Company's
total expenses for operating leases were $15.9 million. The Company believes
that its existing facilities will be adequate for the foreseeable future.
 
EMPLOYEES
 
     As of June 30, 1998, the Company had a total of 2,003 employees, of whom
1,192 were engaged in retail brokerage, 86 in institutional sales, 70 in
research, 163 in trading, 118 in investment banking, 28 in asset management and
346 in accounting, administration and operations. Of these employees, 1,257 were
classified as professionals and 746 were classified in support positions. None
of the Company's employees are subject to a collective bargaining agreement. The
Company believes that its relations with its employees generally are good. See
"Risk Factors -- Dependence on Personnel."
 
EFFECTS OF INTEREST RATES
 
     The Company's business is affected by general economic conditions,
including movements of interest rates. 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 prices 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 equity securities. As interest rates decline, equity securities may tend to
rise in value. The impact of these changes may affect the Company's inventory of
equity securities, which may change in value, and may also affect the
profitability of the Company's investment banking activities. Retail commission
revenue may also be affected by changes in interest rates and any resulting
indirect impact on the value of equity 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 business in
general are highly competitive. The principal competitive factors influencing
the Company's business are its professional staff, its reputation in the
marketplace, its existing client relationships, the ability to commit capital to
client transactions and its mix of market capabilities. The Company's ability to
compete effectively in securities brokerage and investment banking activities
will also be influenced by the adequacy of its capital levels and by its ability
to raise additional capital. See "Risk Factors -- Significant Competition."

 
                                       47
<PAGE>   48
 
REGULATION
 
     The securities and commodities industry is one of the nation's most
extensively regulated industries. The Commission is responsible for carrying out
the federal securities laws and serves as a supervisory body over all national
securities exchanges and associations. The regulation of broker-dealers has to a
large extent been delegated by the federal securities laws to SROs. These SROs
include all the national securities and commodities exchanges, the NASD and the
MSRB. Subject to approval by the Commission and the CFTC, these SROs adopt rules
that govern the industry and conduct periodic examinations of the operations of
certain subsidiaries of the 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 Cleary Gull. 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
among broker-dealers, 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 and member firms of the NYSE or the NASD,
Tucker Anthony, Sutro, Cleary Gull and FSI 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. Freedom Distributors
Corporation, a subsidiary of Freedom Capital, is also subject to Rule 15c3-1.
The Net Capital Rules, which specifies minimum net capital requirements for
registered broker-dealers, is designed to measure the financial soundness and
liquidity of broker-dealers. The Net Capital Rules also (i) require that broker-
dealers notify the Commission, 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; (ii) 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
has net capital of less than $300,000 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 (iii) provide that the SEC
may, by order, prohibit withdrawals from 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 an 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
$312,500 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 $375,000 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.
 
     The Company also is subject to "Risk Assessment Rules" imposed by the
Commission 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 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 Commission. In addition, the
possibility exists that, on the basis of the information it obtains under the
Risk Assessment Rules, the Commission could seek authority over the Company's

 
                                       48
<PAGE>   49
 
unregulated subsidiaries either directly or through its existing authority over
the Company's regulated subsidiaries.
 
     Tucker Anthony, Sutro, Cleary Gull, Freedom Capital and other subsidiaries
are registered with the Commission as investment advisors under the Investment
Advisors Act of 1940 (the "Advisors 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, Cleary Gull, 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. See "Risk Factors -- Business Subject to
Extensive Regulation; Constraints Imposed by Net Capital Requirements."
 
     In October 1996, during an annual review of the Company's former clearing
subsidiary by the NYSE, it was discovered that for the period of April 4, 1996
through July 1, 1996, such subsidiary had a net capital deficiency on certain
days in violation of the net capital requirements of the Commission and the
NYSE. These net capital deficiencies resulted from a misclassification on the
books of such subsidiary related to the continuation by such subsidiary of a
lending arrangement for overnight and short-term loans on an unsecured basis
with a lending institution during the winding down of its clearing operation
following the commencement of the Company's financing arrangement with Wexford.
While no net capital deficiencies occurred between July 1, 1996 and the
Company's voluntary withdrawal of such subsidiary's broker-dealer license in
March 1997, the Company has reached a settlement with the NYSE in which the
Company was censured and charged a fine of $60,000.
 
LITIGATION
 
     The Company and its subsidiaries are parties to various legal proceedings
which are of an ordinary or routine nature incidental to the operations of the
Company and its subsidiaries. As of July 31, 1998, there were approximately 36
lawsuits and arbitrations pending against the Company and its subsidiaries. The
defense of such lawsuits or arbitrations may divert the efforts and attention of
the Company's management and staff, and the Company may incur significant legal
expense in defending such litigation or arbitration. This may be the case even
with respect to frivolous claims or litigation. The amount of time that
management and other employees may be required to devote in connection with the
defense of litigation could be substantial and might divert their attention from
other responsibilities within the Company. The Company believes that it has
adequately reserved for such litigation matters and that they will not have a
material adverse effect on the Company's financial condition or results of
operations.

 
                                       49
<PAGE>   50
 
                                   MANAGEMENT
 
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
 
     The directors and executive officers of the Company and their respective
ages and positions are as follows:
 
<TABLE>
<CAPTION>
           NAME             AGE                              POSITION
<S>                         <C>    <C>
John H. Goldsmith.........  56     Chairman, Director and Chief Executive Officer as well as
                                   Chief Executive Officer of Tucker Anthony, Chairman of Sutro
                                   and Chairman of Cleary Gull
Robert H. Yevich..........  48     Director and President of Tucker Anthony
John F. Luikart...........  48     Director and President and Chief Executive Officer of Sutro
Henry Greenleaf...........  55     President and Chief Executive Officer of Freedom Capital
William C. Dennis, Jr.....  54     Executive Vice President and Chief Financial Officer
Kevin J. McKay............  49     General Counsel and Secretary
Gregory N. Thomas.........  51     Director and Vice Chairman
David P. Prokupek.........  36     Director and President and Chief Executive Officer of Cleary
                                   Gull
David V. Harkins..........  56     Director
C. Hunter Boll............  42     Director
Thomas M. Hagerty.........  35     Director
Seth W. Lawry.............  33     Director
Winston J. Churchill......  57     Director
Hugh R. Harris............  47     Director
</TABLE>
 
     John H. Goldsmith.  Mr. Goldsmith joined the Predecessor Company in 1988
and has served as Chairman, Director and Chief Executive Officer of the
Predecessor Company, Chief Executive Officer of Tucker Anthony, Chairman of
Sutro since that time and Chairman of Cleary Gull since the acquisition. Mr.
Goldsmith has served as Chairman, Director and Chief Executive Officer of the
Company since the Acquisition in 1996. Prior to joining the Predecessor 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.
 
     Robert H. Yevich.  Mr. Yevich joined Tucker Anthony in 1985 and served as
National Sales Manager until being elected to the Board of Directors of the
Predecessor Company and promoted to President of Tucker Anthony in 1995. Mr.
Yevich has served as Director of the Company since the Acquisition in 1996. Mr.
Yevich has 24 years of varied 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 Paine Webber.
 
     John F. Luikart.  Mr. Luikart joined Sutro in 1988 as President and was
responsible for directing all of the firm's capital markets activities. Mr.
Luikart was subsequently elected to the Board of Directors of the Predecessor
Company and appointed Chief Executive Officer of Sutro in October 1995. Mr.
Luikart has served as Director of the Company since the Acquisition in 1996.
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
NYSE Regional Firm Advisory Committee.
 
     Henry Greenleaf.  Mr. Greenleaf is the President and Chief Executive
Officer of Freedom Capital Management. Prior to joining Freedom in 1997, he was
Vice President and Senior Portfolio Manager with The Glenmede Trust Company.
From 1995 to 1997, he was a Principal and Chief Investment Officer with the
investment counseling firm of Resources Management Corporation/Asset Management
Partners of Farmington, Connecticut. Earlier, he was President and Chief
Investment Officer of HT Investors, Inc. and Senior Vice President of Rhode
Island Hospital Trust National Bank. Mr. Greenleaf also served as portfolio
manager for the Phoenix Mutual Life Insurance Company and The Aetna Life and
Casualty Company. Mr. Greenleaf is a member of the Board of Directors of Cambric
Graphics.

 
                                       50
<PAGE>   51
 
     William C. Dennis, Jr.  Mr. Dennis was elected Executive Vice President and
Chief Financial Officer of the Company in May, 1997. Prior to joining the
Company, he was a Director and Chief Financial Officer of Rodman & Renshaw
Capital Group, Inc., a financial services firm, from 1996 to 1997. Previously,
Mr. Dennis was a managing director of MIS, Inc., a database management company,
and prior to joining MIS, Inc. he was Chief Financial Officer of the Capital
Markets Sector of Merrill Lynch & Co., Inc. Earlier in his career, Mr. Dennis
was a senior financial executive of Exxon Corporation.
 
     Kevin J. McKay.  Mr. McKay joined the Predecessor Company in 1994 and has
served as General Counsel and Secretary of the Predecessor Company since that
time. Mr. McKay has served as General Counsel and Secretary of the Company since
the Acquisition in 1996. Prior to joining the Predecessor Company, Mr. McKay was
General Counsel of Prudential Securities, Inc. from 1990 to 1994. Mr. McKay has
over 19 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.
 
     Gregory N. Thomas.  Mr. Thomas joined the Company as Executive Vice
President in December 1997; was elected to the Board of Directors in January
1998 and was elected Vice Chairman of the Board of Directors in June, 1998. Mr.
Thomas also serves as a Director and Executive Vice President of Cleary Gull.
Prior to joining the Company, Mr. Thomas served as President of ShadowWood
Corporation, a private real estate investment company. In 1997, Mr. Thomas also
served as an Adjunct Professor in the School of Business and Economics at the
College of Charleston. Previously, Mr. Thomas was a general partner of William
Blair & Company. Mr. Thomas is currently a director of Obermeyer Asset
Management Company.
 
     David P. Prokupek.  Mr. Prokupek was elected to the 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, and was named Chief Executive Officer in 1996. 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.
 
     David V. Harkins.  Mr. Harkins was elected to the Board of Directors of the
Company in 1996. He has been affiliated with THL since its founding in 1974 and
joined THL as a full time employee in 1986. Mr. Harkins is Chairman of the Board
of National Dentex Corporation and is a director of First Security Services,
Inc., Fisher Scientific International, Inc., Stanley Furniture Company, Inc. and
Syratech Corporation. Mr. Harkins also serves as Senior Vice President and
Trustee of Thomas H. Lee Advisors I, and T.H. Lee Mezzanine II, affiliates of
ML-Lee Acquisition Fund, L.P., and the ML-Lee Acquisition Fund II, L.P.,
respectively.
 
     C. Hunter Boll.  Mr. Boll was elected to the Board of Directors of the
Company in 1996. He joined THL in 1986. From 1984 through 1986, Mr. Boll was
with The Boston Consulting Group. From 1977 through 1982, he served as an
Assistant Vice President, Energy and Minerals Division of Chemical Bank. Mr.
Boll is a Director of Big V Supermarkets, Inc., New York Restaurant Group, and
TransWestern Publishing, L.P. Mr. Boll is also a Vice President of Thomas H. Lee
Advisors I, T.H. Lee Mezzanine II, and the Administrative General Partner of
Thomas H. Lee Advisors II, L.P., which is also affiliated with the ML-Lee
Acquisition Fund II, L.P.
 
     Thomas M. Hagerty.  Mr. Hagerty was elected to the Board of Directors of
the Company in 1996. He joined THL in 1988. Prior to joining THL, Mr. Hagerty
was in the Mergers and Acquisitions Department of Morgan Stanley & Co.
Incorporated. Mr. Hagerty is a director of Syratech Corporation and Cott
Corporation. Mr. Hagerty is also a Vice President of Thomas H. Lee Advisors I,
T.H. Lee Mezzanine II, and the Administrative General Partner of Thomas H. Lee
Advisors II, L.P., which is also affiliated with the ML-Lee Acquisition Fund II,
L.P.
 
     Seth W. Lawry.  Mr. Lawry was elected to the Board of Directors of the
Company in 1996. He worked at THL from 1989 to 1990 and rejoined in 1994. From
1987 to 1989 and 1992 to 1994, Mr. Lawry worked at Morgan Stanley & Co.
Incorporated in the Mergers and Acquisitions, Corporate Finance and Equity
Capital Markets Departments. Mr. Lawry is a director of Safelite Glass Corp. and
Syratech Corporation.
 
     Winston J. Churchill.  Mr. Churchill was elected to the Board of Directors
in 1996. Mr. Churchill joined SCP at its founding in 1996 as a Managing General
Partner. Prior to joining SCP, Mr. Churchill formed CIP

 
                                       51
<PAGE>   52
 
Capital, Inc., in 1990 and Churchill Investment Partners, Inc., in 1989. Mr.
Churchill serves as Chairman of the Board of Central Sprinkler Corporation, and
as a director of Geotek Communications, Inc., IBAH Inc., Millenium Multimedia,
Tescorp, Inc., Cinema Star Luxury Theatres, Inc., and Griffin Land and
Nurseries, Inc. Mr. Churchill also serves as a director of Fordham University,
Georgetown University, and several other institutions.
 
     Hugh R. Harris.  Mr. Harris was elected to the Board of Directors in June,
1998. From 1988 until 1997, Mr. Harris was the President and Chief Operating
Officer of BancBoston Mortgage Corporation, until it was sold to HomeSide
Lending, Inc. HomeSide Lending, Inc. was sold to National Australia Bank in
February 1998 and is now a wholly-owned subsidiary thereof. Mr. Harris remains
as the President and Chief Operating Officer of HomeSide Lending, Inc.
 
BOARD COMMITTEES
 
     The Compensation Committee of the Board of Directors of the Company is
comprised of David V. Harkins, Thomas M. Hagerty, Hugh R. Harris and Winston J.
Churchill. The Audit Committee of the Board of Directors of the Company is
comprised of C. Hunter Boll, Seth W. Lawry, Hugh R. Harris and Winston J.
Churchill.
 
ELECTION AND COMPENSATION OF DIRECTORS
 
     Each director of the Company holds office until his successor has been duly
elected and qualified. Directors of the Company are elected annually by the
stockholders of the Company. Officers of the Company are elected by the Board of
Directors of the Company at each annual meeting of the Board of Directors and
serve at its discretion. Other than Hugh Harris, current directors of the
Company receive no compensation for serving as directors; Mr. Harris receives
$1,000 per board meeting and $750 per committee meeting. Additionally, Mr.
Harris receives an annual retainer of $15,000.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     Messrs. Harkins, Boll, Hagerty and Lawry are employed by THL, Mr. Churchill
is employed by SCP Mr. Harris is employed by HomeSide Lending, Inc. and the
other directors of the Company are employed by the Company or its subsidiaries.
THL, SCP and those directors who are employed by the Company have each been
involved in transactions with the Company. See "Certain Relationships and
Related Transactions."

 
                                       52
<PAGE>   53
 
EXECUTIVE COMPENSATION
 
     The following table sets forth the compensation earned by the Company's
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers (collectively, the "Named Executive Officers")
during the year ended December 31, 1997:
 
                         SUMMARY COMPENSATION TABLE(1)
 
<TABLE>
<CAPTION>
                                                                                LONG-TERM     ALL OTHER
                                                            1997               COMPENSATION    COMPEN-
                                                     ANNUAL COMPENSATION          AWARDS       SATION
                                                 ---------------------------   ------------   ---------
                                                                      OTHER
                                                                     ANNUAL     SECURITIES
                                                                     COMPEN-    UNDERLYING
                                                 SALARY     BONUS    SATION      OPTIONS
NAME AND PRINCIPAL POSITION                        ($)       ($)       ($)         (#)           ($)
<S>                                              <C>       <C>       <C>       <C>            <C>
John H. Goldsmith..............................  400,000   850,000       (2)      54,540       41,595(3)
Chairman, Director and Chief Executive Officer
William C. Dennis, Jr. (4).....................  350,000   400,000       --       36,360           --
Chief Financial Officer
Kevin J. McKay.................................  300,000   400,000       (2)      29,088        3,200(3)
General Counsel and Secretary
Robert H. Yevich...............................  300,000   700,000       (2)      44,541        3,200(3)
Director and President of Tucker Anthony
John F. Luikart................................  250,000   800,000       (2)      44,541        3,000(3)
Director and Chief Executive Officer of Sutro
</TABLE>
 
------------------------------
 
(1) Amounts shown reflect compensation earned in the period presented, although
    payments earned in prior periods may have been paid in the period presented
    and compensation earned in the period presented may have been paid in a
    subsequent period.
 
(2) Amount does not exceed lesser of $50,000 or 10% of compensation.
 
(3) Represents contribution to 401(k) plan and, in the case of Mr. Goldsmith,
    $38,395 of insurance premiums.
 
(4) The amount presented in the table above includes a $250,000 loan which was
    forgiven by the Company. Mr. Dennis' employment began May 12, 1997 and his
    effective annual base salary rate is $400,000.

 
                                       53
<PAGE>   54
 
     The following table sets forth certain information regarding the option
grants made during Fiscal 1997 to each of the Company's named executive officers
in the Summary Compensation Table above. The Company issued no stock
appreciation rights in 1997.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                                INDIVIDUAL GRANTS                              POTENTIAL REALIZABLE
                       --------------------------------------------------------------------           VALUE
                                      PERCENT OF                                                AT ASSUMED ANNUAL
                                         TOTAL                                                        RATES
                                        OPTIONS                                                   OF STOCK PRICE
                        NUMBER OF     GRANTED TO                     MARKET                      APPRECIATION FOR
                       SECURITIES      EMPLOYEES                    VALUE ON                          OPTION
                       UNDERLYING         IN         EXERCISE OR     DATE OF                        TERM(1)(2)
                         OPTIONS      FISCAL YEAR    BASE PRICE       GRANT      EXPIRATION    --------------------
NAME                   GRANTED (#)        (%)         ($/SHARE)     ($/SHARE)       DATE        5%($)       10%($)
<S>                    <C>            <C>            <C>            <C>          <C>           <C>         <C>
John H. Goldsmith....    17,998                          5.50          5.50       01/31/07      62,261     157,781
                         36,542                          5.50          5.50       05/31/06     116,014     288,746
                         ------
                         54,540          2.56
                         ------
William C. Dennis,
  Jr.................    11,999                          5.50          6.31       05/01/07      41,507     105,186
                         24,361                          5.50          6.31       05/31/06      74,744     184,598
                         ------
                         36,360          1.70
                         ------
Kevin J. McKay.......     9,599                          5.50          5.50       01/31/07      33,206      84,150
                         19,489                          5.50          5.50       05/31/06      61,874     153,998
                         ------
                         29,088          1.36
                         ------
Robert H. Yevich.....    14,699                          5.50          5.50       01/31/07      50,846     128,854
                         29,842                          5.50          5.50       05/31/06      94,745     235,809
                         ------
                         44,541          2.09
                         ------
John F. Luikart......    14,699                          5.50          5.50       01/31/07      50,846     128,854
                         29,842                          5.50          5.50       05/31/06      94,745     235,809
                         ------
                         44,541          2.09
                         ------
</TABLE>
 
------------------------------
(1) In accordance with the rules of the Commission, shown are the gains or
    "option spreads" that would exist for the respective options granted. These
    gains are based on the assumed rates of annual compound stock price
    appreciation of 5% and 10% from the date the option was granted over the
    full option term. These assumed annual compound rates of stock price
    appreciation are mandated by the rules of the Commission and do not
    represent the Company's estimate or projection of future Common Stock
    prices.
 
(2) Options issued to Mr. Dennis were issued below fair market value on the date
    of grant resulting in gains or "option spreads" of $9,719 and $19,732. These
    gains are based on the assumed rate of annual compound stock price
    appreciation of 0% from the dates options were granted over the full option
    term.
 

                                       54
<PAGE>   55
 
     Year End Option Table.  The following table sets forth information
regarding exercise of options and the number and value of options held at
December 31, 1997, by each of the Company's named executive officers in the
Summary Compensation Table above:
 
    AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
 
<TABLE>
<CAPTION>
                                                       NUMBER OF SECURITIES
                                                      UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED IN-THE-
                            SHARES                          OPTIONS AT                    MONEY OPTIONS AT
                           ACQUIRED                      FISCAL YEAR END                 FISCAL YEAR-END(1)
                              ON        VALUE      ----------------------------    -------------------------------
                           EXERCISE    REALIZED    EXERCISABLE    UNEXERCISABLE     EXERCISABLE      UNEXERCISABLE
NAME                         (#)         ($)           (#)             (#)              ($)               ($)
<S>                        <C>         <C>         <C>            <C>              <C>               <C>
John H. Goldsmith........     --          --         10,908          43,632           158,166           632,664
William C. Dennis, Jr....     --          --          7,272          29,088           105,444           421,776
Kevin J. McKay...........     --          --          5,818          23,270            84,361           337,415
Robert H. Yevich.........     --          --          8,908          35,633           129,166           516,679
John F. Luikart..........     --          --          8,908          35,633           129,166           516,679
</TABLE>
 
------------------------------
(1) Value is based on the difference between the option exercise price and the
    initial public offering price of the Common Stock multiplied by the number
    of shares of Common Stock underlying the option. No market existed for the
    Common Stock prior to the initial public offering.
 
STOCK OPTION AND STOCK PURCHASE PLANS
 
     1996 Stock Option Plan.  The 1996 Stock Option Plan (the "1996 Plan")
provides for the granting of incentive stock options and non-qualified options
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), to employees of the Company. The 1996 Plan is administered by either
the Company's Board of Directors ("the Board") or a committee (the "Committee")
comprised of members of the Board to which the Board may delegate its
administrative duties and authority. The Committee (i) interprets and applies
the 1996 Plan; (ii) determines the eligibility of an individual to participate
in the 1996 Plan; (iii) approves the assignment of options immediately prior to
the registration of the Company's stock pursuant to the 1934 Act if such
assignment would increase the number of Common Stock holders; and (iv)
determines and allocates the cancellation or exchange of outstanding options in
the case of a recapitalization, acquisition, merger or Change in Control. No
director or officer of the Company is eligible for such options unless such
director or officer is also an employee. No options may be granted to an
employee that, at the time of the grant, owns more than 10% of the voting power
or greater than 10% of each class of the Company's outstanding stock, unless the
purchase price for the purchase of the stock is not less than 110% of the
stock's fair market value on the date of the grant and the option, by its terms,
shall not be exercisable more than five years from the date it is granted.
 
     The Company has authorized the issuance of options for up to 2,181,600
shares of the Company's Common Stock under the 1996 Plan. Matured options may be
exercised in full at one time or in part from time to time and the payment of
the exercise price may be made by delivery of (i) cash or a check payable to the
order of the Company in an amount equal to the exercise price of such options;
(ii) shares of Common Stock of the Company owned by the optionee having a fair
market value equal in amount to the exercise price of the options being
exercised; (iii) the cancellation of shares covered by this Option which are
then vested and exercisable having a fair market value equal in amount to the
purchase price of the shares being purchased; (iv) at the sole discretion of the
Committee, a promissory note; or (v) any combination of (i), (ii), (iii) and
(iv); provided, however, that payment of the exercise price by delivery of
shares of Common Stock of the Company owned by such optionee or cancellation of
shares covered by the option may be made only with the consent of the Committee
if such payment results in a charge to earnings for financial accounting
purposes as determined by the Committee. The Company may delay the issuance of
shares covered by the exercise of an option until (a) the shares for which such
option has been exercised have been registered or qualified under the applicable
federal or state securities laws or (b) counsel for the Company has opined that
such shares are exempt from the registration requirements of such federal or
state securities laws.

 
                                       55
<PAGE>   56
 
     The term of any option granted under the 1996 Plan shall be limited to ten
years. Upon the termination of an optionholder's employment with the Company,
such options shall terminate between 30 and 180 days after that optionholder
leaves the employ of the Company. All options under the 1996 Plan may only be
assigned to the spouse and children of the optionholder or by will or law of
descent.
 
     As of December 31, 1997, options to purchase 2,133,888 shares were granted
under the 1996 Plan of which options to purchase 455,840 shares vest based on
time at the rate of 20% per year for five years following the date of grant and
options to purchase 1,678,048 shares vest on the sixth anniversary of the date
of grant, of which options to purchase 925,396 shares are subject to accelerated
vesting, based on certain performance thresholds tied to the Company's
operations and options to purchase 752,652 shares are subject to accelerated
vesting based on individual performance (none of which have been granted to the
Company's executive officers). All of the outstanding options have an exercise
price of $5.50 per share. The following options under the 1996 Plan have been
granted to the executive officers of the Company:
 
<TABLE>
<CAPTION>
                                                        TIME-VESTED    COMPANY PERFORMANCE
                                                          OPTIONS            OPTIONS
<S>                                                     <C>            <C>
John H. Goldsmith.....................................    17,998             36,542
William C. Dennis, Jr. ...............................    11,999             24,361
Kevin J. McKay........................................     9,599             19,489
Robert H. Yevich......................................    14,699             29,842
John F. Luikart.......................................    14,699             29,842
Henry Greenleaf.......................................     4,500              9,135
</TABLE>
 
     1998 Long-Term Incentive Plan.  The Company's 1998 Long-Term Incentive Plan
(the "1998 Plan") provides for the granting of stock options, SARs, restricted
stock and long-term performance awards, in each case on such terms and to such
officers and other key employees as the administrators of the 1998 Plan may
select. The 1998 Plan shall be administered by a committee (the "Committee") of
the Board of Directors comprised of directors who qualify as "non-employee
directors" within the meaning of Rule 16(b)
promulgated under Section 16 of the Exchange Act and as "outside directors"
within the meaning of Code Section 162(m) and the regulations promulgated
thereunder. The failure of a Committee member to qualify under these
requirements shall not invalidate any award otherwise made under the Bonus Plan.
A total of 2,291,688 shares of the Common Stock have been reserved for issuance
under the 1998 Plan.
 
     The maximum number of stock options, SARs or shares of restricted stock
that can be granted at any time shall equal 2,291,688 shares reduced by the sum
(without duplication) of: the number of shares of Common Stock subject to
outstanding awards under the 1998 Plan, the number of shares of Common Stock in
respect of which awards have been exercised, and the number of shares of Common
Stock issued without forfeiture or similar restrictions or issued with
forfeiture or similar restrictions which have lapsed, and increased by the
number of shares of stock delivered or withheld in payment of the exercise
price, purchase price or tax withholding requirements of an award granted under
the 1998 Plan. Unless specifically consented to by the administrators of the
1998 Plan, shares may not be delivered or withheld in payment of the exercise
price, purchase price or tax withholding requirements of an award granted under
the 1998 Plan if such payment would result in a charge to earnings for financial
accounting purposes. The maximum number of stock options, SARs or shares of
restricted stock that can be granted to any one participant in any one plan year
is 250,000. Stock options awarded under the 1998 Plan may either be "incentive
stock options" as defined in Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code") or non-qualified stock options. The term of each stock
option shall be fixed by the administrators of the 1998 Plan, but no incentive
stock option shall be exercisable for a period of more than ten years from the
date the option is granted and any option granted to any optionee who, at the
time the option is granted, owns more than 10% of the voting power of all
classes of capital stock of the Company or of a subsidiary may not have a term
of more than five years from the date of grant. Upon receipt of written notice
to exercise a stock option, the Company may, in the administrators' sole
discretion, elect to cash out all or part of the option to be exercised by
paying the optionee an amount, in cash or Common Stock, equal to the excess of
the fair market value of the Common Stock over the option price on the effective
date of such cashout. Restricted stock under the 1998 Plan shall be awarded for
nominal or no consideration on behalf of the recipient.

 
                                       56
<PAGE>   57
 
     The 1998 Plan contains provisions intended to comply with Section 162(m) of
the Code. During such time Section 162(m) of the Code or any successor provision
is in effect, the maximum value any participant subject to the provisions of
Section 162(m) may receive in any calendar year under the 1998 Plan will be $2
million multiplied by the number of years in the relevant measuring period, but
in no event more than $5 million, and the maximum annual amount that may be paid
to a participant under the 1998 Plan for (i) the year in which the 1998 Plan is
implemented shall equal no more than $2 million, and (ii) each subsequent year
shall equal 110% of such maximum amount for the preceding year; provided that
the maximum annual amount determined under this provision shall be determined
without regard to the value of any stock options granted to a participant under
the 1998 Plan.
 
     The 1998 Plan provides that in the event of a Change in Control of the
Company (i) SARs and stock options awarded under the 1998 Plan not previously
exercisable and vested which have been held for at least six months from the
date of grant shall become fully vested and exercisable; (ii) the restrictions
applicable to any restricted stock awards under the 1998 Plan shall lapse and
such shares and awards shall be deemed fully vested and (iii) any outstanding
long-term performance awards shall be vested and paid out based on the pro rated
target results for the performance period relating to such awards, unless the
administrators of the 1998 Plan provide at or after grant and prior to the
Change in Control for a different payment. The value of outstanding stock
options, SARs and restricted stock awards shall, unless otherwise determined by
the administrator of the 1998 Plan at or after grant, be cashed out on the basis
of the Change in Control Price. "Change in Control" is defined as the happening
of any of the following: (i) when any "person" as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company or a subsidiary or
employee benefit plan of the Company) who is not the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's outstanding securities on the effective date of the 1998 Plan
is or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
outstanding securities without the consent of the Board of Directors of the
Company; (ii) the occurrence of any transaction or event relating to the Company
required to be described pursuant to the requirements of item 6(e) of Schedule
14A of the Exchange Act; (iii) when, during any period of two consecutive years
during the existence of the 1998 Plan, the individuals who, at the beginning of
such period, constitute the Board of Directors of the Company cease for any
reason other than death to constitute a majority thereof, provided, however,
that a director who is not a director at the beginning of such period shall be
deemed to have satisfied the two-year requirement if such director was elected
by, or on the recommendation of, at least a majority of the directors who were
directors at the beginning of such period (either actually or by prior operation
of this clause (iii)); or (iv) the occurrence of a transaction requiring
stockholder approval for the acquisition of the Company by an entity other than
the Company through purchase of assets, or by merger or otherwise. The "Change
in Control Price" is defined as the highest sales price per share of Common
Stock paid or offered in any bona fide transaction relating to a Change in
Control of the Company, as determined by the administrators of the 1998 Plan.
The 1998 Plan provides that no payment shall be made in connection with a Change
in Control which, when aggregated with other payments made to the employee
would, as determined by such persons as the administrators of the 1998 Plan
shall irrevocably designate at or prior to a Change in Control, result in an
"excess parachute payment" for which the Company would not receive a federal
income tax deduction by reason of Section 280G of the Code.
 
     The administrators of the 1998 Plan may amend, alter or discontinue the
1998 Plan at any time and from time to time, but no alteration or
discontinuation shall be made which would impair the rights of an optionee or
participant with respect to an award which has been granted under the 1998 Plan
without the optionee's or participant's consent. In addition, without the
approval of the Company's stockholders, the administrators of the 1998 Plan may
not make any such amendment which would, except in connection with stock splits,
dividends or similar recapitalizations of the Company, increase the total number
of shares reserved for purposes of the 1998 Plan, change the employees or class
of employees eligible to participate in the 1998 Plan or extend the maximum
option period applicable to incentive stock options granted under the 1998 Plan.
 
     The other terms and conditions of awards under the 1998 Plan, including
vesting provisions, term and exercisability of the awards, shall be as
determined by the administrators of the 1998 Plan. Upon closing of this
offering, options to purchase 545,400 shares with an exercise price equal to the
initial public offering price
 

                                       57
<PAGE>   58
 
will be granted under the 1998 Plan to employees of the Company. Such options
will vest in three equal annual installments commencing on the third anniversary
of the grant date. Options to purchase 236,500 shares with an exercise price
equal to the initial public offering price have been granted under the 1998 Plan
to employees of Cleary Gull. Such options will vest on the third anniversary of
the grant date. Additionally, options to purchase an aggregate of 183,405 shares
with an exercise price between $4.95 to $5.70 per share have been granted under
the 1998 Plan to employees of Cleary Gull. Such options are immediately
exercisable.
 
1998 STOCK PURCHASE PLAN
 
     The Company's 1998 Employee Stock Purchase Plan (the "1998 Purchase Plan")
authorizes the issuance of a maximum of 500,000 shares of Common Stock pursuant
to the exercise of nontransferable options granted to participating employees.
 
     The 1998 Purchase Plan is administered by the Compensation Committee. All
employees of the Company whose customary employment is 20 hours or more per week
and five months or more per year and have been employed by the Company for at
least six months are eligible to participate in the 1998 Purchase Plan.
Employees who own 5% or more of the Company's stock, directors who are not
employees of the Company and persons subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934 may not participate in the
1998 Purchase Plan. To participate in the 1998 Purchase Plan an employee must
authorize the Company in writing to deduct an amount (not less than 1% nor more
than 10% of a participant's base compensation and not more than $25,000 in any
year) from his or her pay commencing on January 1, April 1, July 1 and October 1
of each year (each a "Purchase Period"), commencing October 1, 1998. On the
first day of each Purchase Period, the Company grants to each participating
employee an option to purchase up to that number of shares of Common Stock they
are entitled to purchase under the 1998 Purchase Plan. The exercise price for
the option for each Purchase Period is 85% of the fair market value of the
Common Stock. The fair market value will be the average of the closing selling
price of the Common Stock on the NYSE for the last five days of any Purchase
Period. If an employee is not a participant on the last day of the Purchase
Period, such employee is not entitled to exercise his or her option, and the
amount of his or her accumulated payroll deduction will be refunded to the
employee. An employee's rights under the 1998 Purchase Plan terminate upon his
or her voluntary withdrawal from the Plan at any time or upon termination of
employment.
 
     Common Stock for the 1998 Purchase Plan will be made available either from
authorized but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Company, including shares repurchased in the open market.
 
1998 EXECUTIVE PERFORMANCE BONUS PLAN
 
     Certain of the Company's executive officers and other key employees are
entitled to participate in the Company's 1998 Executive Performance Bonus Plan
(the "Bonus Plan"). The Bonus Plan shall be administered by a committee (the
"Committee") of the Board of Directors comprised of directors who qualify as
"non-employee directors" within the meaning of Rule 16(b) promulgated under
Section 16 of the Exchange Act and as "outside directors" within the meaning of
Code Section 162(m) and the regulations promulgated thereunder. The failure of a
Committee member to qualify under these requirements shall not invalidate any
award otherwise made under the Bonus Plan. Amounts paid pursuant to the Bonus
Plan are intended to qualify as performance-based compensation within the
meaning of Section 162(m) of the Code. The Bonus Plan provides that the
Committee will establish an award pool from which awards may be paid to eligible
employees in accordance with the Bonus Plan. The amount included in the award
pool for any particular performance period shall be equal to a percentage of
pre-tax operating income of the Company (as defined) for the performance period
before provision for incentive compensation and extraordinary items, which
percentage shall be determined by the Committee and shall not exceed 15%. Within
ninety days following the commencement of each performance period, the Committee
shall allocate in writing, on behalf of each participant, a portion of the award
pool, if any, to be paid for such performance period; provided in no event shall
the percentage portion of the award pool allocated to any participant exceed 50%
of the award pool. The Committee may establish other criteria which it deems
appropriate for awards under the Bonus Plan, which may or may not be tied to
pre-tax operating income of the Company, so long as the amounts of the
                                       58
<PAGE>   59
 
awards fall within the maximum amounts described above. The Committee is
authorized at any time during or after a performance period, in its sole
discretion, to reduce or eliminate (but not increase) the award pool or a
portion of the award pool allocated to any participant for any reason, including
changes in the position or duties of any participant with the Company during the
performance period, whether due to termination of employment or otherwise.
Participants are entitled to receive payment under the Bonus Plan in cash as
soon as practicable after the total amount of the award pool and the awards
payable to each participant are determined. In the discretion of the Committee,
partial payments may be made to participants during the course of a performance
period; provided that the aggregate of such partial payments may not exceed the
amount of the award that a participant would otherwise receive pursuant to the
Bonus Plan. The Board of Directors of the Company may at any time terminate,
suspend or modify the Bonus Plan and the terms and conditions of any award
thereunder that has not been paid. No award may be granted under the Bonus Plan
during any period of suspension or after its termination. Amendments of the
Bonus Plan are subject to the approval of the stockholders of the Company only
if such approval is necessary to maintain the Bonus Plan in compliance with the
requirements of Section 162(m) of the Code, or any other applicable law or
regulation. No awards have yet been made under the Bonus Plan.
 
LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     As permitted by the Delaware General Corporation Law, the Company has
included in its Charter a provision to eliminate the personal liability of its
directors for monetary damages for breach or alleged breach of their fiduciary
duties as directors, subject to certain exceptions. In addition, the Bylaws of
the Company provide that the Company is required to indemnify its officers and
directors under certain circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and the Company is required to
advance expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. The Company has also
agreed to indemnify its directors and certain officers to the maximum extent
permitted by Delaware law pursuant to agreements with such directors and
officers. At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted. The Company
believes that its charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.

 
                                       59
<PAGE>   60
 
                       PRINCIPAL AND SELLING STOCKHOLDERS
 
     The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of June 30, 1998, and as adjusted to
reflect the sale of the Common Stock offered hereby by: (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock; (ii) each of the Company's directors; (iii) each of the Selling
Stockholders for which the date as of which stock ownership information is
provided is September 3, 1998; (iv) each named executive officer, and (v) all
directors and executive officers as a group. Except as otherwise specified
below, the persons named in the table below have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them.
 
<TABLE>
<CAPTION>
                                                 BENEFICIAL             NUMBER OF        BENEFICIAL OWNERSHIP
                                               OWNERSHIP PRIOR         SHARES WHICH              AFTER
                                             TO THIS OFFERING(1)       MAY BE SOLD        THIS OFFERING(1)(3)
                                            ---------------------      PURSUANT TO       ---------------------
                                            NUMBER OF                      THIS          NUMBER OF
                                            SHARES(46)    PERCENT     PROSPECTUS(2)      SHARES(46)    PERCENT
NAME OF BENEFICIAL OWNER(1)                 ----------    -------    ----------------    ----------    -------
<S>                                         <C>           <C>        <C>                 <C>           <C>
Thomas H. Lee Equity Fund III, L.P.(4)....  4,305,212       21.5%         --             4,305,212       22.3%
John H. Goldsmith(5)......................    122,388          *          --               122,388          *
William C. Dennis, Jr.(6) ................     98,172          *          --                98,172          *
Kevin J. McKay(7).........................     78,538          *          --                78,538          *
Robert H. Yevich(8).......................    104,808          *          --               104,808          *
John F. Luikart(9)........................    109,808          *          --               109,808          *
Gregory N. Thomas.........................     90,900          *          --                90,900          *
David V. Harkins(10)......................  5,018,197       25.1          --             5,018,197         26
C. Hunter Boll(11)........................  5,018,197       25.1          --             5,018,197         26
Thomas M. Hagerty(12).....................  5,018,197       25.1          --             5,018,197         26
Seth W. Lawry(13).........................  5,018,197       25.1          --             5,018,197         26
Winston J. Churchill(14)..................    494,748        2.5          --               494,748        2.6
Hugh R. Harris(15)........................     --           --            --                --           --
Michael J. Cleary(16)(17).................    122,194          *          103,543           18,651          *
David P. Prokupek(18).....................    140,156          *          103,656           36,500          *
Timothy P. Reiland(19)....................    120,121          *           93,543           26,578          *
T. Ferguson Locke(20).....................    114,108          *           97,135           16,973          *
John F. Syburg(21)........................     56,866          *           31,086           25,780          *
John R. Peterson(22)......................     44,954          *           26,009           18,945          *
Richard C. Eastman(23)....................     35,032          *              862           34,170          *
Cheryl L. Gehl(24)(25)....................     33,832          *            5,552           28,280          *
Owen L. Hill(26)..........................     25,294          *           22,427            2,867          *
Gerald L. Gerndt..........................      7,437          *            7,012              425          *
Michael G. Klein..........................     12,622          *           12,197              425          *
J. Scott Barraclough(27)..................     23,914          *           15,664            8,250          *
Anne Mategrano(28)........................     25,914          *           15,664           10,250          *
Ajoy Kumer Bose...........................     19,416          *           14,416            5,000          *
Joseph F. Hickey Jr.(29)..................     21,319          *            6,329           14,990          *
Robert H. Neugebauer(30)..................     17,813          *           10,913            6,900          *
Martin G. Pembroke(31)....................     18,622          *           17,622            1,000          *
Christopher S. Barnes(32).................     16,092          *            3,202           12,890          *
Robert Butendorf(33)(34)..................     16,592          *            8,202            8,390          *
Judith S. Neugebauer(35)..................     14,258          *           11,158            3,100          *
Robert C. Damron..........................     13,315          *            9,065            4,250          *
</TABLE>
 
                                       60
<PAGE>   61
 
<TABLE>
<CAPTION>
                                                 BENEFICIAL             NUMBER OF        BENEFICIAL OWNERSHIP
                                               OWNERSHIP PRIOR         SHARES WHICH              AFTER
                                             TO THIS OFFERING(1)       MAY BE SOLD        THIS OFFERING(1)(3)
                                            ---------------------      PURSUANT TO       ---------------------
                                            NUMBER OF                      THIS          NUMBER OF
                                            SHARES(46)    PERCENT     PROSPECTUS(2)      SHARES(46)    PERCENT
NAME OF BENEFICIAL OWNER(1)                 ----------    -------    ----------------    ----------    -------
<S>                                         <C>           <C>        <C>                 <C>           <C>
Ronald D. Miller(36)......................     13,940          *            6,323            7,617          *
Jeffrey Holmes............................     13,303          *            6,803            6,500          *
David L. Armstrong(37)....................      3,844          *            2,594            1,250          *
Amy Weasler...............................      4,695          *            2,595            2,100          *
Norman C. Gerlach(38).....................     10,353          *            6,408            3,945          *
James Schultz(39).........................      9,711          *            8,561            1,150          *
Jane E. Pegelow(40).......................      7,197          *            6,408              789          *
Mark W. Johnson...........................      6,061          *            3,561            2,500          *
Kenneth Salmon............................      3,204          *            3,204               --         --
Oyvind Solvang............................      6,408          *            6,408               --         --
Douglas L. Gessl(41)......................     10,047          *            9,047            1,000          *
Gregory T. Gorlinski......................      1,820          *            1,820               --         --
Stephen A. Schlueter......................      3,845          *            3,845               --         --
Bradley J. Simenz.........................      1,922          *            1,922               --         --
Matt D. Guerink(42).......................     26,309          *           18,419            7,890          *
Ronald A. White(43)(44)...................     18,213          *           13,768            4,445          *
Mark S. Marcon(36)........................     10,299          *            4,381            5,918          *
All Directors and Executive Officers as a
  Group (14 persons, including the
  above)..................................  6,278,622       31.2%         103,656        6,174,966       31.9%
</TABLE>
 
------------------------------
   * Less than one percent
 (1) Beneficial ownership is determined in accordance with rules of the
     Commission and includes general voting power or investment power with
     respect to securities. Shares of Common Stock subject to options and
     warrants currently exercisable or exercisable within sixty (60) days of
     June 30, 1998 are deemed outstanding for computing the percentage of the
     person holding such options, but are not deemed outstanding for computing
     the percentage of any other person. Unless otherwise indicated, the address
     of each of the beneficial owners identified is One Beacon Street, Boston,
     MA 02108.
 
 (2) Unless otherwise noted, each Selling Stockholder maintains a principal
     place of business at Cleary Gull Reiland & McDevitt Inc., 100 E. Wisconsin
     Avenue, Milwaukee, Wisconsin 53202.
 
 (3) Assumes that each Selling Stockholder will sell all of the Shares set forth
     above under "Shares Which May Be Sold Pursuant to This Prospectus". There
     can be no assurance that the Selling Stockholders will sell all or any of
     the Shares offered hereunder.
 
 (4) Each of THL Equity Advisors III, L.P. ("Advisors III"), the general partner
     of Thomas H. Lee Equity Fund III, L.P. and Thomas H. Lee Foreign Fund III,
     L.P., and THL Equity Trust III, the general partner of Advisors III, also
     may be deemed to be beneficial owners of the 4,305,212 shares of Common
     Stock held by Thomas H. Lee Equity Fund III, L.P. and the 266,394 shares of
     Common Stock held by Thomas H. Lee Foreign Fund III, L.P. Each of Advisors
     III and THL Equity Trust III disclaim beneficial ownership of such shares.
     Each of Advisors III and THL Equity Trust III maintains a principal
     business address c/o Thomas H. Lee Company, 75 State Street, Boston, MA
     02109.
 
 (5) Includes 10,908 shares of Common Stock which Mr. Goldsmith has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
                                       61
<PAGE>   62
 
 (6) Includes 7,272 shares of Common Stock which Mr. Dennis has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
 (7) Includes 5,818 shares of Common Stock which Mr. McKay has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
 (8) Includes 8,908 shares of Common Stock which Mr. Yevich has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
 (9) Includes 8,908 shares of Common Stock which Mr. Luikart has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
(10) Includes the shares of Common Stock held by Thomas H. Lee Equity Fund III,
     L.P., Thomas H. Lee Foreign Fund III, L.P. and THL-CCI, L.P. ("THL-CCI"),
     which Mr. Harkins may be deemed to beneficially own by virtue of his
     position as a Trustee of THL Equity Trust III and officer of THL Investment
     Management Corp., the general partner of THL-CCI. Mr. Harkins disclaims
     beneficial ownership of such additional shares. Mr. Harkins maintains his
     principal business address c/o Thomas H. Lee Company, 75 State Street,
     Boston, MA, 02109.
 
(11) Includes the shares of Common Stock held by Thomas H. Lee Equity Fund III,
     Thomas H. Lee Foreign Fund III, L.P. and THL-CCI, which Mr. Boll may be
     deemed to beneficially own by virtue of his position as officer of each of
     THL Equity Trust III and THL Investment Management Corp. Mr. Boll disclaims
     beneficial ownership of such additional shares. Mr. Boll maintains his
     principal business address c/o Thomas H. Lee Company, 75 State Street,
     Boston, MA 02109.
 
(12) Includes the shares of Common Stock held by Thomas H. Lee Equity Fund III,
     L.P., Thomas H. Lee Foreign Fund III, L.P. and THL-CCI, which Mr. Hagerty
     may be deemed to beneficially own by virtue of his position as officer of
     each of THL Equity Trust III and THL Investment Management Corp. Mr.
     Hagerty disclaims beneficial ownership of such additional shares. Mr.
     Hagerty maintains his principal business address c/o Thomas H. Lee Company,
     75 State Street, Boston, MA, 02109.
 
(13) Includes the shares of Common Stock held by Thomas H. Lee Equity Fund III,
     L.P., Thomas H. Lee Foreign Fund III, L.P. and THL-CCI, which Mr. Lawry may
     be deemed to beneficially own by virtue of his position as officer of each
     of THL Equity Trust III and THL Investment Management Corp. Mr. Lawry
     disclaims beneficial ownership of such additional shares. Mr. Lawry
     maintains his principal business address c/o Thomas H. Lee Company, 75
     State Street, Boston, MA, 02109.
 
(14) Mr. Churchill also may be deemed to be the beneficial owner the shares of
     Common Stock held by SCP Private Equity L.P. by virtue of his position as
     officer of the general partner of SCP Private Equity, L.P. Mr. Churchill
     disclaims beneficial ownership of such additional shares. Mr. Churchill
     maintains his principal business address c/o SCP Private Equity, L.P., 800
     The Safeguard Building, 435 Devon Park Drive, Wayne, PA, 19087.
 
(15) Mr. Harris maintains a principal business address c/o HomeSide Lending,
     Inc., 7301 Bay Meadows Way, Jacksonville, FL 32256.
 
(16) Includes 3,551 shares of Common Stock which Mr. Cleary has the right to
     acquire pursuant to the 1998 Plan.
 
(17) Includes 100 shares of Common Stock held by Mr. Cleary for the benefit of
     his children and as to which Mr. Cleary disclaims beneficial ownership.
 
(18) Includes 4,000 shares of Common Stock held in a retirement account for the
     benefit of Mr. Prokupek and 5,000 shares of Common Stock owned by Mr.
     Prokupek and his wife as joint tenants.
 
(19) Includes 1,578 shares of Common Stock which Mr. Reiland has the right to
     acquire pursuant to the 1998 Plan.
 
(20) Includes 1,973 shares of Common Stock which Mr. Locke has the right to
     acquire pursuant to the 1998 Plan.
 
(21) Includes 15,780 shares of Common Stock which Mr. Syburg has the right to
     acquire pursuant to the 1998 Plan.
 
(22) Includes 3,945 shares of Common Stock which Mr. Peterson has the right to
     acquire pursuant to the 1998 Plan.
 
(23) Includes 23,670 shares of Common Stock which Mr. Eastman has the right to
     acquire pursuant to the 1998 Plan.
 
(24) Includes 15,780 shares of Common Stock which Ms. Gehl has the right to
     acquire pursuant to the 1998 Plan.
 
(25) Includes 1,000 shares of Common Stock held in a retirement account for the
     benefit of Ms. Gehl.
 
(26) Includes 2,367 shares of Common Stock which Mr. Hill has the right to
     acquire pursuant to the 1998 Plan.
 
(27) Includes 2,000 shares of Common Stock held in a retirement account for the
     benefit of Mr. Barraclough.
 
(28) Includes 4,000 shares of Common Stock held in a retirement account for the
     benefit of Ms. Mategrano.
 
(29) Includes 7,890 shares of Common Stock which Mr. Hickey has the right to
     acquire pursuant to the 1998 Plan.
 
(30) Includes 10,784 shares of Common Stock held in Mr. Neugebauer's individual
     retirement account, for which Tucker Anthony acts as custodian.
 
(31) Includes 17,622 shares of Common Stock held in a retirement account for the
     benefit of Mr. Pembroke and 1,000 shares of Common Stock owned by Mr.
     Pembroke and his wife as joint tenants.
 
                                       62
<PAGE>   63
 
(32) Includes 7,890 shares of Common Stock which Mr. Barnes has the right to
     acquire pursuant to the 1998 Plan.
 
(33) Includes 8,111 shares of Common Stock held in a retirement account for the
     benefit of Mr. Butendorf.
 
(34) Includes 7,890 shares of Common Stock which Mr. Butendorf's retirement
     account has the right to acquire pursuant to the 1998 Plan.
 
(35) Includes 5,652 shares of Common Stock held in Ms. Neugebauer's individual
     retirement account, for which Tucker Anthony acts as custodian.
 
(36) Includes 2,367 shares of Common Stock which Mr. Miller has the right to
     acquire pursuant to the 1988 Plan.
 
(37) Includes 1,922 shares of Common Stock held in Mr. Armstrong's individual
     retirement account, for which Tucker Anthony acts as custodian.
 
(38) Includes 3,945 shares of Common Stock which Mr. Gerlach has the right to
     acquire pursuant to the 1998 Plan.
 
(39) Includes 900 shares of Common Stock held in a retirement account for the
     benefit of Mr. Schultz. Also includes 250 shares of Common Stock held in a
     retirement account for the benefit of Mr. Shultz's wife and as to which Mr.
     Schultz disclaims beneficial ownership.
 
(40) Includes 789 shares of Common Stock which Ms. Pegelow has the right to
     acquire pursuant to the 1998 Plan.
 
(41) Includes 500 shares of Common Stock held in a retirement account for the
     benefit of Mr. Gessl.
 
(42) Mr. Geurink's address is 4313 West River Willows Court, Mequon, WI 53092.
 
(43) Mr. White's address is 3465 North Lake Drive, Milwaukee, WI 53211.
 
(44) Includes 500 shares of Common Stock held in a retirement account for the
     benefit of Mr. White.
 
(45) Mr. Marcon's address is 11500 MacApline Court, No. 736, Glen Allen, VA.
 
(46) Includes shares which the Selling Stockholders have the right to acquire
     pursuant to options granted under the 1998 Plan. Such options were received
     by the Selling Stockholders pursuant to the Agreement in exchange for
     fully-vested options which were granted to the Selling Stockholders under
     the Cleary Gull 1996 Executive Stock Option Plan prior to the Cleary Gull
     Acquisition.
 
                                       63
<PAGE>   64
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
THE ACQUISITION
 
     On November 29, 1996, the Acquisition was completed pursuant to the terms
of the Contribution Agreement, dated October 4, 1996 (the "Contribution
Agreement").
 
     Under the terms of the Contribution Agreement, THL, SCP and approximately
350 employee investors (the "Employee Investors") contributed to the Company an
aggregate of $75,000,000 in exchange for shares representing approximately 95%
of the then outstanding shares of the Company. THL contributed $39,931,200 in
exchange for approximately 51%. SCP contributed $9,982,800 in exchange for
approximately 13%, and the Employee Investors contributed an aggregate of
$25,086,000 in exchange for approximately 31%. Hancock contributed 100% of the
outstanding capital stock of the Predecessor Company to the Company in exchange
for $180,000,000 in cash and 4.999% of the Company's outstanding capital stock.
The consideration paid to Hancock was financed with the $75,000,000 equity
contribution of THL, SCP and the Employee Investors, $85,000,000 of bank
financing under the Credit Facility and $20,000,000 of excess cash of the
Company. In connection with the Acquisition, the Company also repaid its
existing debt to Hancock totaling approximately $32,500,000. Approximately
$25,800,000 of the debt was paid with bank financing and approximately
$6,700,000 was paid from excess cash of the Company.
 
     Under the terms of the Contribution Agreement and a Tax Matters Agreement
(the "Tax Matters Agreement") entered into at the closing of the Acquisition,
each of the Company and Hancock agreed to indemnify the other party for breaches
of representations, warranties and covenants contained in the Contribution
Agreement, and Hancock has agreed to indemnify the Company for certain specified
matters. Each party's right to indemnification for breaches of any
representations and warranties contained in the Contribution Agreement survives
the closing until April 1, 1998, with the exception of certain representations
and warranties relating to authorization, validity and title to shares which
continue beyond such date. In addition, indemnification for breaches of certain
covenants contained in the Contribution Agreement, such as confidentiality and
non-competition, survive beyond April, 1998. With respect to most other claims,
if any, based on breaches of representations or warranties, a party providing
indemnification is liable for all of the other party's losses in excess of $1.75
million. Hancock's liability for all indemnification obligations under the
Contribution Agreement is limited to $30 million, except with respect to
representations regarding capitalization and share ownership and certain
covenants. In addition, the Chief Executive Officer of the Company agreed in a
separate agreement to contribute towards Hancock's indemnification obligations
for breaches of certain representations one-third of any amounts paid by Hancock
up to a maximum of $250,000.
 
     The Contribution Agreement provides that following the closing of the
Acquisition, the Company and its affiliates have the exclusive right to use all
names incorporating "Freedom", "Tucker Anthony" or "Sutro" or to use the
Freedom, Tucker Anthony or Sutro logos. Hancock agreed to cause the mutual funds
managed by its affiliates to change their names to exclude the words "Freedom,"
"Tucker Anthony" or "Sutro" from their names and to no longer use any such names
or confusingly similar names, subject to the continuation of the use of the
"Freedom" name by Hancock for a period ending April 30, 1998 for certain
purposes relating to mutual funds advised by its affiliates. In addition, the
Company agreed that after the closing date of the Acquisition the Company and
its affiliates would not have any right to use names incorporating "John
Hancock" or use any John Hancock logo, and the Company agreed to discontinue the
use of any such names and logos, provided that the Company has no liability to
Hancock for any incidental or accidental use of such names for a twelve month
period following the closing date if it is attempting in good faith to
discontinue such use and does so when it becomes aware of such use.
 
     In connection with the Acquisition, the Company and certain of its
stockholders entered into certain agreements described below affecting the
rights and obligations of the Company and its affiliates.
 
     Tax Matters Agreement.  Pursuant to the Tax Matters Agreement, the Company
assumed responsibility for all federal, state and local taxes of the Company
beginning in 1996, exclusive of (i) 50% of any sales or transfer taxes triggered
by the Acquisition and (ii) certain taxes for which Hancock has agreed to
indemnify the Company. Amounts paid by the Company in respect of its obligations
under the Tax Matters Agreement
 

                                       64
<PAGE>   65
 
were treated by Hancock and the Company as an adjustment to the amount received
by Hancock pursuant to the Contribution Agreement.
 
     Transition Services Agreement.  At the closing of the Acquisition, the
Company and Hancock entered into a Transition Services Agreement (the
"Transition Services Agreement") pursuant to which, among other things, the
parties have provided for the continuation for specified periods of time of
certain services historically provided by Hancock to the Company and its
subsidiaries at market rates. These services included certain employee benefits
and insurance coverage, which are no longer provided, and access to telephone
service rates which is expected to continue until August 2000. The Company paid
Hancock $6.1 million under the Transition Services Agreement during 1997.
 
     Additional Share Agreement.  Upon consummation of the Acquisition, the
Company entered into an Additional Share Agreement (the "Additional Share
Agreement") with Hancock pursuant to which Hancock is entitled to receive, for
no additional consideration, five percent of the number of shares issued
pursuant to any incentive stock plan adopted by the Company prior to November
29, 1998, up to a maximum of 88,609 shares of Common Stock.
 
STOCKHOLDERS AGREEMENT
 
     The Stockholders Agreement among certain of the existing stockholders of
the Company (the "Stockholders Agreement") provides that THL may require the
Company to effect the registration of shares of Common Stock held by THL for
sale to the public on two occasions, subject to certain limitations. The
Stockholders Agreement further provides that, at any time following the first
offering of the Common Stock of the Company to the public, SCP may require the
Company to effect the registration of shares of Common Stock held by SCP for
sale to the public and after the second offering, the employees party to such
agreements may require the Company to effect two such registrations. In
addition, under the terms of the Stockholders Agreement, if the Company proposes
to register any of its shares under the Securities Act, whether for its own
account or otherwise, any holders of the Company's registrable shares party to
the Stockholders Agreement are entitled to notice of such registration and are
entitled to include their shares therein, subject to certain conditions and
limitations. All fees, costs, and expenses (other than underwriting discounts
and commissions transfer taxes and attorneys' fees) of any registration effected
pursuant to the Stockholders Agreement, will be paid by the Company. The
Stockholders Agreement also grants certain "tag-along" rights to the parties in
the event THL enters into a single transaction to sell more than 50% of the
stock acquired by it in the Acquisition.
 
EMPLOYMENT AGREEMENTS
 
     Mr. Goldsmith is employed pursuant to a three year employment agreement
expiring on December 31, 1999 renewable annually thereafter. Mr. Goldsmith is
entitled to receive such annual base salary and bonus compensation as is agreed
to by Mr. Goldsmith and the Company from time to time, provided that he is
entitled to receive minimum cash compensation in any calendar year of at least
$750,000. Mr. Goldsmith is also entitled to participate in the employee benefit
and incentive compensation plans that the Company makes available to its key
executives. If Mr. Goldsmith's employment is terminated by the Company without
cause or if he resigns for certain enumerated reasons, such as a reduction in
executive duties, a decrease in compensation or benefits or default by the
Company ("Good Reason"), Mr. Goldsmith is entitled to receive cash compensation
at his then current rate of pay and benefits through the end of the
twenty-fourth month following such date of termination. Such amount shall be
payable in a lump sum amount equal to $500,000 at the time of termination with
the remaining amounts paid in equal monthly installments, plus interest. In
addition, in the event of any such termination, any unvested stock options
granted to Mr. Goldsmith shall become fully vested. If Mr. Goldsmith's
employment is terminated for cause or if he resigns other than for Good Reason,
he shall be entitled to receive only that compensation accrued through the date
of termination. Mr. Goldsmith's employment agreement contains a covenant not to
solicit any of the Company's clients, officers, senior managers or senior
investment executives for a period of two years following termination by the
Company without cause or by Mr. Goldsmith for Good Reason, or for a period of
six months following termination by Mr. Goldsmith for any other reason.

 
                                       65
<PAGE>   66
 
     Mr. Thomas is employed pursuant to a two year employment agreement expiring
on December 3, 1999. Mr. Thomas is entitled to receive such annual base salary
and bonus compensation as is agreed to by Mr. Thomas and the Company from time
to time, provided that he is entitled to receive minimum cash compensation in
any calendar year of at least $700,000. Mr. Thomas is also entitled to
participate in the employee benefit and incentive compensation plans that the
Company makes available to its key executives. If Mr. Thomas' employment is
terminated by the Company without cause or if he resigns for Good Reason, Mr.
Thomas is entitled to receive cash compensation at his then current rate of pay
and benefits through the end of the twenty-fourth month following such date of
termination. Such amount shall be payable in a lump sum amount equal to $500,000
at the time of termination with the remaining amounts paid in equal monthly
installments, plus interest. In addition, in the event of any such termination,
any unvested stock options granted to Mr. Thomas shall become fully vested and
immediately exercisable. If Mr. Thomas' employment is terminated for cause or if
he resigns other than for Good Reason, he shall be entitled to receive only that
compensation accrued through the date of termination. Mr. Thomas' employment
agreement contains a covenant not to solicit any of the Company's clients,
officers, senior managers or senior investment executives for a period of two
years following termination by the Company without cause or by Mr. Thomas for
Good Reason, or for a period of six months following termination by Mr. Thomas
for any other reason.
 
     Mr. Dennis is employed pursuant to a two year employment agreement with the
Company which expires May 11, 1999. Mr. Dennis was entitled to base salary of
$150,000 during the first year of employment and $400,000 during the second year
of employment. In addition, the Company loaned Mr. Dennis $250,000 upon
commencement of his employment which was forgiven on May 12, 1998. He is
entitled to a minimum annualized bonus of $200,000 for 1998, plus an additional
$400,000 in the aggregate if the Company attains certain performance targets in
each of the first two twelve month periods of his employment with the Company.
Mr. Dennis is eligible to receive additional merit bonuses as determined by the
Board of Directors of the Company. If, prior to May 12, 2001, Mr. Dennis'
employment is terminated by the Company without cause or if he resigns for Good
Reason, he shall be entitled to receive the greater of his salary and bonus
compensation through the end of his initial two year term of employment, if any,
or $600,000. If he is terminated for cause or resigns other than for Good
Reason, Mr. Dennis shall only be entitled to receive the compensation accrued up
to the date of termination or resignation. Mr. Dennis is also entitled to
participate in the Company's benefit and incentive plans to the same extent as
any senior management executive of the Company.
 
OTHER TRANSACTIONS WITH MANAGEMENT
 
     Compensation and Benefits.  The executive officers of the Company receive
compensation, bonuses and other benefits under various employee benefit plan
arrangements maintained by the Company and its subsidiaries. The executive
officers participated in such benefit plans under the same terms generally made
available to other similarly situated employees of the Company or its
subsidiaries with similar responsibilities and levels of compensation.
 
     Outstanding Indebtedness.  Certain executive officers and directors borrow
from time to time under margin accounts maintained at Wexford. All such
borrowings on margin are made in the ordinary course of business, are made on
substantially the same terms, including interest rates and collateral, as those
prevailing for margin transactions with other persons at the time made and do
not involve more than the normal risk of collectibility or other unfavorable
features.
 
     Investment Partnerships.  Certain executive officers of the Company are
among the limited partners of certain investment vehicles organized to allow
these employees to invest in funds and other investment vehicles sponsored by
certain of the Company's clients and on a co-investment basis in transactions in
which the Company's clients also invest (collectively, the "Employee Investment
Partnerships"). In certain instances, the Company lends to the limited partners
the amounts used by them to invest in the Employee Investment Partnerships.
Limited partnership interests owned by employees are subject to redemption by
the applicable Employee Investment Partnership if the employee terminates
employment with the Company for any reason during a three or, in certain
instances, four year period following his or her initial investment in the
Employee Investment Partnership at the lesser of (i) his or her paid-in capital
contribution, less distributions

 
                                       66
<PAGE>   67
 
paid prior to such redemption, or (ii) the value of the limited partnership
interest. Such redemptions are made at the option of the applicable Employee
Investment Partnership. Any outstanding loans are also callable by the Company
at the time the limited partner ceases to be an employee of the Company. Through
June 30, 1998, the Employee Investment Partnerships have invested $27.2 million
in 45 investments and $25.4 million has been contributed to date by the limited
partners. The limited partners have received distributions totaling $57.3
million through June 30, 1998, including $7.1 million, $23.1 million, $4.7
million and $2.1 million during 1995, 1996, 1997 and 1998, respectively. Amounts
contributed to the Employee Investment Partnerships by each of the Company's
executive officers and distributions made during 1995, 1996, 1997 and 1998, and
the outstanding balances of related loans made to them by the Company as of June
30, 1998 are set forth below:
 
<TABLE>
<CAPTION>
                                                       AMOUNT       DISTRIBUTIONS      LOAN
NAME                                                 CONTRIBUTED        MADE         BALANCE
<S>                                                  <C>            <C>              <C>
John H. Goldsmith..................................   $139,466        $359,763       $ 22,123
Gregory N. Thomas..................................         --              --             --
William C. Dennis, Jr. ............................         --              --             --
Kevin J. McKay.....................................    172,083          71,812         92,568
Robert H. Yevich...................................    113,065         254,700         22,123
John F. Luikart....................................    180,188          13,944         70,668
Henry Greenleaf....................................         --              --             --
David P. Prokupek..................................         --              --             --
</TABLE>
 
TRANSACTIONS WITH HANCOCK PRIOR TO THE ACQUISITION
 
     Prior to the Acquisition the Predecessor Company, Hancock and their
respective affiliates engaged in a variety of transactions in the ordinary
course of business. As a general rule, the Predecessor Company did not retain
independent third parties to evaluate transactions with Hancock and there was no
independent committee of the Board of Directors of the Predecessor Company to
evaluate such transactions. Notwithstanding this fact, the Company believes that
each of the arrangements described below was made on an arms-length basis. All
of the transactions or relationships described below were completed or
terminated at or prior to the time of the Acquisition. The Company anticipates
that future transactions with Hancock, if any, will be made on an arms-length
basis.
 
     Loans, Advances and Dividends.  The aggregate outstanding amount of
payables, primarily inter-company tax allocations and working capital financing,
between the Predecessor Company and Hancock and its affiliates was $233.7
million as of December 31, 1995 and $32.5 million as of November 29, 1996, which
was repaid in full in connection with the Acquisition. In addition, the
Predecessor Company paid dividends to Hancock in the amount of $5.8 million and
none, respectively, during 1995 and 1996.
 
     Other Transactions with Hancock.  As a wholly-owned subsidiary of Hancock,
the Predecessor Company participated in group insurance arrangements arranged
through Hancock. In addition, the Predecessor Company participated in certain
shared services provided by Hancock to certain of its affiliates, including
limited legal and other support functions. The Predecessor Company paid Hancock
its allocable share of the cost of such insurance and other items, which
amounted to $11.6 million and $11.1 million during 1995 and 1996, respectively.
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The authorized capital stock of the Company consists of 60,000,000 shares
of Common Stock, $.01 par value per share, of which 19,993,833 shares are
outstanding, and 1,000,000 shares of Preferred Stock, $.01 par value per share,
none of which are outstanding. The following description of the capital stock of
the Company and certain provisions of the Company's Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Bylaws is a summary and
is qualified in its entirety by the provisions of the Certificate of
Incorporation and Bylaws, copies of which have been filed as exhibits to the
Company's Registration Statement of which this Prospectus is a part.
 
                                       67
<PAGE>   68
 
COMMON STOCK
 
     Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of the stockholders, including the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election if they choose to do so. The Certificate of Incorporation
does not provide for cumulative voting for the election of directors. Holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, and shall be entitled to receive, pro rata, all assets of
the Company available for distribution to such holders upon liquidation. Holders
of Common Stock have no preemptive, subscription or redemption rights.
 
PREFERRED STOCK
 
     The Company is authorized to issue "blank check" preferred stock
("Preferred Stock"), which may be issued from time to time in one or more series
upon authorization by the Company's Board of Directors. The Board of Directors,
without further approval of the stockholders, is authorized to fix the dividend
rights and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, and any other rights, preferences, privileges and
restrictions applicable to each series of the Preferred Stock. The issuance of
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Company's Common Stock at a premium or
otherwise adversely affect the market price of the Common Stock. The Company
currently has no plans to issue any Preferred Stock.
 
CERTAIN CERTIFICATE OF INCORPORATION, BYLAW AND STATUTORY ANTI-TAKEOVER
PROVISIONS AFFECTING STOCKHOLDERS
 
     Section 203 of Delaware Law.  The Company is subject to the "business
combination" statute of the Delaware General Corporation Law. In general, such
statute prohibits a publicly held Delaware corporation from engaging in various
"business combination" transactions with any "interested shareholder" for a
period of three years after the date of the transaction in which the person
became an "interested shareholder," unless (i) the transaction is approved by
the Board of Directors prior to the date the interested shareholder obtained
such status, (ii) upon consummation of the transaction which resulted in the
shareholder becoming an "interested shareholder," the "interested shareholder"
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned by (a) persons who are directors and
also officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (iii) on or subsequent
to such date the "business combination" is approved by the Board of Directors
and authorized at an annual or special meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the "interested shareholder." A "business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
a shareholder. An "interested shareholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's voting stock. By virtue of the Company's decision not to elect
out of the statute's provisions, the statute applies to the Company. No current
stockholders of the Company are "interested stockholders" because their
acquisition of shares was approved by the Board of Directors of the Company. The
statute could prohibit or delay the accomplishment of mergers or other takeover
or change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company.
 
     Directors Liability.  The Certificate of Incorporation provides that no
director shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director notwithstanding any
provision of law imposing such liability, provided that, to the extent provided
by applicable law, the Certificate of Incorporation shall not eliminate the
liability of a director for (i) any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) acts
or omissions in respect of certain unlawful dividend payments or stock
redemptions or repurchases; or (iv) any transaction from which such

 
                                       68
<PAGE>   69
 
director derives improper personal benefit. The effect of this provision is to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages against a
director for breach of the fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. The limitations
summarized above, however, do not affect the ability of the Company or its
stockholders to seek non-monetary based remedies, such as an injunction or
rescission, against a director for breach of his fiduciary duty nor would such
limitations limit liability under the Federal securities laws. The Company's
Bylaws provide that the Company shall, to the extent permitted by Delaware Law,
as amended from time to time, indemnify and advance expenses to the currently
acting and former directors, officers, employees and agents of the Company or of
another corporation, partnership, joint venture, trust or other enterprise if
serving at the request of the Company arising in connection with their acting in
such capacities.
 
REGISTRATION RIGHTS OF CERTAIN HOLDERS
 
     Under the terms of the Stockholders' Agreement, if the Company proposes to
register any of its securities under the Securities Act, whether for its own
account or otherwise, holders of approximately 10,762,509 shares (the
"Registrable Shares") of Common Stock are entitled to notice of such
registration and are entitled to include their shares therein, subject to
certain conditions and limitations. The holders of Registrable Shares also may
require the Company to effect the registration of their Registrable Shares for
sale to the public, subject to certain conditions and limitations. None of the
holders of Registrable Shares has elected to register their Registrable Shares
for sale to the public in connection with this offering. See "Certain
Relationships and Related Transactions -- Stockholders Agreement".
 
TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, of New York.

 
                                       69
<PAGE>   70
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     The Company has outstanding 19,993,833 shares of Common Stock assuming no
exercise of options after June 30, 1998. Of these shares, 9,231,324 shares are
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 described below. The remaining 10,762,509 shares of Common
Stock outstanding upon closing of the offering are "restricted securities" as
that term is defined in Rule 144.
 
     On September 29, 1998, an aggregate of 10,762,509 shares will become
immediately eligible for sale subject to the timing, volume, and manner of sale
restrictions of Rule 144. Commencing December 1998, all outstanding shares not
owned by affiliates of the Company (currently 4,674,785 shares) will be eligible
for sale pursuant to Rule 144(k). In addition, 449,900 additional shares of
Common Stock subject to outstanding vested stock options could also be sold as
of June 30, 1998, subject in some cases to compliance with certain volume
limitations as described below. On various dates through May 1, 2002, 183,750
shares of Common Stock deposited in escrow pursuant to the Agreement will be
released to the extent no claims have been made against such shares. Commencing
on May 1, 1999, such shares will be eligible for sale pursuant to Rule 144.
 
     In general, under Rule 144, as amended, a person (or persons whose shares
are aggregated) who has beneficially owned shares for at least one year
(including the holding period of any prior owner except an affiliate from whom
such shares were purchased) is entitled to sell in "brokers' transactions" or to
market makers, within any three-month period commencing 90 days after the date
of this Prospectus, a number of shares that does not exceed the greater of (i)
one percent of the number of shares of Common Stock then outstanding
(approximately 199,938 shares) or (ii) generally, the average weekly trading
volume in the Common Stock during the four calendar weeks preceding the required
filing of a Form 144 with respect to such sale. Sales under Rule 144 are
generally subject to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an affiliate
of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner other than an affiliate from
whom such shares were purchased), is entitled to sell such shares without having
to comply with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Under Rule 701, persons who purchase shares upon
exercise of options granted prior to the effective date of the initial public
offering are entitled to sell such shares 90 days after the effective date of
the initial public offering in reliance on Rule 144, without having to comply
with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.
 
     The holders of an aggregate of 10,762,509 shares of Common Stock or their
transferees are entitled to certain rights with respect to the registration of
such shares under the Securities Act. See "Description of Capital
Stock-Registration Rights of Certain Holders."
 
                              PLAN OF DISTRIBUTION
 
     The Shares covered by this Prospectus may be offered and sold from time to
time by the Selling Stockholders. The Selling Stockholders received their Shares
in connection with the Cleary Gull Acquisition pursuant to the Agreement. The
Agreement required the Company to file the Registration Statement of which this
Prospectus is a part with the Commission and have it declared effective within
181 days after the closing date of the Company's initial public offering. The
Selling Stockholders will act independently of the Company in making decisions
with respect to the timing, manner and size of each sale. The Selling
Stockholders may sell the Shares being offered hereby on the New York Stock
Exchange, or otherwise, at prices and under terms then prevailing or at prices
related to the then current market price or at negotiated prices. The Shares may
be sold by one or more of the following means of distribution: (a) a block trade
in which the broker-dealer so engaged will attempt to sell Shares as agent, but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this Prospectus; (c) an
over-the-counter distribution in accordance with the rules of the New York Stock
Exchange; (d) ordinary brokerage transactions and transactions in which the
broker
 
                                       70
<PAGE>   71
 
solicits purchasers; and (e) in privately negotiated transactions. To the extent
required, this Prospectus may be amended and supplemented from time to time to
describe a specific plan of distribution. In connection with distributions of
the Shares or otherwise, the Selling Stockholders may enter into hedging
transactions with broker-dealers or other financial institutions. In connection
with such transactions, broker-dealers or other financial institutions may
engage in short sales of the Company's Common Stock in the course of hedging the
positions they assume with Selling Stockholders. The Selling Stockholders may
also sell the Company's Common Stock short and redeliver the Shares to close out
such short positions. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions which
require the delivery to such broker-dealer or other financial institution of
Shares offered hereby, which Shares such broker-dealer or other financial
institution may resell pursuant to this Prospectus (as supplemented or amended
to reflect such transaction). The Selling Stockholders may also pledge Shares to
a broker-dealer or other financial institution, and upon a default, such
broker-dealer or other financial institution, may effect sales of the pledged
Shares pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). In addition, any Shares that qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to this Prospectus.
 
     In effecting sales, brokers, dealers or agents engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any such commissions, discounts or concessions may be deemed to be
underwriting discounts or commissions under the Securities Act. The Company will
pay all expenses incident to the offering and sale of the Shares to the public
other than any commissions and discounts of underwriters, dealers or agents and
any transfer taxes.
 
     In order to comply with the securities laws of certain states, if
applicable, the Shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
 
     The Company has advised the Selling Stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of Shares in the
market and to the activities of the Selling Stockholders and their affiliates.
In addition, the Company will make copies of this Prospectus available to the
Selling Stockholders and has informed them of the need for delivery of copies of
this Prospectus to purchasers at or prior to the time of any sale of the Shares
offered hereby. The Selling Stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
 
     At the time a particular offer of Shares is made, if required, a Prospectus
Supplement will be distributed that will set forth the number of Shares being
offered and the terms of the offering, including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, any discount,
commission and other item constituting compensation, any discount, commission or
concession allowed or reallowed or paid to any dealer, and the proposed selling
price to the public. There can be no assurance that the Selling Stockholders
will sell all or any of the Shares.
 
     The Company has agreed with the Selling Stockholders to keep the
Registration Statement of which this Prospectus constitutes a part effective for
up to 185 days following the effectiveness of the Registration Statement. The
Company intends to de-register any of the Shares not sold by the Selling
Stockholders at the end of such period; however, it is anticipated that at such
time any unsold shares may be freely tradeable subject to compliance with Rule
144 of the Securities Act.

 
                                       71
<PAGE>   72
 
                                 LEGAL MATTERS
 
     The validity of the shares of Common Stock offered hereby will be passed
upon for the Selling Stockholders by Hutchins, Wheeler & Dittmar, A Professional
Corporation, Boston, Massachusetts. Certain stockholders of Hutchins, Wheeler &
Dittmar are limited partners in THL-CCI, L.P. and, as a result, may be deemed to
have a beneficial interest in 6,363 shares of Common Stock.
 
                                    EXPERTS
 
     The consolidated statements of financial condition of the Company as of
December 31, 1996 and 1997 and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the one month period ended
December 31, 1996 and the year ended December 31, 1997 and the consolidated
statements of income, changes in stockholders' equity and cash flows of the
Predecessor Company for the period from January 1, 1996 to November 29, 1996 and
for the year ended December 31, 1995, included in this Prospectus, have been
included herein in reliance on the report of Ernst & Young LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
 
                             ADDITIONAL INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such Common Stock, reference is
hereby made to such Registration Statement and to the exhibits and schedules
filed therewith. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete, and
in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
certain fees prescribed by the Commission. The Commission maintains a World Wide
Website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the website is http://www.sec.gov.
 
     The Company intends to furnish its stockholders with annual reports
containing financial statements audited by the Company's independent public
accountants and quarterly reports for the first three fiscal quarters of each
fiscal year containing unaudited interim financial information.

 
                                       72
<PAGE>   73
 
               INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors..............................  F-2
Consolidated Statements of Financial Condition -- December
  31, 1996 and 1997.........................................  F-3
Consolidated Statements of Income -- For the year ended
  December 31, 1995, eleven months ended November 29, 1996,
  one month ended December 31, 1996 and year ended December
  31, 1997..................................................  F-4
Consolidated Statements of Changes in Stockholders'
  Equity -- For the year ended December 31, 1995, eleven
  months ended November 29, 1996, one month ended December
  31, 1996 and year ended December 31, 1997.................  F-5
Consolidated Statements of Cash Flows -- For the year ended
  December 31, 1995, eleven months ended November 29, 1996,
  one month ended December 31, 1996 and year ended December
  31, 1997..................................................  F-6
Notes to Consolidated Financial Statements..................  F-7
</TABLE>
 
  
                                     F-1
<PAGE>   74
 
                         REPORT OF INDEPENDENT AUDITORS
 
To the Stockholders and Board of Directors of
  Freedom Securities Corporation
 
     We have audited the accompanying consolidated statements of financial
condition of Freedom Securities Corporation ("Company") as of December 31, 1996
and 1997 and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the one month period ended December 31,
1996 and the year ended December 31, 1997, and the accompanying consolidated
statements of income, changes in stockholders' equity and cash flows of Freedom
Securities Holding Corporation ("Predecessor Company") for the year ended
December 31, 1995 and for the period January 1, 1996 to November 29, 1996. These
financial statements are the responsibility of the management of the Company and
the Predecessor Company. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. 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 Freedom
Securities Corporation at December 31, 1996 and 1997 and the consolidated
results of its operations and its cash flows for the one month period ended
December 31, 1996 and for the year ended December 31, 1997, and the consolidated
results of operations and cash flows of the Predecessor Company for the year
ended December 31, 1995 and for the period January 1, 1996 to November 29, 1996
in conformity with generally accepted accounting principles.
 
                                            /s/ ERNST & YOUNG, LLP
 
New York, New York
March 10, 1998
 

                                       F-2
<PAGE>   75
 
                         FREEDOM SECURITIES CORPORATION
 
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 1996 AND 1997
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                1996        1997
<S>                                                           <C>         <C>
                           ASSETS
Cash and cash equivalents...................................  $  7,248    $ 12,936
Receivables from brokers, dealers and others................    65,404      74,314
Securities purchased under agreements to resell.............    84,211     113,335
Securities owned, at market.................................   253,106     423,522
Fixed assets, net of accumulated depreciation and
  amortization..............................................    25,929      20,464
Goodwill, net of accumulated amortization...................    28,075      24,861
Other assets................................................    52,979      58,155
                                                              --------    --------
Total assets................................................  $516,952    $727,587
                                                              ========    ========
            LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Payables to brokers, dealers and others...................  $ 74,131    $ 59,062
  Securities sold under agreements to repurchase............    44,976          --
  Securities sold, not yet purchased, at market.............   101,140     354,565
  Accrued compensation and benefits.........................    55,503      65,653
  Accounts payable and accrued expenses.....................    50,915      44,535
  Notes payable to banks....................................   110,819     101,446
                                                              --------    --------
          Total liabilities.................................   437,484     625,261
                                                              --------    --------
Stockholders' equity:
  Common stock (21,816,000 shares authorized, 14,352,479 and
     14,840,627 shares issued in 1996 and 1997,
     respectively, $.01 par value)..........................       143         147
  Additional paid-in capital................................    78,804      83,654
  Retained earnings.........................................       740      19,438
  Subscribed stock (136,532 shares in 1997).................        --        (913)
  Treasury stock (39,723 shares in 1996, at cost)...........      (219)         --
                                                              --------    --------
     Total stockholders' equity.............................    79,468     102,326
                                                              --------    --------
          Total liabilities and stockholders' equity........  $516,952    $727,587
                                                              ========    ========
</TABLE>
 
                 See Notes to Consolidated Financial Statements


                                       F-3
<PAGE>   76
 
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
                       CONSOLIDATED STATEMENTS OF INCOME
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                  PREDECESSOR
                                                    COMPANY
                                       ----------------------------------
                                        YEAR ENDED    ELEVEN MONTHS ENDED   ONE MONTH ENDED    YEAR ENDED
                                       DECEMBER 31,      NOVEMBER 29,        DECEMBER 31,     DECEMBER 31,
                                           1995              1996                1996             1997
<S>                                    <C>            <C>                   <C>               <C>
Revenues
  Commissions........................    $140,180          $139,018             $12,522         $167,184
  Principal transactions.............     105,789            95,481               8,350           99,269
  Investment banking.................      34,773            33,964               4,137           55,259
  Asset management...................      14,901            17,316               1,682           19,950
  Other..............................      12,766            15,218                 573           12,465
                                         --------          --------             -------         --------
          Total operating revenues...     308,409           300,997              27,264          354,127
  Interest income....................      60,116            46,486               3,361           44,056
                                         --------          --------             -------         --------
          Total revenues.............     368,525           347,483              30,625          398,183
  Interest expense...................      36,000            26,454               1,829           22,428
                                         --------          --------             -------         --------
          Net revenues...............     332,525           321,029              28,796          375,755
                                         --------          --------             -------         --------
Non-interest expenses
  Compensation and benefits..........     217,589           209,187              18,859          245,939
  Occupancy and equipment............      26,050            30,993               2,231           24,331
  Communications.....................      18,129            16,596               1,317           16,948
  Brokerage and clearance............       7,322            10,473               1,007           11,262
  Promotional........................       9,455             9,156                 818           10,308
  Other..............................      31,696            24,237               2,577           28,480
                                         --------          --------             -------         --------
          Total non-interest
            expenses.................     310,241           300,642              26,809          337,268
Acquisition interest expense.........          --                --                 567            6,052
                                         --------          --------             -------         --------
Income before income taxes...........      22,284            20,387               1,420           32,435
Income taxes.........................       9,220             8,844                 680           13,737
                                         --------          --------             -------         --------
Net income...........................    $ 13,064          $ 11,543             $   740         $ 18,698
                                         ========          ========             =======         ========
Basic earnings per share.............          --                --             $  0.05         $   1.31
                                                                                =======         ========
Diluted earnings per share...........          --                --             $  0.05         $   1.27
                                                                                =======         ========
</TABLE>
 
                 See Notes to Consolidated Financial Statements

                                       F-4
<PAGE>   77
 
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                       (DOLLARS AND SHARES IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                COMMON STOCK
                             ------------------     ADDITIONAL      RETAINED   SUBSCRIBED   TREASURY
                             SHARES   PAR VALUE   PAID-IN-CAPITAL   EARNINGS     STOCK       STOCK      TOTAL
<S>                          <C>      <C>         <C>               <C>        <C>          <C>        <C>
PREDECESSOR COMPANY:
Balance at December 31,
  1994.....................       1     $  1         $109,748       $35,719      $  --       $  --     $145,468
Net income.................                                          13,064                              13,064
Non-cash dividend to
  Hancock..................                                          (5,751)                             (5,751)
                             ------     ----         --------       -------      -----       -----     --------
Balance at December 31,
  1995.....................       1        1          109,748        43,032         --          --      152,781
                             ------     ----         --------       -------      -----       -----     --------
Net income.................                                          11,543                              11,543
                             ------     ----         --------       -------      -----       -----     --------
Balance at November 29,
  1996.....................       1     $  1         $109,748       $54,575      $  --       $  --     $164,324
                             ======     ====         ========       =======      =====       =====     ========
FREEDOM SECURITIES
  CORPORATION(a):
Sale of Common Stock at
  November 29, 1996
  (including $3,947 of non-
  cash capital contributed
  by Hancock)..............  14,313     $143         $ 78,804       $    --      $  --       $(219)    $ 78,728
Net income.................                                             740                                 740
                             ------     ----         --------       -------      -----       -----     --------
Balance at December 31,
  1996.....................  14,313      143           78,804           740         --        (219)      79,468
                             ------     ----         --------       -------      -----       -----     --------
Sale of Common Stock.......     488        4            4,693                                             4,697
Net income.................                                          18,698                              18,698
Acquisition of treasury
  stock....................     (97)                                                          (537)        (537)
Reissuance of treasury
  stock....................      --                       157                     (913)        756           --
                             ------     ----         --------       -------      -----       -----     --------
Balance at December 31,
  1997.....................  14,704     $147         $ 83,654       $19,438      $(913)      $  --     $102,326
                             ======     ====         ========       =======      =====       =====     ========
</TABLE>
 
---------------
 
(a) Reflects effect of 1.818 for 1 stock split. See Note 17.
 
                See Notes to Consolidated Financial Statements.


                                       F-5
<PAGE>   78
 
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                   PREDECESSOR COMPANY
                                            ----------------------------------
                                             YEAR ENDED    ELEVEN MONTHS ENDED   ONE MONTH ENDED    YEAR ENDED
                                            DECEMBER 31,      NOVEMBER 29,        DECEMBER 31,     DECEMBER 31,
                                                1995              1996                1996             1997
<S>                                         <C>            <C>                   <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................    $ 13,064          $  11,543           $     740       $  18,698
Adjustments to reconcile net income to net
  cash from operating activities:
  Depreciation............................       4,274              4,632                 304           5,128
  Amortization............................       6,403              7,807                 685           5,714
  Non-cash compensation...................          --                 --                  --           1,432
Changes in assets and liabilities
  (Increase) decrease in operating assets:
    Receivables from brokers, dealers and
      others..............................     (28,855)           105,303              19,304          (8,910)
    Receivables from customers............     (24,408)           333,252                  --              --
    Securities purchased under agreements
      to resell...........................     (26,490)            92,052              31,212         (29,124)
    Securities owned, at market...........     (73,825)            57,720              37,698        (170,416)
    Other assets..........................     (11,163)            (7,628)              3,876          (6,056)
  Increase (decrease) in operating
    liabilities:
    Short-term loans from a Hancock
      affiliate...........................      10,000           (200,000)                 --              --
    Short-term loans......................      61,535           (107,745)                 --              --
    Payables to brokers, dealers and
      others..............................      19,443            (39,937)            (33,027)        (15,069)
    Payables to customers.................      23,125           (186,206)                 --              --
    Securities sold under agreements to
      repurchase..........................      28,710            (91,795)             (5,061)        (44,976)
    Securities sold, not yet purchased, at
      market..............................       4,523              7,517             (47,088)        253,425
    Accrued compensation and benefits.....      13,066                364               2,230          10,150
    Accounts payable and accrued
      expenses............................       4,663             11,060              (7,930)         (6,380)
                                              --------          ---------           ---------       ---------
Net cash from operating activities........      24,065             (2,061)              2,943          13,616

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets.................     (10,883)            (8,417)               (112)         (1,994)
Proceeds from sale of fixed assets........          --                 --                  --             711
Purchase of Predecessor Company...........          --                 --            (180,000)             --
Acquisition related expenditures..........          --                 --              (5,740)             --
                                              --------          ---------           ---------       ---------
Net cash used in investing activities.....     (10,883)            (8,417)           (185,852)         (1,283)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock, net...          --                 --              74,781           2,728
Proceeds from notes payable to banks......          --             25,819             110,819              --
Repayment of notes payable to banks.......          --                 --                  --          (9,373)
Proceeds from notes payable to a Hancock
  affiliate...............................       6,105                 --                  --              --
Repayment of notes payable to a Hancock
  affiliate...............................      (2,400)           (33,736)                 --              --
                                              --------          ---------           ---------       ---------
Net cash from financing activities........       3,705             (7,917)            185,600          (6,645)
Increase (decrease) in cash and cash
  equivalents.............................      16,887            (18,395)              2,691           5,688
Cash and cash equivalents, beginning of
  period..................................       6,065             22,952               4,557           7,248
                                              --------          ---------           ---------       ---------
Cash and cash equivalents, end of
  period..................................    $ 22,952          $   4,557           $   7,248       $  12,936
                                              ========          =========           =========       =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION
Cash paid for:
  Income taxes............................    $  9,086          $  10,453           $   1,421       $  14,859
  Interest................................    $ 33,432          $  22,912           $   1,246       $  28,338
</TABLE>
 
                 See Notes to Consolidated Financial Statements


                                       F-6
<PAGE>   79
 
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Organization and Basis of Presentation
 
     Freedom Securities Corporation (formerly JHFSC Acquisition Corp.) is a
holding company which together with its wholly owned subsidiaries (collectively,
the "Company") is a full-service, regionally focused retail brokerage 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"), Sutro & Co. Incorporated ("Sutro") and Freedom Capital
Management Corporation ("Freedom Capital").
 
     Tucker Anthony, headquartered in Boston and focused on the northeastern
United States, and Sutro, headquartered in San Francisco and focused on the
western United States, are full service regionally focused retail brokerage and
investment banking firms. Freedom Capital is the Company's investment advisory
and asset management subsidiary which is focused on public sector entities and
high net worth individuals.
 
     Principles of Consolidation
 
     All significant intercompany accounts and transactions have been eliminated
in consolidation. The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from these
estimates. Certain prior year amounts have been reclassified to conform with the
current period's financial statement presentation.
 
     The Acquisition
 
     The Company was established to facilitate a buyout of Freedom Securities
Holding Corporation (the "Predecessor Company" and formerly John Hancock Freedom
Securities Corporation). Until November 29, 1996, the Predecessor Company was a
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company
("Hancock").
 
     Under terms of a Contribution Agreement dated October 4, 1996 and
consummated on November 29, 1996 among Hancock, the Company, two private
investor groups and selected employee investors, Hancock contributed 100% of the
issued and outstanding capital stock of the Predecessor Company to the Company
in exchange for 4.999% of the issued and outstanding capital stock of the
Company and an aggregate consideration of $180 million. With the consummation of
the transactions under the Contribution Agreement, the Predecessor Company
became a wholly owned subsidiary of the Company as of the close of business
November 29, 1996. Through November 29, 1996, the consolidated financial
statements present the financial condition, results of operations and cash flows
of the Predecessor Company and its subsidiaries.
 
     The Acquisition has been accounted for as a purchase and, accordingly, the
purchase price was allocated to the assets and liabilities acquired based upon
their fair values at the date of the Acquisition. The purchase price, including
acquisition costs, exceeded the fair value of net assets acquired by $28.2
million and the excess was recorded as goodwill.
 
     Wexford Arrangement
 
     Tucker Anthony and Sutro clear their securities transactions on a fully
disclosed basis through Wexford Clearing Services Corporation ("Wexford" or the
"clearing broker"), a guaranteed wholly owned subsidiary of Prudential
Securities, Inc. ("Prudential"). Prior to April 3, 1996, Tucker Anthony and
Sutro cleared their securities transactions through a wholly owned subsidiary of
the Predecessor Company. This subsidiary
 

                                       F-7
<PAGE>   80
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
subsequently withdrew its broker-dealer registration but continues to perform
certain liaison functions and provides data processing and communications
support to its affiliates.
 
     Securities
 
     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. 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 futures and options on futures
contracts. These contracts are valued at market with related changes in
unrealized appreciation or depreciation reflected in principal transactions
revenues.
 
     Investment Banking
 
     Investment banking revenues are recorded as follows: management fees as of
the offering date; sales commissions on trade date and underwriting fees at the
time the underwriting is completed and the income is reasonably determinable.
 
     Asset Management Fees
 
     The Company earns investment advisory fees for services rendered to its
clients based on either a percentage of the average net assets managed or on a
percentage of quarter-end market value of assets managed, depending upon 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 life
of the improvements or the terms of the respective leases. Fixed assets are
stated at cost net of accumulated depreciation and amortization of $0.6 million
and $2.4 million at December 31, 1996 and 1997, respectively.
 
     Intangibles
 
     Intangibles related to the Acquisition include debt issuance costs ($2.9
million and $2.4 million at December 31, 1996 and 1997, respectively) which are
reported in other assets, and goodwill. Goodwill and debt issuance costs are
stated at cost net of accumulated amortization and are amortized on a
straight-line basis over fifteen and five years, respectively.
 
     The accumulated amortization of intangibles totaled $0.2 million and $2.7
million at December 31, 1996 and 1997, respectively.
 
     Income Taxes
 
     Through November 29, 1996, the Predecessor Company was included in the
consolidated U.S. Federal income tax return of Hancock. Pursuant to an agreement
with Hancock, the Predecessor Company's share of
 

                                       F-8
<PAGE>   81
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
combined Federal income taxes was equivalent to the total provision or benefit
the Predecessor Company would have recorded for such taxes had they been
determined on a stand-alone basis. Pursuant to an agreement relating to the
Acquisition, Hancock assumed responsibility for all Federal, state and local
taxes of the Predecessor Company through 1995.
 
     Subsequent to the Acquisition, the Company and its subsidiaries file a
consolidated U. S. Federal income tax return. State and local taxes are computed
on a separate company basis. The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards ("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 for
future consequences of events that have been recognized in the Company's
financial statements or tax returns.
 
     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. Cash flows for the one month ended December 31, 1996 are shown net
of the effects of the purchase of the Predecessor Company.
 
     Accounting Pronouncements
 
     In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 125 introduced the
financial-components approach which focuses on the recognition of financial
assets that an entity controls and the derecognition of financial assets for
which control has been transferred. The FASB, under SFAS No. 127 "Deferral of
the Effective Date of Certain Provisions of SFAS No. 125," has deferred the
effective date of accounting for other types of transfers of financial assets,
including repurchase agreements and securities lending transactions, until
January 1, 1998. The Company does not expect the adoption of this statement to
have a material impact on the Company's consolidated financial statements.
 
2.  RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND OTHERS
 
     Included in the receivables from brokers, dealers and others are unsettled
proprietary trades and certain overnight funds with a Wexford affiliate.
Included in payables to brokers, dealers and others are the amounts due to
Wexford for collateralized financing of proprietary positions and to Freedom
Capital's transfer agent for 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.
 

                                       F-9
<PAGE>   82
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
2.  RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND OTHERS (CONTINUED)

     Amounts receivable from and payable to brokers, dealers and others at
December 31, consist of the following:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1996       1997
                                                              -------    -------
<S>                                                           <C>        <C>
RECEIVABLES FROM BROKERS, DEALERS AND OTHERS
  Receivable from Prudential................................  $47,230    $46,129
  Unsettled proprietary trades, net.........................   18,104     24,189
  Receivables from other brokers and dealers................       70      3,996
                                                              -------    -------
                                                              $65,404    $74,314
                                                              =======    =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1996       1997
                                                              -------    -------
<S>                                                           <C>        <C>
PAYABLES TO BROKERS, DEALERS AND OTHERS
  Payable to Wexford........................................  $32,599    $16,633
  Payable to transfer agent.................................   40,947     42,088
  Payables to other brokers and dealers.....................      585        341
                                                              -------    -------
                                                              $74,131    $59,062
                                                              =======    =======
</TABLE>
 
3.  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, request customers
to deposit additional collateral or reduce securities positions 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,
1996 and 1997, there were no amounts to be indemnified to Wexford for these
accounts since the customers were able to fulfill their obligations.
 
4.  SHORT-TERM LOANS
 
     In periods prior to 1997, short-term loans with banks and a Hancock
affiliate were used to finance securities purchased by customers on margin and
proprietary inventory positions. Borrowings from the Hancock affiliate were on
an uncollateralized basis and bore interest at a rate approximating the
commercial paper rate of such affiliate. Interest expense related to these loans
was $7.7 million for the year ended December 31, 1995 and $12.1 million for the
eleven months ended November 29, 1996.
 
5.  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. At December 31, 1996 and 1997 these
agreements matured within 13 days. Securities sold under agreements to
repurchase had a weighted-average interest rate of 6.0% at December 31, 1996. 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

 
                                      F-10
<PAGE>   83
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
5.  SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER
    AGREEMENTS TO REPURCHASE (CONTINUED)

monitoring credit exposure and collateral values on a daily basis and requiring
additional collateral to be deposited or returned when deemed appropriate.
 
6.  TRANSACTIONS WITH AFFILIATES
 
     During 1995, the Predecessor Company distributed its $5.8 million ownership
interest in JHM Capital Management Corp. to Hancock as a dividend. The earnings
prior to such distribution were not significant.
 
     Prior to November 29, 1996, the Predecessor Company had outstanding notes
payable to a Hancock affiliate which incurred interest at rates approximating
such affiliate's average cost of borrowing and were payable on demand. These
notes were repaid on November 29, 1996. Interest expense incurred relating to
these notes was $1.8 million for the year ended December 31, 1995 and $1.7
million for the eleven months ended November 29, 1996.
 
     The Predecessor Company participated in group insurance arrangements
arranged through Hancock and also received certain shared services. The
Predecessor Company paid Hancock its allocable share of the cost of such
insurance and other items, which amounted to $11.6 million and $11.1 million
during the year ended December 31, 1995 and the eleven months ended November 29,
1996, respectively. Subsequent to the Acquisition, the Company continued to
participate in the group insurance arrangements through Hancock until June 30,
1997 when the Company obtained its own insurance arrangements. The Company paid
its allocable share of the cost of such insurance which amounted to $0.8 million
and $6.1 million for the one month period ended December 31, 1996 and the six
month period ended June 30, 1997, respectively.
 
     Effective with the Acquisition, the Company entered into management
agreements, with certain shareholders, and has agreed to pay annual management
fees totaling $0.3 million. These agreements terminate by the mutual consent of
the parties or upon an initial public offering of the Company's common stock.
 

                                      F-11
<PAGE>   84
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
7.  SECURITIES
 
     Securities owned and securities sold, not yet purchased are recorded at
market value and consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1996        1997
<S>                                                           <C>         <C>
OWNED:
Obligations of the U.S. government or its agencies..........  $ 23,650    $ 27,396
State and municipal obligations.............................    56,057      38,222
Arbitrage securities........................................    84,967     291,023
Other corporate obligations.................................    73,127      51,709
Other corporate stocks and warrants.........................    15,305      15,172
                                                              --------    --------
                                                              $253,106    $423,522
                                                              ========    ========
SOLD, NOT YET PURCHASED:
Obligations of the U.S. government or its agencies..........  $ 37,663    $ 22,890
State and municipal obligations.............................     1,476       1,519
Arbitrage securities........................................    51,671     322,316
Other corporate obligations.................................     6,055       1,356
Other corporate stocks and warrants.........................     4,275       6,484
                                                              --------    --------
                                                              $101,140    $354,565
                                                              ========    ========
</TABLE>
 
8.  NOTES PAYABLE TO BANKS
 
     Included in notes payable to banks is the Company's borrowing for fixed
asset financing of approximately $25.8 million and $21.4 million at December 31,
1996 and 1997, respectively, which bears interest at 8.02% annually and is
payable in equal monthly installments through December 2001. This note is
collateralized by furniture, fixtures and leasehold improvements.
 
     The Company entered into a Revolving Credit Agreement (the "credit
agreement") with certain participating banks. Borrowings under the credit
agreement equaled $85 million and $80 million at December 31, 1996 and 1997,
respectively. These borrowings bear interest, approximately 7.06% and 6.97% at
December 31, 1996 and 1997, respectively, at the current Eurodollar Rate plus
applicable margin, as defined, ranging from 0.75% to 2.00% based on a calculated
leverage ratio in accordance with the credit agreement. Interest expense related
to the credit agreement is shown in the consolidated statements of income as
acquisition interest expense. Subject to the terms and conditions as set forth
in this credit agreement, the Company may borrow, repay and reborrow from time
to time up to the maturity date, December 31, 2001, of this credit agreement.
The credit agreement also includes certain financial covenants (see note 10) and
a mandatory reduction of the participating banks' commitment at the end of
various calendar quarters.
 
     The aggregate amount of principal repayment requirements on notes payable
is as follows by year (in thousands):
 
<TABLE>
<CAPTION>
                                                  FIXED ASSET    BORROWINGS UNDER THE
YEAR                                               FINANCING       CREDIT AGREEMENT
<S>                                               <C>            <C>
1998...........................................     $4,737             $10,000
1999...........................................      5,131              12,500
2000...........................................      5,558              25,000
2001...........................................      6,020              32,500
</TABLE>
 

                                      F-12
<PAGE>   85
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
9.  INCOME TAXES
 
     The components of income tax expense (benefit) are (in thousands):
 
<TABLE>
<CAPTION>
                           YEAR ENDED        ELEVEN MONTHS       ONE MONTH ENDED     YEAR ENDED
                          DECEMBER 31,    ENDED NOVEMBER 29,      DECEMBER 31,      DECEMBER 31,
                              1995               1996                 1996              1997
<S>                       <C>             <C>                    <C>                <C>
Federal:
  Current...............    $ 6,969             $ 9,422               $ 581           $ 7,693
  Deferred..............     (1,456)             (3,930)               (148)            1,482

State:
  Current...............      4,116               4,784                 300             4,501
  Deferred..............       (409)             (1,432)                (53)               61
                            -------             -------               -----           -------
                            $ 9,220             $ 8,844               $ 680           $13,737
                            =======             =======               =====           =======
</TABLE>
 
     The effective income tax differs from the amount computed by applying the
Federal statutory income tax rate as follows (in thousands):
 
<TABLE>
<CAPTION>
                                         YEAR ENDED    ELEVEN MONTHS ENDED   ONE MONTH ENDED    YEAR ENDED
                                        DECEMBER 31,      NOVEMBER 29,        DECEMBER 31,     DECEMBER 31,
                                            1995              1996                1996             1997
<S>                                     <C>            <C>                   <C>               <C>
Federal statutory income tax..........     $7,799            $7,136               $497           $11,352
State and local incomes taxes, net of
  federal tax benefit.................      2,410             2,179                160             2,965
Tax exempt interest, net..............       (840)             (570)               (53)             (770)
Other, net............................       (149)               99                 76               190
                                           ------            ------               ----           -------
Effective income tax..................     $9,220            $8,844               $680           $13,737
                                           ======            ======               ====           =======
</TABLE>
 
     The temporary differences which created deferred tax assets and liabilities
are included as a net amount in other assets at December 31, 1996 and 1997 as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                               1996       1997
<S>                                                           <C>        <C>
Deferred Tax Assets:
  Deferred compensation.....................................  $ 6,122    $ 5,990
  Reserves..................................................    2,759      2,042
  Other.....................................................    3,240      2,118
  Less valuation allowance..................................   (1,131)        --
                                                              -------    -------
     Total deferred tax assets..............................   10,990     10,150
                                                              -------    -------
Deferred Tax Liabilities:
  Net unrealized appreciation on investments and other......      185        887
                                                              -------    -------
     Total deferred tax liabilities.........................      185        887
                                                              -------    -------
Net deferred tax asset......................................  $10,805    $ 9,263
                                                              =======    =======
</TABLE>
 
     At December 31, 1996, the Company had net operating loss carryforwards
("NOLs") related to the original acquisition of Sutro of $3.2 million for which
it had recorded a valuation allowance against the full amount of the deferred
tax asset. These NOLs were fully utilized in 1997 resulting in a reduction to
taxes payable but without a reduction to reported income tax expense as the
offset was reported as an adjustment to goodwill.
 

                                      F-13
<PAGE>   86
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
10.  NET CAPITAL REQUIREMENTS
 
     Certain subsidiaries of the Company are subject to the net capital
requirements of the New York Stock Exchange ("Exchange") and the Uniform Net
Capital requirements of the Securities and Exchange Commission ("Commission")
under Rule 15c3-1. The Exchange and the Commission 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, 1997,
Tucker Anthony had net capital of approximately $47.0 million which was $46.0
million in excess of the $1 million amount required to be maintained at that
date.
 
     Sutro is a registered broker and dealer. At December 31, 1997, Sutro had
net capital of approximately $10.8 million which was $9.8 million in excess of
the $1.0 million amount required to be maintained at that date.
 
     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 minimums and ratios. At December 31, 1997,
FTC's regulatory capital, as defined, was $1.1 million and FTC was in compliance
with all such requirements.
 
     Under the clearing arrangement with Wexford, Tucker Anthony and Sutro are
required to maintain certain minimum levels of net capital and comply with other
financial ratio requirements. At December 31, 1997, Tucker Anthony and Sutro
were in compliance with all such requirements.
 
     In accordance with the provisions of the credit agreement (see note 8), the
Company and its principal subsidiaries have executed agreements to guarantee the
borrowings to the benefit of the participating banks. The stock of the Company's
subsidiaries currently is pledged as security under the terms of the credit
agreement. Under the financial covenants of this credit agreement, the maturity
of amounts borrowed may be accelerated if the Company breaches certain
provisions of the credit agreement, among which are requirements for the Company
and its principal subsidiaries to maintain minimum levels, as defined, including
leverage ratio and net capital. The Company was in compliance with these
covenants at December 31, 1997.
 
11.  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. Rent expense was $18.1 million for the year
ended December 31, 1995, $22.5 million for the eleven month period ended
November 29, 1996, $1.5 million for the one month period ended December 31, 1996
and $15.9 million for the year ended 1997. Included in rent expense for the
eleven month period ended November 29, 1996 is $4.7 million of expense related
to the present value of future rent costs for space no longer required due
primarily to the outsourcing of clearing services.
 

                                      F-14
<PAGE>   87
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
11.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

     At December 31, 1997, the Company's future minimum rental commitments based
upon original terms (including escalation costs) under noncancelable leases
which have an initial or remaining term of one year or more are as follows (in
thousands):
 
<TABLE>
<S>                                                 <C>
1998..............................................  $ 17,204
1999..............................................    16,915
2000..............................................    15,025
2001..............................................    14,350
2002..............................................    13,586
Thereafter........................................    26,184
                                                    --------
  Sub-total.......................................   103,264
Less aggregate sublease income....................    (3,847)
                                                    --------
                                                    $ 99,417
                                                    ========
</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 counsel, that the resolution of these actions will not have a
material adverse effect on the consolidated financial position and results of
operations of the Company. Included in other operating expenses, for the eleven
month period ended November 29, 1996, is $6.3 million of insurance recoveries
relating to certain litigation costs that were incurred in prior years.
 
     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 exposure related to
these off-balance sheet commitments. Subsequent to December 31, 1997, such
transactions settled at no loss.
 
12.  BENEFITS
 
     Certain subsidiaries of the Company have qualified profit-sharing plans
which cover substantially all their full-time employees. Each plan includes a
salary reduction agreement and a matching contribution subject to certain
limitations. In addition, a subsidiary may contribute additional amounts to its
plan, at its discretion, based upon its profits for the year.
 
     The aggregate contributions to these plans for the year ended December 31,
1995, the eleven month period ended November 29, 1996, the one month period
ended December 31, 1996 and the year ended December 31, 1997 were $6.4 million,
$5.5 million, $0.5 million and $7.1 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 will accrue and no new
participants will be admitted after August 1, 1997. Amounts related to the plan
are not material to the consolidated financial statements.
 
     Compensation cost recognized for Common Stock and stock options issued to
employees during 1997 was $1.4 million.
 
13.  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.

 
                                      F-15
<PAGE>   88
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
13.  FINANCIAL INSTRUMENTS (CONTINUED)

     The fair value of the fixed asset financing estimated using the Company's
incremental borrowing rate, approximated its carrying value at December 31, 1997
and 1996. The carrying value of the Company's debt under the variable rate
credit agreement approximates 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. There were no
open contracts outstanding at December 31, 1996. At December 31, 1997, the
Company had open options on futures contracts outstanding approximating $34.5
million (notional amount). 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, 1997. 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, 1995, 1996 and 1997.
 
     The following table summarizes the Company's principal transactions
revenues by business activity for the applicable periods reflected.
 
<TABLE>
<CAPTION>
                                        YEAR ENDED                                               YEAR ENDED
                                       DECEMBER 31,   ELEVEN MONTHS ENDED    ONE MONTH ENDED    DECEMBER 31,
                                           1995        NOVEMBER 29, 1996    DECEMBER 31, 1996       1997
                                       ------------   -------------------   -----------------   ------------
<S>                                    <C>            <C>                   <C>                 <C>
Equities.............................    $ 39,814           $35,545              $2,831           $39,181
Fixed Income.........................      52,289            47,731               3,990            47,641
Arbitrage............................      13,686            12,205               1,529            12,447
                                         --------           -------              ------           -------
                                         $105,789           $95,481              $8,350           $99,269
                                         ========           =======              ======           =======
</TABLE>
 
14.  EARNINGS PER COMMON SHARE
 
     The Company computes its earnings per share in accordance with SFAS 128
"Earnings Per Share." The following table sets forth the computation for basic
and diluted earnings per share (in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                       ONE MONTH ENDED          YEAR ENDED
                                                      DECEMBER 31, 1996     DECEMBER 31, 1997
                                                      ------------------    ------------------
                                                       BASIC     DILUTED     BASIC     DILUTED
<S>                                                   <C>        <C>        <C>        <C>
NUMERATOR:

  Net income........................................  $   740    $   740    $18,698    $18,698
                                                      -------    -------    -------    -------
DENOMINATOR:

  Weighted average shares outstanding...............   14,313     14,313     14,287     14,287
  Dilutive effect of:
     Stock options and other exercisable shares.....       --         --         --        446
                                                      -------    -------    -------    -------
  Adjusted weighted average shares outstanding......   14,313     14,313     14,287     14,733
                                                      -------    -------    -------    -------
Earnings per share..................................  $  0.05    $  0.05    $  1.31    $  1.27
                                                      =======    =======    =======    =======
</TABLE>
 
15.  STOCK OPTIONS
 
     The Company's 1996 Stock Option Plan ("the Plan") provides for granting
officers and other key employees options to purchase shares of common stock at
the fair market value of the stock on the date of grant or such other prices as
provided by the Plan, and expire within either nine and one half years of
November 29, 1996, or ten years from the date of grant. The options vest over
periods from five to six years
 

                                      F-16
<PAGE>   89
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
15.  STOCK OPTIONS (CONTINUED)

from November 29, 1996. Certain options issued under performance-based
agreements may be exercisable earlier, vesting over three years for individual
performance-based options and five years for Company performance-based options,
if certain individual and Company performance-based goals are met. Regardless of
whether these performance based targets are attained, the options will vest no
later than six years from November 29, 1996. During 1997, the Company granted
options on 2,336,652 shares, no options were exercised, and options on 202,764
shares were forfeited. All options have an exercise price of $5.50. At December
31, 1997, 2,181,600 shares were authorized for issuance under options and
options on 2,133,888 shares were outstanding, with a weighted-average remaining
contractual life of 8.6 years. At December 31, 1997, options on 276,247 shares
were exercisable, with a weighted-average remaining contractual life of 8.6
years.
 
     The Company accounts for stock option grants in accordance with the
provisions of Accounting Principles Board Opinion ("APB") No. 25 "Accounting for
Stock Issued to Employees." Had compensation expense for the Company's stock
options been determined on the fair value at the date of grant for awards under
the Plan, consistent with the method of SFAS 123 "Accounting for Stock Based
Compensation," the Company's net income and earnings per share would have been
reduced to pro forma amounts presented below (in thousands except per share
amounts):
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                                       1997
<S>                                                 <C>            <C>
Net income........................................  As reported      $18,698
                                                    Pro forma        $18,318
Basic earnings per share..........................  As reported      $  1.31
                                                    Pro forma        $  1.28
Diluted earnings per share........................  As reported      $  1.27
                                                    Pro forma        $  1.26
</TABLE>
 
     The pro forma information presented is not representative of the effect
stock options will have on net income or earnings per share for future years.
 
     The fair value of each option granted during the year ended December 31,
1997 is the estimated present value at grant date using the minimum value model
with the following assumptions: (i) dividend yield of 0.8%, (ii) expected life
of 6 years, and (iii) risk free interest rate of 5.4%. The weighted-average fair
value of the options on 2,127,696 shares granted January 31, 1997 whose exercise
price equals the fair market value of the Company's stock on grant date was
$1.30. The weighted-average fair value of the options on 208,956 shares granted
subsequent to January 31, 1997 whose exercise price is less than the fair market
value of the Company's stock on grant date was $4.37.
 

                                      F-17
<PAGE>   90
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
16.  QUARTERLY INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                  PREDECESSOR COMPANY
                                 ------------------------------------------------------
                                           THREE MONTHS ENDED                  TWO             ONE
                                 --------------------------------------    MONTHS ENDED    MONTH ENDED
                                 MARCH 31,    JUNE 30,    SEPTEMBER 30,    NOVEMBER 29,    DECEMBER 31,
                                   1996         1996          1996             1996            1996
<S>                              <C>          <C>         <C>              <C>             <C>
Net revenues...................   $89,281     $88,168       $ 81,034         $ 62,546        $ 28,796
Income before income taxes.....     6,440       5,361          4,480            4,106           1,420
Net income.....................     3,677       3,029          2,517            2,320             740
Basic earnings per share.......        --          --             --               --        $   0.05
Diluted earnings per share.....        --          --             --               --        $   0.05
</TABLE>
 
<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED
                                 ------------------------------------------------------
                                 MARCH 31,    JUNE 30,    SEPTEMBER 30,    DECEMBER 31,
                                   1997         1997          1997             1997
<S>                              <C>          <C>         <C>              <C>             <C>
Net revenues...................   $84,448     $85,129       $103,579         $102,599
Income before income taxes.....     6,043       5,040         10,464           10,888
Net income.....................     3,493       2,918          5,967            6,320
Basic earnings per share.......   $  0.24     $  0.20       $   0.42         $   0.45
Diluted earnings per share.....   $  0.24     $  0.20       $   0.41         $   0.42
</TABLE>
 
17.  SUBSEQUENT EVENTS
 
     On March 10, 1998, the Company's Board of Directors approved an increase in
the authorized Capital Stock of the Company to 60,000,000 shares of Common
Stock, $.01 par value per share, and 1,000,000 shares of Preferred Stock, $.01
par value per share, of which none of the preferred stock has been issued. In
addition, the Company's Board of Directors approved a 1.818-for-1 Common Stock
split to be distributed in the form of a stock dividend payable to existing
stockholders immediately prior to the consummation of the Company's public
offering of Common Stock. All references throughout the financial statements to
number of shares, per share amounts and stock options data of the Company's
Common Stock reflect the stock split.
 
     The Company has agreed to acquire, through a merger with a wholly owned
subsidiary of the Company, the regional brokerage firm of Cleary Gull Reiland &
McDevitt Inc. ("Cleary Gull") pursuant to an Agreement and Plan of Merger dated
March 9, 1998. The following is a summary of certain financial information of
Cleary Gull at and for the year ended December 31, 1997 (in thousands):
 
<TABLE>
<S>                                                           <C>        <C>
Total assets................................................  $20,698
Stockholders' equity........................................    7,198
 
Total revenues..............................................  $26,414
Net income..................................................    1,251
</TABLE>
 

                                      F-18
<PAGE>   91
 
                                                      
================================================================================
 
     NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
 
                            ------------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                       PAGE
<S>                                    <C>
Prospectus Summary...................     3
Risk Factors.........................     8
Use of Proceeds......................    18
Dividend Policy......................    18
Capitalization.......................    19
Selected Historical Consolidated
  Financial and Other Data...........    20
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations......................    22
Business.............................    36
Management...........................    50
Principal and Selling Stockholders...    60
Certain Relationships and Related
  Transactions.......................    64
Description of Capital Stock.........    67
Shares Eligible for Future Sale......    70
Plan of Distribution.................    70
Legal Matters........................    72
Experts..............................    72
Additional Information...............    72
Index to Financial Statements........   F-1
</TABLE>
 
                            ------------------------
 
UNTIL           , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENT OR SUBSCRIPTIONS.
 
================================================================================

================================================================================



                                 721,324 SHARES



 
                   [FREEDOM SECURITIES(SM) CORPORATION LOGO]




                                  COMMON STOCK




                           -------------------------
                              P R O S P E C T U S
                           -------------------------





                                          , 1998
 
================================================================================
<PAGE>   92
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The expenses payable in connection with the sale of the Common Stock
offered hereby are as follows, all of which will be paid by the Company:
 
<TABLE>
<CAPTION>
                                                                AMOUNT
<S>                                                           <C>
Commission registration fee.................................  $     3,877
Printing expenses...........................................       50,000
Legal fees and expenses.....................................       50,000
Accounting fees and expenses................................       25,000
Blue sky fees and expenses (including legal fees and
  expenses).................................................       10,000
Transfer agent and registrar fees and expenses..............       10,000
Miscellaneous...............................................       51,123
                                                              -----------
     Total..................................................      200,000
                                                              ===========
</TABLE>
 
------------------------------
* All amounts are estimated, except Commission registration fee.
 
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
Section 145 of the General Corporation Law of the State of Delaware provides as
follows:
 
     A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
 
     A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

 
                                      II-1
<PAGE>   93
 
     In addition, pursuant to its Articles of Organization and Bylaws, the
Company shall indemnify its directors and officers against expenses (including
judgments or amounts paid in settlement) incurred in any action, civil or
criminal, to which any such person is a party by reason of any alleged act or
failure to act in his capacity as such, except as to a matter as to which such
director or officer shall have been finally adjudged not to have acted in good
faith in the reasonable belief that his action was in the best interest of the
corporation.
 
     The Company maintains directors and officers liability insurance for the
benefit of its directors and certain of its officers and has entered into
indemnification agreements with its directors and certain of its officers.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES
 
     During the past three years, the Company has issued the following
securities, none of which have been registered under the Securities Act:
 
          (a) On November 29, 1996, the Company sold an aggregate of 826,281
     shares of Common Stock for an aggregate consideration of $4,545,000 in
     transactions exempt from registration pursuant to Rule 701 under the
     Securities Act.
 
          (b) On November 29, 1996, in transactions exempt from registration
     pursuant to Section 4(2) of the Securities Act, the Company sold an
     aggregate of 13,526,200 shares of Common Stock to accredited investors for
     an aggregate consideration of $74,401,540.
 
          (c) During 1997 the Company granted options to purchase 2,336,652
     shares of Common Stock to certain employees of the Company, each with an
     exercise price of $5.50, in transactions exempt from registration pursuant
     to Section 4(2) and Rule 701 under the Securities Act.
 
          (d) During 1997, in transactions exempt from registration pursuant to
     Section 4(2) of the Securities Act, the Company sold an aggregate of
     488,148 shares of Common Stock for aggregate consideration of $3,265,061 to
     employees of the Company and its subsidiaries who were accredited
     investors. In addition, Hancock exercised its pre-emptive right to purchase
     an aggregate of 31,099 shares of Common Stock for aggregate consideration
     of $208,006.
 
          (e) During 1998, in transactions exempt from registration pursuant to
     section 4(2) of the Securities Act, the Company has sold an aggregate of
     56,776 shares of Common Stock for aggregate consideration of $390,700 to
     employees of the Company's Subsidiaries.
 
          (f) On May 1, 1998, the Company issued, in a transaction exempt from
     registration pursuant to Section 4(2) of the Securities Act, an aggregate
     of 889,878 shares of Common Stock to the former stockholders of Cleary Gull
     in connection with the Company's acquisition of Cleary Gull.
 

                                      II-2
<PAGE>   94
 
ITEM 16.  EXHIBITS
 
<TABLE>
<CAPTION>
EXHIBITS
  NO.                         DESCRIPTION OF DOCUMENTS
--------                      ------------------------
<C>         <S>
   +3.1     Restated Certificate of Incorporation of the Registrant
   +3.2     Bylaws of the Registrant to be effective prior to
            effectiveness of the Registration Statement
    5.1     Form of Opinion of Hutchins, Wheeler & Dittmar, A
            Professional Corporation
  +10.1     Contribution Agreement by and among the Registrant, Hancock,
            THL and SCP, dated as of October 4, 1996
  +10.2     Stockholders Agreement by and among the Registrant 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     Revolving Credit Agreement by and among the Registrant and
            The First National Bank of Boston, as agent for the lenders
            listed on Schedule 1 thereto, dated as of November 29, 1996
  +10.4     Additional Share Agreement by and between the Registrant and
            Hancock, dated as of November 29, 1996
  +10.5     Tax Matters Agreement by and between the Registrant and
            Hancock, dated as of November 29, 1996
  +10.6     Contribution and Indemnity Agreement by and between the
            Registrant and John H. Goldsmith, dated as of November 29,
            1996
  +10.7     Management Agreement by and between the Registrant and THL,
            dated as of November 29, 1996
  +10.8     Management Agreement by and between the Registrant and SCP,
            dated as of November 29, 1996
  +10.9     1996 Stock Option Plan
  +10.10    Employment Agreement by and between the Registrant and John
            H. Goldsmith, dated as of November 29, 1996
  +10.11    Employment Agreement by and between the Registrant and
            Gregory N. Thomas, dated as of December 3, 1997
  +10.12    Letter Agreement by and between the Registrant and William
            C. Dennis, Jr., dated as of April 2, 1997
  +10.13    Agreement, by and among Prudential Securities Incorporated,
            John Hancock Clearing Corporation, Tucker Anthony
            Incorporated and Sutro & Co. Incorporated
  +10.14    Form of TAMP Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated as of July 1, 1989
  +10.15    Form of TAMP II Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated as of February 28, 1995
  +10.16    Form of TAMM II Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated April 8, 1984
  +10.17    Form of Sutro Venture Partners I, L.P. Limited Partnership
            Agreement, dated as of March 21, 1996
  +10.18    Form of Sutro Venture Partners II, L.P. Limited Partnership
            Agreement, dated as of March 21, 1996
  +10.19    Form of Operating Agreement for Sutro Investment Partners
            IV, LLC dated as of June 30, 1997
  +10.20    Agreement and Plan of Merger, by and among the Registrant,
            CGRM Merger Corp. and Cleary Gull Reiland & McDevitt Inc.,
            dated March 9, 1998.
  +10.21    Cleary Gull Registration Rights Agreement.
  +10.22    Chattel Leasing Security Agreement by and between T.A.
            Leasing, Inc. and BancBoston Leasing, Inc., dated November
            29, 1996.
</TABLE>

 
                                      II-3
<PAGE>   95
 
<TABLE>
<CAPTION>
EXHIBITS
  NO.                         DESCRIPTION OF DOCUMENTS
--------                      ------------------------
<C>         <S>
  +10.23    Amended and Restated Chattel Leasing Promissory Note, by and
            between T.A. Leasing, Inc. and BancBoston Leasing, Inc.,
            dated February 28, 1997.
  +10.24    Chattel Leasing Security Agreement by and between Sutro
            Leasing Inc. and BancBoston Leasing, Inc., dated February
            28, 1997.
  +10.25    Chattel Leasing Promissory Note by and between Sutro Leasing
            Inc. and BancBoston Leasing, Inc., dated February 28, 1997.
  +10.26    1998 Long Term Incentive Plan.
  +10.27    1998 Executive Performance Bonus Plan.
  +10.28    Amendment No. 1 to the Stockholders Agreement.
  +10.29    Amendment No. 2 to the Stockholders Agreement, as of March
            10, 1998.
  +10.30    Amendment No. 3 to the Stockholders Agreement, dated as of
            March 25, 1998.
  *10.31    David P. Prokupek Employment Agreement.
  +21.1     Subsidiaries of the Registrant
   23.1     Consent of Ernst & Young LLP
  +23.2     Consent of Hutchins, Wheeler & Dittmar, A Professional
            Corporation (included in Exhibit 5.1)
  +24.1     Power of Attorney (included on page II-6)
  +27.1     Financial Data Schedule
</TABLE>
 
---------------
 
 * To be filed by amendment.
 
 + Previously filed with the Commission on Form S-1 (File No. 333-44931).
 
     Schedules and exhibits to certain exhibits have been omitted, which
schedules shall be furnished to the Commission upon request.
 
ITEM 17.  UNDERTAKINGS
 
     The undersigned registrant hereby undertakes:
 
     (1)  To file, during any period in which offers or sales are being made, a
     post-effective amendment to this registration statement:
 
        (i)   To include any prospectus required by section 10(a)(3) of the
        Securities Act of 1933;
 
        (ii)   To reflect in the prospectus any facts or events arising after
        the effective date of the registration statement (or the most recent
        post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in the registration statement. Notwithstanding the foregoing, any
        increase or decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation from the low or high end of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) if, in the aggregate, the
        changes in volume and price represent no more than a 20% change in the
        maximum aggregate offering price set forth in the "Calculation of
        Registration Fee" table in the effective registration statement.
 
        (iii)  To include any material information with respect to the plan of
        distribution not previously disclosed in the registration statement or
        any material change to such information in the registration statement.
 

                                      II-4
<PAGE>   96
 
     (2)  That, for the purpose of determining any liability under the
     Securities Act of 1933, each such post-effective amendment shall be deemed
     to be a new registration statement relating to the securities offered
     therein, and the offering of such securities at that time shall be deemed
     to be initial bona fide offering thereof.
 
     (3)  To remove from registration by means of a post-effective amendment any
     of the securities being registered which remain unsold at the termination
     of the offering.
 
     (4)  If the registrant is a foreign private issuer, to file a
     post-effective amendment to the registration statement to include any
     financial statements required by sec.210.3-19 of this chapter at the start
     of any delayed offering or throughout a continuous offering. Financial
     statements and information otherwise required by Section 10(a)(3) of the
     Act need not be furnished, provided that the registrant includes in the
     prospectus, by means of a post-effective amendment, financial statements
     required pursuant to this paragraph (a)(4) and other information necessary
     to ensure that all other information in the prospectus is at least as
     current as the date of those financial statements. Notwithstanding the
     foregoing, with respect to registration statements on Form F-3, a
     post-effective amendment need not be filed to include financial statements
     and information required by Section 10(a)(3) of the Act of sec.210.3-19 of
     this chapter if such financial statements and information are contained in
     periodic reports filed with or furnished to the Commission by the
     registrant pursuant to Section 13 or Section 15(d) of the Securities
     Exchange Act of 1934 that are incorporated by reference in the Form F-3.
 
 
                                      II-5
<PAGE>   97
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in Boston,
Massachusetts, on September 3, 1998.
 
                                          FREEDOM SECURITIES CORPORATION
 
                                          By:     /s/ JOHN H. GOLDSMITH
                                            ------------------------------------
                                          Name: John H. Goldsmith
                                          Title: Chief Executive Officer
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints John H. Goldsmith and Gregory N. Thomas, and each
of them, with the power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him or in his name, place and stead, in any and all capacities to sign any
and all amendments or post-effective amendments to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or either of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
 
     Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                SIGNATURE                                   TITLE                         DATE
<C>                                           <S>                                   <C>
 
          /s/ JOHN H. GOLDSMITH               Chairman, Director and Chief          September 3, 1998
------------------------------------------    Executive Officer as well as Chief
            John H. Goldsmith                 Executive Officer of Tucker
                                              Anthony and Chairman of Sutro
 
        /s/ WILLIAM C. DENNIS, JR.            Chief Financial Officer               September 3, 1998
------------------------------------------
          William C. Dennis, Jr.
 
           /s/ DAVID V. HARKINS               Director                              September 3, 1998
------------------------------------------
             David V. Harkins
 
            /s/ C. HUNTER BOLL                Director                              September 3, 1998
------------------------------------------
              C. Hunter Boll
 
          /s/ THOMAS M. HAGERTY               Director                              September 3, 1998
------------------------------------------
            Thomas M. Hagerty
 
            /s/ SETH W. LAWRY                 Director                              September 3, 1998
------------------------------------------
              Seth W. Lawry
 
         /s/ WINSTON J. CHURCHILL             Director                              September 3, 1998
------------------------------------------
           Winston J. Churchill
 
           /s/ JOHN F. LUIKART                Director                              September 3, 1998
------------------------------------------
             John F. Luikart
</TABLE>
 
                                      II-6
<PAGE>   98
 
<TABLE>
<CAPTION>
                SIGNATURE                                   TITLE                         DATE
<C>                                           <S>                                   <C>
           /s/ ROBERT H. YEVICH               Director                              September 3, 1998
------------------------------------------
             Robert H. Yevich
 
          /s/ GREGORY N. THOMAS               Director                              September 3, 1998
------------------------------------------
            Gregory N. Thomas
 
          /s/ DAVID P. PROKUPEK               Director                              September 3, 1998
------------------------------------------
            David P. Prokupek
 
            /s/ HUGH R. HARRIS                Director                              September 3, 1998
------------------------------------------
              Hugh R. Harris
</TABLE>
 
                                      II-7
<PAGE>   99
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBITS
  NO.                         DESCRIPTION OF DOCUMENTS                    PAGE
--------                      ------------------------                    ----
<C>         <S>                                                           <C>
   +3.1     Restated Certificate of Incorporation of the Registrant
   +3.2     Bylaws of the Registrant to be effective prior to
            effectiveness of the Registration Statement
   *5.1     Form of Opinion of Hutchins, Wheeler & Dittmar, A
            Professional Corporation
  +10.1     Contribution Agreement by and among the Registrant, Hancock,
            THL and SCP, dated as of October 4, 1996
  +10.2     Stockholders Agreement by and among the Registrant 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     Revolving Credit Agreement by and among the Registrant and
            The First National Bank of Boston, as agent for the lenders
            listed on Schedule 1 thereto, dated as of November 29, 1996
  +10.4     Additional Share Agreement by and between the Registrant and
            Hancock, dated as of November 29, 1996
  +10.5     Tax Matters Agreement by and between the Registrant and
            Hancock, dated as of November 29, 1996
  +10.6     Contribution and Indemnity Agreement by and between the
            Registrant and John H. Goldsmith, dated as of November 29,
            1996
  +10.7     Management Agreement by and between the Registrant and THL,
            dated as of November 29, 1996
  +10.8     Management Agreement by and between the Registrant and SCP,
            dated as of November 29, 1996
  +10.9     1996 Stock Option Plan
  +10.10    Employment Agreement by and between the Registrant and John
            H. Goldsmith, dated as of November 29, 1996
  +10.11    Employment Agreement by and between the Registrant and
            Gregory N. Thomas, dated as of December 3, 1997
  +10.12    Letter Agreement by and between the Registrant and William
            C. Dennis, Jr., dated as of April 2, 1997
  +10.13    Agreement, by and among Prudential Securities Incorporated,
            John Hancock Clearing Corporation, Tucker Anthony
            Incorporated and Sutro & Co. Incorporated
  +10.14    Form of TAMP Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated as of July 1, 1989
  +10.15    Form of TAMP II Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated as of February 28, 1995
  +10.16    Form of TAMM II Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated April 8, 1984
  +10.17    Form of Sutro Venture Partners I, L.P. Limited Partnership
            Agreement, dated as of March 21, 1996
  +10.18    Form of Sutro Venture Partners II, L.P. Limited Partnership
            Agreement, dated as of March 21, 1996
  +10.19    Form of Operating Agreement for Sutro Investment Partners
            IV, LLC dated as of June 30, 1997
  +10.20    Agreement and Plan of Merger, by and among the Registrant,
            CGRM Merger Corp. and Cleary Gull Reiland & McDevitt Inc.,
            dated March 9, 1998.
  +10.21    Cleary Gull Registration Rights Agreement
  +10.22    Chattel Leasing Security Agreement by and between T.A.
            Leasing, Inc. and BancBoston Leasing, Inc., dated November
            29, 1996.
</TABLE>

<PAGE>   100
 
<TABLE>
<CAPTION>
EXHIBITS
  NO.                         DESCRIPTION OF DOCUMENTS                    PAGE
--------                      ------------------------                    ----
<C>         <S>                                                           <C>
  +10.23    Amended and Restated Chattel Leasing Promissory Note, by and
            between T.A. Leasing, Inc. and BancBoston Leasing, Inc.,
            dated February 28, 1997.
  +10.24    Chattel Leasing Security Agreement by and between Sutro
            Leasing Inc. and BancBoston Leasing, Inc., dated February
            28, 1997.
  +10.25    Chattel Leasing Promissory Note by and between Sutro Leasing
            Inc. and BancBoston Leasing, Inc., dated February 28, 1997.
  +10.26    1998 Long Term Incentive Plan.
  +10.27    1998 Executive Performance Bonus Plan.
  +10.28    Amendment No. 1 to the Stockholders Agreement dated January
            30, 1998.
  +10.29    Form of Amendment No. 2 to the Stockholders Agreement.
  +10.30    Form of Amendment No. 3 to the Stockholders Agreement.
  *10.31    David P. Prokupek Employment Agreement.
  +21.1     Subsidiaries of the Registrant
   23.1     Consent of Ernst & Young LLP
  +23.2     Consent of Hutchins, Wheeler & Dittmar, A Professional
            Corporation (included in Exhibit 5.1)
  +24.1     Power of Attorney (included on page II-6)
  +27.1     Financial Data Schedule
</TABLE>
 
---------------
 
* To be filed by Amendment.
 
 + Previously filed with the Commission on Form S-1 (File No. 333-44938).
 
     Schedules and exhibits to certain exhibits to this Registration Statement
have been omitted, which schedules shall be furnished to the Commission upon
request.
[{"type": "S-1", "sequence": "1", "description": "FREEDOM SECURITIES CORPORATION", "secsgml_size_bytes": 437614}]
{"company-data": {"conformed-name": "FREEDOM SECURITIES CORP /DE/", "cik": "0001029267", "assigned-sic": "6211", "irs-number": "043335712", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-62857", "film-number": "98704013"}, "business-address": {"street1": "ONE BEACON STREET", "street2": "617-227-1050", "city": "BOSTON", "state": "MA", "zip": "02108"}, "mail-address": {"street1": "ONE BEACON STREET", "city": "BOSTON", "state": "MA", "zip": "02108"}, "former-company": {"former-conformed-name": "JHFSC ACQUISITION CORP", "date-changed": "19980123"}}
1
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 3, 1998
 
                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
 
                         FREEDOM SECURITIES CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE                               6211                              04-3335712
  (STATE OR OTHER JURISDICTION OF        (PRIMARY STANDARD INDUSTRIAL               (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)        CLASSIFICATION CODE NUMBER)              IDENTIFICATION NO.)
ONE BEACON STREET
                                BOSTON, MA 02108
                                 (617) 725-2000
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                               JOHN H. GOLDSMITH
                            CHIEF EXECUTIVE OFFICER
                               ONE BEACON STREET
                                BOSTON, MA 02108
                                 (617) 725-2000
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                                    Copy to:
                             JAMES WESTRA, ESQUIRE
                          HUTCHINS, WHEELER & DITTMAR
                           A PROFESSIONAL CORPORATION
                               101 FEDERAL STREET
                          BOSTON, MASSACHUSETTS 02110
                                 (617) 951-6600
 
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  As soon
as practicable after the effective date of this Registration Statement.
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [X]
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering.  [ ]
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering.  [ ]
     If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the earlier
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
------------------------
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
                            ------------------------
                        CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
                                                AMOUNT            PROPOSED MAXIMUM       PROPOSED MAXIMUM
TITLE OF EACH CLASS OF                          TO BE            OFFERING PRICE PER         AGGREGATE              AMOUNT OF
 SECURITIES TO BE REGISTERED                  REGISTERED              SHARE(1)            OFFERING PRICE        REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value per
  share................................        721,324               $12.71875              $9,174,340               $2,706
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee, based
    upon the average of the high and low prices of the Company's Common Stock as
    reported on the New York Stock Exchange on August 31, 1998, in accordance
    with Rule 457(c) under the Securities Act of 1933, as amended.
                             -----------------------------
      THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
 
PROSPECTUS
 
          , 1998
                                 721,324 SHARES
 
                     [FREEDOM SECURITIES CORPORATION LOGO]
 
                                  COMMON STOCK
 
     This Prospectus relates to the public offering, which is not being
underwritten, of up to 721,324 shares of Common Stock, par value $0.01 per share
(the "Shares"), of Freedom Securities Corporation ("Freedom" or the "Company"),
which may be offered from time to time by certain stockholders of the Company
(the "Selling Stockholders"). The Company will receive no part of the proceeds
of such sales. All of the Shares being offered were originally issued by the
Company in connection with the Company's acquisition of Cleary Gull Reiland &
McDevitt Inc., a Delaware corporation ("Cleary Gull"), by and through a merger
of Cleary Gull with and into a wholly-owned subsidiary of Freedom, CGRM
Acquisition Corp.("Merger Corp.") (the "Cleary Gull Acquisition"). The Shares
were issued pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), provided by
Regulation D thereunder. The sale of the Shares is being registered by the
Company pursuant to the Agreement and the Plan of Merger dated as of March 9,
1998 (the "Agreement") by and among Freedom, Merger Corp. and Cleary Gull.
 
     The Shares may be offered by the Selling Stockholders from time to time in
one or more transactions as described under "Plan of Distribution." To the
extent required, the number of shares to be sold, the name of the Selling
Stockholder(s), the purchase price, the name of any agent or broker-dealer, and
any applicable commissions, discounts or other items constituting a compensation
to such agent or broker-dealer with respect to a particular offering will be set
forth in a supplement or supplements to this Prospectus (each, a "Prospectus
Supplement"). The aggregate proceeds to the Selling Stockholder(s) from the sale
of the shares offered from time to time hereby will be the purchase price of the
shares sold less commissions, discounts and other compensation, if any, paid by
the Selling Stockholder(s) to any agent or broker-dealer. The price at which any
of the Shares may be sold, and the commissions, if any paid in connection with
any such sale, are unknown and may vary from transaction to transaction. The
Company will pay all expenses incident to the offering and sale of the Shares to
the public other than any commissions and discounts of underwriters, dealers or
agents and any transfer taxes. See "Selling Stockholders" and "Plan of
Distribution."
 
     The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "FSI." On September   , 1998, the last sale price of the Company's
Common Stock was $     per share.
 
                         ------------------------------
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF RISK FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
 
                         ------------------------------
 
 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
      EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
          SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
           COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
                PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
                            IS A CRIMINAL OFFENSE.
 
                         ------------------------------
 
     The Securities and Exchange Commission (the "Commission") may take the view
that, under certain circumstances, the Selling Stockholders and any
broker-dealers or agents that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act. Commissions, discounts or concessions received by any
such broker-dealer or agent may be deemed to be underwriting commissions under
the Securities Act. The Company and the Selling Stockholders have agreed to
certain indemnification arrangements. See "Plan of Distribution."
3
--------------------------------------------------------------------------------
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in the Prospectus. Unless the context otherwise requires, the terms "Freedom"
and "the Company" mean Freedom Securities Corporation and its consolidated
subsidiaries during the periods following the Acquisition described below and
its predecessor (the "Predecessor Company") during periods prior to the
Acquisition. Certain market information contained herein is based on securities
industry publications.
 
                                  THE COMPANY
 
     Freedom, through its three brokerage subsidiaries, Tucker Anthony
Incorporated ("Tucker Anthony"), Sutro & Co. Incorporated ("Sutro") and Cleary
Gull Reiland & McDevitt Inc. ("Cleary Gull"), and its asset management
subsidiary, Freedom Capital Management Corporation ("Freedom Capital"), is a
full-service, regionally focused retail brokerage and investment banking firm.
The Company was formed in November 1996 to effect the acquisition (the
"Acquisition") of Freedom Securities Holding Corporation (the "Predecessor
Company") and its subsidiaries, including Tucker Anthony, Sutro and Freedom
Capital, from John Hancock Mutual Life Insurance Company ("Hancock"). Tucker
Anthony, headquartered in Boston and focused primarily on the northeastern
United States, and Sutro, headquartered in San Francisco and focused primarily
on the western United States, are both over 100 years old and have well
established reputations in their respective regions. Cleary Gull, headquartered
in Milwaukee, Wisconsin, was founded in 1987 and is focused primarily on the
midwestern United States. On April 16, 1998, the Company closed into escrow and
funded its previously announced acquisition of Cleary Gull. The acquisition was
completed on May 1, 1998 and was accounted for under the purchase method of
accounting. The consolidated financial and other data included elsewhere in this
Prospectus include the results of Cleary Gull's operations from the date of
acquisition. Management believes that it can best serve the needs of these
distinct regions through separate, locally managed organizations, while avoiding
cost duplication through the use of shared clearing and support services. This
approach enables the Company to capitalize on each organization's name
recognition, historical areas of expertise and close community ties while
lessening the Company's reliance on a single region's economy.
 
     The Company's three primary areas of focus, described below, are (i) its
full-service retail brokerage operations; (ii) its equity capital markets
activities; and (iii) its asset management operations.
 
     Retail Operations.  The retail operations of Tucker Anthony and Sutro,
conducted in 13 states and the District of Columbia, have together generated
between 56% and 62% of the Company's operating revenues in each of the last
three calendar years and have historically represented the Company's core
business. 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. As of June 30, 1998, customers had over $29 billion of assets
in over 200,000 Tucker Anthony and Sutro brokerage accounts. Management believes
that the experience of its 707 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. Management also
believes that its 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 significant tenure at their local branch offices.
 
     Equity Capital Markets.  Each of Tucker Anthony, Sutro and Cleary Gull has
historically demonstrated strengths in offering various investment banking
services, such as merger and acquisition services, to clients within its
respective region. The Company's strategy is to develop equally strong
research-driven equity capital markets groups including equity research,
investment banking, institutional sales, trading and syndication services.
Tucker Anthony's, Sutro's and Cleary Gull's research and investment banking
departments target emerging and middle-market companies within their respective
regions and within the industries in which they specialize. Equity capital
markets activities have generated 16% to 17% of the Company's operating revenues

--------------------------------------------------------------------------------
                                        3
4
--------------------------------------------------------------------------------

in each of the past three calendar years. For the first six months of 1998,
equity capital markets activities generated approximately 23% of the Company's
operating revenues.
 
     Asset Management.  Freedom Capital, headquartered in Boston, was formed in
1930 and as of June 30, 1998 managed approximately $6.2 billion of assets,
including approximately $3.4 billion of investments by public sector entities,
high net worth individuals and others, with the remainder comprised of money
market funds for the benefit of Tucker Anthony, Sutro and Cleary Gull clients.
Freedom Capital has developed a leading position in the management of public
funds for local Massachusetts municipalities and agencies, has also developed an
important presence in certain sectors of the union pension fund market and is
growing its corporate funds management business. Asset management revenues have
represented approximately 5% to 6% of the Company's operating revenues in each
of the past three calendar years.
 
     The Company's subsidiaries also engage in a number of other activities,
including trading fixed income securities, underwriting municipal securities,
and purchasing and selling securities in arbitrage transactions. Additionally,
the Company, through a subsidiary, has a 25% interest in the profits and losses
of a joint specialist account in which it participates with two other NYSE
specialist firms. See "Business" for a more complete description of the
Company's activities.
 
     The following chart depicts in simplified form the Company's corporate
structure, including its primary subsidiaries:
 
                               ------------------
                               FREEDOM SECURITIES
                                  CORPORATION
                               ------------------
                                        |
         ---------------------------------------------------------
        |                  |                 |                    |
   --------------     ------------     ---------------     ---------------
                                         CLEARY GULL       FREEDOM CAPITAL
   TUCKER ANTHONY      SUTRO & CO.        REILAND &          MANAGEMENT
    INCORPORATED      INCORPORATED      MCDEVITT INC.       CORPORATION
   --------------     ------------     ---------------     ---------------
 
BUSINESS STRATEGY
 
     Since the Acquisition, management formulated and is implementing a strategy
to (i) enhance the services the Company offers its customers; (ii) improve the
profitability of Tucker Anthony's and Sutro's retail operations; (iii) expand
the equity capital markets activities of Tucker Anthony, Sutro and Cleary Gull;
and (iv) increase Freedom Capital's money management business. Management also
plans to supplement the Company's internal growth with strategic acquisitions.
See "Business -- Business Strategy." The principal elements of the Company's
strategy are set forth below:
 
     Enhance Personalized, High-End Service.  Tucker Anthony, Sutro and Cleary
Gull have traditionally sought to attract and retain brokerage clients by
offering a high level of personal service responsive to customer needs. The
Company intends to increase its commitment to service by providing its
investment executives with advanced account information systems and flexibility
in determining appropriate 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.
 
     Improve Profitability of Retail Brokerage Operations.  The Company intends
to continue to improve the profitability of its retail operations by hiring
additional experienced and highly productive investment executives and by
providing Tucker Anthony's and Sutro's investment executives with enhanced
training, product offerings, information systems and support.
 
     Expand Regional and Speciality Equity Capital Markets Activities.  The
Company intends to continue to increase Tucker Anthony's, Sutro's and Cleary
Gull's investment banking business by committing greater

--------------------------------------------------------------------------------
                                        4
5
--------------------------------------------------------------------------------
 
resources to, and by carefully focusing their research and investment banking
coverage on, companies in geographic regions and industries which management
believes offer the greatest opportunities.
 
     Increase Asset Management Business.  Management intends to grow Freedom
Capital's business by extending its public funds business from Massachusetts to
other states, by improving coordination with the Tucker Anthony and Sutro retail
brokerage networks and by increasing the assets under its management and the
number of its portfolio managers through acquisitions or recruiting. The Company
also intends to continue to encourage the growth of Cleary Gull's investment
management services.
 
     Supplement Growth With Strategic Acquisitions.  Management plans to
actively pursue opportunities to acquire other firms with complementary
businesses which would strengthen or expand the Company's geographic or product
offering base, such as the acquisition of Cleary Gull, which has allowed the
Company to expand its geographic coverage. Management believes that acquisitions
may also allow the Company to realize cost benefits by leveraging its
infrastructure.
 
THE ACQUISITION
 
     To finance the Acquisition of Freedom from Hancock in November 1996,
approximately 350 employees of the Company, including senior management and
investment executives, purchased an aggregate of approximately 28% of the
Company's equity (after giving effect to the Company's initial public offering),
with additional equity financing provided by affiliates of Thomas H. Lee Company
("THL") and SCP Private Equity Partners, L.P. ("SCP"). Incentive equity programs
have been established pursuant to which employees have acquired or may acquire
additional equity of the Company, which, when added to shares previously owned,
would result in employees owning up to approximately 45% of the shares of Common
Stock outstanding. See "Certain Relationships and Related Transactions -- The
Acquisition" for a more complete description of the Acquisition and "Management"
for a description of the Company's incentive equity programs.
 
     Management believes that the Company's independence and employee ownership
resulted in progressively higher levels of employee motivation, confidence and
commitment during 1997, as compared to 1996 when the Predecessor Company was for
sale and it was uncertain whether the Acquisition would be consummated or
whether the Predecessor Company would be sold to another organization.
Management believes that uncertainty surrounding the future of the Company
adversely affected the Company's performance in 1996 and, to a lesser extent, in
early 1997 by weakening employee motivation and the Company's ability to recruit
personnel, creating uncertainty among customers and prospective customers,
consuming management's time and inhibiting the Company's ability to pursue new
initiatives. The Company believes that the Acquisition and the strategies
instituted in connection therewith have been successful. For example, Tucker
Anthony, Sutro and Cleary Gull managed or co-managed 19 equity offerings in the
first half of 1998 compared to 17 in the first half of 1997. For the full year
1997, the Company managed or co-managed 34 equity offerings compared to 16 in
1996 and 9 in 1995. In 1997, the Company reported net income of $18.7 million, a
52% increase over net income of $12.3 million in 1996 and a 43% increase over
net income of $13.1 million in 1995. For the first six months of 1998, the
Company reported net income of $12.6 million, before extraordinary item, a 98%
increase over net income of $6.4 million for the first half of 1997. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
INITIAL PUBLIC OFFERING
 
     On April 2, 1998, the Company completed its 7.4 million share initial
public offering, including 4.2 million shares of Common Stock sold by the
Company. The initial public offering raised approximately $76.7 million for the
Company, after deducting underwriting discounts, commissions and expenses.
 
CLEARY GULL ACQUISITION
 
     On May 1, 1998, the Company completed its previously announced acquisition
of Cleary Gull, a privately held investment banking, institutional brokerage and
investment advisory firm headquartered in Milwaukee, Wisconsin. Cleary Gull was
established in 1987 as a private investment bank focusing on the equity capital
markets through institutional research, sales and trading, and investment
banking services. Cleary Gull's

--------------------------------------------------------------------------------
                                        5
6
 
research analysts cover such areas as distribution and logistics, business
services, applied technology and growth companies in the midwestern United
States. Cleary Gull's equity capital markets activities include a national
institutional sales force and over-the-counter and listed trading services.
Cleary Gull's investment banking activities are focused primarily on merger and
acquisition advisory services and financing assignments in both public and
private equity and debt markets. Cleary Gull recently established its Private
Client Group to provide retail brokerage and investment management services to
institutional accounts and high net worth individuals.
 
                                  RISK FACTORS
 
     No assurances can be given that the Company's objectives or strategies will
be achieved. Prospective investors should consider carefully the factors
discussed in detail elsewhere in this Prospectus under the caption "Risk
Factors."
 
                                  THE OFFERING
Common Stock offered by the Selling Stockholders.......  721,324 shares

Common Stock to be outstanding after the Offering......  19,993,833 shares(1)

Dividend policy........................................  The Company declared a dividend of $0.04 per
                                                         share on the outstanding shares of Common
                                                         Stock beginning with the dividend payable in
                                                         the third quarter of 1998 with respect to
                                                         the second quarter of 1998 and currently
                                                         intends to declare similar quarterly
                                                         dividends in the future. See "Dividend
                                                         Policy."

Use of proceeds........................................  The Company will not receive any proceeds
                                                         from the sale of the Common Stock offered
                                                         hereby.
                                                         See "Use of Proceeds."

NYSE symbol............................................  "FSI"
------------------------------
(1) Excludes 2,530,769 shares of Common Stock issuable upon exercise of
    outstanding stock options under the Company's stock option plans at June 30,
    1998, with a weighted average exercise price of $6.85, of which 449,900
    shares were exercisable as of such date at a weighted average exercise price
    of $5.38, and up to 88,176 shares issuable to Hancock for no additional
    consideration upon such exercise. See "Management -- Stock Option and Stock
    Purchase Plans" and "Certain Relationships and Related
    Transactions -- Additional Share Agreement."
 
                                        6
7
--------------------------------------------------------------------------------

                 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
 
     The information set forth below should be read in conjunction with
"Selected Historical Consolidated Financial and Other Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's and Predecessor Company's Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.
PREDECESSOR COMPANY
                           ----------------------------------------
                                 YEARS ENDED          ELEVEN MONTHS    ONE MONTH
                                 DECEMBER 31,             ENDED          ENDED
                           ------------------------   NOVEMBER 29,    DECEMBER 31,
                            1993     1994     1995        1996            1996
                                (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
  Total revenues.........  $385.6   $327.1   $368.5      $347.5          $30.6
  Net revenues(2)........   364.5    296.9    332.5       321.0           28.8
  Total non-interest
    expenses.............   335.8    286.0    310.2       300.6           26.8
  Acquisition interest
    expense..............      --       --       --          --            0.6
  Income before income
    taxes................    28.7     10.9     22.3        20.4            1.4
  Extraordinary item (net
    of applicable taxes
    of $0.9)(4)..........      --       --       --          --             --
  Net income after
    extraordinary item...    16.7      6.4     13.1        11.6            0.7
  Basic earnings per
    share before
    extraordinary
    item(5)..............      --       --       --          --          $0.05
  Diluted earnings per
    share before
    extraordinary
    item(5)..............      --       --       --          --           0.05
  Basic earnings per
    share after
    extraordinary
    item(5)..............      --       --       --          --          $0.05
  Diluted earnings per
    share after
    extraordinary
    item(5)..............      --       --       --          --           0.05
SIX MONTHS
                           COMBINED(1)                          ENDED
                           ------------                       JUNE 30,
                            YEAR ENDED     YEAR ENDED        (UNAUDITED)
                           DECEMBER 31,   DECEMBER 31,   -------------------
                               1996           1997         1997       1998
                             (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
  Total revenues.........     $378.1         $398.2       $181.4     $235.8
  Net revenues(2)........      349.8          375.8        169.6      221.8
  Total non-interest
    expenses.............      327.4          337.3(3)     155.5      198.5(3)
  Acquisition interest
    expense..............        0.6            6.1          3.0        1.5
  Income before income
    taxes................       21.8           32.4         11.1       21.8
  Extraordinary item (net
    of applicable taxes
    of $0.9)(4)..........         --             --           --        1.2
  Net income after
    extraordinary item...       12.3           18.7          6.4       11.4
  Basic earnings per
    share before
    extraordinary
    item(5)..............         --         $ 1.31       $ 0.45     $ 0.73
  Diluted earnings per
    share before
    extraordinary
    item(5)..............         --           1.27         0.44       0.69
  Basic earnings per
    share after
    extraordinary
    item(5)..............         --         $ 1.31       $ 0.45     $ 0.66
  Diluted earnings per
    share after
    extraordinary
    item(5)..............         --           1.27         0.44       0.62
AS OF
                                                              JUNE 30, 1998
                                                               (UNAUDITED)
                                                              -------------
                                                              (IN MILLIONS,
                                                               EXCEPT PER
                                                               SHARE DATA)
STATEMENT OF FINANCIAL CONDITION DATA:
  Total assets..............................................     $655.5
  Long-term debt............................................       19.1
  Stockholders' equity......................................      212.7
  Book value per common share outstanding...................     $10.64
PREDECESSOR                                 SIX MONTHS
                                                                     COMPANY          COMBINED(1)                 ENDED
                                                              ---------------------   -----------               JUNE 30,
                                                                        YEARS ENDED DECEMBER 31,               (UNAUDITED)
                                                              --------------------------------------------   ---------------
                                                              1993    1994    1995       1996        1997     1997     1998
OTHER FINANCIAL DATA:
After-tax return on average equity(6).......................   12.6%    4.5%    8.8%      10.6%       20.6%    15.5%    15.1%
Compensation and benefits expense as a percentage of net
  revenues..................................................   64.9    66.8    65.4       65.2        65.5     64.7     66.0
Non-compensation and benefits operating expense as a
  percentage of net revenues................................   27.3    29.5    27.8       28.4        24.3     27.0     23.5
Amortization of acquisition-related intangibles (in
  millions).................................................     --      --      --     $  0.2      $  2.5   $  1.2   $  3.5(7)
Assets in retail brokerage accounts (at end of period) (in
  billions).................................................  $15.0   $17.0   $20.0     $ 23.0      $ 28.0   $ 24.6   $ 29.3
------------------------------
(1) Year ended December 31, 1996 combined financial data refer to the
    consolidated results of the Predecessor Company for the eleven months ended
    November 29, 1996 combined with the consolidated results of the Company for
    the one month ended December 31, 1996. These periods are not directly
    comparable due to the effects of the Acquisition, including related purchase
    accounting adjustments and the Acquisition financing.
(2) Net revenues equals total revenues less interest expense other than the
    Acquisition interest expense.
(3) Includes the effect of $1.4 and $0.5 million of non-cash compensation
    expense for the year ended December 31, 1997 and for the six months ended
    June 30, 1998, respectively, resulting from issuance of Common Stock and
    stock options to employees.
(4) The extraordinary item is a write-off of capitalized debt issuance costs
    resulting from the early retirement of $77.5 million in debt with the
    proceeds from the Company's second quarter initial public offering.
(5) Basic earnings per share ("Basic EPS") is calculated by dividing net income
    by the weighted average number of outstanding shares. Diluted earnings per
    share ("Diluted EPS") also includes the effects of the issuance of stock
    options and other exercisable shares. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations -- Earnings Per
    Share" for a detailed calculation of earnings per share.
(6) After-tax return on average equity is calculated by dividing net income
    after extraordinary item by average stockholders' equity for the year or six
    month period. For the six months ended June 30, 1998, after-tax return on
    average equity before extraordinary item was 16.7%.
(7) Includes amortization of acquisition-related goodwill of $1.0 million,
    write-off of debt issuance costs of $2.4 million and amortization of
    goodwill relating to the acquisition of Cleary Gull of $0.1 million.
 

--------------------------------------------------------------------------------
                                        7
8
 
                                  RISK FACTORS
 
     In addition to the other information contained in this Prospectus, the
following risk factors should be considered in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby.
 
ADVERSE CONSEQUENCES OF THE VOLATILE NATURE OF THE SECURITIES BROKERAGE BUSINESS
 
     The stock market has recently experienced significant volatility, including
some of the largest single day point declines in history. After the stock market
declines in October 1987 and October 1989, many firms in the industry suffered
financial losses and the level of individual investor trading activity
decreased. Reduced trading volume and lower prices generally result in reduced
transaction revenues. A severe market fluctuation in the future could have a
material adverse effect on the Company's business, financial condition and
operating results. Lower price levels of securities may result in (i) reduced
volumes of securities transactions, with a consequent reduction in commission
revenues, and (ii) reduced management fees calculated as a percentage of assets
managed. Sudden sharp declines in market values of securities and the failure of
issuers and counterparties to perform their obligations can result in illiquid
markets which, in turn, may result in the Company having difficulty selling
securities, hedging its securities positions and investing funds under its
management.
 
     The securities brokerage business is, by its nature, subject to significant
risks, particularly in volatile or illiquid markets. Risks inherent in the
securities brokerage business discussed elsewhere herein, such as the risk of
trading losses, losses resulting from the ownership or underwriting of
securities, risks associated with principal activities, the failure of
counterparties to meet commitments, customer fraud, employee fraud, issuer
fraud, litigation and errors, misconduct and failures in connection with the
processing of securities transactions, are enhanced in periods of volatility and
illiquidity. The Company's principal business activity, its retail broker-dealer
operations, as well as its investment banking, institutional sales, proprietary
trading, investment advisory and other services, are subject to these enhanced
risks present during volatile trading markets and fluctuations in the volume of
market activity.
 
     In addition, to the extent the Company, through Wexford Clearing Services
Corporation ("Wexford"), the Company's clearing broker, permits customers to
purchase securities on margin, the Company is subject to risks inherent in
extending credit, especially during periods of rapidly declining markets in
which collateral value could fall below the amount of a customer's indebtedness.
Any resulting losses could have a material adverse effect on the Company's
business, financial condition and operating results.
 
BUSINESS SUBJECT TO GENERAL ECONOMIC AND POLITICAL CONDITIONS
 
     The securities business is directly affected by many factors, including
economic and political conditions, broad trends in business and finance,
legislation and regulation affecting the national and international business and
financial communities, currency values, inflation, market conditions, the
availability and cost of short-term or long-term funding and capital, the credit
capacity or perceived creditworthiness of the securities industry in the
marketplace and the level and volatility of interest rates. Any one or more of
these factors may contribute to reduced levels of trading activity, securities
offerings and merger and acquisition activities, which would result in lower
revenues from the Company's brokerage, trading, institutional sales and
investment banking activities. In addition, these and other factors can
contribute to lower price levels for securities and illiquid markets.
 
SIGNIFICANT COMPETITION
 
     All aspects of the Company's business and of the securities business in
general are highly competitive. The principal competitive factors influencing
the Company's business are its professional staff, its reputation in the
marketplace, its existing client relationships, its ability to commit capital to
client transactions and its mix of market capabilities. The Company's ability to
compete effectively in its securities brokerage and investment banking
activities will also be influenced by the adequacy of its capital levels and by
its ability to raise additional capital.

 
                                        8
9
 
     The Company competes directly with national and regional full service
broker-dealers and, to a lesser extent, with discount brokers, dealers,
investment banking firms, investment advisors and certain commercial banks. In
addition, the Company competes indirectly for investment assets with insurance
companies and others. In addition to competition from firms currently in the
securities business, domestic commercial banks and investment banking boutiques
have recently entered the business. In recent years, large international banks
have entered the markets served by United States investment banks, including the
markets in which the Company competes. The Company expects competition from
domestic and international banks to increase as a result of recent and
anticipated legislative and regulatory initiatives in the United States to
remove or relieve certain restrictions on commercial banks relating to the sale
of securities. The financial services industry has become considerably more
concentrated as numerous securities firms have either ceased operations or have
been acquired by or merged into other firms. Such mergers and acquisitions have
increased competition from these firms, many of which have significantly greater
equity capital and financial and other resources than the Company. Many of these
firms, because of their significantly greater financial capital and scope of
operations, are able to offer their customers more product offerings, broader
research capabilities, access to international markets and other products and
services not offered by the Company, which may provide such firms with
competitive advantages over the Company.
 
     The Company also faces competition from a rapidly developing industry
comprised of companies offering discount and/or electronic brokerage services.
These competitors may have lower costs and may offer their customers more
attractive pricing or other terms than those offered by the Company. The Company
also anticipates competition from underwriters who attempt to effect public
offerings for emerging and middle-market companies through new means of
distribution, including transactions effected using electronic media such as the
Internet. In addition, issuers may attempt to sell their securities directly to
purchasers, including through sales using electronic media such as the Internet.
To the extent that issuers and purchasers of securities are able to transact
business without the assistance of financial intermediaries such as the Company,
the Company's operating results could be adversely affected.
 
DEPENDENCE ON PERSONNEL
 
     The Company's business is dependent on the highly skilled and often highly
specialized individuals it employs. Retention of senior management and retail
investment executives, research, investment banking, public finance,
institutional sales and trading, money management and administrative
professionals is particularly important to the Company's prospects. The Company
generally does not have written employment agreements with its investment
professionals.
 
     The departure of an investment executive typically results in such
executive taking his or her clients with him or her. The departure of investment
executives could adversely impact the Company's operating results.
 
     The Company's strategy with respect to investment banking is to establish
relationships with the Company's prospective corporate clients in advance of any
transaction and to maintain such relationships over the long term by providing
advisory services to corporate clients in public or private offerings of equity
or debt securities and merger and acquisition transactions. Similarly, the
Company's strategy with respect to state and local government clients is to
establish long-term relationships by providing advisory services to governmental
entities as well as underwriting services. Research professionals contribute
significantly to the Company's ability to secure a role in managing public
offerings and in providing other investment banking services. From time to time,
the Company has experienced losses of equity research, investment banking,
public finance, and institutional sales and trading professionals. The loss of a
significant number of such professionals could materially adversely affect the
Company's operating results.
 
     The intense competition for skilled professionals has led to escalating
compensation packages in the industry for such individuals. Upfront payments,
increased payouts and guaranteed contracts make hiring of employees more
difficult and can be a major factor in an employee leaving the Company. There
can be no assurance that losses of key personnel due to such competition or
otherwise will not occur in the future.
 
     The Company's business, financial condition and operating results depend,
to a significant extent, on the ability of the management of the Company and its
subsidiaries to implement the Company's strategy outlined

 
                                        9
10
 
in this Prospectus. See "Business -- Business Strategy." There is no guarantee,
however, that management will be able to successfully implement such strategy or
that such strategy will be effective, and the inability of management to succeed
in its efforts may have an adverse effect on the Company's business, financial
condition and operating results.
 
GEOGRAPHIC CONCENTRATION OF THE COMPANY'S BUSINESS
 
     Because of the Company's focus on investors and equity capital market
clients based in the northeastern, midwestern and western United States, a
significant economic downturn in any of those regions could adversely affect the
Company's revenues. Approximately 59% of the Company's 1997 operating revenue
(and a significantly greater percentage of the Company's operating income) was
generated by Tucker Anthony whose clients are primarily located in the
northeastern United States and approximately 35% was generated by Sutro whose
clients are primarily located in the western United States. During the second
quarter of 1998, Cleary Gull, whose clients are primarily located in the
midwestern United States, generated 8% of the Company's operating revenue. As a
result, an economic downturn in one of these regions could adversely affect the
companies in these regions, which in turn could reduce the Company's
underwriting and brokerage business relating to those companies. In addition, a
regional economic downturn in one of these regions could have an adverse effect
on the Company's retail clients in that region or emerging and middle-market
companies in that region. Any adverse effect on emerging and middle-market
companies or growth industries concentrated in the northeastern, midwestern or
western United States or, to a lesser extent, in other regions in which emerging
or middle-market technology, healthcare, financial service, consumer product,
distribution and logistics, applied technology and business services companies
are also concentrated could also reduce the Company's business relating to those
companies.
 
DEPENDENCE ON CERTAIN RELATIONSHIPS
 
     The Company has entered into an arrangement with Wexford pursuant to which
Wexford acts as the Company's clearing broker. The Company's communications and
information systems are coordinated with the clearing information systems of
Wexford. Additionally, 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, monthly account statements, cashiering
functions and the handling of margin accounts. Accordingly, the Company is
currently dependent upon Wexford's clearing capabilities and systems. The
Company and Wexford are parties to an agreement setting forth the terms and
conditions of their relationship. The initial term of the Agreement expires
April 3, 2001 and renews annually thereafter (unless either party gives notice
of its intent not to renew), subject to earlier termination by Wexford in the
event the Company fails to meet certain financial tests. The per trade charge
under the Wexford Agreement is subject to adjustment based on a consumer price
index commencing in April 1999. The Agreement provides that either Wexford or
the Company have the right to renegotiate the financial terms and services of
the contract to apply after the end of the initial term. Any interruption of
service by or at Wexford, or the inability of the Company to extend the Wexford
arrangement on acceptable terms or find an acceptable alternative for the
Company's financing or clearing arrangements could have a material adverse
effect on the Company's business, financial condition and operating results. For
1997 the Company paid clearing and financing fees to Wexford totaling
approximately $20 million, which represented approximately 5% of net revenues.
Assuming similar trading volumes in 1998, the Company expects that these charges
will continue for the remainder of 1998.
 
DEPENDENCE ON OUTSIDE SOURCES OF FINANCING
 
     The principal sources of the Company's cash and liquidity are financing
activities, commissions, collateralized repurchase agreements and collateralized
loans. The Company currently has an uncommitted financing arrangement with
Wexford through which the Company finances its customer accounts and firm
trading positions. Such financing of customer accounts is not reflected in the
Company's Statements of Financial Condition. The Company retains risk with
respect thereto, however, because the Company has agreed to indemnify Wexford
for losses it may sustain in connection with the accounts of the Company's
customers. The availability of financing to the Company may vary depending on
market conditions, the
 
                                       10
11
 
volume of certain trading activities, credit ratings, credit capacity and the
overall availability of credit to the financial services industry. There can be
no assurance that the Company will be able to access the necessary lines of
credit or that financing adequate to support the Company's business will be
available in the future.
 
CONSTRAINTS IMPOSED BY BANK DEBT
 
     The Company currently maintains a senior revolving credit facility with
BankBoston, N.A. as agent for several lenders (the "Credit Facility"), with no
outstanding balance. The Company also maintains through two of its subsidiaries,
a fixed asset leasing arrangement with BancBoston Leasing Inc. (the "Fixed Asset
Facility") with an outstanding balance at June 30, 1998 of approximately $19.1
million.
 
     The terms of the Credit Facility require the Company and certain of its
subsidiaries to maintain specified financial ratios and satisfy certain tests,
including, among others, a minimum interest coverage ratio, a minimum debt
service coverage ratio and a maximum leverage ratio. The ability of the Company
to comply with the foregoing financial ratios and tests may be affected by
events beyond the control of the Company, and there can be no assurance that the
Company will achieve operating results that comply with such provisions. A
breach of any of the foregoing covenants would result in a default under the
Credit Facility. In the event of any such default, the lenders could elect to
declare all amounts borrowed under the Credit Facility, together with accrued
interest thereon, to be immediately due and payable and pursuant to a
cross-default provision in the Fixed Asset Facility, BancBoston Leasing, Inc.
may accelerate the amounts due under the Fixed Asset Facility. If the Company
were unable to repay such amounts, the lenders could proceed against the
collateral granted to them to repay the indebtedness and other obligations due
and payable under the Credit Facility. If the Credit Facility were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company. If the Company were to default under the Credit Facility and the
lenders thereunder were to foreclose on such subsidiary stock, such subsidiary
stock could be sold to a third party, which would adversely affect the Company.
 
DEPENDENCE ON TECHNOLOGY
 
     The Company's business is highly dependent on communications and
information systems. Any failure or interruption of the Company's or its
subsidiaries' systems, or of the systems of Wexford, could cause delays in the
Company's securities trading activities which could have a material adverse
effect on the Company's operating results. Such failures and interruptions may
result from the inability of certain computing systems (including those of the
Company, Wexford and other third party vendors) to recognize the Year 2000.
There can be no assurance that these Year 2000 issues can be adequately
addressed by the Company, that the costs incurred in connection therewith will
not exceed anticipated amounts or that any such additional payments would not
have a material adverse effect on the results of operations or financial
condition of the Company. In addition, there can be no assurance that the
Company, its subsidiaries or Wexford will not suffer any systems failure or
interruption, whether caused by earthquake, fire, other natural disaster, power
or telecommunications failure, act of God, act of war or otherwise, or that the
Company's or its subsidiaries' or Wexford's back-up procedures and capabilities
in the event of any such failure or interruption will be adequate. Furthermore,
any deterioration in Wexford's or its parent's financial condition could
materially adversely affect the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Year 2000
Compliance."
 
LITIGATION IN THE COMPANY'S SECURITIES BROKERAGE BUSINESS
 
     Many aspects of the Company's securities brokerage business involve
substantial risks of liability. From time to time the Company or its
subsidiaries may be named as defendants in civil litigation arising from their
business activities as retail broker-dealers. The plaintiffs in such litigation
may allege misconduct on the part of the Company's investment executives,
claiming, for example, that investments sold to such plaintiffs by the Company's
investment executives were unsuitable for their portfolios, or that such
investment executives engaged in excessive trading with respect to such
plaintiffs' accounts. Factors affecting the likelihood of such litigation
include the conduct of individual investment executives and the performance of
the investment vehicles sold by the Company's investment executives. Such
factors have resulted in the Company making payments to plaintiffs in the past,
and there can be no assurance that substantial payments in connection with the
resolution of such litigation will not occur in the future.

 
                                       11
12
 
     In recent years, there has been a substantial amount of litigation
involving the securities brokerage industry, including class action lawsuits
that generally seek substantial damages and other suits seeking punitive
damages. Companies engaged in the underwriting of securities, including Tucker
Anthony Sutro and Cleary Gull, are subject to substantial potential liability,
including for material misstatements or omissions in prospectuses and other
communications with respect to underwritten offerings of securities or
statements made by securities analysts, under federal laws such as Rule 10b-5
promulgated under the Securities and Exchange Act of 1934 and Section 11 of the
Securities Act and similar state statutes and common law doctrines. See
"-- Business Subject to Significant Regulation." Like other securities brokerage
firms, the Company and its subsidiaries have been named as defendants in class
action and other lawsuits and have in the past been subject to substantial
settlements and judgments. The risk of liability may be higher for an
underwriter which, like the Company, is active in the underwriting of securities
offerings for emerging and middle-market companies due to the higher degree of
risk and volatility associated with the securities of such companies. The
defense of these or any other lawsuits or arbitrations may divert the efforts
and attention of the Company's management and staff, and the Company may incur
significant legal expense in defending such litigation or arbitration. This may
be the case even with respect to frivolous claims or litigation. The amount of
time that management and other employees may be required to devote in connection
with the defense of litigation could be substantial and might divert their
attention from other responsibilities within the Company.
 
     In the normal course of business, the Company and its subsidiaries are also
defendants in various civil actions and arbitrations arising out of their
activities as employers and as a result of other business activities. The
Company and its subsidiaries have in the past made substantial payments in
connection with the resolution of disputed claims, and there can be no assurance
that substantial payments in connection with the resolution of disputed claims
will not occur in the future.
 
     As of July 31, 1998, there were approximately 36 lawsuits and arbitrations
pending against the Company and its subsidiaries. The Company does not believe
that these lawsuits and arbitrations, in the aggregate, will have a material
adverse effect on the Company's results of operations or financial condition.
 
     As is common in the securities industry, the Company does not carry
insurance that would cover payments made in connection with certain types of
lawsuits. In addition, the Company's and its subsidiaries' charter documents
require indemnification of the Company's and such subsidiaries' officers,
directors and agents to the maximum extent permitted by law.
 
POTENTIAL LOSSES DUE TO FRAUD OR MISTAKES OF CUSTOMERS OR EMPLOYEES
 
     The Company is exposed to the risk of significant losses as a result of
customer fraud, employee errors, misconduct and fraud (including unauthorized
transactions by traders) and failures in connection with the processing of
securities transactions. There can be no assurance that the Company's risk
management procedures and internal controls will prevent such losses from
occurring.
 
     The Company has 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 for which such former employee was responsible.
The Company determined in the fourth quarter of 1997 that approximately $2.6
million of trading losses arose from the actions of the former employee. The
loss has been included in the Company's financial results as follows: $228,000
in the first quarter, $1,071,000 in the second quarter, $431,000 in the third
quarter and $901,000 in the fourth quarter. The Company notified the Securities
and Exchange Commission (the "Commission") 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 Commission and the NYSE are investigating this
matter. The Company does not expect that the results of these investigations
will have a material adverse effect on the Company's business, financial
condition or operating results.

 
                                       12
13
 
MARKET, CREDIT AND LIQUIDITY RISKS ASSOCIATED WITH MARKET MAKING, PRINCIPAL
TRADING, ARBITRAGE AND UNDERWRITING ACTIVITIES
 
     The Company's market making, principal trading, arbitrage and underwriting
activities often involve the purchase, sale or short sale of securities as
principal. Such activities subject the Company's capital to significant risks
from markets that may be characterized by relative illiquidity or that may be
particularly susceptible to rapid fluctuations in liquidity. Such market
conditions could limit the Company's ability to resell securities purchased or
to repurchase securities sold short. Such activities subject the Company's
capital to significant risks, including market, credit, counterparty and
liquidity risks. Market risk relates to the risk of fluctuating values based on
market prices without any action on the part of the Company. Credit risk relates
generally to the ability of third parties to whom the Company has extended
credit to repay amounts owed to the Company. Counterparty risk relates to
whether a counterparty on a derivative or other transaction will fulfill its
contractual obligations, which may include delivery of securities or payment of
funds. Liquidity risk relates to the Company's inability to liquidate assets or
redirect the deployment of assets contained in illiquid investments.
 
     As a result of its underwriting and arbitrage activities, from time to time
the Company has large position concentrations in securities of, or commitments
to, a single issuer or issuers engaged in a specific industry. In addition, the
trend in all major capital markets, for competitive and other reasons, toward
larger commitments on the part of lead underwriters means that, from time to
time, an underwriter (including a co-manager) may retain significant position
concentrations in individual securities. Such concentrations increase the
Company's exposure to specific credit and market risks.
 
CONSTRAINTS IMPOSED BY NET CAPITAL REQUIREMENTS
 
     The Commission, the NYSE, and various other securities exchanges and other
regulatory bodies in the United States have rules with respect to net capital
requirements which affect each broker-dealer subsidiary of the Company. These
rules are designed to ensure that broker-dealers maintain adequate regulatory
capital in relation to their liabilities and the size of their customer
business. These rules (the "Net Capital Rules") have the effect of requiring
that a substantial portion of a broker-dealer's assets be kept in cash or highly
liquid investments. Failure to maintain the required net capital may subject a
firm to suspension or revocation of its registration by the Commission and
suspension or expulsion by the National Association of Securities Dealers (the
"NASD") and other regulatory bodies, and ultimately may require its liquidation.
Compliance by the Company's broker-dealer subsidiaries with such Net Capital
Rules could limit certain operations that require intensive use of capital, such
as underwriting or trading activities. These rules could also restrict the
ability of the Company to withdraw capital, even in circumstances where the
Company's broker-dealer subsidiaries have more than the minimum amount of
required capital, which, in turn, could limit the ability of the Company to pay
dividends, implement its strategies, pay interest on and repay the principal of
its debt and redeem or repurchase shares of outstanding capital stock. In
addition, a change in such Net Capital Rules or the imposition of new rules
affecting the scope, coverage, calculation or amount of such net capital
requirements, or a significant operating loss or any large charge against net
capital, could have similar adverse effects.
 
CONCENTRATED CONTROL OF THE COMPANY
 
     As of June 30, 1998, THL owns approximately 25%, SCP owns approximately 3%
and current or former employees of the Company and its subsidiaries own
approximately 32% of the outstanding Common Stock of the Company. This
concentration of ownership and voting power may have the effect of accelerating,
delaying or preventing a change in control of the Company or otherwise affect
the ability of any stockholder to influence the policies of the Company. See
"Certain Relationships and Related Transactions -- Stockholders Agreement."
 
BUSINESS SUBJECT TO EXTENSIVE REGULATION
 
     Each subsidiary of the Company which is registered as a broker-dealer
and/or investment advisor is, and the securities industry in general is, subject
to extensive regulation in the United States at both the federal and

 
                                       13
14
 
state level. Broker-dealers are subject to regulations covering all aspects of
the securities business, including sales methods, trade practices among
broker-dealers, use and safekeeping of customers' funds and securities, capital
structure, record keeping and the conduct of directors, officers and employees.
As a result of the Cleary Gull Acquisition, Cleary Gull was required to
re-register as a broker-dealer with the NASD and each state in which it conducts
business. Cleary Gull's membership application with the NASD and various state
registration applications are currently pending.
 
     As registered investment advisors under the Investment Advisors Act of 1940
(the "Advisors Act"), Tucker Anthony, Sutro, Cleary Gull and Freedom Capital 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 advisor'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 approval of a majority of its
shareholders, and as to the Company's other clients, the consent of such clients
to such assignments.
 
     As a matter of public policy, regulatory bodies are charged with
safeguarding the integrity of the securities and other financial markets and
with protecting the interests of customers participating in those markets, not
with protecting the interests of the Company's stockholders. In addition,
self-regulatory organizations ("SROs") and other regulatory bodies in the United
States, such as the Commission, the NYSE, the NASD, the Commodities Futures
Trading Commission (the "CFTC"), the National Futures Association (the "NFA")
and the Municipal Securities Rulemaking Board (the "MSRB"), require strict
compliance with their rules and regulations. Failure to comply with any of these
laws, rules or regulations, the application of which under certain circumstances
may be unclear, could result in a variety of adverse consequences including
censure, civil penalties (including treble damages in the case of insider
trading violations), fines, the issuance of cease-and-desist orders, the
deregistration or suspension of a broker-dealer, investment adviser or futures
commission merchant, the statutory disqualification of officers or employees or
other adverse consequences which could have a material adverse effect on the
Company. Even if none of such actions is taken, such administrative or judicial
proceedings or arbitrations could have a material adverse effect on the
Company's perceived creditworthiness, reputation and competitiveness. Customers
of the Company's subsidiaries or others who allege that they have been damaged
by a violation of applicable regulations also may seek to obtain compensation
from such subsidiary, including the unwinding of any transactions with such
subsidiary. Additional legislation or regulations, or changes in the methods or
enforcement of existing regulations by governmental entities or SROs may
materially and adversely affect the Company's business, financial condition or
operating results.
 
     The Company's businesses may be materially affected not only by regulations
applicable to its subsidiaries as financial market intermediaries, but also by
regulations of general application. For example, the volume of the Company's
underwriting, merger and acquisition and principal investment business in a
given time period could be affected by, among other things, existing and
proposed tax legislation, antitrust policy and other governmental regulations
and policies (including the interest rate policies of the Federal Reserve Board)
and changes in interpretation or enforcement of existing laws and rules that
affect the business and financial communities. From time to time, various forms
of antitakeover legislation and legislation that could affect the benefits
associated with financing leveraged transactions with high-yield securities have
been proposed that, if enacted, could adversely affect the volume of merger and
acquisition business, which in turn could adversely affect the Company's
underwriting, advisory and trading revenues related thereto. The level of
business and financing activity in each of the industries on which the Company
and its subsidiaries focus can be affected not

 
                                       14
15
 
only by such legislation or regulations of general applicability, but also by
industry-specific legislation or regulations.
 
     The Company's subsidiaries' ability to comply with applicable laws and
rules is dependent in large part upon the establishment and maintenance of a
compliance system designed to monitor compliance with such laws and rules, as
well as the Company's ability to attract and retain qualified compliance
personnel. The Company and its subsidiaries could in the future be subject to
disciplinary or other actions due to claimed noncompliance which could have a
material adverse effect on the Company's business, financial condition and
operating results.
 
LIMITED OPERATING HISTORY AS STAND-ALONE COMPANY
 
     The Company is a holding company formed in November 1996 to effect the
Acquisition. It conducts its business solely through its subsidiaries. Prior to
the Acquisition, Tucker Anthony, Sutro and the Company's other subsidiaries were
indirect wholly owned subsidiaries of Hancock and prior to May 1, 1998, Cleary
Gull was an independent company. Consequently, the Company has a limited history
as a stand-alone company. In the past, Hancock or its affiliates provided
certain services to the Company, particularly short term financing and various
employee benefit and insurance services, and also limited legal and other
support services. The Company and its subsidiaries no longer obtain such
services from Hancock or its affiliates. See "Certain Relationships and Related
Transactions -- Relationship Between the Company and Hancock."
 
POTENTIAL ADVERSE MARKET EFFECT OF FUTURE SALES OF COMMON STOCK
 
     Sales of a substantial number of shares of Common Stock in the public
market, whether by public stockholders or by THL, SCP or employees of the
Company, could adversely affect the prevailing market price of the Common Stock
and could impair the Company's future ability to raise capital through an
offering of its equity securities. There will be 19,993,833 shares of Common
Stock outstanding immediately after completion of this offering, of which
9,231,324 shares will be freely tradeable. All other shares will be owned by
THL, Hancock, SCP or current or former Company employees and will be "restricted
securities" for purposes of the Securities Act of 1933, as amended (the
"Securities Act"), and, subject to the volume and other limitations set forth in
Rule 144 promulgated under the Securities Act, will be eligible for sale on or
about September 30, 1998. The Company, THL, Hancock, SCP and certain employees
of the Company are parties to an agreement which provides THL, Hancock, SCP and
such employees with certain registration rights. See "Certain Relationships and
Related Transactions" and "Shares Eligible for Future Sale."
 
HOLDING COMPANY STRUCTURE
 
     Substantially all of the revenues of the Company are generated by Tucker
Anthony, Sutro, Cleary Gull and Freedom Capital, and their subsidiaries. Freedom
Securities Corporation, the issuer of the shares offered hereby, relies
exclusively on financing activities and distributions from its subsidiaries for
funds required to pay dividends, implement its strategies and redeem or
repurchase shares of outstanding capital stock. The Company's ability to receive
distributions from its subsidiaries may be limited by the Net Capital Rules,
restrictions which may be imposed by the Credit Facility or successor borrowing
arrangements of the Company's subsidiaries, or by the earnings, financial
condition and cash requirements of the Company's subsidiaries. Additionally,
there can be no assurance that the Company will be able to obtain funds through
financing activities. These factors may impose limitations on or prevent the
Company from paying dividends, implementing its strategies or repurchasing
shares of its capital stock.
 
INTEGRATION AND OTHER RISKS ASSOCIATED WITH ACQUISITION STRATEGY
 
     The Company expects to continue a strategy of identifying and acquiring
companies with complementary businesses which would strengthen or expand the
firm's geographical or product offering base. There can be no assurance that the
Company will be able to identify appropriate acquisition candidates, negotiate
appropriate acquisition terms, obtain financing which may be needed to effect
such acquisitions or integrate acquisitions

 
                                       15
16
 
successfully into the Company's operations. Additionally, there can be no
assurance that any such acquisitions will contribute to the profitability of the
Company.
 
BOARD OF DIRECTORS' ABILITY TO DESIGNATE TERMS AND AUTHORIZE ISSUANCE OF BLANK
CHECK PREFERRED STOCK
 
     The Company is authorized to issue "blank check" preferred stock
("Preferred Stock"), which may be issued from time to time in one or more series
upon authorization by the Company's Board of Directors. The Board of Directors,
without further approval of the stockholders, is authorized to fix the dividend
rights, conversion rights, voting rights, redemption rights, liquidation
preferences, and any other rights, preferences, privileges and restrictions
applicable to each series of the Preferred Stock. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes could, among other things, adversely affect the voting
power and dividend rights of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Company's Common Stock at a premium or
otherwise adversely affect the market price of the Common Stock. See
"Description of Capital Stock -- Certain Certificate of Incorporation, Bylaw and
Statutory Anti-Takeover Provisions Affecting Stockholders."
 
USE OF DERIVATIVE FINANCIAL INSTRUMENTS
 
     The Company enters into derivatives transactions as part of its principal
trading activities, primarily to manage its own interest rate and price risks,
and also as an alternative to investment in the cash markets. While the use of
derivatives may allow the Company to better manage certain risks, derivatives
also have risks that are similar in type to the risks of the cash market
instruments to which their values are linked. For example, in times of market
stress, sharp price movements or reductions in liquidity in the cash markets may
be related to comparable or even greater price movements and reductions in
liquidity in the derivatives markets. Further, the risks associated with
derivatives are potentially greater than those associated with the related cash
market instruments because of the additional complexity and potential for
leverage. In addition, derivatives may create credit risk (the risk that a
counterparty on a derivative transaction will not fulfill its contractual
obligations), as well as legal, operational, reputational and other risks beyond
those associated with the underlying cash market instruments to which their
values are linked. The Company manages the risks associated with its derivative
financial instruments as part of its overall risk management policies and
procedures. There can be no assurance, however, that the Company's use of
derivatives may not have a material adverse effect on its results of operations
or financial condition in any period.
 
CONFLICTS OF INTEREST
 
     Certain key employees of the Company, including the executive officers of
the Company, make investments in, or make investments together with, certain of
the Company's equity capital markets clients through various investment
vehicles. See "Certain Relationships and Related Transactions -- Other
Transactions with Management -- Investment Partnerships." Conflicts of interest
could exist in situations where the investment objectives of such employees are
not aligned with those of such clients. The Company does not believe that any
such conflict of interest will have any adverse effect on the Company's
operations or financial condition. The Company believes that no material
conflicts of interest exist between the Company or its employees, on the one
hand, and investors in this offering, on the other.
 
RESTRICTION ON PAYMENT OF DIVIDENDS
 
     The Predecessor Company paid dividends on its Common Stock each year from
1991 to 1995. No dividends were paid by the Company in 1996 or 1997. The
Company's Board of Directors has declared a dividend of $0.04 per share on the
outstanding shares of Common Stock payable in the third quarter of 1998 with
respect to the second quarter of 1998 and currently intends to pay similar
dividends on a quarterly basis. The timing and amount of future dividends will
be determined by the Board and will depend, among other factors, upon the
Company's earnings, financial condition and cash requirements at the time such
payment is considered. Furthermore, the net capital rules of the various
regulatory bodies impose limitations on the payment of dividends by the Company.
See "Dividend Policy."

 
                                       16
17
 
CERTAIN CERTIFICATE OF INCORPORATION, BYLAW AND STATUTORY ANTI-TAKEOVER
PROVISIONS AFFECTING STOCKHOLDERS
 
     The Company's Certificate of Incorporation and Bylaws and certain statutes
affecting the Company contain provisions that might diminish the likelihood that
a potential acquiror would make an offer for the Common Stock, or impede a
transaction favorable to the interests of the stockholders, or increase the
difficulty of removing the incumbent Board of Directors and management. These
provisions with respect to the Company's Certificate of Incorporation and Bylaws
include (i) the authority of the Board of Directors to issue a series of
preferred stock with such voting rights and other powers as the Board of
Directors may determine; (ii) the inability of stockholders to take any action
without a meeting or to call a special meeting of stockholders; and (iii)
certain advance notice procedures for nominating candidates for election as
directors and for submitting proposals for consideration at stockholders'
meetings. See "Description of Capital Stock -- Certain Certificate of
Incorporation, Bylaw and Statutory Anti-Takeover Provisions Affecting
Stockholders."

 
                                       17
18
 
                                USE OF PROCEEDS
 
     The Company will not receive any proceeds from the sale of shares of Common
Stock offered hereby by the Selling Stockholders. See "Principal and Selling
Stockholders."
 
                                DIVIDEND POLICY
 
     The Predecessor Company paid dividends on its Common Stock each year from
1991 to 1995. No dividends were paid by the Company in 1996 or 1997. The
Company's Board of Directors has declared a dividend of $0.04 per share on the
outstanding shares of Common Stock payable in the third quarter of 1998 with
respect to the second quarter of 1998 and currently intends to pay similar
dividends on a quarterly basis. The timing and amount of future dividends will
be determined by the Board and will depend, among other factors, upon the
Company's earnings, financial condition and cash requirements at the time such
payment is considered. Furthermore, the net capital rules of the various
regulatory bodies impose limitations on the payment of dividends by the Company.
See "Risk Factors -- Restriction on Payment of Dividends" and Note 10 to the
Company's Consolidated Financial Statements included elsewhere in this
Prospectus.

 
                                       18
19
 
                                 CAPITALIZATION
 
     The following table sets forth the long-term debt and total capitalization
of the Company as of June 30, 1998.
AS OF JUNE 30, 1998
                                                                -------------------
                                                                  (IN THOUSANDS)
Long-term debt:
  Credit Facility...........................................         $     --
  Fixed Asset Facility......................................           19,125
                                                                     --------
          Total long-term borrowings........................           19,125
Stockholders' equity:
  Common Stock, $.01 par value; 60,000,000 shares
     authorized; 19,993,833 shares issued and outstanding...              200
  Additional paid-in capital................................          181,645
  Retained earnings.........................................           30,826
                                                                     --------
          Total stockholders' equity........................          212,671
                                                                     --------
                      Total capitalization..................         $231,796
                                                                     ========
19
20
 
           SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
 
     The selected consolidated financial data set forth below for the six months
ended June 30, 1998 and 1997 are derived from consolidated financial statements
not included in this Prospectus and have not been audited by Ernst & Young, LLP,
independent accountants. The selected consolidated financial data set forth
below as of December 31, 1996 and 1997 and for the one month period ended
December 31, 1996 and year ended December 31, 1997 are derived from the
consolidated financial statements of the Company included elsewhere in this
Prospectus which have been audited by Ernst & Young LLP, independent
accountants. The selected consolidated financial data set forth below for the
year ended December 31, 1995 and for the eleven months ended November 29, 1996
are derived from the consolidated financial statements of the Predecessor
Company included elsewhere in this Prospectus which have been audited by Ernst &
Young LLP, independent accountants. The selected consolidated financial data as
of December 31, 1993, 1994 and 1995 and for the years ended December 31, 1993
and 1994 are derived from financial statements of the Predecessor Company, also
audited by Ernst & Young LLP, not included in this Prospectus. The historical
results are not necessarily indicative of the results of operations to be
expected in the future. The following financial data are qualified in their
entirety by, and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
PREDECESSOR COMPANY                              COMBINED(1)
                                      ------------------------------------------                  ------------
                                                                      ELEVEN        ONE MONTH
                                       YEARS ENDED DECEMBER 31,    MONTHS ENDED       ENDED        YEAR ENDED     YEAR ENDED
                                      --------------------------   NOVEMBER 29,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                       1993      1994      1995        1996            1996           1996           1997
                                                           (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
  Revenues:
    Commissions.....................  $131.1    $122.9    $140.2      $139.0           $12.5         $151.5         $167.2
    Principal transactions..........   125.3      85.3     105.8        95.5            8.4           103.9           99.3
    Investment banking..............    63.0      40.1      34.8        34.0            4.1            38.1           55.2
    Asset management................    12.6      13.0      14.9        17.3            1.7            19.0           19.9
    Other...........................    12.9      13.7      12.7        15.2            0.6            15.8           12.5
                                      ------    ------    ------      ------          -----          ------         ------
        Total operating revenues....   344.9     275.0     308.4       301.0           27.3           328.3          354.1
    Interest income.................    40.7      52.1      60.1        46.5            3.3            49.8           44.1
                                      ------    ------    ------      ------          -----          ------         ------
        Total revenues..............   385.6     327.1     368.5       347.5           30.6           378.1          398.2
    Interest expense................    21.1      30.2      36.0        26.5            1.8            28.3           22.4
                                      ------    ------    ------      ------          -----          ------         ------
        Net revenues(2).............   364.5     296.9     332.5       321.0           28.8           349.8          375.8
  Non-interest expenses:
    Compensation and benefits.......   236.4     198.3     217.6       209.2           18.9           228.1          245.9(3)
    Occupancy and equipment.........    26.0      25.8      26.1        31.0            2.2            33.2           24.3
    Communications..................    15.8      16.4      18.1        16.6            1.3            17.9           17.0
    Brokerage and clearance.........     7.9       7.5       7.3        10.5            1.0            11.5           11.3
    Promotional.....................     9.2       7.9       9.5         9.1            0.8             9.9           10.3
    Other...........................    40.5      30.1      31.6        24.2            2.6            26.8           28.5
                                      ------    ------    ------      ------          -----          ------         ------
        Total non-interest
          expenses..................   335.8     286.0     310.2       300.6           26.8           327.4          337.3
                                      ------    ------    ------      ------          -----          ------         ------
  Acquisition interest expense......      --        --        --          --            0.6             0.6            6.1
                                      ------    ------    ------      ------          -----          ------         ------
  Income before income taxes........    28.7      10.9      22.3        20.4            1.4            21.8           32.4
  Income taxes......................    12.0       4.5       9.2         8.8            0.7             9.5           13.7
                                      ------    ------    ------      ------          -----          ------         ------
  Net income before extraordinary
    item............................    16.7       6.4      13.1        11.6            0.7            12.3           18.7
  Extraordinary item (net of
    applicable taxes of $0.9)(4)....      --        --        --          --             --              --             --
                                      ------    ------    ------      ------          -----          ------         ------
  Net income after extraordinary
    item............................  $ 16.7    $  6.4    $ 13.1      $ 11.6          $ 0.7          $ 12.3         $ 18.7
                                      ======    ======    ======      ======          =====          ======         ======
  Basic earnings per share before
    extraordinary item(5)...........      --        --        --          --          $0.05              --         $ 1.31
                                                                                      =====                         ======
  Diluted earnings per share before
    extraordinary item(5)...........      --        --        --          --           0.05              --           1.27
                                                                                      =====                         ======
  Basic earnings per share after
    extraordinary item(5)...........      --        --        --          --          $0.05              --         $ 1.31
                                                                                      =====                         ======
  Diluted earnings per share after
    extraordinary item(5)...........      --        --        --          --           0.05              --           1.27
                                                                                      =====                         ======
SIX MONTHS
                                            ENDED
                                          JUNE 30,
                                      -----------------
                                       1997      1998
                                         (UNAUDITED)
STATEMENT OF INCOME DATA:
  Revenues:
    Commissions.....................    $77.7     $94.5
    Principal transactions..........     44.6      50.9
    Investment banking..............     22.0      45.8
    Asset management................      9.5      11.9
    Other...........................      6.4       6.9
                                      -------   -------
        Total operating revenues....    160.2     210.0
    Interest income.................     21.2      25.8
                                      -------   -------
        Total revenues..............    181.4     235.8
    Interest expense................     11.8      14.0
                                      -------   -------
        Net revenues(2).............    169.6     221.8
  Non-interest expenses:
    Compensation and benefits.......    109.7     146.4(3)
    Occupancy and equipment.........     12.9      13.1
    Communications..................      8.6       9.0
    Brokerage and clearance.........      5.6       6.2
    Promotional.....................      4.5       6.5
    Other...........................     14.2      17.3
                                      -------   -------
        Total non-interest
          expenses..................    155.5     198.5
                                      -------   -------
  Acquisition interest expense......      3.0       1.5
                                      -------   -------
  Income before income taxes........     11.1      21.8
  Income taxes......................      4.7       9.2
                                      -------   -------
  Net income before extraordinary
    item............................      6.4      12.6
  Extraordinary item (net of
    applicable taxes of $0.9)(4)....       --       1.2
                                      -------   -------
  Net income after extraordinary
    item............................  $   6.4   $  11.4
                                      =======   =======
  Basic earnings per share before
    extraordinary item(5)...........  $  0.45   $  0.73
                                      =======   =======
  Diluted earnings per share before
    extraordinary item(5)...........     0.44      0.69
                                      =======   =======
  Basic earnings per share after
    extraordinary item(5)...........  $  0.45   $  0.66
                                      =======   =======
  Diluted earnings per share after
    extraordinary item(5)...........     0.44      0.62
                                      =======   =======
20
21
PREDECESSOR COMPANY
                                  ----------------------------------------                  COMBINED(1)
                                    YEARS ENDED DECEMBER        ELEVEN        ONE MONTH
                                            31,              MONTHS ENDED       ENDED        YEAR ENDED     YEAR ENDED
                                  ------------------------   NOVEMBER 29,    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                   1993     1994     1995        1996            1996           1996           1997
                                                      (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
STATEMENT OF FINANCIAL
  CONDITION DATA (AT END OF
  PERIOD):
  Total assets(6)..............   $1,159.8 $1,037.9 $1,214.0                                   $517.0         $727.6
  Long-term debt(7)............       --       --       --                                      110.8          101.4
  Stockholders' equity(7)......    140.0    145.4    152.7                                       79.5          102.3
  Book value per share of
    Common Stock outstanding...       --       --       --                                     $ 5.55         $ 6.96
OTHER FINANCIAL DATA:
  After-tax return on average
    equity(8)..................     12.6%     4.5%     8.8%                                      10.6%          20.6%
  Compensation and benefits
    expense as a percentage of
    net revenues...............     64.9     66.8     65.4                                       65.2           65.5
  Non-compensation and benefits
    operating expense as a
    percentage of net
    revenues...................     27.3     29.5     27.8                                       28.4           24.3
  Amortization of
    acquisition-related
    intangibles (in
    millions)..................       --       --       --          --          $ 0.2           $ 0.2          $ 2.5
  Assets in retail brokerage
    accounts (at end of period)
    (in billions)..............    $15.0    $17.0    $20.0                                      $23.0          $28.0
SIX MONTHS
                                      ENDED
                                    JUNE 30,
                                 ---------------
                                  1997     1998
                                   (UNAUDITED)
STATEMENT OF FINANCIAL
  CONDITION DATA (AT END OF
  PERIOD):
  Total assets(6)..............  $542.6   $655.5
  Long-term debt(7)............   108.7     19.1
  Stockholders' equity(7)......    85.6    212.7
  Book value per share of
    Common Stock outstanding...  $ 6.03   $10.64
OTHER FINANCIAL DATA:
  After-tax return on average
    equity(8)..................    15.5%    15.1%
  Compensation and benefits
    expense as a percentage of
    net revenues...............    64.7     66.0(3)
  Non-compensation and benefits
    operating expense as a
    percentage of net
    revenues...................    27.0     23.5
  Amortization of
    acquisition-related
    intangibles (in
    millions)..................   $ 1.2    $ 3.5(9)
  Assets in retail brokerage
    accounts (at end of period)
    (in billions)..............   $24.6    $29.3
------------------------------
 
(1) Year ended December 31, 1996 combined financial data refer to the
    consolidated results of the Predecessor Company for the eleven months ended
    November 29, 1996 combined with the consolidated results of the Company for
    the one month ended December 31, 1996. These periods are not directly
    comparable due to the effects of the Acquisition, including related purchase
    accounting adjustments and the Acquisition financing.
 
(2) Net revenues equals total revenues less interest expense other than the
    Acquisition interest expense.
 
(3) Includes the effect of $1.4 million and $0.5 million of non-cash
    compensation expense for the year ended December 31, 1997 and for the six
    months ended June 30, 1998, respectively, resulting from issuance of Common
    Stock and stock options to employees.
 
(4) The extraordinary item is a write-off of capitalized debt issuance costs
    resulting from the early retirement of $77.5 million in debt with proceeds
    from the Company's second quarter initial public offering.
 
(5) Basic earnings per share ("Basic EPS") is calculated by dividing net income
    by the weighted average number of outstanding shares. Diluted earnings per
    share ("Diluted EPS") also includes the effects of the issuance of stock
    options and other exercisable shares. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations -- Earnings Per
    Share" for a detailed calculation of earnings per share.
 
(6) The decline in total assets from December 31, 1995 to December 31, 1996 is
    primarily attributable to the initiation of the Wexford clearing arrangement
    pursuant to which certain customer and broker-dealer balances are no longer
    included on the Company's Statements of Financial Condition.
 
(7) The decrease in stockholders' equity and increase in long-term debt from
    December 31, 1995 to December 31, 1996 was primarily a result of the
    Acquisition. The decrease in long-term debt and increase in stockholders'
    equity from December 31, 1997 to June 30, 1998 was related to the early
    retirement of debt with proceeds from the Company's second quarter initial
    public offering.
 
(8) After-tax return on average equity is calculated by dividing net income
    after extraordinary item by average stockholders' equity for the year or six
    month period. For the six months ended June 30, 1998, after-tax return on
    average equity before extraordinary item was 16.7%.
 
(9) Includes amortization of acquisition-related goodwill of $1.0 million,
    write-off of debt issuance costs of $2.4 million and amortization of
    goodwill relating to the acquisition of Cleary Gull of $0.1 million.

 
                                       21
22
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion should be read in conjunction with "Selected
Historical Consolidated Financial and Other Data" and the Company's Consolidated
Financial Statements and Notes thereto, each appearing elsewhere in this
Prospectus. In addition to historical information, the following Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ significantly from those anticipated in
these forward-looking statements as a result of certain factors, including those
discussed in "Risk Factors" contained elsewhere in this Prospectus.
 
BUSINESS ENVIRONMENT
 
     The Company's retail securities brokerage activities, as well as its
investment banking, investment advisory, institutional sales and trading and
equity research services, are highly competitive 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
and 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. Declining interest rates and a
favorable economic environment contributed to a significant increase in activity
in the equity markets in the United States since the latter part of 1995. The
Company's financial results have been and may continue to be subject to
fluctuations due to these and other factors. Consequently, the results of
operations for a particular period may not be indicative of results to be
expected for other periods.
 
EQUITY PARTICIPATION OF EMPLOYEES
 
     In connection with the Company's April 1998 initial public offering,
employees sold no shares of the Company's Common Stock and purchased their
entire allocation of 335,000 shares. As of June 30, 1998, the Company's
employees, including senior management and investment executives, owned in
excess of 31% of the Company's outstanding Common Stock. Management believes
that significant employee ownership has resulted in progressively higher levels
of employee motivation, confidence and commitment.
 
     Incentive equity programs have been established pursuant to which employees
have acquired or may acquire additional equity of the Company, which when added
to the shares currently owned would result in employees owning approximately 45%
of the Company's outstanding Common Stock.
 
THE ACQUISITION
 
     The Acquisition of the Company occurred in November 1996. Discussions
herein with respect to 1996 refer to the consolidated results of the Predecessor
Company for the eleven months ended November 29, 1996 combined with the
consolidated results of the Company for the one month period ended December 31,
1996. As a result of purchase accounting in connection with the Acquisition, the
Company's goodwill, which is amortized over a period of 15 years, increased by
$14.7 million dollars in 1996. As part of the Acquisition, the Company increased
its level of long-term indebtedness and experienced an attendant increase in
annual interest expense. The net proceeds of the initial public offering to the
Company, together with available cash, were used to repay this indebtedness and,
as a result, the Company recorded an extraordinary item of $2.2 million ($1.2
million on an after-tax basis) for the write-off of capitalized debt issuance
costs during the period in which the initial public offering was consummated.
The effects of the Acquisition impact the comparability of the Company's
financial results with those of the Predecessor Company.
 
     The Company believes that, especially during the months prior to the
Acquisition and to some extent immediately thereafter, uncertainty regarding a
change in ownership of the Company and the subsequent transition adversely
affected the business of the Company. In management's opinion, employee
purchases of equity of the Company in conjunction with the Acquisition and the
consummation of the Acquisition have

 
                                       22
23
 
significantly enhanced employee motivation and the Company's ability to retain
existing employees and improved its ability to recruit additional investment
professionals.
 
CONTRIBUTION OF PRINCIPAL SUBSIDIARIES
 
     During 1996 and 1997, Tucker Anthony contributed 62% and 59%, respectively,
of the Company's total operating revenues while Sutro contributed 32% and 35%,
respectively, of total operating revenues and Freedom Capital contributed 6% of
total operating revenues in each of 1996 and 1997. During these periods, Tucker
Anthony and Freedom Capital contributed a significantly greater percentage of
the Company's net operating income than their respective contributions to total
operating revenues. As a result of initiatives to improve the productivity of
Sutro, its profit margins have been improving since 1995.
 
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 ("OTC") agency, mutual fund, insurance, and
annuity transactions. Principal transactions revenues include gains and losses
from the trading of securities by the Company as principal including principal
sales credits and dividends. 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
and portfolio management services to institutional and high net worth investors.
Other revenues primarily consist of transaction fees, retirement plan revenue
and third party correspondent clearing fees. 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. Net revenues equal total revenues less interest expense. 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.
 
     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. Brokerage and clearance
expense includes the cost of securities clearance, floor brokerage and exchange
fees. Communications expense includes service charges for telecommunications,
news and market data services. Occupancy and equipment expense includes rent and
operating expenses for facilities, expenditures for repairs and maintenance, and
depreciation of furniture, fixtures, leasehold improvements, business equipment
and computer equipment. Promotional expense includes travel, entertainment and
advertising. Other expenses include general and administrative expenses,
including professional services, litigation expenses, goodwill amortization,
data processing and other miscellaneous expenses. Acquisition interest expense
represents the interest expense incurred under the Credit Facility.

 
                                       23
24
 
RESULTS OF OPERATIONS
 
     The following table sets forth certain financial data as a percentage of
net revenues:
SIX MONTHS
                                                                              ENDED
                                            YEARS ENDED DECEMBER 31,         JUNE 30,
                                           ---------------------------    --------------
                                           1995(1)    1996(2)    1997     1997     1998
Revenues:
  Commissions............................    42.1%      43.3%     44.5%    45.8%    42.6%
  Principal transactions.................    31.8       29.7      26.4     26.3     23.0
  Investment banking.....................    10.5       10.9      14.7     13.0     20.6
  Asset management.......................     4.5        5.4       5.3      5.6      5.4
  Other..................................     3.8        4.5       3.3      3.8      3.1
                                            -----      -----     -----    -----    -----
     Total operating revenues............    92.7       93.8      94.2     94.5     94.7
  Interest income........................    18.1       14.2      11.7     12.5     11.7
                                            -----      -----     -----    -----    -----
     Total revenues......................   110.8      108.0     105.9    107.0    106.4
  Interest expense.......................    10.8        8.0       5.9      7.0      6.4
                                            -----      -----     -----    -----    -----
     Net revenues........................   100.0      100.0     100.0    100.0    100.0
Non-interest expenses:
  Compensation and benefits..............    65.4       65.2      65.5(3)  64.7     66.0(3)
  Occupancy and equipment................     7.9        9.5       6.5      7.6      5.9
  Communications.........................     5.4        5.1       4.5      5.0      4.1
  Brokerage and clearance................     2.2        3.3       3.0      3.3      2.8
  Promotional............................     2.9        2.8       2.7      2.6      2.9
  Other..................................     9.5        7.7       7.6      8.4      7.8
                                            -----      -----     -----    -----    -----
     Total non-interest expenses.........    93.3       93.6      89.8     91.6     89.5
                                            -----      -----     -----    -----    -----
Acquisition interest expense.............      --        0.2       1.6      1.8      0.7
                                            -----      -----     -----    -----    -----
Income before income taxes...............     6.7        6.2       8.6      6.6      9.8
Income taxes.............................     2.8        2.7       3.6      2.8      4.1
                                            -----      -----     -----    -----    -----
Net income before extraordinary item.....     3.9        3.5       5.0      3.8      5.7
Extraordinary item (net of applicable
  taxes).................................      --         --        --       --      0.6
                                            -----      -----     -----    -----    -----
Net income after extraordinary item......     3.9%       3.5%      5.0%     3.8%     5.1%
                                            =====      =====     =====    =====    =====
------------------------------
(1) Predecessor Company.
 
(2) 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 the one month ended December 31, 1996.
 
(3) Includes the effect of $1.4 million and $0.5 million of non-cash
    compensation expense for the year ended December 31, 1997 and for the six
    months ended June 30, 1998, respectively, resulting from issuance of Common
    Stock and stock options to employees.
 
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
 
     The Company experienced strong operating results in the first six months of
1998 compared to the first six months of 1997. Revenues increased in all of the
Company's operating subsidiaries and total non-interest expenses declined as a
percentage of net revenues. Net income increased $5.0 million or 78% to $11.4
million in the first half of 1998 from net income of $6.4 million in the
comparable 1997 period, including the effect of deducting an after-tax
extraordinary item of $1.2 million in the 1998 period related to the early
retirement of $77.5 million in debt with proceeds from the Company's second
quarter initial public offering. Excluding this extraordinary item, net income
increased 97% to $12.6 million in the first half of 1998.
 
                                       24
25
 
     Total operating revenues increased $49.8 million or 31% to $210.0 million
in the six months ended June 30, 1998 from $160.2 million in the same period in
1997. Net revenues increased $52.2 million or 31% to $221.8 million in the 1998
period compared with 1997.
 
     Commission revenues increased $16.8 million or 22% to $94.5 million in the
first six months of 1998 from $77.7 million in the first six months of 1997, due
to increased volume in the Company's retail businesses, reflecting a higher
level of market activity, a greater number of investment executives and
increased average production per retail investment executive. During the first
half of 1998 the Company added 57 new investment executives averaging over
$450,000 of trailing twelve month production which is above the Company's
existing overall average retail production levels.
 
     Principal transactions revenues increased $6.3 million or 14% to $50.9
million in the first half of 1998 from $44.6 million in the comparable 1997
period primarily due to higher risk arbitrage and fixed income trading profits
in 1998. In addition, the first half 1997 trading results were negatively
impacted by a mortgage-backed securities trading loss of $1.3 million.
 
     The Company had strong investment banking results in the first half of 1998
evidenced by an increase in revenues of $23.8 million or 108% to $45.8 million
from $22.0 million in the first half of 1997. The improved investment banking
revenues resulted from higher public offering fees, increased fees from merger
and acquisition activities and the first time inclusion of financial results of
Cleary Gull.
 
     Asset management revenues increased $2.4 million or 25% to $11.9 million in
the first six months of 1998 from $9.5 million in the first six months of 1997.
This revenue increase reflected an overall growth in assets under management,
which resulted from both new money added to the funds as well as asset
appreciation arising from equity market performance.
 
     Interest income increased $4.6 million or 22% to $25.8 million in the first
six months of 1998 from $21.2 million in the first six months of 1997, due
primarily to the combination of higher interest income on customer balances and
greater stock borrow activity. Interest expense, excluding those expenses
associated with financing the Acquisition, increased $2.2 million or 19% to
$14.0 million in the first half of 1998 from $11.8 million in the comparable
1997 period primarily reflecting higher average inventory balances.
 
     In 1998 the Company has shown considerable improvement in overall
productivity, as well as expense management, evidenced by the increased
operating pre-tax margin of 11% in the first half of 1998 from 8% in the first
half of 1997. On the expense side, total non-interest expenses increased $43.0
million or 28% to $198.5 million in the first half of 1998 from $155.5 million
in the comparable 1997 period primarily due to higher compensation expenses. The
Company experienced a lower non-compensation expense growth rate of 14% compared
to net revenue growth of 31% in 1998 versus the first six months of 1997.
 
     Compensation and benefits expense increased $36.7 million or 33% to $146.4
million in the six months ended June 30, 1998 from $109.7 million in the same
period in 1997, primarily due to increased incentive and production-related
compensation attributable to higher revenues. Compensation and benefits as a
percentage of net revenues increased to 66% in the first six months of 1998
compared to 65% the first six months of 1997 reflecting aggressive new hiring in
the Company's retail and equity capital markets groups and provisions for
non-cash compensation related to employee stock purchases.
 
     All other operating expenses increased an aggregate of $6.3 million or 14%
to $52.1 million for the first six months of 1998 from $45.8 million in the
first six months of 1997. In addition, all other operating expenses as a
percentage of net revenues declined to 23% in 1998 from 27% in 1997. Promotional
expenses increased $2.0 million or 45% to $6.5 million in the first half of 1998
from $4.5 million in the comparable 1997 period due to increased spending on
research conferences, advertising, business development and travel in 1998.
Other expenses increased $3.1 million or 22% to $17.3 million for the six months
ended June 30, 1998 from $14.2 million in the comparable 1997 period.
 
     The Company's income tax provisions for the six months ended June 30, 1998
and 1997 were $9.2 million and $4.7 million, respectively, which represented a
42% effective tax rate in each six month period.

 
                                       25
26
 
  1997 COMPARED TO 1996
 
     The Company experienced strong operating results in 1997 compared to 1996.
Revenues increased in all of the Company's core businesses, with the exception
of principal transaction revenues, and expenses declined as a percentage of net
revenues. Net income increased $6.4 million or 52% to $18.7 million in 1997 from
net income of $12.3 million in 1996, even after deducting after-tax expenses of
$5.9 million in 1997 related to the Acquisition (primarily amortization of
goodwill and interest and other expenses related to the Credit Facility).
 
     Total operating revenues increased $25.8 million or 8% to $354.1 million in
1997 from $328.3 million in 1996. During 1996 and 1997, Tucker Anthony
contributed 62% and 59%, respectively, of the Company's total operating revenues
while Sutro contributed 32% and 35%, respectively, and Freedom Capital
contributed 6% in each year. Net revenues, including the effect of interest
income and interest expense, other than the Acquisition interest expense,
increased $26.0 million or 7% to $375.8 million in 1997 versus $349.8 million in
1996.
 
     Commission revenues increased $15.7 million or 10% to $167.2 million in
1997 from $151.5 million in 1996, due to increased business in the Company's
retail systems, reflecting the growth in listed share volume on all the major
equity exchanges and higher mutual fund commission revenue. During 1997, Tucker
Anthony and Sutro increased average production per retail investment executive
by 15% and 13%, respectively, over the prior year.
 
     Principal transaction revenues declined $4.6 million or 4% to $99.3 million
in 1997 from $103.9 million in 1996, mainly due to the combined result of
management's decision to discontinue certain institutional fixed income business
resulting in a decline of $1.5 million, the $1.3 million net effect of a
decrease in convertible arbitrage trading profits as interest rates declined
during the period partially offset by improvement in risk arbitrage trading, a
$0.8 million improvement in the trading of equities and a mortgage-backed
securities trading loss of $2.6 million caused by a former employee.
 
     Investment banking revenues increased $17.1 million or 45% to $55.2 million
in 1997 from $38.1 million in the prior year. The higher investment banking
revenues resulted from increased underwriting activity, similar to that
experienced in the securities industry generally, and due to the Company's
refocused and increased emphasis on the public offering business at Tucker
Anthony and Sutro. Tucker Anthony or Sutro collectively managed or co-managed 34
public equity offerings during 1997 compared to 16 during 1996 and generated an
increase in private placement, advisory and merger and acquisition fees of 17%
over 1996.
 
     Asset management revenues increased $0.9 million or 5% to $19.9 million in
1997 from $19.0 million in 1996. This revenue increase arose primarily in the
institutional area where assets grew 14% to $1.7 billion and related revenues
increased 21% or $1.0 million in 1997, reflecting the full year effect of new
accounts at year-end 1996 and asset appreciation arising from equity market
performance which produced higher fee income. Revenues from other areas of the
asset management business were essentially unchanged from 1996 as higher money
market fee income in 1997 was largely offset by lower revenues in the taxable
advisory business which discontinued its tax preparation services at year-end
1996. Total assets under management grew to $5.6 billion at year end 1997 from
$5.1 billion at year end 1996.
 
     Other income decreased $3.3 million or 21% to $12.5 million in 1997 from
$15.8 million in 1996. This decrease resulted primarily from the mid-1997
expiration of a five year contract with John Hancock Broker Distribution
Services under which the Company recovered mutual fund sales charges.
 
     Interest income decreased a net of $5.7 million or 11% to $44.1 million in
1997 from $49.8 million in 1996, due primarily to the combination of $4.4
million of higher interest income on customer balances more than offset by a
$10.1 million decline in interest income mainly on lower average government bond
inventories. Interest expense, excluding those expenses associated with
financing the Acquisition, decreased $5.9 million or 21% to $22.4 million in
1997 from $28.3 million in 1996, reflecting lower average inventory balances.
 
     Total non-interest expenses increased $9.9 million or 3% to $337.3 million
in 1997 from $327.4 million in 1996. This increase was the result of higher
production-related compensation principally attributable to higher revenues
partially offset by reduced operating expenses mainly resulting from the
Company's outsourcing of its

 
                                       26
27
 
clearing function to Wexford and other cost efficiencies. Although the Company's
income statement refers to brokerage and clearance as a specific category of
expense, the compensation, occupancy and other expense categories also included
costs associated with the Company's clearing activity, both while self clearing
and after its conversion to Wexford. The Company achieved substantial savings in
these expense categories as a result of the Wexford clearing arrangement, even
after the incurrence of $4.5 million of one-time occupancy expense in
conjunction with entering into the Wexford clearing arrangement. The Company
began to clear through Wexford in April 1996; consequently, comparisons between
1996 and 1997 do not reflect the full cost savings experienced as a result of
the new clearing arrangement.
 
     Compensation and benefits expense increased $17.8 million or 8% to $245.9
million in 1997 from $228.1 million in 1996, primarily due to increased
incentive and production-related compensation, offset by lower fixed expenses
resulting from back office support personnel reductions associated with the
outsourcing of the Company's clearing function in 1996 and substantial
organizational changes in the fixed income area. Compensation and benefits as a
percentage of net revenues remained virtually unchanged at 65% in 1997 as
compared to 1996. During 1997, the Company incurred $1.4 million of non-cash
compensation expense resulting from issuance of Common Stock and stock options
to its employees.
 
     Despite substantially increased clearing activity, brokerage and clearance
expenses declined slightly to $11.3 million in 1997 compared to $11.5 million in
1996, primarily as a result of the cost effective Wexford clearing arrangement.
 
     All other operating expenses decreased an aggregate of $7.7 million or 9%
to $80.1 million for 1997 from $87.8 million in 1996, primarily due to the
realization of benefits from outsourcing and other cost efficiencies initiated
by management. All other expenses as a percentage of net revenues declined to
21% in 1997 from 25% in 1996. Specifically, communications expense decreased
$0.9 million, or 5%, and occupancy and equipment expense decreased $8.9 million,
or 27% (including a one-time charge of $4.5 million in 1996 related to entering
into the Wexford clearing arrangement). These decreases were partially offset by
an increase in promotional expense of $0.4 million or 4% and an increase in
other expenses which totaled $28.5 million in 1997 (including $1.9 million in
goodwill amortization relating to the Acquisition), as compared to 1996 when
other expenses totaled $26.8 million (including a one-time credit of $6.3
million due to an insurance recovery associated with litigation expenses
incurred during a prior period). Without giving effect to such amortization
expense and insurance recovery, other expenses decreased $6.5 million or 20%
compared to 1996, primarily as a result of the Wexford clearing arrangement.
 
     The Company's income tax provisions in 1997 and 1996 were $13.7 million and
$9.5 million, respectively, which represented a 42% effective tax rate in 1997
and a 44% effective tax rate in 1996. The lower effective tax rate in 1997 was
due mainly to an increase in non-taxable dividend income.
 
  1996 COMPARED TO 1995
 
     Total operating revenues increased $19.9 million or 6% to $328.3 million in
1996 from $308.4 million in 1995. The Company, along with the rest of the
securities industry, benefited during 1996 from continued strength in the equity
markets and resultant higher trading volumes. In particular, agency commission
income, OTC principal sales credits and asset management fee income increased
substantially over the prior year. Revenues from fixed income trading and
institutional sales declined, partially offsetting these gains. Net income
decreased $0.8 million or 6% to $12.3 million in 1996 from $13.1 million in
1995.
 
     Commission revenues increased $11.3 million or 8% to $151.5 million in 1996
from $140.2 million in 1995 reflecting higher sales of both listed and OTC
securities and increased mutual fund business.
 
     Principal transaction revenues decreased $1.9 million or 2% to $103.9
million in 1996 from $105.8 million in 1995, primarily as a result of a $0.6
million decline in certain institutional fixed income business and a $1.4
million decline in over the counter trading activity, particularly in the
municipal bond business of Tucker Anthony. Accordingly, management took steps in
1996 to curtail further such losses by downsizing the fixed income group and
redirecting the municipal bond trading business away from institutional sales
and trading towards support of retail operations.

 
                                       27
28
 
     Investment banking revenues increased $3.3 million or 9% to $38.1 million
in 1996 from $34.8 million in 1995, primarily due to an increase in underwriting
and management fees of $4.3 million partially offset by lower public finance
fees which decreased $0.9 million.
 
     Asset management revenues increased $4.1 million or 28% to $19.0 million in
1996 from $14.9 million in 1995, due to growth in fees from the Company's asset
management subsidiary, Freedom Capital. Assets under management grew from $4.6
billion at the end of 1995 to $5.1 billion at the end of 1996, reflecting
increases of approximately $300 million in money market funds and $200 million
in institutional funds.
 
     Other income increased $3.1 million or 24% to $15.8 million in 1996 from
$12.7 million in 1995, primarily reflecting an increase of $1.0 million in
Hancock mutual fund distribution fees and $1.5 million from the sale of
securities obtained from litigation settlements.
 
     Interest income decreased $10.3 million or 17% to $49.8 million in 1996
from $60.1 million in 1995 reflecting the combined effects of a reduced level of
bond inventories ($5.3 million lower interest income), and decreased stock
borrowing activity ($5.0 million). Interest expense, excluding those expenses
associated with financing the Acquisition in 1996, decreased $7.7 million or 21%
to $28.3 million in 1996 from $36.0 million in 1995 due in part to reduced stock
loan activity.
 
     Total non-interest expenses increased $17.2 million or 6% to $327.4 million
in 1996 from $310.2 million in 1995, largely as a result of increased
production-based compensation. During 1996, the Company incurred a one-time
charge of $4.5 million, included in occupancy and equipment expense, in
conjunction with entering into its Wexford clearing arrangement and the related
abandonment of certain properties previously leased for the Company's clearing
operations.
 
     Compensation and benefits expenses increased $10.5 million or 5% to $228.1
million in 1996 from $217.6 million in 1995, primarily due to payment of higher
commissions, resulting from higher retail revenues, and increased
production-based compensation.
 
     Brokerage and clearance expenses increased $4.2 million or 58% to $11.5
million in 1996 from $7.3 million in 1995. This increase is primarily
attributable to the costs associated with clearing through Wexford. Clearing
expenses in 1995, while the Predecessor Company was self-clearing, were also
reported in compensation, occupancy and other expense categories of the income
statement.
 
     Occupancy and equipment expense increased $7.1 million or 27% to $33.2
million in 1996 from $26.1 million in 1995 primarily due to a $4.5 million
provision for future lease obligations pertaining to New York office space which
was previously occupied by the Company's clearing and cash management
operations, which operations are now performed by Wexford effective April 1,
1996.
 
     All other expenses declined $4.6 million or 8% to $54.6 million in 1996
from $59.2 million in 1995. Specifically, communications expense decreased $0.2
million or 1%, promotional expense increased $0.4 million or 4%, and other
expenses decreased $4.8 million or 15%, attributable in large part to a $6.3
million insurance recovery related to litigation during a prior period.
 
     The Company's income tax provision for 1996 and 1995 was $9.5 million and
$9.2 million, respectively, which represented a 44% effective tax rate in 1996
and a 41% effective tax rate in 1995. The higher effective tax rate for 1996 was
due primarily to decreases in tax-exempt interest income and non-taxable
dividend income.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company receives dividends, interest on loans and other payments from
its subsidiaries which are the Company's primary source of funds to pay
expenses, service debt, and pay dividends. Distributions and interest payments
to the Company from its registered broker-dealer subsidiaries, which are
expected to be 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 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.

 
                                       28
29
 
     On April 2, 1998, the Company completed a 7,400,000 share initial public
offering of its common stock, including 4,200,000 shares sold by the Company.
 
     Borrowings under the Credit Facility were repaid in full with the net
proceeds of the initial public offering to the Company, leaving the Company with
$19.1 million of indebtedness under a fixed asset credit facility secured by the
Company's fixed assets.
 
     The assets of the Company's primary operating subsidiaries, are highly
liquid with the majority 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. A relatively small percentage of total assets is fixed or held for a
period of longer than one year.
 
     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 is based on
its clearing arrangement with Wexford under which the Company can borrow on an
uncommitted collateralized basis against its proprietary inventory positions.
This financing is generally 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 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 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, 1994, December 31, 1995, December 31,
1996, December 31, 1997 and June 30, 1998 were $1,037.9 million, $1,214.0
million, $517.0 million, $727.6 million and $655.5 million, respectively. The
decline in total assets from December 31, 1995 to December 31, 1996 is primarily
attributable to the initiation of the Wexford clearing arrangement pursuant to
which certain customer and broker-dealer balances are no longer included in the
Company's Statements of Financial Condition.
 
     The Company's operating activities generate cash resulting from net income
earned during the period and fluctuations in the Company's current assets and
liabilities. The most significant fluctuations have resulted from changes in the
level of customer activity and changes in proprietary arbitrage trading
strategies dictated by prevailing market conditions.
 
     The Acquisition was funded through proceeds from the sale of Common Stock
and borrowings under the Credit Facility. The acquisition of Cleary Gull was
funded through the issuance of shares of the Company's Common Stock and with
funds generated from operating activities.
 
     The Company has historically financed capital expenditures through internal
cash generation and through the Fixed Asset Facility, established in 1996, which
matures in 2001. For the year ended December 31, 1997 and the six months ended
June 30, 1998, the Company had capital expenditures of approximately $2 million
and $1.8 million, respectively, which were funded from operations.
 
     In addition to normal operating requirements, capital is required to
satisfy financing and regulatory requirements on securities inventories and
investment banking commitments. 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. Management believes that
existing capital funds provided from operations, the current credit arrangements
with Wexford and unutilized credit facilities will be sufficient to finance the
operating subsidiaries' ongoing businesses.

 
                                       29
30
 
QUARTERLY RESULTS
 
    The information set forth below is derived from unaudited quarterly results
of operations of the Company for each quarter of 1996, 1997 and 1998. The data
have been prepared by the Company on a basis consistent with the Consolidated
Financial Statements included elsewhere in this Prospectus and includes all
adjustments, consisting principally of normal recurring accruals, that the
Company considers necessary for a fair presentation thereof. These operating
results are not necessarily indicative of the Company's future performance.
THREE MONTHS ENDED
                                   ---------------------------------------------------------------------------------
                                     MARCH 31,    JUNE 30,    SEPTEMBER 30,   DECEMBER 31,    MARCH 31,    JUNE 30,
                                       1996         1996          1996           1996(1)        1997         1997
                                                                    (IN THOUSANDS)
Revenues:
Commissions.......................    $41,313     $38,621        $32,823         $38,783       $40,098     $37,592
Principal transactions............     26,224      27,062         24,614          25,931        22,009      22,561
Investment banking................      7,266       9,567         10,107          11,161         9,569      12,416
Asset management..................      4,473       4,640          4,819           5,066         4,880       4,660
Other.............................      3,868       3,676          3,349           4,898         3,387       3,058
                                      -------     -------        -------         -------       -------     -------
  Total operating revenues........     83,144      83,566         75,712          85,839        79,943      80,287
Interest income...................     14,911      12,490         11,358          11,088        10,411      10,725
                                      -------     -------        -------         -------       -------     -------
  Total revenues..................     98,055      96,056         87,070          96,927        90,354      91,012
Interest expense..................      8,774       7,888          6,036           5,585         5,906       5,883
                                      -------     -------        -------         -------       -------     -------
  Net revenues....................     89,281      88,168         81,034          91,342        84,448      85,129
Non-interest expenses:
Compensation and benefits.........     58,363      56,566         52,358          60,759        54,476      55,261
Occupancy and equipment...........      6,826       7,235          7,303          11,860(3)      6,519       6,321
Communications....................      4,539       4,976          4,341           4,057         4,189       4,362
Brokerage and clearance...........      2,024       3,308          3,084           3,064         2,704       2,914
Promotional.......................      2,378       2,509          2,562           2,525         2,094       2,378
Other.............................      8,711       8,213          6,906           2,984(4)      6,929       7,314
                                      -------     -------        -------         -------       -------     -------
  Total non-interest expenses.....     82,841      82,807         76,554          85,249        76,911      78,550
Acquisition interest expense......         --          --             --             567         1,494       1,539
                                      -------     -------        -------         -------       -------     -------
Income before income taxes........      6,440       5,361          4,480           5,526         6,043       5,040
Income taxes......................      2,763       2,332          1,963           2,466         2,550       2,122
                                      -------     -------        -------         -------       -------     -------
Net income before extraordinary
  item............................      3,677       3,029          2,517           3,060         3,493       2,918
Extraordinary item (net of
  applicable taxes of $.922)(5)...         --          --             --              --            --          --
                                      -------     -------        -------         -------       -------     -------
Net income after extraordinary
  item............................    $ 3,677     $ 3,029        $ 2,517         $ 3,060       $ 3,493     $ 2,918
                                      =======     =======        =======         =======       =======     =======
THREE MONTHS ENDED
                                    ----------------------------------------------------
                                    SEPTEMBER 30,   DECEMBER 31,    MARCH 31,   JUNE 30,
                                        1997            1997          1998        1998
                                                       (IN THOUSANDS)
Revenues:
Commissions.......................     $45,948         $43,546      $ 46,306    $ 48,176
Principal transactions............      28,553          26,146        25,253      25,690
Investment banking................      15,018          18,256        13,712      32,047
Asset management..................       5,115           5,295         5,813       6,078
Other.............................       2,952           3,068         2,681       4,222
                                       -------         -------      --------    --------
  Total operating revenues........      97,586          96,311        93,765     116,213
Interest income...................      10,989          11,931        13,267      12,603
                                       -------         -------      --------    --------
  Total revenues..................     108,575         108,242       107,032     128,816
Interest expense..................       4,996           5,643         7,014       7,032
                                       -------         -------      --------    --------
  Net revenues....................     103,579         102,599       100,018     121,784
Non-interest expenses:
Compensation and benefits.........      68,196          68,006(2)     66,452(2)   79,885
Occupancy and equipment...........       6,378           5,113         6,187       6,942
Communications....................       4,385           4,012         4,123       4,920
Brokerage and clearance...........       2,872           2,772         2,756       3,420
Promotional.......................       2,783           3,053         2,756       3,728
Other.............................       6,956           7,281         7,798       9,521
                                       -------         -------      --------    --------
  Total non-interest expenses.....      91,570          90,237        90,072     108,416
Acquisition interest expense......       1,545           1,474         1,350         130
                                       -------         -------      --------    --------
Income before income taxes........      10,464          10,888         8,596      13,238
Income taxes......................       4,497           4,568         3,567       5,603
                                       -------         -------      --------    --------
Net income before extraordinary
  item............................       5,967           6,320         5,029       7,635
Extraordinary item (net of
  applicable taxes of $.922)(5)...          --              --            --       1,276
                                       -------         -------      --------    --------
Net income after extraordinary
  item............................     $ 5,967         $ 6,320      $  5,029    $  6,359
                                       =======         =======      ========    ========
------------------------------
 
(1) Represents the consolidated results of the Predecessor Company for the two
    months ended November 29, 1996 combined with the consolidated results of the
    Company for the one month ended December 31, 1996.
 
(2) Includes $1.2 million of the $1.4 million non-cash compensation expense
    resulting from issuance of Common Stock and stock options to employees
    during 1997. Non-cash compensation for first quarter 1998 was $0.5 million.
 
(3) Includes $4.5 million in provisions for lease obligations pertaining to
    abandoned New York office space.
 
(4) Includes an insurance recovery in the amount of $6.3 million relating to
    litigation expenses incurred during prior periods.
 
(5) The extraordinary item is a write off of capitalized debt issuance costs
    resulting from the early retirement of $77.5 million in debt with proceeds
    from the Company's second quarter initial public offering.
 
                                       30
31
 
     The following table sets forth certain financial data as a percentage of
net revenues for the periods presented:
THREE MONTHS ENDED
                                     --------------------------------------------------------------------------------------------
                                     MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,    MARCH 31,   JUNE 30,    SEPTEMBER 30,
                                       1996        1996         1996           1996(1)        1997        1997          1997
Revenues:
Commissions........................     46.3%      43.8%         40.5%           42.5%         47.5%       44.2%         44.4%
Principal transactions.............     29.4       30.7          30.4            28.4          26.1        26.5          27.6
Investment banking.................      8.1       10.9          12.5            12.2          11.3        14.6          14.5
Asset management...................      5.0        5.3           5.9             5.5           5.8         5.5           4.9
Other..............................      4.3        4.2           4.1             5.4           4.0         3.5           2.9
                                       -----      -----         -----           -----         -----       -----         -----
  Total operating revenues.........     93.1       94.9          93.4            94.0          94.7        94.3          94.3
Interest income....................     16.7       14.2          14.0            12.1          12.3        12.6          10.6
                                       -----      -----         -----           -----         -----       -----         -----
  Total revenues...................    109.8      109.1         107.4           106.1         107.0       106.9         104.9
Interest expense...................      9.8        9.1           7.4             6.1           7.0         6.9           4.9
                                       -----      -----         -----           -----         -----       -----         -----
  Net revenues.....................    100.0      100.0         100.0           100.0         100.0       100.0         100.0
Non-interest expenses:
Compensation and benefits..........     65.4       64.2          64.6            66.5          64.5        64.9          65.8
Occupancy and equipment............      7.6        8.2           9.0            13.0(3)        7.7         7.4           6.2
Communications.....................      5.1        5.6           5.4             4.4           5.0         5.1           4.2
Brokerage and clearance............      2.3        3.8           3.8             3.4           3.2         3.4           2.8
Promotional........................      2.7        2.8           3.2             2.8           2.5         2.8           2.7
Other..............................      9.7        9.3           8.5             3.3(4)        8.2         8.6           6.7
                                       -----      -----         -----           -----         -----       -----         -----
  Total non-interest expenses......     92.8       93.9          94.5            93.4          91.1        92.2          88.4
Acquisition interest expense.......       --         --            --             0.6           1.8         1.8           1.5
Income before income taxes.........      7.2        6.1           5.5             6.0           7.1         6.0          10.1
Income taxes.......................      3.1        2.6           2.4             2.7           3.0         2.5           4.3
                                       -----      -----         -----           -----         -----       -----         -----
Net income before extraordinary
  item.............................      4.1        3.5           3.1             3.3           4.1         3.5           5.8
Extraordinary item (net of
  applicable taxes)(5).............       --         --            --              --            --          --            --
                                       -----      -----         -----           -----         -----       -----         -----
Net income after extraordinary
  item.............................      4.1%       3.5%          3.1%            3.3%          4.1%        3.5%          5.8%
THREE MONTHS ENDED
                                     ------------------------------------
                                     DECEMBER 31,    MARCH 31,   JUNE 30,
                                         1997          1998        1998
Revenues:
Commissions........................       42.4%         46.3%      39.6%
Principal transactions.............       25.5          25.2       21.1
Investment banking.................       17.8          13.7       26.3
Asset management...................        5.2           5.8        5.0
Other..............................        3.0           2.7        3.5
                                         -----         -----      -----
  Total operating revenues.........       93.9          93.7       95.5
Interest income....................       11.6          13.3       10.3
                                         -----         -----      -----
  Total revenues...................      105.5         107.0      105.8
Interest expense...................        5.5           7.0        5.8
                                         -----         -----      -----
  Net revenues.....................      100.0         100.0      100.0
Non-interest expenses:
Compensation and benefits..........       66.3(2)       66.4(2)    65.6
Occupancy and equipment............        5.0           6.2        5.7
Communications.....................        3.9           4.1        4.0
Brokerage and clearance............        2.7           2.8        2.8
Promotional........................        3.0           2.8        3.1
Other..............................        7.1           7.8        7.8
                                         -----         -----      -----
  Total non-interest expenses......       88.0          90.1       89.0
Acquisition interest expense.......        1.4           1.3        0.1
Income before income taxes.........       10.6           8.6       10.9
Income taxes.......................        4.5           3.6        4.6
                                         -----         -----      -----
Net income before extraordinary
  item.............................        6.1           5.0        6.3
Extraordinary item (net of
  applicable taxes)(5).............         --            --        1.1
                                         -----         -----      -----
Net income after extraordinary
  item.............................        6.1%          5.0%       5.2%
---------------
(1) Based on the consolidated results of the Predecessor Company for the two
    months ended November 29, 1996 combined with the consolidated results of the
    Company for the one month ended December 31, 1996.
 
(2) Includes 1.2% of non-cash compensation expense resulting from issuance of
    Common Stock and stock options to employees during the fourth quarter of
    1997. Non-cash compensation for first quarter 1998 was $0.
 
(3) Includes 4.9% in provisions for lease obligations pertaining to abandoned
    New York office space.
 
(4) Includes an insurance recovery of 6.9% relating to litigation expenses
    incurred during prior periods.
 
(5) The extraordinary item is a write off of capitalized debt issuance costs
    resulting from the early retirement of $77.5 million in debt with proceeds
    from the Company's second quarter initial public offering.
 
                                       31
32
 
RISK MANAGEMENT
 
     Tucker Anthony's, Sutro's and Cleary Gull's exposure to risk includes items
that are fundamental to the securities industry, such as trading of securities,
extension of credit to counterparties and investment banking activities, as well
as other risks, such as extension of credit to retail and institutional
customers. Tucker Anthony, Sutro and Cleary Gull monitor their market and credit
risk daily through a number of control procedures designed to identify and
evaluate the various risks to which Tucker Anthony, Sutro and Cleary Gull are
exposed.
 
     Tucker Anthony, Sutro and Cleary Gull may act as a principal to facilitate
customer-related transactions in financial instruments which expose the firm to
market risks. Tucker Anthony and Sutro make markets for dealers in certain
equity and debt securities and Tucker Anthony trades for its own account in
arbitrage trading activities. Whether acting as principal to facilitate customer
transactions or trading for their own account, Tucker Anthony, Sutro and Cleary
Gull undertake a variety of measures to manage against losses which may be
incurred through market risk.
 
     Methods of managing exposure to market risk include: 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;
limiting the number of days inventory is held; using third party security
pricing services to enhance market price testing and variance analysis; and
tactically employing certain hedging techniques that reduce the amount of risk
taken by Tucker Anthony and Sutro. Management believes that the subsidiaries'
risk management and hedging practices aid in managing their market exposure and
reducing volatility of the Company's earnings. Cleary Gull utilizes similar risk
management techniques including the use of third party security pricing
services. Cleary Gull does not limit the number of days inventory is held,
however, it does impose an overall position limit which is monitored by the
over-the-counter trading manager.
 
     At December 31, 1996, December 31, 1997 and June 30, 1998, the Company's
securities owned and securities sold, not yet purchased consisted of the
following:
DECEMBER 31,        JUNE 30,
                                             --------------------    --------
                                               1996        1997        1998
                                             --------    --------    --------
                                                      (IN THOUSANDS)
OWNED:
Obligations of the U.S. government or its
  agencies.................................  $ 23,650    $ 27,396    $ 27,395
State and municipal obligations............    56,057      38,222      49,067
Arbitrage securities.......................    84,967     291,023     219,827
Other corporate obligations................    73,127      51,709      26,357
Other corporate stocks and warrants........    15,305      15,172      26,571
                                             --------    --------    --------
                                             $253,106    $423,522    $349,217
                                             ========    ========    ========
SOLD, NOT YET PURCHASED:
Obligations of the U.S. government or its
  agencies.................................  $ 37,663    $ 22,890    $ 23,349
State and municipal obligations............     1,476       1,519       1,076
Arbitrage securities.......................    51,671     322,316     203,416
Other corporate obligations................     6,055       1,356       1,661
Other corporate stocks and warrants........     4,275       6,484      11,870
                                             --------    --------    --------
                                             $101,140    $354,565    $241,372
                                             ========    ========    ========
Tucker Anthony and Sutro manage their daily risk exposure in their firm
inventory accounts by requiring various levels of management to participate in
review of these accounts. The primary purpose of the risk management function is
to participate in the establishment of position limits and to monitor both the
buy and sell activity in the firm's trading accounts relative to the established
position limits. Tucker Anthony's, Sutro's

 
                                       32
33
 
and Cleary Gull's trading activities result in the creation of inventory
positions. Position and exposure reports indicating both long and short exposure
are prepared, distributed and reviewed each day by Tucker Anthony's and Sutro's
risk management personnel as well as by certain members of senior management.
These reports enable Tucker Anthony and Sutro to control their inventory levels,
monitor trading results on a product-by-product basis and review inventory
aging, pricing and concentration. Cleary Gull monitors trading activity on a
monthly basis unless the overall position limit is exceeded.
 
     In addition to position and exposure reporting, Tucker Anthony, Sutro and
Cleary Gull each produce a daily revenue report which summarizes trading,
interest and commission revenue items for each product area. Daily revenues are
reviewed independently for various risk factors that could adversely affect
certain trading decisions. The daily revenue reports are produced by their
accounting departments and distributed to various levels of management together
with the position and exposure reports. The combined use of these reports
enables senior management to monitor and control firm trading activity on a
product-by-product basis.
 
     Tucker Anthony and Sutro deal with counterparties or other broker-dealers
in conducting business for their clients or for their own account. Credit and
trading limits extended to counterparties are controlled and managed by Tucker
Anthony's and Sutro's credit and risk management functions. Financing extended
to counterparties is provided against collateral. Tucker Anthony and Sutro
monitor their exposure to counterparty risk on a daily basis through the use of
internally generated credit exposure information and the monitoring of
collateral values. The risk management function participates in the review of
counterparties to establish appropriate exposure limits on a product-by-product
basis. Tucker Anthony and Sutro manage their daily credit exposure by monitoring
on an ongoing basis the creditworthiness of counterparties and their related
trading limits, requesting additional collateral when deemed necessary and
limiting the amount and duration of counterparty exposure.
 
     Tucker Anthony and Sutro, through Wexford, also extend credit to their
retail customers. 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 Wexford's, Tucker Anthony's and Sutro's credit review and daily
monitoring procedures.
 
     Risks associated with investment banking activities are controlled through
committees within Tucker Anthony and Sutro. Their respective commitment
committees review every significant proposed investment banking transaction
prior to its acceptance by Tucker Anthony and Sutro. Their respective capital
committees review major proposed transactions in order to determine the effect
of such transactions on regulatory capital prior to their acceptance. Only after
acceptance by both committees within a firm will that firm's commitment to
underwrite a specific security be extended to the investment banking client.
Cleary Gull's commitment committee performs the dual function of analyzing
proposed transactions as well as assessing their impact on regulatory capital.
 
     Tucker Anthony's and Sutro's compliance department professionals monitor
customer and employee transactions, conduct periodic and other examinations and
communicate with the various regulatory agencies that have jurisdiction over
Tucker Anthony, Sutro and Cleary Gull and their businesses. Additionally, Cleary
Gull is in the process of integrating certain risk management procedures already
in place at Tucker Anthony and Sutro and expect the process to be completed in
the near future.
 
YEAR 2000 COMPLIANCE
 
     The securities industry is, to a significant extent, technologically driven
and dependent. In addition to internally utilized technological applications,
the Company's financial services businesses are materially dependent upon the
performance of exchanges, market centers, counterparties, customers and vendors
(collectively "the Company's material third parties") who, in turn, may be
heavily reliant on technological applications. In sum, the securities industry
is pervasively interdependent with each "link of the chain" strengthened or
weakened by the quality and performance of its attendant information and
embedded technology.

 
                                       33
34
 
     The Company is aware that the Year 2000 provides potential problems with
the programming code in existing computer systems. The "Year 2000 problem" is
extensive and complex as virtually every computer operation will be affected to
some degree by the change of the two digit year value to 00. The issue is
whether computer systems will properly recognize date-sensitive information when
the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or fail.
 
     The failure or faulty performance of computer systems could potentially
have a far ranging impact on the Company's businesses such as a diminution in
its ability to (a) ascertain information vital to strategic decision making by
both the Company and its customers; (b) perform interest rate and pricing
calculations; (c) execute and settle proprietary and customer transactions; (d)
undertake regulatory surveillance and risk management; (e) maintain accurate
books and records and provide timely reports; (f) maintain appropriate internal
financial operations and accounting; and (g) access credit facilities for both
the Company and its customers. Accordingly it is necessary for the Company, to
the extent reasonably practicable, to identify the internal computer systems and
software which are likely to have a critical impact on its operations, make an
assessment of its Year 2000 readiness and modify or replace information and
embedded technology as needed. In addition, the Company must make a Year 2000
readiness assessment for the Company's material third parties.
 
     In the fourth quarter of 1995, the Company began to strategically assess
the need for renovation, replacement or retirement of all business applications.
This assessment was coincident with the conversion of the Company's principal
broker-dealer subsidiaries to clear securities transactions through Wexford, an
unaffiliated broker-dealer. During the first half of 1996, in connection with
the conversion to Wexford, a substantial portion of all application and vendor
code were modified to be Year 2000 compliant and these changes were tested and
verified in 1998 to be materially effective.
 
     Although Wexford is the contracting party for the provision of clearing
services, it in fact delivers those services through the operations of its
guaranteeing parent company, Prudential Securities Incorporated ("Prudential"),
a leading registered broker and dealer. Consequently, it is the readiness of
Prudential that is critical when assessing the Year 2000 compliance of the
clearing and operations capacity of the Company's active broker-dealer
subsidiaries. Prudential has been assessed, by internal industry standards
established by the Securities Industry Association, to be within the top tier of
Year 2000 readiness. In recent industry-wide testing conducted by the Securities
Industry Association, in which Prudential took part, Prudential and other
participants were able to input transactions and send them to the appropriate
markets for execution, confirmation and clearance under simulated Year 2000
conditions.
 
     Additionally, the Company has assessed the state of readiness of all known
technologically oriented service vendors and believes, based on letters of
certification, that the vast majority of these vendors are Year 2000 compliant
with the remainder expected to be compliant by December 1998. This determination
does not mean that the vast majority of the Company's material third parties
pose no Year 2000 risk to the Company. First, the Company is relying in large
measure on these parties' assessments of their readiness. Second, there are
several vendors, which account for a substantial portion of the Company's
mission critical operations, which may be partially or largely, but not fully,
Year 2000 compliant. Finally, certain critical third parties, such as exchanges,
clearing houses, depositories and other service vendors have no direct
functional contact with the Company (as they operate directly with Wexford) but
may impact the Company's operations.
 
     At this juncture the Company is in the process of establishing a strategic
plan for the remainder of its Year 2000 remediation efforts which would include
(1) identification, modification and testing of any remaining non-compliant Year
2000 code; (2) identification, inventory, assessment and, if necessary,
modification of internal ad hoc systems or applications that may be material to
the Company's operations; (3) with the exception of counterparties and
customers, documentation of the assessment of the readiness of the Company's
material third parties; and (4) a timetable for completion of the plan. The
Company intends to complete its written plan by December 1998 while
concomitantly proceeding to assess, and taking measures to enhance, Year 2000
readiness. To date, the Company's Year 2000 costs have been minimal. The Company
believes that, going forward, it will incur Year 2000 costs of approximately
$500,000 which will be funded out

 
                                       34
35
 
of its working capital. Provided there is an absence of unanticipated critical
events, the Company does not expect Year 2000 costs to have a material effect on
its operating results, financial condition or cash flows.
 
     Currently, the Company has not developed any Year 2000 contingency plans
because of the following reasons: (1) the Company has substantially modified, to
the extent it can ascertain the problem, most mission critical code and embedded
technology; (2) the Company's vendors have represented that they are either
currently Year 2000 compliant or will become so by the second quarter of 1999;
(3) there are no alternatives in the event the exchanges or other market centers
fail to perform; and (4) the Company believes it is highly likely that the
factors which may prevent a particular clearing firm from performing would
similarly affect all other clearing firms which would either preclude the
availability of alternative clearing service providers or overwhelm the
resources of surviving alternative clearing services providers. In other words,
the Year 2000 presents a problem which is not likely to be susceptible to
remediation at a future date if it is not fixed in advance. The Company will,
however, continue to consider the viability of a contingency plan.
 
     The Company is cautiously optimistic about its current state of readiness
and its ability to make any further necessary modifications to internal systems
in time for the Year 2000. The Company also believes that its major third party
service provider, Prudential, has undertaken a systematic approach to the Year
2000 problem and will complete its plan which is designed to achieve a state of
readiness. However, there are factors outside the control of the Company which
make certainty impossible such as: (1) the inability to access the readiness of
market counterparties and customers; (2) the inability to achieve assurance as
to any material third parties' representations of readiness; (3) the global
exposure of the Company's material third parties to Year 2000 problems outside
the United States which have a "knock-on" effect within the domestic securities
markets and operations; and (4) the limitations in anticipating all aspects of a
problem with which there is no prior historical experience. The presence of any
or all of these and other factors may well have a material adverse effect on the
Company's businesses, operating results, financial condition and cash flows.
 
EARNINGS PER SHARE
 
     The Company computes its earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") 128 "Earnings Per Share." The following
table sets forth the computation for basic and diluted earnings per share (in
thousands, except per share amounts):
THREE MONTHS        SIX MONTHS
                                                             ENDED JUNE 30,     ENDED JUNE 30,
                                                             ---------------   ----------------
                                                              1998     1997     1998      1997
                                                              ----     ----     ----      ----
NUMERATOR
---------
Net income before extraordinary item.......................  $7,635   $2,918   $12,664   $6,411
Extraordinary item.........................................   1,276       --     1,276       --
                                                             ------   ------   -------   ------
Net income after extraordinary item........................  $6,359   $2,918   $11,388   $6,411
 
DENOMINATOR
-----------
Weighted average shares outstanding........................  19,792   14,244    17,322   14,273
Dilutive effect of:
     Stock options and exercisable shares..................   1,398      220     1,156      172
                                                             ------   ------   -------   ------
Adjusted weighted average shares outstanding...............  21,190   14,464    18,478   14,445
 
Basic earnings per share before extraordinary item.........  $ 0.39   $ 0.20   $  0.73   $ 0.45
Less: Extraordinary item...................................    0.07       --      0.07       --
                                                             ------   ------   -------   ------
Basic earnings per share after extraordinary item..........  $ 0.32   $ 0.20   $  0.66   $ 0.45
 
Diluted earnings per share before extraordinary item.......  $ 0.36   $ 0.20   $  0.69   $ 0.44
Less: Extraordinary item...................................    0.06       --      0.07       --
                                                             ------   ------   -------   ------
Diluted earnings per share after extraordinary item........  $ 0.30   $ 0.20   $  0.62   $ 0.44
35
36
 
                                    BUSINESS
 
INDUSTRY BACKGROUND
 
     In recent years, the financial markets have grown in size and complexity,
characterized by a proliferation of investment products and services, frequent
innovations, increased globalization, strong capital flows and heavy trading
volume. These trends have increased the number and variety of choices available
to investors and the range of financing alternatives available to businesses and
other issuers of securities. Management believes these trends will continue in
the future and consequently believes that the needs of both investors and
issuers for high quality professional financial advice and services, such as
those offered by the Company, will continue to increase.
 
     Demand for investment products has increased significantly as large numbers
of "baby boomers" have begun to invest for their children's education and for
their own retirement. In 1996, the first 3.4 million baby boomers turned 50; the
impact of this generation on the capital markets is expected to continue to
build through the year 2010, when 57 million people will be in what has
historically been their prime investing years (ages 50 through 65).
Additionally, it is estimated that these individuals will inherit over $10
trillion (adjusted for inflation) from the previous generation between 1990 and
2040, representing the largest absolute transference of wealth in history.
 
     Changes in household investing patterns have also contributed to the
increase in demand for investment products. In 1980, households owned $1.3
trillion of marketable securities, representing 48% of their liquid financial
assets. By September 30, 1997, the household sector's ownership of marketable
securities had risen by more than 660% to $9.9 trillion, or 76% of household
liquid financial assets. Over the same period, bank deposits decreased from 52%
to 24% of household liquid financial assets.
 
     The volume of equity securities offered to the public illustrates the
growth in supply of investment products. Initial public offerings ("IPOs")
underwritten and total common equity issued in the United States public market
grew from $1.4 billion and $12.8 billion, respectively, in 1980, to $10.2
billion and $19.2 billion, respectively, in 1990, to $43.9 billion and $118.4
billion, respectively, in 1997. California and Massachusetts (the headquarters
states of Sutro and Tucker Anthony, respectively) ranked first and eighth,
respectively, among the 50 states in dollar volume of IPOs for locally
headquartered companies in 1997 and first and seventh, respectively, in dollar
volume of public offerings of common stock. Management believes that a
significant portion of the growth in equity offerings has come from emerging and
middle-market companies and that the increase in emerging and middle-market
issuers has been facilitated by large increases in the flow of cash into equity
mutual funds and other managed funds as a result of these changes in household
investing patterns.
 
     The combination of increasing flows of funds into the equity markets and
new issuance activity has contributed to significantly higher trading volumes.
From 1980 to 1997, average daily trading volume grew at a compound annual rate
of 15.6% on the NYSE and 20.7% on the Automated Quotation System of the NASD
(the "Nasdaq"). More recently, the combined NYSE and Nasdaq average daily
trading volumes grew at a compound annual rate of 22.2% for the five years ended
1997 and increased 22.9% in 1997 over 1996.
 
COMPANY OVERVIEW
 
     Freedom, through its three brokerage subsidiaries, Tucker Anthony, Sutro
and Cleary Gull and its asset management subsidiary, Freedom Capital, is a
full-service, regionally focused retail brokerage and investment banking firm.
Tucker Anthony, headquartered in Boston and focused primarily on the
northeastern United States, and Sutro, headquartered in San Francisco and
focused primarily on the western United States, are both over 100 years old and
have well established reputations in their respective regions. Cleary Gull,
headquartered in Milwaukee, Wisconsin, was founded in 1987 and is focused
primarily on the midwestern United States. On April 16, 1998, the Company closed
into escrow and funded its previously announced acquisition of Cleary Gull. The
acquisition was completed on May 1, 1998 and was accounted for under the
purchase method of accounting. The consolidated financial and other data
included elsewhere in this Prospectus include the results of Cleary Gull's
operations from the date of acquisition. Management believes that it can best
serve the needs of these distinct regions through separate, locally managed
organizations, while

 
                                       36
37
 
avoiding cost duplication through the use of shared clearing and support
services. This approach enables the Company to capitalize on each organization's
name recognition, historical areas of expertise and close community ties while
lessening the Company's reliance on a single region's economy.
 
     The Company believes that its primary strengths are (i) the experience and
tenure of its investment executives, which have often led to long-term
relationships with clients in their respective communities; (ii) its high level
of employee commitment, evidenced by significant employee ownership in the
Company; (iii) its personalized, service-oriented culture emphasizing
responsiveness to client and regional market demands; (iv) its focus on emerging
and middle-market companies in targeted industries in which the Company has
specialized expertise or regional presence; and (v) its ability to manage and
control operating costs through centralization of certain services and other
cost effective solutions, including its clearing and processing arrangements
with Wexford.
 
     The Company's three primary areas of focus, described below, are (i) its
full-service retail brokerage operations; (ii) its equity capital markets
activities; and (iii) its asset management operations.
 
     Retail Operations.  The retail operations of Tucker Anthony and Sutro
conducted in 13 states and the District of Columbia, have together generated
between 56% and 62% of the Company's operating revenues in each of the last
three calendar years and have historically represented the Company's core
business. 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. As of June 30, 1998, customers had over $29 billion of assets
in over 200,000 Tucker Anthony and Sutro brokerage accounts. Management believes
that the experience of its 707 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. Management also
believes that its 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 significant tenure at their local branch offices.
 
     Equity Capital Markets.  Each of Tucker Anthony, Sutro and Cleary Gull has
historically demonstrated strengths in offering various investment banking
services, such as mergers and acquisition services, to clients within its
respective region. The Company's strategy is to develop equally strong
research-driven equity capital markets groups including equity research,
investment banking, institutional sales, trading and syndication services.
Tucker Anthony's, Sutro's and Cleary Gull's respective research and investment
banking departments target emerging and middle-market companies within their
respective regions and within the industries in which they specialize, such as
consumer products, healthcare, financial services and technology industries.
Equity capital markets activities have represented 16% to 17% of the Company's
operating revenues in each of the past three calendar years. For the first six
months of 1998, equity capital markets activities generated approximately 23% of
the Company's operating revenues.
 
     Asset Management.  Freedom Capital, headquartered in Boston, was formed in
1930 and as of June 30, 1998 managed approximately $6.2 billion of assets,
including approximately $3.4 billion of investments by public sector entities,
high net worth individuals and others, with the remainder comprised of money
market funds for the benefit of Tucker Anthony, Sutro and Cleary Gull clients.
Freedom Capital has developed a leading position in the management of public
funds for local Massachusetts municipalities and agencies, has also developed an
important presence in certain sectors of the union pension fund market and is
growing its corporate funds management business. Asset management revenues have
represented approximately 5% to 6% of the Company's total operating revenues in
each of the past three calendar years. Cleary Gull recently established its
Private Client Group to provide retail brokerage and investment management
services to institutional accounts and high networth individuals.
 
     The Company's subsidiaries also engage in a number of other activities,
including trading fixed income securities, underwriting municipal securities,
and purchasing and selling securities in arbitrage transactions. Additionally,
the Company, through a subsidiary, has a 25% interest in the profits and losses
of a joint specialist account in which it participates with two other NYSE
specialist firms.

 
                                       37
38
 
BUSINESS STRATEGY
 
     Since the Acquisition, management formulated and is implementing a strategy
to (i) enhance the services the Company offers its customers; (ii) improve the
profitability of Tucker Anthony's and Sutro's retail operations; (iii) expand
each firm's equity capital markets activities; and (iv) increase Freedom
Capital's money management business. Management also plans to supplement the
Company's internal growth with strategic acquisitions. The principal elements of
the Company's strategy are set forth below.
 
     Enhance Personalized, High-End Service.  Tucker Anthony and Sutro have
traditionally sought to attract and retain brokerage clients by offering a high
level of personal service responsive to customer needs. The Company intends to
increase its commitment to service by providing its investment executives with
advanced account information systems and flexibility in determining appropriate
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.
 
     Improve Profitability of Retail Brokerage Operations.  The Company intends
to continue to improve the profitability of its retail operations primarily by
hiring additional experienced and highly productive investment executives and by
providing Tucker Anthony's and Sutro's investment executives with enhanced
training, product offerings, information systems and support. Average production
per retail investment executive increased 15% in 1997 compared to 1996 and 18%
in 1996 compared to 1995 at Tucker Anthony, while average production per retail
investment executive increased 13% in 1997 compared to 1996 and 8% in 1996
compared to 1995 at Sutro. Management believes that the implementation of this
strategy will be aided by the Company's entrepreneurial culture and strategy of
providing a high level of support for its investment executives.
 
     Expand Regional and Specialty Equity Capital Markets Activities.  Tucker
Anthony, Sutro and Cleary Gull maintain separate and independent investment
banking groups. Each investment banking group is supported by its own regionally
and industry focused research department, institutional sales group and equity
trading. The Company intends to continue to increase Tucker Anthony's, Sutro's
and Cleary Gull's investment banking business by committing greater resources
to, and by carefully focusing their research and investment banking coverage on,
geographic regions and industries which management believes offer the greatest
opportunities. Management believes that this independent and regional focus is
particularly well suited to the northeastern, western and midwestern regions
currently served by Tucker Anthony, Sutro and Cleary Gull, respectively. In
1997, for example, Massachusetts and California ranked seventh and first,
respectively, in dollar volume of public offerings of common stock of locally
headquartered companies. 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.
 
     Increase Asset Management Business.  Management intends to grow Freedom
Capital's business by extending its public funds business from Massachusetts to
other states, by improving coordination with the Tucker Anthony and Sutro retail
brokerage networks, and by increasing the assets under its management and the
number of its portfolio managers through acquisitions or recruiting. Management
also intends to continue to encourage the growth of Cleary Gull's investment
management services.
 
     Supplement Growth with Strategic Acquisitions.  Management plans to
actively pursue opportunities to acquire other firms with complementary business
which would strengthen or expand the firm's geographic or product offering base,
such as the acquisition of Cleary Gull, which has allowed the Company to expand
its geographic coverage. Management believes that attractive acquisition
opportunities exist particularly among smaller regional firms that want to
affiliate with a larger firm while still retaining their regional identity and
focus and entrepreneurial culture, as Tucker Anthony and Sutro have been able to
do. In addition, the Company believes that the consolidation trends in the
brokerage and asset management businesses will allow it to hire proven
investment professionals who prefer the culture and opportunities inherent in a
smaller, entrepreneurial and independent firm. Management believes that
acquisitions may also allow the Company to realize cost benefits by leveraging
its infrastructure.

 
                                       38
39
 
THE ACQUISITION
 
     To finance the Acquisition of Freedom from Hancock in November 1996,
approximately 350 employees of the Company, including senior management and
investment executives, purchased an aggregate of approximately 28% of the
Company's equity (after giving effect to the Company's initial public offering),
with additional equity financing provided by THL and SCP. Incentive equity
programs have been established pursuant to which employees have acquired or may
acquire additional equity of the Company, which, when added to shares previously
owned, would result in employees owning up to approximately 45% of the shares of
Common Stock outstanding. See "Certain Relationships and Related
Transactions -- The Acquisition" for a more complete description of the
Acquisition and "Management" for a description of the Company's incentive equity
programs.
 
     Management believes that the Company's independence and employee ownership
have resulted in progressively higher levels of employee motivation, confidence
and commitment during 1997, as compared to 1996 when the Predecessor Company was
for sale and it was uncertain whether the Acquisition would be consummated or
whether the Predecessor Company would be sold to another organization.
Management believes that uncertainty surrounding the future of the Company
adversely affected the Company's performance in 1996 and, to a lesser extent, in
early 1997 by weakening employee motivation and the Company's ability to recruit
personnel, creating uncertainty among customers and prospective customers,
consuming management's time and inhibiting the Company's ability to pursue new
initiatives. The Company believes that the Acquisition and the strategies
instituted in connection therewith have been successful. For example, during the
first six months of 1998, Tucker Anthony, Sutro and Cleary Gull managed or
co-managed 19 equity offerings compared to 17 during the first six months of
1997. During 1997, the Company managed or co-managed 34 equity offerings in 1997
compared to 16 in 1996 and 9 in 1995. In 1997, the Company reported net income
of $18.7 million, a 52% increase over net income of $12.3 million in 1996 and
43% increase over net income of $13.1 million in 1995. For the first six months
of 1998, the Company reported net income of $12.6 million, before extraordinary
item, a 98% increase over net income of $6.4 million for the first six months of
1997. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
 
INITIAL PUBLIC OFFERING
 
     On April 2, 1998, the Company completed its 7.4 million shares initial
public offering, including 4.2 million shares of Common Stock sold by the
Company. The initial public offering raised approximately $76.7 million for the
Company, after deducting underwriting discounts, commissions and expenses.
 
CLEARY GULL ACQUISITION
 
     On May 1, 1998, the Company completed its previously announced acquisition
of Cleary Gull, a privately held investment banking, institutional brokerage and
investment advisory firm headquartered in Milwaukee, Wisconsin. Cleary Gull was
established in 1987 as a private investment bank focusing on the equity capital
markets through institutional research, sales and trading, and investment
banking services. Cleary Gull's research analysts cover such areas as
distribution and logistics, business services, applied technology and growth
companies in the upper midwestern United States. Cleary Gull's equity capital
markets activities include a national institutional sales force and
over-the-counter and listed trading services. Cleary Gull's investment banking
activities are focused primarily on merger and acquisition advisory services and
financing assignments in both public and private equity and debt markets. Cleary
Gull recently established its Private Client Group to provide retail brokerage
and investment management services to institutional accounts and high net worth
individuals.

 
                                       39
40
 
GENERAL
 
     A chart depicting in simplified form the corporate structure of the Company
and its primary subsidiaries is set forth below, together with a brief
description of the business undertaken by each of the entities shown:
 
                    ----------------------------------------
                               FREEDOM SECURITIES
                                  CORPORATION
                    ----------------------------------------
------------------------------------------------------------------------------------------------------
------------------------  ------------------------  ------------------------  ------------------------
     TUCKER ANTHONY             SUTRO & CO.           CLEARY GULL REILAND         FREEDOM CAPITAL
      INCORPORATED              INCORPORATED            & MCDEVITT INC.        MANAGEMENT CORPORATION
------------------------  ------------------------  ------------------------  ------------------------
Freedom Securities Corporation: Issuer of the shares offered hereby,
Freedom Securities Corporation is a holding company formed in 1996 to acquire
Freedom Securities Holding Corporation from Hancock.
 
     Tucker Anthony Incorporated: One of the Company's primary operating
subsidiaries, Tucker Anthony engages in the securities brokerage and investment
banking businesses and transacts business primarily in the northeastern United
States.
 
     Sutro & Co. Incorporated: One of the Company's primary operating
subsidiaries, Sutro engages in the securities brokerage and investment banking
businesses and transacts business primarily in the western United States.
 
     Cleary Gull Reiland & McDevitt Inc.: One of the Company's primary operating
subsidiaries, Cleary Gull engages in the securities brokerage and investment
banking businesses and transacts business primarily in the midwestern United
States.
 
     Freedom Capital Management Corporation: One of the Company's primary
operating subsidiaries, Freedom Capital engages in the investment advisory and
asset management businesses.
 
     The Company's business is described in more detail below.
 
TUCKER ANTHONY, SUTRO AND CLEARY GULL
 
     Most of the Company's business activities are conducted through Tucker
Anthony, Sutro and Cleary Gull, and its asset management business is conducted
through Freedom Capital. Tucker Anthony's, Sutro's and Cleary Gull's principal
business activities are summarized below.
 
     Retail Brokerage
 
     A large portion of the Company's revenues are generated from commissions or
fees earned as a broker 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. The Company also earns
commissions or fees for services provided in the areas of managed accounts and
personal trusts. As of June 30, 1998, Tucker Anthony had 476 investment
executives located in 10 states and the District of Columbia, and Sutro had 231
investment executives located in 3 states. For the years ended December 31,
1995, 1996 and 1997, commissions and sales credits from individual investors
constituted approximately 77%, 82% and 84%, respectively, of total commissions
and sales credits and 46%, 52% and 54%, respectively, of the Company's total
revenues. Management believes that such retail services will continue to be the
Company's primary source of revenue for the foreseeable future. Tucker Anthony
and Sutro charge retail commissions on both exchange and OTC transactions in
accordance with commission rate tables which they have formulated. Discounts
from the commission rate tables are granted in certain cases and the commission
rate tables may

 
                                       40
41
 
change from time to time. Each firm also offers certain account arrangements
under which a single fee is charged based on a percentage of the assets held in
a customer's account and no commissions are charged on a transaction by
transaction basis. Tucker Anthony and Sutro have also adopted the "Beacon
Account" and "Sutro Asset Value Account" programs, respectively, through which
clients may be charged negotiated fees based upon the level of services
provided.
 
     Tucker Anthony and Sutro provide their 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 Tucker Anthony, Sutro, Cleary Gull
and other research analysts and offers services such as financial planning and
tax, trust and estate advice to its retail clients. The Company believes that
the personalized nature and range of services it provides to its retail clients
is a key factor in the success of its retail brokerage units.
 
     The following table sets forth the locations and number of investment
executives in the Company's retail offices as of June 30, 1998:
 
        TUCKER ANTHONY                                      SUTRO
MASSACHUSETTS
Andover...................       3              CALIFORNIA
Boston....................      74              Beverly Hills.............      27
Burlington................       7              Big Bear..................       2
Franklin..................       6              Fresno....................       9
New Bedford...............       6              Hollywood.................       1
Springfield...............      12              La Jolla..................       8
Worcester.................       5              Los Angeles...............      16
                            ------              Newport Beach.............      20
  Total...................     113              Oakland...................      17
CONNECTICUT                                     Sacramento................      14
Hartford..................      27              San Francisco.............      35
New Haven.................      16              San Jose..................      13
Stamford..................      15              San Luis Obispo...........       4
                            ------              Santa Maria...............       5
  Total...................      58              Santa Rosa................      15
MAINE                                           West Los Angeles..........       2
Bangor....................       6              Woodland Hills............      12
Portland..................      16                                          ------
                            ------                Total...................     200
  Total...................      22              ARIZONA
RHODE ISLAND                                    Scottsdale................      13
Providence................      21              Tucson....................       8
NEW HAMPSHIRE                                                               ------
Concord...................       1                Total...................      21
Nashua....................       4              NEVADA
Peterborough..............       3              Las Vegas.................      10
Portsmouth................       2              TOTAL SUTRO...............     231
                            ------                                          ------
  Total...................      10              TOTAL COMPANY.............     707
NEW YORK                                                                    ======
Garden City...............       4
New York City
  Fifth Avenue............      34
  World Financial
    Center................      61
Rochester.................       8
Rome......................       8
Schenectady...............       6
Southampton...............       8
Syracuse..................       9
Watertown.................       5
                            ------
  Total...................     143
NEW JERSEY
Fairhaven.................      18
Morristown................      15
Princeton.................      17
                            ------
  Total...................      50
PENNSYLVANIA
Philadelphia..............      21
ILLINOIS
Chicago...................      21
DISTRICT OF COLUMBIA
Washington................       7
DELAWARE
Wilmington................      10
                            ------
TOTAL TUCKER ANTHONY......     476
41
42
 
     The Tucker Anthony and Sutro retail sales forces are comprised of an
experienced and productive group of investment executives. Management believes
that its 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 productive and experienced investment
executives. Tucker Anthony's and Sutro's investment executives average more than
10 and 6 1/2 years, respectively, of tenure with the Company and 19 and 17 1/2
years, respectively, of experience in the securities brokerage industry.
Management believes that Tucker Anthony and Sutro have been able to successfully
recruit and retain investment executives for a number of reasons including a
corporate culture which supports and encourages performance, employee ownership,
advanced technology, competitive payouts, no discount sharing and a
service-driven rather than a products-driven environment.
 
     The following table illustrates the improved production of the Company's
retail investment executives.
 
               AVERAGE PRODUCTION PER RETAIL INVESTMENT EXECUTIVE
                             (DOLLARS IN THOUSANDS)
TUCKER ANTHONY                                             SUTRO
-----------------------------------------------        ----------------------------------------------
                          AVERAGE                                               AVERAGE
                          ANNUAL        ANNUAL                                  ANNUAL        ANNUAL
YEAR                   PRODUCTION(1)   INCREASE        YEAR                  PRODUCTION(1)   INCREASE
1994.................      $208                        1994................      $271
1995.................       242          16.3%         1995................       289           6.6%
1996.................       285          17.8          1996................       312           8.0
1997.................       327          14.7          1997................       352          12.8
1997 (first half)....       301            --          1997 (first half)...       333            --
1998 (first half)....       357          18.6          1998 (first half)...       338           1.5
---------------
 
(1) Calculated by dividing total retail commissions and managed account fees by
    the average of the number of investment executives at the beginning and end
    of each period (excluding non-producing managers and trainees). First half
    of 1997 and 1998 is annualized.
 
     Tucker Anthony and Sutro together had over 200,000 accounts representing
approximately $28 billion in client assets as of December 31, 1997. The Company
maintains insurance provided by the Securities Investors Protection Corporation
(the "SIPC") for up to $500,000 (coverage of cash is limited to $100,000) per
customer account, as well as excess SIPC coverage for an additional $9.5 million
per client account. Clients who have established a Freedom Asset Account are
provided protection up to a maximum of $60 million, which is included in the
Freedom Asset Account annual fee. The excess SIPC coverage of $9.5 million and
$59.5 million is provided under an insurance policy arranged through Wexford.
 
  Institutional Equity Sales and Research
 
     Tucker Anthony, Sutro and Cleary Gull execute 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, which transactions require 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, Washington, D.C.
and Paris, France.
 
     Institutional transactions are executed by the Company acting as broker or
principal. The Company permits discounts from its commission schedule to its
institutional customers. The size of such discounts varies with the size of
particular transactions and other factors. For the fiscal years ended December
31, 1995, 1996 and 1997, commissions and sales credits from institutional
investors constituted approximately 11%, 10% and 10%, respectively, of total
commissions and sales credits and 6% of the Company's total revenues in each
year. 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 activity.

 
                                       42
43
 
     Historically, Tucker Anthony and Sutro combined their institutional equity
sales and research forces under a joint venture, which was intended to create
efficiencies in institutional account coverage and research development costs.
In order to better coordinate the respective institutional sales, investment
banking, equity research and trading departments of Tucker Anthony and Sutro,
the research joint venture was disbanded following the Acquisition, and each of
Tucker Anthony and Sutro established their own targeted regional and industry
equity research and institutional equity sales programs.
 
     Tucker Anthony, Sutro and Cleary Gull have each focused their equity
research on selected sectors of the consumer products, healthcare, financial
services and technology industries primarily concentrated in their respective
regions. Within each of these industries, Tucker Anthony, Sutro and Cleary Gull
have focused on various industry niches which each believes offers it the
greatest opportunities. Each firm focuses its equity capital markets group on
integrating its research, institutional sales, corporate finance, trading and
syndication functions. Management believes that its research will be a key
factor in growing its equity capital markets activities.
 
  Principal Transactions and Trading
 
     The Company conducts its principal transactions and trading business
through Tucker Anthony and Sutro, with each firm's business focused on the
activities summarized below, except for arbitrage activities which are engaged
in primarily by Tucker Anthony.
 
     Tucker Anthony and Sutro make markets, buying and selling as principal, in
common stocks, convertible preferred stocks, warrants and other securities
traded on Nasdaq or in other OTC markets. As of June 30, 1998, the Company made
markets in equity securities of over 500 issuers. Such securities are
principally those in which there is substantial continuing client interest and
include securities which the Company has underwritten or on which it provides
research opinions. 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, but 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, 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. Profits or losses are recognized from fluctuations in the value of
securities in which it maintains positions. The Company's capital can be at risk
to the extent significant adverse price fluctuations occur. Additionally,
trading activities include the purchase of securities under agreements to resell
at future dates (resale agreements) and the sale of the same or similar
securities under agreements to repurchase at future dates (repurchase
agreements). Profits and losses on the repurchase transactions result from the
interest rate differentials. 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 its trading positions as part of its Wexford
clearing arrangement, by overnight borrowing and by repurchase agreements. See
"Risk Factors -- Market, Credit and Liquidity Risks Associated with Principal
Trading Arbitrage and Underwriting Activities."
 
     Tucker Anthony and Sutro are each municipal securities dealers in both the
primary and secondary markets, buying and selling securities for their own
account and for clients. Revenues derived from these activities include
underwriting and management fees, selling concessions and trading profits.
 
     Tucker Anthony engages in the purchase and sale of convertible and equity
securities to take advantage of price differences prevailing in separate
markets. These 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

 
                                       43
44
 
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.
 
  Underwriting Activities and Investment Banking
 
     The Company's investment banking and underwriting activities are performed
by Tucker Anthony's, Sutro's and Cleary Gull's corporate finance, public 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. Tucker Anthony's, Sutro's
and Cleary Gull's managed public equity offerings and merger and acquisition
transactions are typically undertaken for emerging or middle-market companies in
the consumer products, healthcare, financial services, technology, distribution
and logistics, applied technology and business services sectors or companies
located in each firm's respective geographic region.
 
     Historically, the Company's merger and acquisition advisory business has
been responsible for a majority 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 in further building
upon Tucker Anthony's, Sutro's and Cleary Gull's equity capital markets groups.
 
     Through the Company's renewed focus on its equity capital markets groups,
Tucker Anthony's, Sutro's and Cleary Gull's corporate finance and syndicate
departments coordinate closely with their respective research and institutional
sales departments in order to enhance marketing and provide integrated services
to emerging and middle-market companies and institutional clients. As the
following chart indicates, the Company has been successful in increasing the
underwriting activities of Tucker Anthony.
 
                  PUBLIC EQUITY OFFERINGS LED OR CO-MANAGED(1)
                            (DOLLARS IN MILLIONS)(2)
FIRST HALF
                                                                             ---------------------------------
                            1995              1996              1997              1997              1998
                       ---------------   ---------------   ---------------   ---------------   ---------------
                       NUMBER   AMOUNT   NUMBER   AMOUNT   NUMBER   AMOUNT   NUMBER   AMOUNT   NUMBER   AMOUNT
Issues managed by
  Tucker Anthony.....     5      $171      10      $229      10     $ 419       7      $274      11     $  499
Issues managed by
  Sutro..............     3       118       5       251      20     1,124       8      419        3        205
Issues managed by
  Cleary Gull(3).....   N/A       N/A     N/A       N/A     N/A       N/A     N/A      N/A        4        331
Issues managed by
  Tucker Anthony and
  Sutro jointly......     1        24       1        50       4       200       2       68        1        148
                        ---      ----     ---      ----     ---     ------    ---      ----      --     ------
Total................     9      $313      16      $530      34     $1,743     17      $761      19     $1,183
                        ===      ====     ===      ====     ===     ======    ===      ====      ==     ======
------------------------------
(1) Including public common or preferred stock issues and rights offerings;
    excluding closed-end funds.
 
(2) Shares offered by entire syndicate (excluding over-allotment shares)
    multiplied by offering price.
 
(3) Includes only those offerings completed after the acquisition of Cleary Gull
    by the Company.
 
     The public finance departments of Tucker Anthony and Sutro provide
financial consulting, advisory and underwriting services to cities and public
service districts. The Company's 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 sector has generally
experienced diminishing spreads and a lower level of publicly financed projects.
Nevertheless, both firms have experienced increasing profitability in this
sector in 1997 by concentrating on smaller local community projects.
 
     The syndicate departments coordinate the distribution of managed and
co-managed corporate securities offerings and accept invitations to participate
in underwritings managed by other investment banking firms.

 
                                       44
45
 
     The Company, through certain subsidiaries, has from time to time in the
past and may from time to time in the future participate as an equity investor
in connection with specific transactions.
 
  Other Activities
 
     Tucker Anthony and Sutro hold memberships in major securities exchanges in
the United States (including the NYSE) in order to provide services to their
brokerage clients in the purchase and sale of listed securities.
 
     Additionally, the Company's wholly owned subsidiary, Freedom Specialist
Inc. ("FSI"), has a 25% interest in the profits and losses of a joint specialist
account in which it participates with two other NYSE specialist firms, RPM
Specialist Corp. and R. Adrian & Co. Specialists are responsible for executing
transactions and maintaining a fair and orderly market in securities under NYSE
rules and regulations. In this function, the 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 June 30,
1998, the specialist firm acted as a specialist in 36 equity issues. FSI's
specialist stock settlement and clearing activities are provided by RPM Clearing
Corporation.
 
     Retail client securities transactions are executed on either a cash or
margin basis. Under the current clearing arrangement with Wexford, in a retail
margin transaction, credit is extended to a client through Wexford 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 for net customer debit balances paid to Wexford. The
amount of the Company's gross interest revenues is affected not only by
prevailing interest rates, but also by the volume of business conducted on a
margin basis. By permitting a client to purchase on margin, the Company takes
the risk that market declines could reduce the value of the collateral below the
principal amount loaned, plus accrued interest, before the collateral can be
sold. 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 Wexford's, Tucker Anthony's and Sutro's credit review and daily monitoring
procedures.
 
FREEDOM CAPITAL
 
     The Company's asset management activities are conducted principally by
Freedom Capital. Freedom Capital is a Massachusetts corporation, formerly named
Tucker Anthony Management Corp. organized in 1930. As of June 30, 1998, Freedom
Capital had 58 employees located in Massachusetts and New York. Freedom Capital
provides investment advisory and portfolio management services to individuals,
corporations, public funds, professional firms, endowments and pension funds,
and money market funds. As of June 30, 1998, total assets under management were
approximately $6.2 billion, comprised of approximately $3.4 billion of
investments by public sector entities, high net worth individuals and others,
with the remainder in money market funds for the benefit of Tucker Anthony,
Sutro and Cleary Gull clients.
 
     The Company intends to enhance the profitability of Freedom Capital by
acquiring other money management businesses to increase both assets under
management and the number of investment professionals providing services and by
creating products to be marketed by Freedom Capital. Freedom Capital had offered
proprietary mutual funds to its clients until 1992, when the Company assigned
its investment advisory contracts to Hancock. The Company also intends to
increase the productivity and profitability of Freedom Capital through improved
coordination with the Tucker Anthony and Sutro retail brokerage networks and
other initiatives intended to allow Freedom Capital to manage a larger
percentage of funds held by Tucker Anthony and Sutro clients.
 
     As with other aspects of the Company's business, Freedom Capital is focused
on service and client 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

 
                                       45
46
 
client. Freedom Capital offers comprehensive client statements which include
portfolio appraisals, performance analyses and statements of transactions. In
addition, Freedom Capital provides its clients with economic commentary and
investment letters on a regular basis. Freedom Capital believes that its many
strong, long-term client relationships attest to its attention to service and
client communication.
 
     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 $699 million, of which
$22 million was under management, as of June 30, 1998.
 
RELATIONSHIP WITH WEXFORD
 
     The Company clears all transactions, and carries accounts for customers and
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, 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 is entitled to pay a set fee
per trade, subject to an aggregate annual minimum payment for clearing trades
through Wexford. The Company's current trading volume allows the Company to
realize substantially all of the benefit of the per trade price, although the
Company believes that the Wexford arrangement provides substantial cost
advantages to the Company even during periods with reduced trading volumes.
 
     Consistent with its strategy of providing its investment executives with a
high level of support, following the April 1996 conversion to the Wexford
clearing arrangement, the Company retained approximately 50 of its clearing
operation employees to serve as an interface between Wexford and the Company's
investment executives. The Company's retention of these employees allows its
investment executives to deal exclusively with Company employees in connection
with any client inquiries or problems. In addition to providing the Company and
its investment executives with access to advanced technology without substantial
capital investment by the Company, the Company's relationship with Wexford will
allow the Company to provide its clients with benefits resulting from this
technology. The Company allows clients, for a fee, to access information
concerning their accounts and other market information from their own personal
computers and has acquired technology that will enable its investment executives
to communicate with its customers through electronic mail, subject to rules and
procedures in compliance with Commission and SRO guidelines. The agreement
between the Company and Wexford has a fixed term of five years, with provisions
for negotiated extensions. See "Risk Factors -- Dependence on Certain
Relationships" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
 
     The Company currently has an uncommitted financing arrangement with Wexford
pursuant to which the Company finances its customer accounts, certain
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 for financial accounting reporting
purposes, 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,
request customers to deposit additional collateral or reduce securities
positions when necessary.
 
     See "Risk Factors -- Dependence on Certain Relationships and Technology"
for a discussion of certain risks associated with the Company's Wexford
relationship.

 
                                       46
47
 
PROPERTIES
 
     The principal executive offices of the Company are located at One Beacon
Street, Boston, Massachusetts under a lease expiring December 31, 2005. The
Company is currently leasing approximately 104,000 square feet at that location,
including an additional 15,000 feet commencing July 1, 1998. The Company also
leases approximately 88,000 square feet (of which 18,000 square feet has been
sublet) at One World Financial Center, 200 Liberty Street, New York, New York,
under a lease expiring in January 2005; 64,000 square feet (of which 8,000
square feet has been sublet) at 201 California Street, San Francisco, California
under a lease expiring July 31, 2003; 25,000 square feet at 555 South Flower
Street, Los Angeles, California under a lease expiring July 31, 2002; and 24,000
square feet at 100 East Wisconsin Avenue, Milwaukee, Wisconsin under a lease
expiring January 31, 2006. For the year ended December 31, 1997, the Company's
total expenses for operating leases were $15.9 million. The Company believes
that its existing facilities will be adequate for the foreseeable future.
 
EMPLOYEES
 
     As of June 30, 1998, the Company had a total of 2,003 employees, of whom
1,192 were engaged in retail brokerage, 86 in institutional sales, 70 in
research, 163 in trading, 118 in investment banking, 28 in asset management and
346 in accounting, administration and operations. Of these employees, 1,257 were
classified as professionals and 746 were classified in support positions. None
of the Company's employees are subject to a collective bargaining agreement. The
Company believes that its relations with its employees generally are good. See
"Risk Factors -- Dependence on Personnel."
 
EFFECTS OF INTEREST RATES
 
     The Company's business is affected by general economic conditions,
including movements of interest rates. 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 prices 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 equity securities. As interest rates decline, equity securities may tend to
rise in value. The impact of these changes may affect the Company's inventory of
equity securities, which may change in value, and may also affect the
profitability of the Company's investment banking activities. Retail commission
revenue may also be affected by changes in interest rates and any resulting
indirect impact on the value of equity 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 business in
general are highly competitive. The principal competitive factors influencing
the Company's business are its professional staff, its reputation in the
marketplace, its existing client relationships, the ability to commit capital to
client transactions and its mix of market capabilities. The Company's ability to
compete effectively in securities brokerage and investment banking activities
will also be influenced by the adequacy of its capital levels and by its ability
to raise additional capital. See "Risk Factors -- Significant Competition."

 
                                       47
48
 
REGULATION
 
     The securities and commodities industry is one of the nation's most
extensively regulated industries. The Commission is responsible for carrying out
the federal securities laws and serves as a supervisory body over all national
securities exchanges and associations. The regulation of broker-dealers has to a
large extent been delegated by the federal securities laws to SROs. These SROs
include all the national securities and commodities exchanges, the NASD and the
MSRB. Subject to approval by the Commission and the CFTC, these SROs adopt rules
that govern the industry and conduct periodic examinations of the operations of
certain subsidiaries of the 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 Cleary Gull. 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
among broker-dealers, 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 and member firms of the NYSE or the NASD,
Tucker Anthony, Sutro, Cleary Gull and FSI 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. Freedom Distributors
Corporation, a subsidiary of Freedom Capital, is also subject to Rule 15c3-1.
The Net Capital Rules, which specifies minimum net capital requirements for
registered broker-dealers, is designed to measure the financial soundness and
liquidity of broker-dealers. The Net Capital Rules also (i) require that broker-
dealers notify the Commission, 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; (ii) 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
has net capital of less than $300,000 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 (iii) provide that the SEC
may, by order, prohibit withdrawals from 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 an 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
$312,500 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 $375,000 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.
 
     The Company also is subject to "Risk Assessment Rules" imposed by the
Commission 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 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 Commission. In addition, the
possibility exists that, on the basis of the information it obtains under the
Risk Assessment Rules, the Commission could seek authority over the Company's

 
                                       48
49
 
unregulated subsidiaries either directly or through its existing authority over
the Company's regulated subsidiaries.
 
     Tucker Anthony, Sutro, Cleary Gull, Freedom Capital and other subsidiaries
are registered with the Commission as investment advisors under the Investment
Advisors Act of 1940 (the "Advisors 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, Cleary Gull, 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. See "Risk Factors -- Business Subject to
Extensive Regulation; Constraints Imposed by Net Capital Requirements."
 
     In October 1996, during an annual review of the Company's former clearing
subsidiary by the NYSE, it was discovered that for the period of April 4, 1996
through July 1, 1996, such subsidiary had a net capital deficiency on certain
days in violation of the net capital requirements of the Commission and the
NYSE. These net capital deficiencies resulted from a misclassification on the
books of such subsidiary related to the continuation by such subsidiary of a
lending arrangement for overnight and short-term loans on an unsecured basis
with a lending institution during the winding down of its clearing operation
following the commencement of the Company's financing arrangement with Wexford.
While no net capital deficiencies occurred between July 1, 1996 and the
Company's voluntary withdrawal of such subsidiary's broker-dealer license in
March 1997, the Company has reached a settlement with the NYSE in which the
Company was censured and charged a fine of $60,000.
 
LITIGATION
 
     The Company and its subsidiaries are parties to various legal proceedings
which are of an ordinary or routine nature incidental to the operations of the
Company and its subsidiaries. As of July 31, 1998, there were approximately 36
lawsuits and arbitrations pending against the Company and its subsidiaries. The
defense of such lawsuits or arbitrations may divert the efforts and attention of
the Company's management and staff, and the Company may incur significant legal
expense in defending such litigation or arbitration. This may be the case even
with respect to frivolous claims or litigation. The amount of time that
management and other employees may be required to devote in connection with the
defense of litigation could be substantial and might divert their attention from
other responsibilities within the Company. The Company believes that it has
adequately reserved for such litigation matters and that they will not have a
material adverse effect on the Company's financial condition or results of
operations.

 
                                       49
50
 
                                   MANAGEMENT
 
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
 
     The directors and executive officers of the Company and their respective
ages and positions are as follows:
NAME             AGE                              POSITION
John H. Goldsmith.........  56     Chairman, Director and Chief Executive Officer as well as
                                   Chief Executive Officer of Tucker Anthony, Chairman of Sutro
                                   and Chairman of Cleary Gull
Robert H. Yevich..........  48     Director and President of Tucker Anthony
John F. Luikart...........  48     Director and President and Chief Executive Officer of Sutro
Henry Greenleaf...........  55     President and Chief Executive Officer of Freedom Capital
William C. Dennis, Jr.....  54     Executive Vice President and Chief Financial Officer
Kevin J. McKay............  49     General Counsel and Secretary
Gregory N. Thomas.........  51     Director and Vice Chairman
David P. Prokupek.........  36     Director and President and Chief Executive Officer of Cleary
                                   Gull
David V. Harkins..........  56     Director
C. Hunter Boll............  42     Director
Thomas M. Hagerty.........  35     Director
Seth W. Lawry.............  33     Director
Winston J. Churchill......  57     Director
Hugh R. Harris............  47     Director
John H. Goldsmith.  Mr. Goldsmith joined the Predecessor Company in 1988
and has served as Chairman, Director and Chief Executive Officer of the
Predecessor Company, Chief Executive Officer of Tucker Anthony, Chairman of
Sutro since that time and Chairman of Cleary Gull since the acquisition. Mr.
Goldsmith has served as Chairman, Director and Chief Executive Officer of the
Company since the Acquisition in 1996. Prior to joining the Predecessor 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.
 
     Robert H. Yevich.  Mr. Yevich joined Tucker Anthony in 1985 and served as
National Sales Manager until being elected to the Board of Directors of the
Predecessor Company and promoted to President of Tucker Anthony in 1995. Mr.
Yevich has served as Director of the Company since the Acquisition in 1996. Mr.
Yevich has 24 years of varied 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 Paine Webber.
 
     John F. Luikart.  Mr. Luikart joined Sutro in 1988 as President and was
responsible for directing all of the firm's capital markets activities. Mr.
Luikart was subsequently elected to the Board of Directors of the Predecessor
Company and appointed Chief Executive Officer of Sutro in October 1995. Mr.
Luikart has served as Director of the Company since the Acquisition in 1996.
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
NYSE Regional Firm Advisory Committee.
 
     Henry Greenleaf.  Mr. Greenleaf is the President and Chief Executive
Officer of Freedom Capital Management. Prior to joining Freedom in 1997, he was
Vice President and Senior Portfolio Manager with The Glenmede Trust Company.
From 1995 to 1997, he was a Principal and Chief Investment Officer with the
investment counseling firm of Resources Management Corporation/Asset Management
Partners of Farmington, Connecticut. Earlier, he was President and Chief
Investment Officer of HT Investors, Inc. and Senior Vice President of Rhode
Island Hospital Trust National Bank. Mr. Greenleaf also served as portfolio
manager for the Phoenix Mutual Life Insurance Company and The Aetna Life and
Casualty Company. Mr. Greenleaf is a member of the Board of Directors of Cambric
Graphics.

 
                                       50
51
 
     William C. Dennis, Jr.  Mr. Dennis was elected Executive Vice President and
Chief Financial Officer of the Company in May, 1997. Prior to joining the
Company, he was a Director and Chief Financial Officer of Rodman & Renshaw
Capital Group, Inc., a financial services firm, from 1996 to 1997. Previously,
Mr. Dennis was a managing director of MIS, Inc., a database management company,
and prior to joining MIS, Inc. he was Chief Financial Officer of the Capital
Markets Sector of Merrill Lynch & Co., Inc. Earlier in his career, Mr. Dennis
was a senior financial executive of Exxon Corporation.
 
     Kevin J. McKay.  Mr. McKay joined the Predecessor Company in 1994 and has
served as General Counsel and Secretary of the Predecessor Company since that
time. Mr. McKay has served as General Counsel and Secretary of the Company since
the Acquisition in 1996. Prior to joining the Predecessor Company, Mr. McKay was
General Counsel of Prudential Securities, Inc. from 1990 to 1994. Mr. McKay has
over 19 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.
 
     Gregory N. Thomas.  Mr. Thomas joined the Company as Executive Vice
President in December 1997; was elected to the Board of Directors in January
1998 and was elected Vice Chairman of the Board of Directors in June, 1998. Mr.
Thomas also serves as a Director and Executive Vice President of Cleary Gull.
Prior to joining the Company, Mr. Thomas served as President of ShadowWood
Corporation, a private real estate investment company. In 1997, Mr. Thomas also
served as an Adjunct Professor in the School of Business and Economics at the
College of Charleston. Previously, Mr. Thomas was a general partner of William
Blair & Company. Mr. Thomas is currently a director of Obermeyer Asset
Management Company.
 
     David P. Prokupek.  Mr. Prokupek was elected to the 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, and was named Chief Executive Officer in 1996. 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.
 
     David V. Harkins.  Mr. Harkins was elected to the Board of Directors of the
Company in 1996. He has been affiliated with THL since its founding in 1974 and
joined THL as a full time employee in 1986. Mr. Harkins is Chairman of the Board
of National Dentex Corporation and is a director of First Security Services,
Inc., Fisher Scientific International, Inc., Stanley Furniture Company, Inc. and
Syratech Corporation. Mr. Harkins also serves as Senior Vice President and
Trustee of Thomas H. Lee Advisors I, and T.H. Lee Mezzanine II, affiliates of
ML-Lee Acquisition Fund, L.P., and the ML-Lee Acquisition Fund II, L.P.,
respectively.
 
     C. Hunter Boll.  Mr. Boll was elected to the Board of Directors of the
Company in 1996. He joined THL in 1986. From 1984 through 1986, Mr. Boll was
with The Boston Consulting Group. From 1977 through 1982, he served as an
Assistant Vice President, Energy and Minerals Division of Chemical Bank. Mr.
Boll is a Director of Big V Supermarkets, Inc., New York Restaurant Group, and
TransWestern Publishing, L.P. Mr. Boll is also a Vice President of Thomas H. Lee
Advisors I, T.H. Lee Mezzanine II, and the Administrative General Partner of
Thomas H. Lee Advisors II, L.P., which is also affiliated with the ML-Lee
Acquisition Fund II, L.P.
 
     Thomas M. Hagerty.  Mr. Hagerty was elected to the Board of Directors of
the Company in 1996. He joined THL in 1988. Prior to joining THL, Mr. Hagerty
was in the Mergers and Acquisitions Department of Morgan Stanley & Co.
Incorporated. Mr. Hagerty is a director of Syratech Corporation and Cott
Corporation. Mr. Hagerty is also a Vice President of Thomas H. Lee Advisors I,
T.H. Lee Mezzanine II, and the Administrative General Partner of Thomas H. Lee
Advisors II, L.P., which is also affiliated with the ML-Lee Acquisition Fund II,
L.P.
 
     Seth W. Lawry.  Mr. Lawry was elected to the Board of Directors of the
Company in 1996. He worked at THL from 1989 to 1990 and rejoined in 1994. From
1987 to 1989 and 1992 to 1994, Mr. Lawry worked at Morgan Stanley & Co.
Incorporated in the Mergers and Acquisitions, Corporate Finance and Equity
Capital Markets Departments. Mr. Lawry is a director of Safelite Glass Corp. and
Syratech Corporation.
 
     Winston J. Churchill.  Mr. Churchill was elected to the Board of Directors
in 1996. Mr. Churchill joined SCP at its founding in 1996 as a Managing General
Partner. Prior to joining SCP, Mr. Churchill formed CIP

 
                                       51
52
 
Capital, Inc., in 1990 and Churchill Investment Partners, Inc., in 1989. Mr.
Churchill serves as Chairman of the Board of Central Sprinkler Corporation, and
as a director of Geotek Communications, Inc., IBAH Inc., Millenium Multimedia,
Tescorp, Inc., Cinema Star Luxury Theatres, Inc., and Griffin Land and
Nurseries, Inc. Mr. Churchill also serves as a director of Fordham University,
Georgetown University, and several other institutions.
 
     Hugh R. Harris.  Mr. Harris was elected to the Board of Directors in June,
1998. From 1988 until 1997, Mr. Harris was the President and Chief Operating
Officer of BancBoston Mortgage Corporation, until it was sold to HomeSide
Lending, Inc. HomeSide Lending, Inc. was sold to National Australia Bank in
February 1998 and is now a wholly-owned subsidiary thereof. Mr. Harris remains
as the President and Chief Operating Officer of HomeSide Lending, Inc.
 
BOARD COMMITTEES
 
     The Compensation Committee of the Board of Directors of the Company is
comprised of David V. Harkins, Thomas M. Hagerty, Hugh R. Harris and Winston J.
Churchill. The Audit Committee of the Board of Directors of the Company is
comprised of C. Hunter Boll, Seth W. Lawry, Hugh R. Harris and Winston J.
Churchill.
 
ELECTION AND COMPENSATION OF DIRECTORS
 
     Each director of the Company holds office until his successor has been duly
elected and qualified. Directors of the Company are elected annually by the
stockholders of the Company. Officers of the Company are elected by the Board of
Directors of the Company at each annual meeting of the Board of Directors and
serve at its discretion. Other than Hugh Harris, current directors of the
Company receive no compensation for serving as directors; Mr. Harris receives
$1,000 per board meeting and $750 per committee meeting. Additionally, Mr.
Harris receives an annual retainer of $15,000.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     Messrs. Harkins, Boll, Hagerty and Lawry are employed by THL, Mr. Churchill
is employed by SCP Mr. Harris is employed by HomeSide Lending, Inc. and the
other directors of the Company are employed by the Company or its subsidiaries.
THL, SCP and those directors who are employed by the Company have each been
involved in transactions with the Company. See "Certain Relationships and
Related Transactions."

 
                                       52
53
 
EXECUTIVE COMPENSATION
 
     The following table sets forth the compensation earned by the Company's
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers (collectively, the "Named Executive Officers")
during the year ended December 31, 1997:
 
                         SUMMARY COMPENSATION TABLE(1)
LONG-TERM     ALL OTHER
                                                            1997               COMPENSATION    COMPEN-
                                                     ANNUAL COMPENSATION          AWARDS       SATION
                                                 ---------------------------   ------------   ---------
                                                                      OTHER
                                                                     ANNUAL     SECURITIES
                                                                     COMPEN-    UNDERLYING
                                                 SALARY     BONUS    SATION      OPTIONS
NAME AND PRINCIPAL POSITION                        ($)       ($)       ($)         (#)           ($)
John H. Goldsmith..............................  400,000   850,000       (2)      54,540       41,595(3)
Chairman, Director and Chief Executive Officer
William C. Dennis, Jr. (4).....................  350,000   400,000       --       36,360           --
Chief Financial Officer
Kevin J. McKay.................................  300,000   400,000       (2)      29,088        3,200(3)
General Counsel and Secretary
Robert H. Yevich...............................  300,000   700,000       (2)      44,541        3,200(3)
Director and President of Tucker Anthony
John F. Luikart................................  250,000   800,000       (2)      44,541        3,000(3)
Director and Chief Executive Officer of Sutro
------------------------------
 
(1) Amounts shown reflect compensation earned in the period presented, although
    payments earned in prior periods may have been paid in the period presented
    and compensation earned in the period presented may have been paid in a
    subsequent period.
 
(2) Amount does not exceed lesser of $50,000 or 10% of compensation.
 
(3) Represents contribution to 401(k) plan and, in the case of Mr. Goldsmith,
    $38,395 of insurance premiums.
 
(4) The amount presented in the table above includes a $250,000 loan which was
    forgiven by the Company. Mr. Dennis' employment began May 12, 1997 and his
    effective annual base salary rate is $400,000.

 
                                       53
54
 
     The following table sets forth certain information regarding the option
grants made during Fiscal 1997 to each of the Company's named executive officers
in the Summary Compensation Table above. The Company issued no stock
appreciation rights in 1997.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS                              POTENTIAL REALIZABLE
                       --------------------------------------------------------------------           VALUE
                                      PERCENT OF                                                AT ASSUMED ANNUAL
                                         TOTAL                                                        RATES
                                        OPTIONS                                                   OF STOCK PRICE
                        NUMBER OF     GRANTED TO                     MARKET                      APPRECIATION FOR
                       SECURITIES      EMPLOYEES                    VALUE ON                          OPTION
                       UNDERLYING         IN         EXERCISE OR     DATE OF                        TERM(1)(2)
                         OPTIONS      FISCAL YEAR    BASE PRICE       GRANT      EXPIRATION    --------------------
NAME                   GRANTED (#)        (%)         ($/SHARE)     ($/SHARE)       DATE        5%($)       10%($)
John H. Goldsmith....    17,998                          5.50          5.50       01/31/07      62,261     157,781
                         36,542                          5.50          5.50       05/31/06     116,014     288,746
                         ------
                         54,540          2.56
                         ------
William C. Dennis,
  Jr.................    11,999                          5.50          6.31       05/01/07      41,507     105,186
                         24,361                          5.50          6.31       05/31/06      74,744     184,598
                         ------
                         36,360          1.70
                         ------
Kevin J. McKay.......     9,599                          5.50          5.50       01/31/07      33,206      84,150
                         19,489                          5.50          5.50       05/31/06      61,874     153,998
                         ------
                         29,088          1.36
                         ------
Robert H. Yevich.....    14,699                          5.50          5.50       01/31/07      50,846     128,854
                         29,842                          5.50          5.50       05/31/06      94,745     235,809
                         ------
                         44,541          2.09
                         ------
John F. Luikart......    14,699                          5.50          5.50       01/31/07      50,846     128,854
                         29,842                          5.50          5.50       05/31/06      94,745     235,809
                         ------
                         44,541          2.09
                         ------
------------------------------
(1) In accordance with the rules of the Commission, shown are the gains or
    "option spreads" that would exist for the respective options granted. These
    gains are based on the assumed rates of annual compound stock price
    appreciation of 5% and 10% from the date the option was granted over the
    full option term. These assumed annual compound rates of stock price
    appreciation are mandated by the rules of the Commission and do not
    represent the Company's estimate or projection of future Common Stock
    prices.
 
(2) Options issued to Mr. Dennis were issued below fair market value on the date
    of grant resulting in gains or "option spreads" of $9,719 and $19,732. These
    gains are based on the assumed rate of annual compound stock price
    appreciation of 0% from the dates options were granted over the full option
    term.
 

                                       54
55
 
     Year End Option Table.  The following table sets forth information
regarding exercise of options and the number and value of options held at
December 31, 1997, by each of the Company's named executive officers in the
Summary Compensation Table above:
 
    AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUE
NUMBER OF SECURITIES
                                                      UNDERLYING UNEXERCISED        VALUE OF UNEXERCISED IN-THE-
                            SHARES                          OPTIONS AT                    MONEY OPTIONS AT
                           ACQUIRED                      FISCAL YEAR END                 FISCAL YEAR-END(1)
                              ON        VALUE      ----------------------------    -------------------------------
                           EXERCISE    REALIZED    EXERCISABLE    UNEXERCISABLE     EXERCISABLE      UNEXERCISABLE
NAME                         (#)         ($)           (#)             (#)              ($)               ($)
John H. Goldsmith........     --          --         10,908          43,632           158,166           632,664
William C. Dennis, Jr....     --          --          7,272          29,088           105,444           421,776
Kevin J. McKay...........     --          --          5,818          23,270            84,361           337,415
Robert H. Yevich.........     --          --          8,908          35,633           129,166           516,679
John F. Luikart..........     --          --          8,908          35,633           129,166           516,679
------------------------------
(1) Value is based on the difference between the option exercise price and the
    initial public offering price of the Common Stock multiplied by the number
    of shares of Common Stock underlying the option. No market existed for the
    Common Stock prior to the initial public offering.
 
STOCK OPTION AND STOCK PURCHASE PLANS
 
     1996 Stock Option Plan.  The 1996 Stock Option Plan (the "1996 Plan")
provides for the granting of incentive stock options and non-qualified options
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), to employees of the Company. The 1996 Plan is administered by either
the Company's Board of Directors ("the Board") or a committee (the "Committee")
comprised of members of the Board to which the Board may delegate its
administrative duties and authority. The Committee (i) interprets and applies
the 1996 Plan; (ii) determines the eligibility of an individual to participate
in the 1996 Plan; (iii) approves the assignment of options immediately prior to
the registration of the Company's stock pursuant to the 1934 Act if such
assignment would increase the number of Common Stock holders; and (iv)
determines and allocates the cancellation or exchange of outstanding options in
the case of a recapitalization, acquisition, merger or Change in Control. No
director or officer of the Company is eligible for such options unless such
director or officer is also an employee. No options may be granted to an
employee that, at the time of the grant, owns more than 10% of the voting power
or greater than 10% of each class of the Company's outstanding stock, unless the
purchase price for the purchase of the stock is not less than 110% of the
stock's fair market value on the date of the grant and the option, by its terms,
shall not be exercisable more than five years from the date it is granted.
 
     The Company has authorized the issuance of options for up to 2,181,600
shares of the Company's Common Stock under the 1996 Plan. Matured options may be
exercised in full at one time or in part from time to time and the payment of
the exercise price may be made by delivery of (i) cash or a check payable to the
order of the Company in an amount equal to the exercise price of such options;
(ii) shares of Common Stock of the Company owned by the optionee having a fair
market value equal in amount to the exercise price of the options being
exercised; (iii) the cancellation of shares covered by this Option which are
then vested and exercisable having a fair market value equal in amount to the
purchase price of the shares being purchased; (iv) at the sole discretion of the
Committee, a promissory note; or (v) any combination of (i), (ii), (iii) and
(iv); provided, however, that payment of the exercise price by delivery of
shares of Common Stock of the Company owned by such optionee or cancellation of
shares covered by the option may be made only with the consent of the Committee
if such payment results in a charge to earnings for financial accounting
purposes as determined by the Committee. The Company may delay the issuance of
shares covered by the exercise of an option until (a) the shares for which such
option has been exercised have been registered or qualified under the applicable
federal or state securities laws or (b) counsel for the Company has opined that
such shares are exempt from the registration requirements of such federal or
state securities laws.

 
                                       55
56
 
     The term of any option granted under the 1996 Plan shall be limited to ten
years. Upon the termination of an optionholder's employment with the Company,
such options shall terminate between 30 and 180 days after that optionholder
leaves the employ of the Company. All options under the 1996 Plan may only be
assigned to the spouse and children of the optionholder or by will or law of
descent.
 
     As of December 31, 1997, options to purchase 2,133,888 shares were granted
under the 1996 Plan of which options to purchase 455,840 shares vest based on
time at the rate of 20% per year for five years following the date of grant and
options to purchase 1,678,048 shares vest on the sixth anniversary of the date
of grant, of which options to purchase 925,396 shares are subject to accelerated
vesting, based on certain performance thresholds tied to the Company's
operations and options to purchase 752,652 shares are subject to accelerated
vesting based on individual performance (none of which have been granted to the
Company's executive officers). All of the outstanding options have an exercise
price of $5.50 per share. The following options under the 1996 Plan have been
granted to the executive officers of the Company:
TIME-VESTED    COMPANY PERFORMANCE
                                                          OPTIONS            OPTIONS
John H. Goldsmith.....................................    17,998             36,542
William C. Dennis, Jr. ...............................    11,999             24,361
Kevin J. McKay........................................     9,599             19,489
Robert H. Yevich......................................    14,699             29,842
John F. Luikart.......................................    14,699             29,842
Henry Greenleaf.......................................     4,500              9,135
1998 Long-Term Incentive Plan.  The Company's 1998 Long-Term Incentive Plan
(the "1998 Plan") provides for the granting of stock options, SARs, restricted
stock and long-term performance awards, in each case on such terms and to such
officers and other key employees as the administrators of the 1998 Plan may
select. The 1998 Plan shall be administered by a committee (the "Committee") of
the Board of Directors comprised of directors who qualify as "non-employee
directors" within the meaning of Rule 16(b)
promulgated under Section 16 of the Exchange Act and as "outside directors"
within the meaning of Code Section 162(m) and the regulations promulgated
thereunder. The failure of a Committee member to qualify under these
requirements shall not invalidate any award otherwise made under the Bonus Plan.
A total of 2,291,688 shares of the Common Stock have been reserved for issuance
under the 1998 Plan.
 
     The maximum number of stock options, SARs or shares of restricted stock
that can be granted at any time shall equal 2,291,688 shares reduced by the sum
(without duplication) of: the number of shares of Common Stock subject to
outstanding awards under the 1998 Plan, the number of shares of Common Stock in
respect of which awards have been exercised, and the number of shares of Common
Stock issued without forfeiture or similar restrictions or issued with
forfeiture or similar restrictions which have lapsed, and increased by the
number of shares of stock delivered or withheld in payment of the exercise
price, purchase price or tax withholding requirements of an award granted under
the 1998 Plan. Unless specifically consented to by the administrators of the
1998 Plan, shares may not be delivered or withheld in payment of the exercise
price, purchase price or tax withholding requirements of an award granted under
the 1998 Plan if such payment would result in a charge to earnings for financial
accounting purposes. The maximum number of stock options, SARs or shares of
restricted stock that can be granted to any one participant in any one plan year
is 250,000. Stock options awarded under the 1998 Plan may either be "incentive
stock options" as defined in Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code") or non-qualified stock options. The term of each stock
option shall be fixed by the administrators of the 1998 Plan, but no incentive
stock option shall be exercisable for a period of more than ten years from the
date the option is granted and any option granted to any optionee who, at the
time the option is granted, owns more than 10% of the voting power of all
classes of capital stock of the Company or of a subsidiary may not have a term
of more than five years from the date of grant. Upon receipt of written notice
to exercise a stock option, the Company may, in the administrators' sole
discretion, elect to cash out all or part of the option to be exercised by
paying the optionee an amount, in cash or Common Stock, equal to the excess of
the fair market value of the Common Stock over the option price on the effective
date of such cashout. Restricted stock under the 1998 Plan shall be awarded for
nominal or no consideration on behalf of the recipient.

 
                                       56
57
 
     The 1998 Plan contains provisions intended to comply with Section 162(m) of
the Code. During such time Section 162(m) of the Code or any successor provision
is in effect, the maximum value any participant subject to the provisions of
Section 162(m) may receive in any calendar year under the 1998 Plan will be $2
million multiplied by the number of years in the relevant measuring period, but
in no event more than $5 million, and the maximum annual amount that may be paid
to a participant under the 1998 Plan for (i) the year in which the 1998 Plan is
implemented shall equal no more than $2 million, and (ii) each subsequent year
shall equal 110% of such maximum amount for the preceding year; provided that
the maximum annual amount determined under this provision shall be determined
without regard to the value of any stock options granted to a participant under
the 1998 Plan.
 
     The 1998 Plan provides that in the event of a Change in Control of the
Company (i) SARs and stock options awarded under the 1998 Plan not previously
exercisable and vested which have been held for at least six months from the
date of grant shall become fully vested and exercisable; (ii) the restrictions
applicable to any restricted stock awards under the 1998 Plan shall lapse and
such shares and awards shall be deemed fully vested and (iii) any outstanding
long-term performance awards shall be vested and paid out based on the pro rated
target results for the performance period relating to such awards, unless the
administrators of the 1998 Plan provide at or after grant and prior to the
Change in Control for a different payment. The value of outstanding stock
options, SARs and restricted stock awards shall, unless otherwise determined by
the administrator of the 1998 Plan at or after grant, be cashed out on the basis
of the Change in Control Price. "Change in Control" is defined as the happening
of any of the following: (i) when any "person" as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the Company or a subsidiary or
employee benefit plan of the Company) who is not the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's outstanding securities on the effective date of the 1998 Plan
is or becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
outstanding securities without the consent of the Board of Directors of the
Company; (ii) the occurrence of any transaction or event relating to the Company
required to be described pursuant to the requirements of item 6(e) of Schedule
14A of the Exchange Act; (iii) when, during any period of two consecutive years
during the existence of the 1998 Plan, the individuals who, at the beginning of
such period, constitute the Board of Directors of the Company cease for any
reason other than death to constitute a majority thereof, provided, however,
that a director who is not a director at the beginning of such period shall be
deemed to have satisfied the two-year requirement if such director was elected
by, or on the recommendation of, at least a majority of the directors who were
directors at the beginning of such period (either actually or by prior operation
of this clause (iii)); or (iv) the occurrence of a transaction requiring
stockholder approval for the acquisition of the Company by an entity other than
the Company through purchase of assets, or by merger or otherwise. The "Change
in Control Price" is defined as the highest sales price per share of Common
Stock paid or offered in any bona fide transaction relating to a Change in
Control of the Company, as determined by the administrators of the 1998 Plan.
The 1998 Plan provides that no payment shall be made in connection with a Change
in Control which, when aggregated with other payments made to the employee
would, as determined by such persons as the administrators of the 1998 Plan
shall irrevocably designate at or prior to a Change in Control, result in an
"excess parachute payment" for which the Company would not receive a federal
income tax deduction by reason of Section 280G of the Code.
 
     The administrators of the 1998 Plan may amend, alter or discontinue the
1998 Plan at any time and from time to time, but no alteration or
discontinuation shall be made which would impair the rights of an optionee or
participant with respect to an award which has been granted under the 1998 Plan
without the optionee's or participant's consent. In addition, without the
approval of the Company's stockholders, the administrators of the 1998 Plan may
not make any such amendment which would, except in connection with stock splits,
dividends or similar recapitalizations of the Company, increase the total number
of shares reserved for purposes of the 1998 Plan, change the employees or class
of employees eligible to participate in the 1998 Plan or extend the maximum
option period applicable to incentive stock options granted under the 1998 Plan.
 
     The other terms and conditions of awards under the 1998 Plan, including
vesting provisions, term and exercisability of the awards, shall be as
determined by the administrators of the 1998 Plan. Upon closing of this
offering, options to purchase 545,400 shares with an exercise price equal to the
initial public offering price
 

                                       57
58
 
will be granted under the 1998 Plan to employees of the Company. Such options
will vest in three equal annual installments commencing on the third anniversary
of the grant date. Options to purchase 236,500 shares with an exercise price
equal to the initial public offering price have been granted under the 1998 Plan
to employees of Cleary Gull. Such options will vest on the third anniversary of
the grant date. Additionally, options to purchase an aggregate of 183,405 shares
with an exercise price between $4.95 to $5.70 per share have been granted under
the 1998 Plan to employees of Cleary Gull. Such options are immediately
exercisable.
 
1998 STOCK PURCHASE PLAN
 
     The Company's 1998 Employee Stock Purchase Plan (the "1998 Purchase Plan")
authorizes the issuance of a maximum of 500,000 shares of Common Stock pursuant
to the exercise of nontransferable options granted to participating employees.
 
     The 1998 Purchase Plan is administered by the Compensation Committee. All
employees of the Company whose customary employment is 20 hours or more per week
and five months or more per year and have been employed by the Company for at
least six months are eligible to participate in the 1998 Purchase Plan.
Employees who own 5% or more of the Company's stock, directors who are not
employees of the Company and persons subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934 may not participate in the
1998 Purchase Plan. To participate in the 1998 Purchase Plan an employee must
authorize the Company in writing to deduct an amount (not less than 1% nor more
than 10% of a participant's base compensation and not more than $25,000 in any
year) from his or her pay commencing on January 1, April 1, July 1 and October 1
of each year (each a "Purchase Period"), commencing October 1, 1998. On the
first day of each Purchase Period, the Company grants to each participating
employee an option to purchase up to that number of shares of Common Stock they
are entitled to purchase under the 1998 Purchase Plan. The exercise price for
the option for each Purchase Period is 85% of the fair market value of the
Common Stock. The fair market value will be the average of the closing selling
price of the Common Stock on the NYSE for the last five days of any Purchase
Period. If an employee is not a participant on the last day of the Purchase
Period, such employee is not entitled to exercise his or her option, and the
amount of his or her accumulated payroll deduction will be refunded to the
employee. An employee's rights under the 1998 Purchase Plan terminate upon his
or her voluntary withdrawal from the Plan at any time or upon termination of
employment.
 
     Common Stock for the 1998 Purchase Plan will be made available either from
authorized but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Company, including shares repurchased in the open market.
 
1998 EXECUTIVE PERFORMANCE BONUS PLAN
 
     Certain of the Company's executive officers and other key employees are
entitled to participate in the Company's 1998 Executive Performance Bonus Plan
(the "Bonus Plan"). The Bonus Plan shall be administered by a committee (the
"Committee") of the Board of Directors comprised of directors who qualify as
"non-employee directors" within the meaning of Rule 16(b) promulgated under
Section 16 of the Exchange Act and as "outside directors" within the meaning of
Code Section 162(m) and the regulations promulgated thereunder. The failure of a
Committee member to qualify under these requirements shall not invalidate any
award otherwise made under the Bonus Plan. Amounts paid pursuant to the Bonus
Plan are intended to qualify as performance-based compensation within the
meaning of Section 162(m) of the Code. The Bonus Plan provides that the
Committee will establish an award pool from which awards may be paid to eligible
employees in accordance with the Bonus Plan. The amount included in the award
pool for any particular performance period shall be equal to a percentage of
pre-tax operating income of the Company (as defined) for the performance period
before provision for incentive compensation and extraordinary items, which
percentage shall be determined by the Committee and shall not exceed 15%. Within
ninety days following the commencement of each performance period, the Committee
shall allocate in writing, on behalf of each participant, a portion of the award
pool, if any, to be paid for such performance period; provided in no event shall
the percentage portion of the award pool allocated to any participant exceed 50%
of the award pool. The Committee may establish other criteria which it deems
appropriate for awards under the Bonus Plan, which may or may not be tied to
pre-tax operating income of the Company, so long as the amounts of the
                                       58
59
 
awards fall within the maximum amounts described above. The Committee is
authorized at any time during or after a performance period, in its sole
discretion, to reduce or eliminate (but not increase) the award pool or a
portion of the award pool allocated to any participant for any reason, including
changes in the position or duties of any participant with the Company during the
performance period, whether due to termination of employment or otherwise.
Participants are entitled to receive payment under the Bonus Plan in cash as
soon as practicable after the total amount of the award pool and the awards
payable to each participant are determined. In the discretion of the Committee,
partial payments may be made to participants during the course of a performance
period; provided that the aggregate of such partial payments may not exceed the
amount of the award that a participant would otherwise receive pursuant to the
Bonus Plan. The Board of Directors of the Company may at any time terminate,
suspend or modify the Bonus Plan and the terms and conditions of any award
thereunder that has not been paid. No award may be granted under the Bonus Plan
during any period of suspension or after its termination. Amendments of the
Bonus Plan are subject to the approval of the stockholders of the Company only
if such approval is necessary to maintain the Bonus Plan in compliance with the
requirements of Section 162(m) of the Code, or any other applicable law or
regulation. No awards have yet been made under the Bonus Plan.
 
LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     As permitted by the Delaware General Corporation Law, the Company has
included in its Charter a provision to eliminate the personal liability of its
directors for monetary damages for breach or alleged breach of their fiduciary
duties as directors, subject to certain exceptions. In addition, the Bylaws of
the Company provide that the Company is required to indemnify its officers and
directors under certain circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and the Company is required to
advance expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. The Company has also
agreed to indemnify its directors and certain officers to the maximum extent
permitted by Delaware law pursuant to agreements with such directors and
officers. At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted. The Company
believes that its charter provisions and indemnification agreements are
necessary to attract and retain qualified persons as directors and officers.

 
                                       59
60
 
                       PRINCIPAL AND SELLING STOCKHOLDERS
 
     The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of June 30, 1998, and as adjusted to
reflect the sale of the Common Stock offered hereby by: (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock; (ii) each of the Company's directors; (iii) each of the Selling
Stockholders for which the date as of which stock ownership information is
provided is September 3, 1998; (iv) each named executive officer, and (v) all
directors and executive officers as a group. Except as otherwise specified
below, the persons named in the table below have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them.
BENEFICIAL             NUMBER OF        BENEFICIAL OWNERSHIP
                                               OWNERSHIP PRIOR         SHARES WHICH              AFTER
                                             TO THIS OFFERING(1)       MAY BE SOLD        THIS OFFERING(1)(3)
                                            ---------------------      PURSUANT TO       ---------------------
                                            NUMBER OF                      THIS          NUMBER OF
                                            SHARES(46)    PERCENT     PROSPECTUS(2)      SHARES(46)    PERCENT
NAME OF BENEFICIAL OWNER(1)                 ----------    -------    ----------------    ----------    -------
Thomas H. Lee Equity Fund III, L.P.(4)....  4,305,212       21.5%         --             4,305,212       22.3%
John H. Goldsmith(5)......................    122,388          *          --               122,388          *
William C. Dennis, Jr.(6) ................     98,172          *          --                98,172          *
Kevin J. McKay(7).........................     78,538          *          --                78,538          *
Robert H. Yevich(8).......................    104,808          *          --               104,808          *
John F. Luikart(9)........................    109,808          *          --               109,808          *
Gregory N. Thomas.........................     90,900          *          --                90,900          *
David V. Harkins(10)......................  5,018,197       25.1          --             5,018,197         26
C. Hunter Boll(11)........................  5,018,197       25.1          --             5,018,197         26
Thomas M. Hagerty(12).....................  5,018,197       25.1          --             5,018,197         26
Seth W. Lawry(13).........................  5,018,197       25.1          --             5,018,197         26
Winston J. Churchill(14)..................    494,748        2.5          --               494,748        2.6
Hugh R. Harris(15)........................     --           --            --                --           --
Michael J. Cleary(16)(17).................    122,194          *          103,543           18,651          *
David P. Prokupek(18).....................    140,156          *          103,656           36,500          *
Timothy P. Reiland(19)....................    120,121          *           93,543           26,578          *
T. Ferguson Locke(20).....................    114,108          *           97,135           16,973          *
John F. Syburg(21)........................     56,866          *           31,086           25,780          *
John R. Peterson(22)......................     44,954          *           26,009           18,945          *
Richard C. Eastman(23)....................     35,032          *              862           34,170          *
Cheryl L. Gehl(24)(25)....................     33,832          *            5,552           28,280          *
Owen L. Hill(26)..........................     25,294          *           22,427            2,867          *
Gerald L. Gerndt..........................      7,437          *            7,012              425          *
Michael G. Klein..........................     12,622          *           12,197              425          *
J. Scott Barraclough(27)..................     23,914          *           15,664            8,250          *
Anne Mategrano(28)........................     25,914          *           15,664           10,250          *
Ajoy Kumer Bose...........................     19,416          *           14,416            5,000          *
Joseph F. Hickey Jr.(29)..................     21,319          *            6,329           14,990          *
Robert H. Neugebauer(30)..................     17,813          *           10,913            6,900          *
Martin G. Pembroke(31)....................     18,622          *           17,622            1,000          *
Christopher S. Barnes(32).................     16,092          *            3,202           12,890          *
Robert Butendorf(33)(34)..................     16,592          *            8,202            8,390          *
Judith S. Neugebauer(35)..................     14,258          *           11,158            3,100          *
Robert C. Damron..........................     13,315          *            9,065            4,250          *
60
61
BENEFICIAL             NUMBER OF        BENEFICIAL OWNERSHIP
                                               OWNERSHIP PRIOR         SHARES WHICH              AFTER
                                             TO THIS OFFERING(1)       MAY BE SOLD        THIS OFFERING(1)(3)
                                            ---------------------      PURSUANT TO       ---------------------
                                            NUMBER OF                      THIS          NUMBER OF
                                            SHARES(46)    PERCENT     PROSPECTUS(2)      SHARES(46)    PERCENT
NAME OF BENEFICIAL OWNER(1)                 ----------    -------    ----------------    ----------    -------
Ronald D. Miller(36)......................     13,940          *            6,323            7,617          *
Jeffrey Holmes............................     13,303          *            6,803            6,500          *
David L. Armstrong(37)....................      3,844          *            2,594            1,250          *
Amy Weasler...............................      4,695          *            2,595            2,100          *
Norman C. Gerlach(38).....................     10,353          *            6,408            3,945          *
James Schultz(39).........................      9,711          *            8,561            1,150          *
Jane E. Pegelow(40).......................      7,197          *            6,408              789          *
Mark W. Johnson...........................      6,061          *            3,561            2,500          *
Kenneth Salmon............................      3,204          *            3,204               --         --
Oyvind Solvang............................      6,408          *            6,408               --         --
Douglas L. Gessl(41)......................     10,047          *            9,047            1,000          *
Gregory T. Gorlinski......................      1,820          *            1,820               --         --
Stephen A. Schlueter......................      3,845          *            3,845               --         --
Bradley J. Simenz.........................      1,922          *            1,922               --         --
Matt D. Guerink(42).......................     26,309          *           18,419            7,890          *
Ronald A. White(43)(44)...................     18,213          *           13,768            4,445          *
Mark S. Marcon(36)........................     10,299          *            4,381            5,918          *
All Directors and Executive Officers as a
  Group (14 persons, including the
  above)..................................  6,278,622       31.2%         103,656        6,174,966       31.9%
------------------------------
   * Less than one percent
 (1) Beneficial ownership is determined in accordance with rules of the
     Commission and includes general voting power or investment power with
     respect to securities. Shares of Common Stock subject to options and
     warrants currently exercisable or exercisable within sixty (60) days of
     June 30, 1998 are deemed outstanding for computing the percentage of the
     person holding such options, but are not deemed outstanding for computing
     the percentage of any other person. Unless otherwise indicated, the address
     of each of the beneficial owners identified is One Beacon Street, Boston,
     MA 02108.
 
 (2) Unless otherwise noted, each Selling Stockholder maintains a principal
     place of business at Cleary Gull Reiland & McDevitt Inc., 100 E. Wisconsin
     Avenue, Milwaukee, Wisconsin 53202.
 
 (3) Assumes that each Selling Stockholder will sell all of the Shares set forth
     above under "Shares Which May Be Sold Pursuant to This Prospectus". There
     can be no assurance that the Selling Stockholders will sell all or any of
     the Shares offered hereunder.
 
 (4) Each of THL Equity Advisors III, L.P. ("Advisors III"), the general partner
     of Thomas H. Lee Equity Fund III, L.P. and Thomas H. Lee Foreign Fund III,
     L.P., and THL Equity Trust III, the general partner of Advisors III, also
     may be deemed to be beneficial owners of the 4,305,212 shares of Common
     Stock held by Thomas H. Lee Equity Fund III, L.P. and the 266,394 shares of
     Common Stock held by Thomas H. Lee Foreign Fund III, L.P. Each of Advisors
     III and THL Equity Trust III disclaim beneficial ownership of such shares.
     Each of Advisors III and THL Equity Trust III maintains a principal
     business address c/o Thomas H. Lee Company, 75 State Street, Boston, MA
     02109.
 
 (5) Includes 10,908 shares of Common Stock which Mr. Goldsmith has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
                                       61
62
 
 (6) Includes 7,272 shares of Common Stock which Mr. Dennis has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
 (7) Includes 5,818 shares of Common Stock which Mr. McKay has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
 (8) Includes 8,908 shares of Common Stock which Mr. Yevich has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
 (9) Includes 8,908 shares of Common Stock which Mr. Luikart has the right to
     acquire pursuant to the 1996 Stock Option Plan.
 
(10) Includes the shares of Common Stock held by Thomas H. Lee Equity Fund III,
     L.P., Thomas H. Lee Foreign Fund III, L.P. and THL-CCI, L.P. ("THL-CCI"),
     which Mr. Harkins may be deemed to beneficially own by virtue of his
     position as a Trustee of THL Equity Trust III and officer of THL Investment
     Management Corp., the general partner of THL-CCI. Mr. Harkins disclaims
     beneficial ownership of such additional shares. Mr. Harkins maintains his
     principal business address c/o Thomas H. Lee Company, 75 State Street,
     Boston, MA, 02109.
 
(11) Includes the shares of Common Stock held by Thomas H. Lee Equity Fund III,
     Thomas H. Lee Foreign Fund III, L.P. and THL-CCI, which Mr. Boll may be
     deemed to beneficially own by virtue of his position as officer of each of
     THL Equity Trust III and THL Investment Management Corp. Mr. Boll disclaims
     beneficial ownership of such additional shares. Mr. Boll maintains his
     principal business address c/o Thomas H. Lee Company, 75 State Street,
     Boston, MA 02109.
 
(12) Includes the shares of Common Stock held by Thomas H. Lee Equity Fund III,
     L.P., Thomas H. Lee Foreign Fund III, L.P. and THL-CCI, which Mr. Hagerty
     may be deemed to beneficially own by virtue of his position as officer of
     each of THL Equity Trust III and THL Investment Management Corp. Mr.
     Hagerty disclaims beneficial ownership of such additional shares. Mr.
     Hagerty maintains his principal business address c/o Thomas H. Lee Company,
     75 State Street, Boston, MA, 02109.
 
(13) Includes the shares of Common Stock held by Thomas H. Lee Equity Fund III,
     L.P., Thomas H. Lee Foreign Fund III, L.P. and THL-CCI, which Mr. Lawry may
     be deemed to beneficially own by virtue of his position as officer of each
     of THL Equity Trust III and THL Investment Management Corp. Mr. Lawry
     disclaims beneficial ownership of such additional shares. Mr. Lawry
     maintains his principal business address c/o Thomas H. Lee Company, 75
     State Street, Boston, MA, 02109.
 
(14) Mr. Churchill also may be deemed to be the beneficial owner the shares of
     Common Stock held by SCP Private Equity L.P. by virtue of his position as
     officer of the general partner of SCP Private Equity, L.P. Mr. Churchill
     disclaims beneficial ownership of such additional shares. Mr. Churchill
     maintains his principal business address c/o SCP Private Equity, L.P., 800
     The Safeguard Building, 435 Devon Park Drive, Wayne, PA, 19087.
 
(15) Mr. Harris maintains a principal business address c/o HomeSide Lending,
     Inc., 7301 Bay Meadows Way, Jacksonville, FL 32256.
 
(16) Includes 3,551 shares of Common Stock which Mr. Cleary has the right to
     acquire pursuant to the 1998 Plan.
 
(17) Includes 100 shares of Common Stock held by Mr. Cleary for the benefit of
     his children and as to which Mr. Cleary disclaims beneficial ownership.
 
(18) Includes 4,000 shares of Common Stock held in a retirement account for the
     benefit of Mr. Prokupek and 5,000 shares of Common Stock owned by Mr.
     Prokupek and his wife as joint tenants.
 
(19) Includes 1,578 shares of Common Stock which Mr. Reiland has the right to
     acquire pursuant to the 1998 Plan.
 
(20) Includes 1,973 shares of Common Stock which Mr. Locke has the right to
     acquire pursuant to the 1998 Plan.
 
(21) Includes 15,780 shares of Common Stock which Mr. Syburg has the right to
     acquire pursuant to the 1998 Plan.
 
(22) Includes 3,945 shares of Common Stock which Mr. Peterson has the right to
     acquire pursuant to the 1998 Plan.
 
(23) Includes 23,670 shares of Common Stock which Mr. Eastman has the right to
     acquire pursuant to the 1998 Plan.
 
(24) Includes 15,780 shares of Common Stock which Ms. Gehl has the right to
     acquire pursuant to the 1998 Plan.
 
(25) Includes 1,000 shares of Common Stock held in a retirement account for the
     benefit of Ms. Gehl.
 
(26) Includes 2,367 shares of Common Stock which Mr. Hill has the right to
     acquire pursuant to the 1998 Plan.
 
(27) Includes 2,000 shares of Common Stock held in a retirement account for the
     benefit of Mr. Barraclough.
 
(28) Includes 4,000 shares of Common Stock held in a retirement account for the
     benefit of Ms. Mategrano.
 
(29) Includes 7,890 shares of Common Stock which Mr. Hickey has the right to
     acquire pursuant to the 1998 Plan.
 
(30) Includes 10,784 shares of Common Stock held in Mr. Neugebauer's individual
     retirement account, for which Tucker Anthony acts as custodian.
 
(31) Includes 17,622 shares of Common Stock held in a retirement account for the
     benefit of Mr. Pembroke and 1,000 shares of Common Stock owned by Mr.
     Pembroke and his wife as joint tenants.
 
                                       62
63
 
(32) Includes 7,890 shares of Common Stock which Mr. Barnes has the right to
     acquire pursuant to the 1998 Plan.
 
(33) Includes 8,111 shares of Common Stock held in a retirement account for the
     benefit of Mr. Butendorf.
 
(34) Includes 7,890 shares of Common Stock which Mr. Butendorf's retirement
     account has the right to acquire pursuant to the 1998 Plan.
 
(35) Includes 5,652 shares of Common Stock held in Ms. Neugebauer's individual
     retirement account, for which Tucker Anthony acts as custodian.
 
(36) Includes 2,367 shares of Common Stock which Mr. Miller has the right to
     acquire pursuant to the 1988 Plan.
 
(37) Includes 1,922 shares of Common Stock held in Mr. Armstrong's individual
     retirement account, for which Tucker Anthony acts as custodian.
 
(38) Includes 3,945 shares of Common Stock which Mr. Gerlach has the right to
     acquire pursuant to the 1998 Plan.
 
(39) Includes 900 shares of Common Stock held in a retirement account for the
     benefit of Mr. Schultz. Also includes 250 shares of Common Stock held in a
     retirement account for the benefit of Mr. Shultz's wife and as to which Mr.
     Schultz disclaims beneficial ownership.
 
(40) Includes 789 shares of Common Stock which Ms. Pegelow has the right to
     acquire pursuant to the 1998 Plan.
 
(41) Includes 500 shares of Common Stock held in a retirement account for the
     benefit of Mr. Gessl.
 
(42) Mr. Geurink's address is 4313 West River Willows Court, Mequon, WI 53092.
 
(43) Mr. White's address is 3465 North Lake Drive, Milwaukee, WI 53211.
 
(44) Includes 500 shares of Common Stock held in a retirement account for the
     benefit of Mr. White.
 
(45) Mr. Marcon's address is 11500 MacApline Court, No. 736, Glen Allen, VA.
 
(46) Includes shares which the Selling Stockholders have the right to acquire
     pursuant to options granted under the 1998 Plan. Such options were received
     by the Selling Stockholders pursuant to the Agreement in exchange for
     fully-vested options which were granted to the Selling Stockholders under
     the Cleary Gull 1996 Executive Stock Option Plan prior to the Cleary Gull
     Acquisition.
 
                                       63
64
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
THE ACQUISITION
 
     On November 29, 1996, the Acquisition was completed pursuant to the terms
of the Contribution Agreement, dated October 4, 1996 (the "Contribution
Agreement").
 
     Under the terms of the Contribution Agreement, THL, SCP and approximately
350 employee investors (the "Employee Investors") contributed to the Company an
aggregate of $75,000,000 in exchange for shares representing approximately 95%
of the then outstanding shares of the Company. THL contributed $39,931,200 in
exchange for approximately 51%. SCP contributed $9,982,800 in exchange for
approximately 13%, and the Employee Investors contributed an aggregate of
$25,086,000 in exchange for approximately 31%. Hancock contributed 100% of the
outstanding capital stock of the Predecessor Company to the Company in exchange
for $180,000,000 in cash and 4.999% of the Company's outstanding capital stock.
The consideration paid to Hancock was financed with the $75,000,000 equity
contribution of THL, SCP and the Employee Investors, $85,000,000 of bank
financing under the Credit Facility and $20,000,000 of excess cash of the
Company. In connection with the Acquisition, the Company also repaid its
existing debt to Hancock totaling approximately $32,500,000. Approximately
$25,800,000 of the debt was paid with bank financing and approximately
$6,700,000 was paid from excess cash of the Company.
 
     Under the terms of the Contribution Agreement and a Tax Matters Agreement
(the "Tax Matters Agreement") entered into at the closing of the Acquisition,
each of the Company and Hancock agreed to indemnify the other party for breaches
of representations, warranties and covenants contained in the Contribution
Agreement, and Hancock has agreed to indemnify the Company for certain specified
matters. Each party's right to indemnification for breaches of any
representations and warranties contained in the Contribution Agreement survives
the closing until April 1, 1998, with the exception of certain representations
and warranties relating to authorization, validity and title to shares which
continue beyond such date. In addition, indemnification for breaches of certain
covenants contained in the Contribution Agreement, such as confidentiality and
non-competition, survive beyond April, 1998. With respect to most other claims,
if any, based on breaches of representations or warranties, a party providing
indemnification is liable for all of the other party's losses in excess of $1.75
million. Hancock's liability for all indemnification obligations under the
Contribution Agreement is limited to $30 million, except with respect to
representations regarding capitalization and share ownership and certain
covenants. In addition, the Chief Executive Officer of the Company agreed in a
separate agreement to contribute towards Hancock's indemnification obligations
for breaches of certain representations one-third of any amounts paid by Hancock
up to a maximum of $250,000.
 
     The Contribution Agreement provides that following the closing of the
Acquisition, the Company and its affiliates have the exclusive right to use all
names incorporating "Freedom", "Tucker Anthony" or "Sutro" or to use the
Freedom, Tucker Anthony or Sutro logos. Hancock agreed to cause the mutual funds
managed by its affiliates to change their names to exclude the words "Freedom,"
"Tucker Anthony" or "Sutro" from their names and to no longer use any such names
or confusingly similar names, subject to the continuation of the use of the
"Freedom" name by Hancock for a period ending April 30, 1998 for certain
purposes relating to mutual funds advised by its affiliates. In addition, the
Company agreed that after the closing date of the Acquisition the Company and
its affiliates would not have any right to use names incorporating "John
Hancock" or use any John Hancock logo, and the Company agreed to discontinue the
use of any such names and logos, provided that the Company has no liability to
Hancock for any incidental or accidental use of such names for a twelve month
period following the closing date if it is attempting in good faith to
discontinue such use and does so when it becomes aware of such use.
 
     In connection with the Acquisition, the Company and certain of its
stockholders entered into certain agreements described below affecting the
rights and obligations of the Company and its affiliates.
 
     Tax Matters Agreement.  Pursuant to the Tax Matters Agreement, the Company
assumed responsibility for all federal, state and local taxes of the Company
beginning in 1996, exclusive of (i) 50% of any sales or transfer taxes triggered
by the Acquisition and (ii) certain taxes for which Hancock has agreed to
indemnify the Company. Amounts paid by the Company in respect of its obligations
under the Tax Matters Agreement
 

                                       64
65
 
were treated by Hancock and the Company as an adjustment to the amount received
by Hancock pursuant to the Contribution Agreement.
 
     Transition Services Agreement.  At the closing of the Acquisition, the
Company and Hancock entered into a Transition Services Agreement (the
"Transition Services Agreement") pursuant to which, among other things, the
parties have provided for the continuation for specified periods of time of
certain services historically provided by Hancock to the Company and its
subsidiaries at market rates. These services included certain employee benefits
and insurance coverage, which are no longer provided, and access to telephone
service rates which is expected to continue until August 2000. The Company paid
Hancock $6.1 million under the Transition Services Agreement during 1997.
 
     Additional Share Agreement.  Upon consummation of the Acquisition, the
Company entered into an Additional Share Agreement (the "Additional Share
Agreement") with Hancock pursuant to which Hancock is entitled to receive, for
no additional consideration, five percent of the number of shares issued
pursuant to any incentive stock plan adopted by the Company prior to November
29, 1998, up to a maximum of 88,609 shares of Common Stock.
 
STOCKHOLDERS AGREEMENT
 
     The Stockholders Agreement among certain of the existing stockholders of
the Company (the "Stockholders Agreement") provides that THL may require the
Company to effect the registration of shares of Common Stock held by THL for
sale to the public on two occasions, subject to certain limitations. The
Stockholders Agreement further provides that, at any time following the first
offering of the Common Stock of the Company to the public, SCP may require the
Company to effect the registration of shares of Common Stock held by SCP for
sale to the public and after the second offering, the employees party to such
agreements may require the Company to effect two such registrations. In
addition, under the terms of the Stockholders Agreement, if the Company proposes
to register any of its shares under the Securities Act, whether for its own
account or otherwise, any holders of the Company's registrable shares party to
the Stockholders Agreement are entitled to notice of such registration and are
entitled to include their shares therein, subject to certain conditions and
limitations. All fees, costs, and expenses (other than underwriting discounts
and commissions transfer taxes and attorneys' fees) of any registration effected
pursuant to the Stockholders Agreement, will be paid by the Company. The
Stockholders Agreement also grants certain "tag-along" rights to the parties in
the event THL enters into a single transaction to sell more than 50% of the
stock acquired by it in the Acquisition.
 
EMPLOYMENT AGREEMENTS
 
     Mr. Goldsmith is employed pursuant to a three year employment agreement
expiring on December 31, 1999 renewable annually thereafter. Mr. Goldsmith is
entitled to receive such annual base salary and bonus compensation as is agreed
to by Mr. Goldsmith and the Company from time to time, provided that he is
entitled to receive minimum cash compensation in any calendar year of at least
$750,000. Mr. Goldsmith is also entitled to participate in the employee benefit
and incentive compensation plans that the Company makes available to its key
executives. If Mr. Goldsmith's employment is terminated by the Company without
cause or if he resigns for certain enumerated reasons, such as a reduction in
executive duties, a decrease in compensation or benefits or default by the
Company ("Good Reason"), Mr. Goldsmith is entitled to receive cash compensation
at his then current rate of pay and benefits through the end of the
twenty-fourth month following such date of termination. Such amount shall be
payable in a lump sum amount equal to $500,000 at the time of termination with
the remaining amounts paid in equal monthly installments, plus interest. In
addition, in the event of any such termination, any unvested stock options
granted to Mr. Goldsmith shall become fully vested. If Mr. Goldsmith's
employment is terminated for cause or if he resigns other than for Good Reason,
he shall be entitled to receive only that compensation accrued through the date
of termination. Mr. Goldsmith's employment agreement contains a covenant not to
solicit any of the Company's clients, officers, senior managers or senior
investment executives for a period of two years following termination by the
Company without cause or by Mr. Goldsmith for Good Reason, or for a period of
six months following termination by Mr. Goldsmith for any other reason.

 
                                       65
66
 
     Mr. Thomas is employed pursuant to a two year employment agreement expiring
on December 3, 1999. Mr. Thomas is entitled to receive such annual base salary
and bonus compensation as is agreed to by Mr. Thomas and the Company from time
to time, provided that he is entitled to receive minimum cash compensation in
any calendar year of at least $700,000. Mr. Thomas is also entitled to
participate in the employee benefit and incentive compensation plans that the
Company makes available to its key executives. If Mr. Thomas' employment is
terminated by the Company without cause or if he resigns for Good Reason, Mr.
Thomas is entitled to receive cash compensation at his then current rate of pay
and benefits through the end of the twenty-fourth month following such date of
termination. Such amount shall be payable in a lump sum amount equal to $500,000
at the time of termination with the remaining amounts paid in equal monthly
installments, plus interest. In addition, in the event of any such termination,
any unvested stock options granted to Mr. Thomas shall become fully vested and
immediately exercisable. If Mr. Thomas' employment is terminated for cause or if
he resigns other than for Good Reason, he shall be entitled to receive only that
compensation accrued through the date of termination. Mr. Thomas' employment
agreement contains a covenant not to solicit any of the Company's clients,
officers, senior managers or senior investment executives for a period of two
years following termination by the Company without cause or by Mr. Thomas for
Good Reason, or for a period of six months following termination by Mr. Thomas
for any other reason.
 
     Mr. Dennis is employed pursuant to a two year employment agreement with the
Company which expires May 11, 1999. Mr. Dennis was entitled to base salary of
$150,000 during the first year of employment and $400,000 during the second year
of employment. In addition, the Company loaned Mr. Dennis $250,000 upon
commencement of his employment which was forgiven on May 12, 1998. He is
entitled to a minimum annualized bonus of $200,000 for 1998, plus an additional
$400,000 in the aggregate if the Company attains certain performance targets in
each of the first two twelve month periods of his employment with the Company.
Mr. Dennis is eligible to receive additional merit bonuses as determined by the
Board of Directors of the Company. If, prior to May 12, 2001, Mr. Dennis'
employment is terminated by the Company without cause or if he resigns for Good
Reason, he shall be entitled to receive the greater of his salary and bonus
compensation through the end of his initial two year term of employment, if any,
or $600,000. If he is terminated for cause or resigns other than for Good
Reason, Mr. Dennis shall only be entitled to receive the compensation accrued up
to the date of termination or resignation. Mr. Dennis is also entitled to
participate in the Company's benefit and incentive plans to the same extent as
any senior management executive of the Company.
 
OTHER TRANSACTIONS WITH MANAGEMENT
 
     Compensation and Benefits.  The executive officers of the Company receive
compensation, bonuses and other benefits under various employee benefit plan
arrangements maintained by the Company and its subsidiaries. The executive
officers participated in such benefit plans under the same terms generally made
available to other similarly situated employees of the Company or its
subsidiaries with similar responsibilities and levels of compensation.
 
     Outstanding Indebtedness.  Certain executive officers and directors borrow
from time to time under margin accounts maintained at Wexford. All such
borrowings on margin are made in the ordinary course of business, are made on
substantially the same terms, including interest rates and collateral, as those
prevailing for margin transactions with other persons at the time made and do
not involve more than the normal risk of collectibility or other unfavorable
features.
 
     Investment Partnerships.  Certain executive officers of the Company are
among the limited partners of certain investment vehicles organized to allow
these employees to invest in funds and other investment vehicles sponsored by
certain of the Company's clients and on a co-investment basis in transactions in
which the Company's clients also invest (collectively, the "Employee Investment
Partnerships"). In certain instances, the Company lends to the limited partners
the amounts used by them to invest in the Employee Investment Partnerships.
Limited partnership interests owned by employees are subject to redemption by
the applicable Employee Investment Partnership if the employee terminates
employment with the Company for any reason during a three or, in certain
instances, four year period following his or her initial investment in the
Employee Investment Partnership at the lesser of (i) his or her paid-in capital
contribution, less distributions

 
                                       66
67
 
paid prior to such redemption, or (ii) the value of the limited partnership
interest. Such redemptions are made at the option of the applicable Employee
Investment Partnership. Any outstanding loans are also callable by the Company
at the time the limited partner ceases to be an employee of the Company. Through
June 30, 1998, the Employee Investment Partnerships have invested $27.2 million
in 45 investments and $25.4 million has been contributed to date by the limited
partners. The limited partners have received distributions totaling $57.3
million through June 30, 1998, including $7.1 million, $23.1 million, $4.7
million and $2.1 million during 1995, 1996, 1997 and 1998, respectively. Amounts
contributed to the Employee Investment Partnerships by each of the Company's
executive officers and distributions made during 1995, 1996, 1997 and 1998, and
the outstanding balances of related loans made to them by the Company as of June
30, 1998 are set forth below:
AMOUNT       DISTRIBUTIONS      LOAN
NAME                                                 CONTRIBUTED        MADE         BALANCE
John H. Goldsmith..................................   $139,466        $359,763       $ 22,123
Gregory N. Thomas..................................         --              --             --
William C. Dennis, Jr. ............................         --              --             --
Kevin J. McKay.....................................    172,083          71,812         92,568
Robert H. Yevich...................................    113,065         254,700         22,123
John F. Luikart....................................    180,188          13,944         70,668
Henry Greenleaf....................................         --              --             --
David P. Prokupek..................................         --              --             --
TRANSACTIONS WITH HANCOCK PRIOR TO THE ACQUISITION
 
     Prior to the Acquisition the Predecessor Company, Hancock and their
respective affiliates engaged in a variety of transactions in the ordinary
course of business. As a general rule, the Predecessor Company did not retain
independent third parties to evaluate transactions with Hancock and there was no
independent committee of the Board of Directors of the Predecessor Company to
evaluate such transactions. Notwithstanding this fact, the Company believes that
each of the arrangements described below was made on an arms-length basis. All
of the transactions or relationships described below were completed or
terminated at or prior to the time of the Acquisition. The Company anticipates
that future transactions with Hancock, if any, will be made on an arms-length
basis.
 
     Loans, Advances and Dividends.  The aggregate outstanding amount of
payables, primarily inter-company tax allocations and working capital financing,
between the Predecessor Company and Hancock and its affiliates was $233.7
million as of December 31, 1995 and $32.5 million as of November 29, 1996, which
was repaid in full in connection with the Acquisition. In addition, the
Predecessor Company paid dividends to Hancock in the amount of $5.8 million and
none, respectively, during 1995 and 1996.
 
     Other Transactions with Hancock.  As a wholly-owned subsidiary of Hancock,
the Predecessor Company participated in group insurance arrangements arranged
through Hancock. In addition, the Predecessor Company participated in certain
shared services provided by Hancock to certain of its affiliates, including
limited legal and other support functions. The Predecessor Company paid Hancock
its allocable share of the cost of such insurance and other items, which
amounted to $11.6 million and $11.1 million during 1995 and 1996, respectively.
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The authorized capital stock of the Company consists of 60,000,000 shares
of Common Stock, $.01 par value per share, of which 19,993,833 shares are
outstanding, and 1,000,000 shares of Preferred Stock, $.01 par value per share,
none of which are outstanding. The following description of the capital stock of
the Company and certain provisions of the Company's Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Bylaws is a summary and
is qualified in its entirety by the provisions of the Certificate of
Incorporation and Bylaws, copies of which have been filed as exhibits to the
Company's Registration Statement of which this Prospectus is a part.
 
                                       67
68
 
COMMON STOCK
 
     Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of the stockholders, including the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election if they choose to do so. The Certificate of Incorporation
does not provide for cumulative voting for the election of directors. Holders of
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, and shall be entitled to receive, pro rata, all assets of
the Company available for distribution to such holders upon liquidation. Holders
of Common Stock have no preemptive, subscription or redemption rights.
 
PREFERRED STOCK
 
     The Company is authorized to issue "blank check" preferred stock
("Preferred Stock"), which may be issued from time to time in one or more series
upon authorization by the Company's Board of Directors. The Board of Directors,
without further approval of the stockholders, is authorized to fix the dividend
rights and terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, and any other rights, preferences, privileges and
restrictions applicable to each series of the Preferred Stock. The issuance of
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes could, among other things, adversely
affect the voting power of the holders of Common Stock and, under certain
circumstances, make it more difficult for a third party to gain control of the
Company, discourage bids for the Company's Common Stock at a premium or
otherwise adversely affect the market price of the Common Stock. The Company
currently has no plans to issue any Preferred Stock.
 
CERTAIN CERTIFICATE OF INCORPORATION, BYLAW AND STATUTORY ANTI-TAKEOVER
PROVISIONS AFFECTING STOCKHOLDERS
 
     Section 203 of Delaware Law.  The Company is subject to the "business
combination" statute of the Delaware General Corporation Law. In general, such
statute prohibits a publicly held Delaware corporation from engaging in various
"business combination" transactions with any "interested shareholder" for a
period of three years after the date of the transaction in which the person
became an "interested shareholder," unless (i) the transaction is approved by
the Board of Directors prior to the date the interested shareholder obtained
such status, (ii) upon consummation of the transaction which resulted in the
shareholder becoming an "interested shareholder," the "interested shareholder"
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned by (a) persons who are directors and
also officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (iii) on or subsequent
to such date the "business combination" is approved by the Board of Directors
and authorized at an annual or special meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the "interested shareholder." A "business combination" includes
mergers, asset sales and other transactions resulting in a financial benefit to
a shareholder. An "interested shareholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's voting stock. By virtue of the Company's decision not to elect
out of the statute's provisions, the statute applies to the Company. No current
stockholders of the Company are "interested stockholders" because their
acquisition of shares was approved by the Board of Directors of the Company. The
statute could prohibit or delay the accomplishment of mergers or other takeover
or change in control attempts with respect to the Company and, accordingly, may
discourage attempts to acquire the Company.
 
     Directors Liability.  The Certificate of Incorporation provides that no
director shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director notwithstanding any
provision of law imposing such liability, provided that, to the extent provided
by applicable law, the Certificate of Incorporation shall not eliminate the
liability of a director for (i) any breach of the director's duty of loyalty to
the Company or its stockholders; (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) acts
or omissions in respect of certain unlawful dividend payments or stock
redemptions or repurchases; or (iv) any transaction from which such

 
                                       68
69
 
director derives improper personal benefit. The effect of this provision is to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages against a
director for breach of the fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. The limitations
summarized above, however, do not affect the ability of the Company or its
stockholders to seek non-monetary based remedies, such as an injunction or
rescission, against a director for breach of his fiduciary duty nor would such
limitations limit liability under the Federal securities laws. The Company's
Bylaws provide that the Company shall, to the extent permitted by Delaware Law,
as amended from time to time, indemnify and advance expenses to the currently
acting and former directors, officers, employees and agents of the Company or of
another corporation, partnership, joint venture, trust or other enterprise if
serving at the request of the Company arising in connection with their acting in
such capacities.
 
REGISTRATION RIGHTS OF CERTAIN HOLDERS
 
     Under the terms of the Stockholders' Agreement, if the Company proposes to
register any of its securities under the Securities Act, whether for its own
account or otherwise, holders of approximately 10,762,509 shares (the
"Registrable Shares") of Common Stock are entitled to notice of such
registration and are entitled to include their shares therein, subject to
certain conditions and limitations. The holders of Registrable Shares also may
require the Company to effect the registration of their Registrable Shares for
sale to the public, subject to certain conditions and limitations. None of the
holders of Registrable Shares has elected to register their Registrable Shares
for sale to the public in connection with this offering. See "Certain
Relationships and Related Transactions -- Stockholders Agreement".
 
TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, of New York.

 
                                       69
70
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     The Company has outstanding 19,993,833 shares of Common Stock assuming no
exercise of options after June 30, 1998. Of these shares, 9,231,324 shares are
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 described below. The remaining 10,762,509 shares of Common
Stock outstanding upon closing of the offering are "restricted securities" as
that term is defined in Rule 144.
 
     On September 29, 1998, an aggregate of 10,762,509 shares will become
immediately eligible for sale subject to the timing, volume, and manner of sale
restrictions of Rule 144. Commencing December 1998, all outstanding shares not
owned by affiliates of the Company (currently 4,674,785 shares) will be eligible
for sale pursuant to Rule 144(k). In addition, 449,900 additional shares of
Common Stock subject to outstanding vested stock options could also be sold as
of June 30, 1998, subject in some cases to compliance with certain volume
limitations as described below. On various dates through May 1, 2002, 183,750
shares of Common Stock deposited in escrow pursuant to the Agreement will be
released to the extent no claims have been made against such shares. Commencing
on May 1, 1999, such shares will be eligible for sale pursuant to Rule 144.
 
     In general, under Rule 144, as amended, a person (or persons whose shares
are aggregated) who has beneficially owned shares for at least one year
(including the holding period of any prior owner except an affiliate from whom
such shares were purchased) is entitled to sell in "brokers' transactions" or to
market makers, within any three-month period commencing 90 days after the date
of this Prospectus, a number of shares that does not exceed the greater of (i)
one percent of the number of shares of Common Stock then outstanding
(approximately 199,938 shares) or (ii) generally, the average weekly trading
volume in the Common Stock during the four calendar weeks preceding the required
filing of a Form 144 with respect to such sale. Sales under Rule 144 are
generally subject to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an affiliate
of the Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner other than an affiliate from
whom such shares were purchased), is entitled to sell such shares without having
to comply with the manner of sale, public information, volume limitation or
notice provisions of Rule 144. Under Rule 701, persons who purchase shares upon
exercise of options granted prior to the effective date of the initial public
offering are entitled to sell such shares 90 days after the effective date of
the initial public offering in reliance on Rule 144, without having to comply
with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.
 
     The holders of an aggregate of 10,762,509 shares of Common Stock or their
transferees are entitled to certain rights with respect to the registration of
such shares under the Securities Act. See "Description of Capital
Stock-Registration Rights of Certain Holders."
 
                              PLAN OF DISTRIBUTION
 
     The Shares covered by this Prospectus may be offered and sold from time to
time by the Selling Stockholders. The Selling Stockholders received their Shares
in connection with the Cleary Gull Acquisition pursuant to the Agreement. The
Agreement required the Company to file the Registration Statement of which this
Prospectus is a part with the Commission and have it declared effective within
181 days after the closing date of the Company's initial public offering. The
Selling Stockholders will act independently of the Company in making decisions
with respect to the timing, manner and size of each sale. The Selling
Stockholders may sell the Shares being offered hereby on the New York Stock
Exchange, or otherwise, at prices and under terms then prevailing or at prices
related to the then current market price or at negotiated prices. The Shares may
be sold by one or more of the following means of distribution: (a) a block trade
in which the broker-dealer so engaged will attempt to sell Shares as agent, but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this Prospectus; (c) an
over-the-counter distribution in accordance with the rules of the New York Stock
Exchange; (d) ordinary brokerage transactions and transactions in which the
broker
 
                                       70
71
 
solicits purchasers; and (e) in privately negotiated transactions. To the extent
required, this Prospectus may be amended and supplemented from time to time to
describe a specific plan of distribution. In connection with distributions of
the Shares or otherwise, the Selling Stockholders may enter into hedging
transactions with broker-dealers or other financial institutions. In connection
with such transactions, broker-dealers or other financial institutions may
engage in short sales of the Company's Common Stock in the course of hedging the
positions they assume with Selling Stockholders. The Selling Stockholders may
also sell the Company's Common Stock short and redeliver the Shares to close out
such short positions. The Selling Stockholders may also enter into option or
other transactions with broker-dealers or other financial institutions which
require the delivery to such broker-dealer or other financial institution of
Shares offered hereby, which Shares such broker-dealer or other financial
institution may resell pursuant to this Prospectus (as supplemented or amended
to reflect such transaction). The Selling Stockholders may also pledge Shares to
a broker-dealer or other financial institution, and upon a default, such
broker-dealer or other financial institution, may effect sales of the pledged
Shares pursuant to this Prospectus (as supplemented or amended to reflect such
transaction). In addition, any Shares that qualify for sale pursuant to Rule 144
may be sold under Rule 144 rather than pursuant to this Prospectus.
 
     In effecting sales, brokers, dealers or agents engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales, and any such commissions, discounts or concessions may be deemed to be
underwriting discounts or commissions under the Securities Act. The Company will
pay all expenses incident to the offering and sale of the Shares to the public
other than any commissions and discounts of underwriters, dealers or agents and
any transfer taxes.
 
     In order to comply with the securities laws of certain states, if
applicable, the Shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
 
     The Company has advised the Selling Stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of Shares in the
market and to the activities of the Selling Stockholders and their affiliates.
In addition, the Company will make copies of this Prospectus available to the
Selling Stockholders and has informed them of the need for delivery of copies of
this Prospectus to purchasers at or prior to the time of any sale of the Shares
offered hereby. The Selling Stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.
 
     At the time a particular offer of Shares is made, if required, a Prospectus
Supplement will be distributed that will set forth the number of Shares being
offered and the terms of the offering, including the name of any underwriter,
dealer or agent, the purchase price paid by any underwriter, any discount,
commission and other item constituting compensation, any discount, commission or
concession allowed or reallowed or paid to any dealer, and the proposed selling
price to the public. There can be no assurance that the Selling Stockholders
will sell all or any of the Shares.
 
     The Company has agreed with the Selling Stockholders to keep the
Registration Statement of which this Prospectus constitutes a part effective for
up to 185 days following the effectiveness of the Registration Statement. The
Company intends to de-register any of the Shares not sold by the Selling
Stockholders at the end of such period; however, it is anticipated that at such
time any unsold shares may be freely tradeable subject to compliance with Rule
144 of the Securities Act.

 
                                       71
72
 
                                 LEGAL MATTERS
 
     The validity of the shares of Common Stock offered hereby will be passed
upon for the Selling Stockholders by Hutchins, Wheeler & Dittmar, A Professional
Corporation, Boston, Massachusetts. Certain stockholders of Hutchins, Wheeler &
Dittmar are limited partners in THL-CCI, L.P. and, as a result, may be deemed to
have a beneficial interest in 6,363 shares of Common Stock.
 
                                    EXPERTS
 
     The consolidated statements of financial condition of the Company as of
December 31, 1996 and 1997 and the related consolidated statements of income,
changes in stockholders' equity and cash flows for the one month period ended
December 31, 1996 and the year ended December 31, 1997 and the consolidated
statements of income, changes in stockholders' equity and cash flows of the
Predecessor Company for the period from January 1, 1996 to November 29, 1996 and
for the year ended December 31, 1995, included in this Prospectus, have been
included herein in reliance on the report of Ernst & Young LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
 
                             ADDITIONAL INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such Common Stock, reference is
hereby made to such Registration Statement and to the exhibits and schedules
filed therewith. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to are not necessarily complete, and
in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. A copy of the Registration
Statement may be inspected by anyone without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
certain fees prescribed by the Commission. The Commission maintains a World Wide
Website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the website is http://www.sec.gov.
 
     The Company intends to furnish its stockholders with annual reports
containing financial statements audited by the Company's independent public
accountants and quarterly reports for the first three fiscal quarters of each
fiscal year containing unaudited interim financial information.

 
                                       72
73
 
               INDEX TO FINANCIAL STATEMENTS
PAGE
                                                              ----
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors..............................  F-2
Consolidated Statements of Financial Condition -- December
  31, 1996 and 1997.........................................  F-3
Consolidated Statements of Income -- For the year ended
  December 31, 1995, eleven months ended November 29, 1996,
  one month ended December 31, 1996 and year ended December
  31, 1997..................................................  F-4
Consolidated Statements of Changes in Stockholders'
  Equity -- For the year ended December 31, 1995, eleven
  months ended November 29, 1996, one month ended December
  31, 1996 and year ended December 31, 1997.................  F-5
Consolidated Statements of Cash Flows -- For the year ended
  December 31, 1995, eleven months ended November 29, 1996,
  one month ended December 31, 1996 and year ended December
  31, 1997..................................................  F-6
Notes to Consolidated Financial Statements..................  F-7
F-1
74
 
                         REPORT OF INDEPENDENT AUDITORS
 
To the Stockholders and Board of Directors of
  Freedom Securities Corporation
 
     We have audited the accompanying consolidated statements of financial
condition of Freedom Securities Corporation ("Company") as of December 31, 1996
and 1997 and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for the one month period ended December 31,
1996 and the year ended December 31, 1997, and the accompanying consolidated
statements of income, changes in stockholders' equity and cash flows of Freedom
Securities Holding Corporation ("Predecessor Company") for the year ended
December 31, 1995 and for the period January 1, 1996 to November 29, 1996. These
financial statements are the responsibility of the management of the Company and
the Predecessor Company. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. 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 Freedom
Securities Corporation at December 31, 1996 and 1997 and the consolidated
results of its operations and its cash flows for the one month period ended
December 31, 1996 and for the year ended December 31, 1997, and the consolidated
results of operations and cash flows of the Predecessor Company for the year
ended December 31, 1995 and for the period January 1, 1996 to November 29, 1996
in conformity with generally accepted accounting principles.
 
                                            /s/ ERNST & YOUNG, LLP
 
New York, New York
March 10, 1998
 

                                       F-2
75
 
                         FREEDOM SECURITIES CORPORATION
 
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 1996 AND 1997
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1996        1997
ASSETS
Cash and cash equivalents...................................  $  7,248    $ 12,936
Receivables from brokers, dealers and others................    65,404      74,314
Securities purchased under agreements to resell.............    84,211     113,335
Securities owned, at market.................................   253,106     423,522
Fixed assets, net of accumulated depreciation and
  amortization..............................................    25,929      20,464
Goodwill, net of accumulated amortization...................    28,075      24,861
Other assets................................................    52,979      58,155
                                                              --------    --------
Total assets................................................  $516,952    $727,587
                                                              ========    ========
            LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Payables to brokers, dealers and others...................  $ 74,131    $ 59,062
  Securities sold under agreements to repurchase............    44,976          --
  Securities sold, not yet purchased, at market.............   101,140     354,565
  Accrued compensation and benefits.........................    55,503      65,653
  Accounts payable and accrued expenses.....................    50,915      44,535
  Notes payable to banks....................................   110,819     101,446
                                                              --------    --------
          Total liabilities.................................   437,484     625,261
                                                              --------    --------
Stockholders' equity:
  Common stock (21,816,000 shares authorized, 14,352,479 and
     14,840,627 shares issued in 1996 and 1997,
     respectively, $.01 par value)..........................       143         147
  Additional paid-in capital................................    78,804      83,654
  Retained earnings.........................................       740      19,438
  Subscribed stock (136,532 shares in 1997).................        --        (913)
  Treasury stock (39,723 shares in 1996, at cost)...........      (219)         --
                                                              --------    --------
     Total stockholders' equity.............................    79,468     102,326
                                                              --------    --------
          Total liabilities and stockholders' equity........  $516,952    $727,587
                                                              ========    ========
See Notes to Consolidated Financial Statements

                                       F-3
76
 
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
                       CONSOLIDATED STATEMENTS OF INCOME
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PREDECESSOR
                                                    COMPANY
                                       ----------------------------------
                                        YEAR ENDED    ELEVEN MONTHS ENDED   ONE MONTH ENDED    YEAR ENDED
                                       DECEMBER 31,      NOVEMBER 29,        DECEMBER 31,     DECEMBER 31,
                                           1995              1996                1996             1997
Revenues
  Commissions........................    $140,180          $139,018             $12,522         $167,184
  Principal transactions.............     105,789            95,481               8,350           99,269
  Investment banking.................      34,773            33,964               4,137           55,259
  Asset management...................      14,901            17,316               1,682           19,950
  Other..............................      12,766            15,218                 573           12,465
                                         --------          --------             -------         --------
          Total operating revenues...     308,409           300,997              27,264          354,127
  Interest income....................      60,116            46,486               3,361           44,056
                                         --------          --------             -------         --------
          Total revenues.............     368,525           347,483              30,625          398,183
  Interest expense...................      36,000            26,454               1,829           22,428
                                         --------          --------             -------         --------
          Net revenues...............     332,525           321,029              28,796          375,755
                                         --------          --------             -------         --------
Non-interest expenses
  Compensation and benefits..........     217,589           209,187              18,859          245,939
  Occupancy and equipment............      26,050            30,993               2,231           24,331
  Communications.....................      18,129            16,596               1,317           16,948
  Brokerage and clearance............       7,322            10,473               1,007           11,262
  Promotional........................       9,455             9,156                 818           10,308
  Other..............................      31,696            24,237               2,577           28,480
                                         --------          --------             -------         --------
          Total non-interest
            expenses.................     310,241           300,642              26,809          337,268
Acquisition interest expense.........          --                --                 567            6,052
                                         --------          --------             -------         --------
Income before income taxes...........      22,284            20,387               1,420           32,435
Income taxes.........................       9,220             8,844                 680           13,737
                                         --------          --------             -------         --------
Net income...........................    $ 13,064          $ 11,543             $   740         $ 18,698
                                         ========          ========             =======         ========
Basic earnings per share.............          --                --             $  0.05         $   1.31
                                                                                =======         ========
Diluted earnings per share...........          --                --             $  0.05         $   1.27
                                                                                =======         ========
See Notes to Consolidated Financial Statements

                                       F-4
77
 
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                       (DOLLARS AND SHARES IN THOUSANDS)
COMMON STOCK
                             ------------------     ADDITIONAL      RETAINED   SUBSCRIBED   TREASURY
                             SHARES   PAR VALUE   PAID-IN-CAPITAL   EARNINGS     STOCK       STOCK      TOTAL
PREDECESSOR COMPANY:
Balance at December 31,
  1994.....................       1     $  1         $109,748       $35,719      $  --       $  --     $145,468
Net income.................                                          13,064                              13,064
Non-cash dividend to
  Hancock..................                                          (5,751)                             (5,751)
                             ------     ----         --------       -------      -----       -----     --------
Balance at December 31,
  1995.....................       1        1          109,748        43,032         --          --      152,781
                             ------     ----         --------       -------      -----       -----     --------
Net income.................                                          11,543                              11,543
                             ------     ----         --------       -------      -----       -----     --------
Balance at November 29,
  1996.....................       1     $  1         $109,748       $54,575      $  --       $  --     $164,324
                             ======     ====         ========       =======      =====       =====     ========
FREEDOM SECURITIES
  CORPORATION(a):
Sale of Common Stock at
  November 29, 1996
  (including $3,947 of non-
  cash capital contributed
  by Hancock)..............  14,313     $143         $ 78,804       $    --      $  --       $(219)    $ 78,728
Net income.................                                             740                                 740
                             ------     ----         --------       -------      -----       -----     --------
Balance at December 31,
  1996.....................  14,313      143           78,804           740         --        (219)      79,468
                             ------     ----         --------       -------      -----       -----     --------
Sale of Common Stock.......     488        4            4,693                                             4,697
Net income.................                                          18,698                              18,698
Acquisition of treasury
  stock....................     (97)                                                          (537)        (537)
Reissuance of treasury
  stock....................      --                       157                     (913)        756           --
                             ------     ----         --------       -------      -----       -----     --------
Balance at December 31,
  1997.....................  14,704     $147         $ 83,654       $19,438      $(913)      $  --     $102,326
                             ======     ====         ========       =======      =====       =====     ========
---------------
 
(a) Reflects effect of 1.818 for 1 stock split. See Note 17.
 
                See Notes to Consolidated Financial Statements.

                                       F-5
78
 
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
PREDECESSOR COMPANY
                                            ----------------------------------
                                             YEAR ENDED    ELEVEN MONTHS ENDED   ONE MONTH ENDED    YEAR ENDED
                                            DECEMBER 31,      NOVEMBER 29,        DECEMBER 31,     DECEMBER 31,
                                                1995              1996                1996             1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................    $ 13,064          $  11,543           $     740       $  18,698
Adjustments to reconcile net income to net
  cash from operating activities:
  Depreciation............................       4,274              4,632                 304           5,128
  Amortization............................       6,403              7,807                 685           5,714
  Non-cash compensation...................          --                 --                  --           1,432
Changes in assets and liabilities
  (Increase) decrease in operating assets:
    Receivables from brokers, dealers and
      others..............................     (28,855)           105,303              19,304          (8,910)
    Receivables from customers............     (24,408)           333,252                  --              --
    Securities purchased under agreements
      to resell...........................     (26,490)            92,052              31,212         (29,124)
    Securities owned, at market...........     (73,825)            57,720              37,698        (170,416)
    Other assets..........................     (11,163)            (7,628)              3,876          (6,056)
  Increase (decrease) in operating
    liabilities:
    Short-term loans from a Hancock
      affiliate...........................      10,000           (200,000)                 --              --
    Short-term loans......................      61,535           (107,745)                 --              --
    Payables to brokers, dealers and
      others..............................      19,443            (39,937)            (33,027)        (15,069)
    Payables to customers.................      23,125           (186,206)                 --              --
    Securities sold under agreements to
      repurchase..........................      28,710            (91,795)             (5,061)        (44,976)
    Securities sold, not yet purchased, at
      market..............................       4,523              7,517             (47,088)        253,425
    Accrued compensation and benefits.....      13,066                364               2,230          10,150
    Accounts payable and accrued
      expenses............................       4,663             11,060              (7,930)         (6,380)
                                              --------          ---------           ---------       ---------
Net cash from operating activities........      24,065             (2,061)              2,943          13,616

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets.................     (10,883)            (8,417)               (112)         (1,994)
Proceeds from sale of fixed assets........          --                 --                  --             711
Purchase of Predecessor Company...........          --                 --            (180,000)             --
Acquisition related expenditures..........          --                 --              (5,740)             --
                                              --------          ---------           ---------       ---------
Net cash used in investing activities.....     (10,883)            (8,417)           (185,852)         (1,283)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock, net...          --                 --              74,781           2,728
Proceeds from notes payable to banks......          --             25,819             110,819              --
Repayment of notes payable to banks.......          --                 --                  --          (9,373)
Proceeds from notes payable to a Hancock
  affiliate...............................       6,105                 --                  --              --
Repayment of notes payable to a Hancock
  affiliate...............................      (2,400)           (33,736)                 --              --
                                              --------          ---------           ---------       ---------
Net cash from financing activities........       3,705             (7,917)            185,600          (6,645)
Increase (decrease) in cash and cash
  equivalents.............................      16,887            (18,395)              2,691           5,688
Cash and cash equivalents, beginning of
  period..................................       6,065             22,952               4,557           7,248
                                              --------          ---------           ---------       ---------
Cash and cash equivalents, end of
  period..................................    $ 22,952          $   4,557           $   7,248       $  12,936
                                              ========          =========           =========       =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION
Cash paid for:
  Income taxes............................    $  9,086          $  10,453           $   1,421       $  14,859
  Interest................................    $ 33,432          $  22,912           $   1,246       $  28,338
See Notes to Consolidated Financial Statements

                                       F-6
79
 
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     Organization and Basis of Presentation
 
     Freedom Securities Corporation (formerly JHFSC Acquisition Corp.) is a
holding company which together with its wholly owned subsidiaries (collectively,
the "Company") is a full-service, regionally focused retail brokerage 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"), Sutro & Co. Incorporated ("Sutro") and Freedom Capital
Management Corporation ("Freedom Capital").
 
     Tucker Anthony, headquartered in Boston and focused on the northeastern
United States, and Sutro, headquartered in San Francisco and focused on the
western United States, are full service regionally focused retail brokerage and
investment banking firms. Freedom Capital is the Company's investment advisory
and asset management subsidiary which is focused on public sector entities and
high net worth individuals.
 
     Principles of Consolidation
 
     All significant intercompany accounts and transactions have been eliminated
in consolidation. The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from these
estimates. Certain prior year amounts have been reclassified to conform with the
current period's financial statement presentation.
 
     The Acquisition
 
     The Company was established to facilitate a buyout of Freedom Securities
Holding Corporation (the "Predecessor Company" and formerly John Hancock Freedom
Securities Corporation). Until November 29, 1996, the Predecessor Company was a
wholly-owned subsidiary of John Hancock Mutual Life Insurance Company
("Hancock").
 
     Under terms of a Contribution Agreement dated October 4, 1996 and
consummated on November 29, 1996 among Hancock, the Company, two private
investor groups and selected employee investors, Hancock contributed 100% of the
issued and outstanding capital stock of the Predecessor Company to the Company
in exchange for 4.999% of the issued and outstanding capital stock of the
Company and an aggregate consideration of $180 million. With the consummation of
the transactions under the Contribution Agreement, the Predecessor Company
became a wholly owned subsidiary of the Company as of the close of business
November 29, 1996. Through November 29, 1996, the consolidated financial
statements present the financial condition, results of operations and cash flows
of the Predecessor Company and its subsidiaries.
 
     The Acquisition has been accounted for as a purchase and, accordingly, the
purchase price was allocated to the assets and liabilities acquired based upon
their fair values at the date of the Acquisition. The purchase price, including
acquisition costs, exceeded the fair value of net assets acquired by $28.2
million and the excess was recorded as goodwill.
 
     Wexford Arrangement
 
     Tucker Anthony and Sutro clear their securities transactions on a fully
disclosed basis through Wexford Clearing Services Corporation ("Wexford" or the
"clearing broker"), a guaranteed wholly owned subsidiary of Prudential
Securities, Inc. ("Prudential"). Prior to April 3, 1996, Tucker Anthony and
Sutro cleared their securities transactions through a wholly owned subsidiary of
the Predecessor Company. This subsidiary
 

                                       F-7
80
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
subsequently withdrew its broker-dealer registration but continues to perform
certain liaison functions and provides data processing and communications
support to its affiliates.
 
     Securities
 
     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. 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 futures and options on futures
contracts. These contracts are valued at market with related changes in
unrealized appreciation or depreciation reflected in principal transactions
revenues.
 
     Investment Banking
 
     Investment banking revenues are recorded as follows: management fees as of
the offering date; sales commissions on trade date and underwriting fees at the
time the underwriting is completed and the income is reasonably determinable.
 
     Asset Management Fees
 
     The Company earns investment advisory fees for services rendered to its
clients based on either a percentage of the average net assets managed or on a
percentage of quarter-end market value of assets managed, depending upon 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 life
of the improvements or the terms of the respective leases. Fixed assets are
stated at cost net of accumulated depreciation and amortization of $0.6 million
and $2.4 million at December 31, 1996 and 1997, respectively.
 
     Intangibles
 
     Intangibles related to the Acquisition include debt issuance costs ($2.9
million and $2.4 million at December 31, 1996 and 1997, respectively) which are
reported in other assets, and goodwill. Goodwill and debt issuance costs are
stated at cost net of accumulated amortization and are amortized on a
straight-line basis over fifteen and five years, respectively.
 
     The accumulated amortization of intangibles totaled $0.2 million and $2.7
million at December 31, 1996 and 1997, respectively.
 
     Income Taxes
 
     Through November 29, 1996, the Predecessor Company was included in the
consolidated U.S. Federal income tax return of Hancock. Pursuant to an agreement
with Hancock, the Predecessor Company's share of
 

                                       F-8
81
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
combined Federal income taxes was equivalent to the total provision or benefit
the Predecessor Company would have recorded for such taxes had they been
determined on a stand-alone basis. Pursuant to an agreement relating to the
Acquisition, Hancock assumed responsibility for all Federal, state and local
taxes of the Predecessor Company through 1995.
 
     Subsequent to the Acquisition, the Company and its subsidiaries file a
consolidated U. S. Federal income tax return. State and local taxes are computed
on a separate company basis. The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards ("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 for
future consequences of events that have been recognized in the Company's
financial statements or tax returns.
 
     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. Cash flows for the one month ended December 31, 1996 are shown net
of the effects of the purchase of the Predecessor Company.
 
     Accounting Pronouncements
 
     In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 125 introduced the
financial-components approach which focuses on the recognition of financial
assets that an entity controls and the derecognition of financial assets for
which control has been transferred. The FASB, under SFAS No. 127 "Deferral of
the Effective Date of Certain Provisions of SFAS No. 125," has deferred the
effective date of accounting for other types of transfers of financial assets,
including repurchase agreements and securities lending transactions, until
January 1, 1998. The Company does not expect the adoption of this statement to
have a material impact on the Company's consolidated financial statements.
 
2.  RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND OTHERS
 
     Included in the receivables from brokers, dealers and others are unsettled
proprietary trades and certain overnight funds with a Wexford affiliate.
Included in payables to brokers, dealers and others are the amounts due to
Wexford for collateralized financing of proprietary positions and to Freedom
Capital's transfer agent for 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.
 

                                       F-9
82
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
2.  RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND OTHERS (CONTINUED)

     Amounts receivable from and payable to brokers, dealers and others at
December 31, consist of the following:
DECEMBER 31,
                                                              ------------------
                                                               1996       1997
                                                              -------    -------
RECEIVABLES FROM BROKERS, DEALERS AND OTHERS
  Receivable from Prudential................................  $47,230    $46,129
  Unsettled proprietary trades, net.........................   18,104     24,189
  Receivables from other brokers and dealers................       70      3,996
                                                              -------    -------
                                                              $65,404    $74,314
                                                              =======    =======
DECEMBER 31,
                                                              ------------------
                                                               1996       1997
                                                              -------    -------
PAYABLES TO BROKERS, DEALERS AND OTHERS
  Payable to Wexford........................................  $32,599    $16,633
  Payable to transfer agent.................................   40,947     42,088
  Payables to other brokers and dealers.....................      585        341
                                                              -------    -------
                                                              $74,131    $59,062
                                                              =======    =======
3.  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, request customers
to deposit additional collateral or reduce securities positions 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,
1996 and 1997, there were no amounts to be indemnified to Wexford for these
accounts since the customers were able to fulfill their obligations.
 
4.  SHORT-TERM LOANS
 
     In periods prior to 1997, short-term loans with banks and a Hancock
affiliate were used to finance securities purchased by customers on margin and
proprietary inventory positions. Borrowings from the Hancock affiliate were on
an uncollateralized basis and bore interest at a rate approximating the
commercial paper rate of such affiliate. Interest expense related to these loans
was $7.7 million for the year ended December 31, 1995 and $12.1 million for the
eleven months ended November 29, 1996.
 
5.  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. At December 31, 1996 and 1997 these
agreements matured within 13 days. Securities sold under agreements to
repurchase had a weighted-average interest rate of 6.0% at December 31, 1996. 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

 
                                      F-10
83
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
5.  SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER
    AGREEMENTS TO REPURCHASE (CONTINUED)

monitoring credit exposure and collateral values on a daily basis and requiring
additional collateral to be deposited or returned when deemed appropriate.
 
6.  TRANSACTIONS WITH AFFILIATES
 
     During 1995, the Predecessor Company distributed its $5.8 million ownership
interest in JHM Capital Management Corp. to Hancock as a dividend. The earnings
prior to such distribution were not significant.
 
     Prior to November 29, 1996, the Predecessor Company had outstanding notes
payable to a Hancock affiliate which incurred interest at rates approximating
such affiliate's average cost of borrowing and were payable on demand. These
notes were repaid on November 29, 1996. Interest expense incurred relating to
these notes was $1.8 million for the year ended December 31, 1995 and $1.7
million for the eleven months ended November 29, 1996.
 
     The Predecessor Company participated in group insurance arrangements
arranged through Hancock and also received certain shared services. The
Predecessor Company paid Hancock its allocable share of the cost of such
insurance and other items, which amounted to $11.6 million and $11.1 million
during the year ended December 31, 1995 and the eleven months ended November 29,
1996, respectively. Subsequent to the Acquisition, the Company continued to
participate in the group insurance arrangements through Hancock until June 30,
1997 when the Company obtained its own insurance arrangements. The Company paid
its allocable share of the cost of such insurance which amounted to $0.8 million
and $6.1 million for the one month period ended December 31, 1996 and the six
month period ended June 30, 1997, respectively.
 
     Effective with the Acquisition, the Company entered into management
agreements, with certain shareholders, and has agreed to pay annual management
fees totaling $0.3 million. These agreements terminate by the mutual consent of
the parties or upon an initial public offering of the Company's common stock.
 

                                      F-11
84
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
7.  SECURITIES
 
     Securities owned and securities sold, not yet purchased are recorded at
market value and consist of the following (in thousands):
DECEMBER 31,
                                                              --------------------
                                                                1996        1997
OWNED:
Obligations of the U.S. government or its agencies..........  $ 23,650    $ 27,396
State and municipal obligations.............................    56,057      38,222
Arbitrage securities........................................    84,967     291,023
Other corporate obligations.................................    73,127      51,709
Other corporate stocks and warrants.........................    15,305      15,172
                                                              --------    --------
                                                              $253,106    $423,522
                                                              ========    ========
SOLD, NOT YET PURCHASED:
Obligations of the U.S. government or its agencies..........  $ 37,663    $ 22,890
State and municipal obligations.............................     1,476       1,519
Arbitrage securities........................................    51,671     322,316
Other corporate obligations.................................     6,055       1,356
Other corporate stocks and warrants.........................     4,275       6,484
                                                              --------    --------
                                                              $101,140    $354,565
                                                              ========    ========
8.  NOTES PAYABLE TO BANKS
 
     Included in notes payable to banks is the Company's borrowing for fixed
asset financing of approximately $25.8 million and $21.4 million at December 31,
1996 and 1997, respectively, which bears interest at 8.02% annually and is
payable in equal monthly installments through December 2001. This note is
collateralized by furniture, fixtures and leasehold improvements.
 
     The Company entered into a Revolving Credit Agreement (the "credit
agreement") with certain participating banks. Borrowings under the credit
agreement equaled $85 million and $80 million at December 31, 1996 and 1997,
respectively. These borrowings bear interest, approximately 7.06% and 6.97% at
December 31, 1996 and 1997, respectively, at the current Eurodollar Rate plus
applicable margin, as defined, ranging from 0.75% to 2.00% based on a calculated
leverage ratio in accordance with the credit agreement. Interest expense related
to the credit agreement is shown in the consolidated statements of income as
acquisition interest expense. Subject to the terms and conditions as set forth
in this credit agreement, the Company may borrow, repay and reborrow from time
to time up to the maturity date, December 31, 2001, of this credit agreement.
The credit agreement also includes certain financial covenants (see note 10) and
a mandatory reduction of the participating banks' commitment at the end of
various calendar quarters.
 
     The aggregate amount of principal repayment requirements on notes payable
is as follows by year (in thousands):
FIXED ASSET    BORROWINGS UNDER THE
YEAR                                               FINANCING       CREDIT AGREEMENT
1998...........................................     $4,737             $10,000
1999...........................................      5,131              12,500
2000...........................................      5,558              25,000
2001...........................................      6,020              32,500
F-12
85
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
9.  INCOME TAXES
 
     The components of income tax expense (benefit) are (in thousands):
YEAR ENDED        ELEVEN MONTHS       ONE MONTH ENDED     YEAR ENDED
                          DECEMBER 31,    ENDED NOVEMBER 29,      DECEMBER 31,      DECEMBER 31,
                              1995               1996                 1996              1997
Federal:
  Current...............    $ 6,969             $ 9,422               $ 581           $ 7,693
  Deferred..............     (1,456)             (3,930)               (148)            1,482

State:
  Current...............      4,116               4,784                 300             4,501
  Deferred..............       (409)             (1,432)                (53)               61
                            -------             -------               -----           -------
                            $ 9,220             $ 8,844               $ 680           $13,737
                            =======             =======               =====           =======
The effective income tax differs from the amount computed by applying the
Federal statutory income tax rate as follows (in thousands):
YEAR ENDED    ELEVEN MONTHS ENDED   ONE MONTH ENDED    YEAR ENDED
                                        DECEMBER 31,      NOVEMBER 29,        DECEMBER 31,     DECEMBER 31,
                                            1995              1996                1996             1997
Federal statutory income tax..........     $7,799            $7,136               $497           $11,352
State and local incomes taxes, net of
  federal tax benefit.................      2,410             2,179                160             2,965
Tax exempt interest, net..............       (840)             (570)               (53)             (770)
Other, net............................       (149)               99                 76               190
                                           ------            ------               ----           -------
Effective income tax..................     $9,220            $8,844               $680           $13,737
                                           ======            ======               ====           =======
The temporary differences which created deferred tax assets and liabilities
are included as a net amount in other assets at December 31, 1996 and 1997 as
follows (in thousands):
1996       1997
Deferred Tax Assets:
  Deferred compensation.....................................  $ 6,122    $ 5,990
  Reserves..................................................    2,759      2,042
  Other.....................................................    3,240      2,118
  Less valuation allowance..................................   (1,131)        --
                                                              -------    -------
     Total deferred tax assets..............................   10,990     10,150
                                                              -------    -------
Deferred Tax Liabilities:
  Net unrealized appreciation on investments and other......      185        887
                                                              -------    -------
     Total deferred tax liabilities.........................      185        887
                                                              -------    -------
Net deferred tax asset......................................  $10,805    $ 9,263
                                                              =======    =======
At December 31, 1996, the Company had net operating loss carryforwards
("NOLs") related to the original acquisition of Sutro of $3.2 million for which
it had recorded a valuation allowance against the full amount of the deferred
tax asset. These NOLs were fully utilized in 1997 resulting in a reduction to
taxes payable but without a reduction to reported income tax expense as the
offset was reported as an adjustment to goodwill.
 

                                      F-13
86
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
10.  NET CAPITAL REQUIREMENTS
 
     Certain subsidiaries of the Company are subject to the net capital
requirements of the New York Stock Exchange ("Exchange") and the Uniform Net
Capital requirements of the Securities and Exchange Commission ("Commission")
under Rule 15c3-1. The Exchange and the Commission 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, 1997,
Tucker Anthony had net capital of approximately $47.0 million which was $46.0
million in excess of the $1 million amount required to be maintained at that
date.
 
     Sutro is a registered broker and dealer. At December 31, 1997, Sutro had
net capital of approximately $10.8 million which was $9.8 million in excess of
the $1.0 million amount required to be maintained at that date.
 
     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 minimums and ratios. At December 31, 1997,
FTC's regulatory capital, as defined, was $1.1 million and FTC was in compliance
with all such requirements.
 
     Under the clearing arrangement with Wexford, Tucker Anthony and Sutro are
required to maintain certain minimum levels of net capital and comply with other
financial ratio requirements. At December 31, 1997, Tucker Anthony and Sutro
were in compliance with all such requirements.
 
     In accordance with the provisions of the credit agreement (see note 8), the
Company and its principal subsidiaries have executed agreements to guarantee the
borrowings to the benefit of the participating banks. The stock of the Company's
subsidiaries currently is pledged as security under the terms of the credit
agreement. Under the financial covenants of this credit agreement, the maturity
of amounts borrowed may be accelerated if the Company breaches certain
provisions of the credit agreement, among which are requirements for the Company
and its principal subsidiaries to maintain minimum levels, as defined, including
leverage ratio and net capital. The Company was in compliance with these
covenants at December 31, 1997.
 
11.  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. Rent expense was $18.1 million for the year
ended December 31, 1995, $22.5 million for the eleven month period ended
November 29, 1996, $1.5 million for the one month period ended December 31, 1996
and $15.9 million for the year ended 1997. Included in rent expense for the
eleven month period ended November 29, 1996 is $4.7 million of expense related
to the present value of future rent costs for space no longer required due
primarily to the outsourcing of clearing services.
 

                                      F-14
87
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
11.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

     At December 31, 1997, the Company's future minimum rental commitments based
upon original terms (including escalation costs) under noncancelable leases
which have an initial or remaining term of one year or more are as follows (in
thousands):
1998..............................................  $ 17,204
1999..............................................    16,915
2000..............................................    15,025
2001..............................................    14,350
2002..............................................    13,586
Thereafter........................................    26,184
                                                    --------
  Sub-total.......................................   103,264
Less aggregate sublease income....................    (3,847)
                                                    --------
                                                    $ 99,417
                                                    ========
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 counsel, that the resolution of these actions will not have a
material adverse effect on the consolidated financial position and results of
operations of the Company. Included in other operating expenses, for the eleven
month period ended November 29, 1996, is $6.3 million of insurance recoveries
relating to certain litigation costs that were incurred in prior years.
 
     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 exposure related to
these off-balance sheet commitments. Subsequent to December 31, 1997, such
transactions settled at no loss.
 
12.  BENEFITS
 
     Certain subsidiaries of the Company have qualified profit-sharing plans
which cover substantially all their full-time employees. Each plan includes a
salary reduction agreement and a matching contribution subject to certain
limitations. In addition, a subsidiary may contribute additional amounts to its
plan, at its discretion, based upon its profits for the year.
 
     The aggregate contributions to these plans for the year ended December 31,
1995, the eleven month period ended November 29, 1996, the one month period
ended December 31, 1996 and the year ended December 31, 1997 were $6.4 million,
$5.5 million, $0.5 million and $7.1 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 will accrue and no new
participants will be admitted after August 1, 1997. Amounts related to the plan
are not material to the consolidated financial statements.
 
     Compensation cost recognized for Common Stock and stock options issued to
employees during 1997 was $1.4 million.
 
13.  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.

 
                                      F-15
88
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
13.  FINANCIAL INSTRUMENTS (CONTINUED)

     The fair value of the fixed asset financing estimated using the Company's
incremental borrowing rate, approximated its carrying value at December 31, 1997
and 1996. The carrying value of the Company's debt under the variable rate
credit agreement approximates 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. There were no
open contracts outstanding at December 31, 1996. At December 31, 1997, the
Company had open options on futures contracts outstanding approximating $34.5
million (notional amount). 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, 1997. 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, 1995, 1996 and 1997.
 
     The following table summarizes the Company's principal transactions
revenues by business activity for the applicable periods reflected.
YEAR ENDED                                               YEAR ENDED
                                       DECEMBER 31,   ELEVEN MONTHS ENDED    ONE MONTH ENDED    DECEMBER 31,
                                           1995        NOVEMBER 29, 1996    DECEMBER 31, 1996       1997
                                       ------------   -------------------   -----------------   ------------
Equities.............................    $ 39,814           $35,545              $2,831           $39,181
Fixed Income.........................      52,289            47,731               3,990            47,641
Arbitrage............................      13,686            12,205               1,529            12,447
                                         --------           -------              ------           -------
                                         $105,789           $95,481              $8,350           $99,269
                                         ========           =======              ======           =======
14.  EARNINGS PER COMMON SHARE
 
     The Company computes its earnings per share in accordance with SFAS 128
"Earnings Per Share." The following table sets forth the computation for basic
and diluted earnings per share (in thousands except per share amounts):
ONE MONTH ENDED          YEAR ENDED
                                                      DECEMBER 31, 1996     DECEMBER 31, 1997
                                                      ------------------    ------------------
                                                       BASIC     DILUTED     BASIC     DILUTED
NUMERATOR:

  Net income........................................  $   740    $   740    $18,698    $18,698
                                                      -------    -------    -------    -------
DENOMINATOR:

  Weighted average shares outstanding...............   14,313     14,313     14,287     14,287
  Dilutive effect of:
     Stock options and other exercisable shares.....       --         --         --        446
                                                      -------    -------    -------    -------
  Adjusted weighted average shares outstanding......   14,313     14,313     14,287     14,733
                                                      -------    -------    -------    -------
Earnings per share..................................  $  0.05    $  0.05    $  1.31    $  1.27
                                                      =======    =======    =======    =======
15.  STOCK OPTIONS
 
     The Company's 1996 Stock Option Plan ("the Plan") provides for granting
officers and other key employees options to purchase shares of common stock at
the fair market value of the stock on the date of grant or such other prices as
provided by the Plan, and expire within either nine and one half years of
November 29, 1996, or ten years from the date of grant. The options vest over
periods from five to six years
 

                                      F-16
89
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
15.  STOCK OPTIONS (CONTINUED)

from November 29, 1996. Certain options issued under performance-based
agreements may be exercisable earlier, vesting over three years for individual
performance-based options and five years for Company performance-based options,
if certain individual and Company performance-based goals are met. Regardless of
whether these performance based targets are attained, the options will vest no
later than six years from November 29, 1996. During 1997, the Company granted
options on 2,336,652 shares, no options were exercised, and options on 202,764
shares were forfeited. All options have an exercise price of $5.50. At December
31, 1997, 2,181,600 shares were authorized for issuance under options and
options on 2,133,888 shares were outstanding, with a weighted-average remaining
contractual life of 8.6 years. At December 31, 1997, options on 276,247 shares
were exercisable, with a weighted-average remaining contractual life of 8.6
years.
 
     The Company accounts for stock option grants in accordance with the
provisions of Accounting Principles Board Opinion ("APB") No. 25 "Accounting for
Stock Issued to Employees." Had compensation expense for the Company's stock
options been determined on the fair value at the date of grant for awards under
the Plan, consistent with the method of SFAS 123 "Accounting for Stock Based
Compensation," the Company's net income and earnings per share would have been
reduced to pro forma amounts presented below (in thousands except per share
amounts):
YEAR ENDED
                                                                   DECEMBER 31,
                                                                       1997
Net income........................................  As reported      $18,698
                                                    Pro forma        $18,318
Basic earnings per share..........................  As reported      $  1.31
                                                    Pro forma        $  1.28
Diluted earnings per share........................  As reported      $  1.27
                                                    Pro forma        $  1.26
The pro forma information presented is not representative of the effect
stock options will have on net income or earnings per share for future years.
 
     The fair value of each option granted during the year ended December 31,
1997 is the estimated present value at grant date using the minimum value model
with the following assumptions: (i) dividend yield of 0.8%, (ii) expected life
of 6 years, and (iii) risk free interest rate of 5.4%. The weighted-average fair
value of the options on 2,127,696 shares granted January 31, 1997 whose exercise
price equals the fair market value of the Company's stock on grant date was
$1.30. The weighted-average fair value of the options on 208,956 shares granted
subsequent to January 31, 1997 whose exercise price is less than the fair market
value of the Company's stock on grant date was $4.37.
 

                                      F-17
90
                       FREEDOM SECURITIES CORPORATION AND
         FREEDOM SECURITIES HOLDING CORPORATION ("PREDECESSOR COMPANY")
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
16.  QUARTERLY INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
PREDECESSOR COMPANY
                                 ------------------------------------------------------
                                           THREE MONTHS ENDED                  TWO             ONE
                                 --------------------------------------    MONTHS ENDED    MONTH ENDED
                                 MARCH 31,    JUNE 30,    SEPTEMBER 30,    NOVEMBER 29,    DECEMBER 31,
                                   1996         1996          1996             1996            1996
Net revenues...................   $89,281     $88,168       $ 81,034         $ 62,546        $ 28,796
Income before income taxes.....     6,440       5,361          4,480            4,106           1,420
Net income.....................     3,677       3,029          2,517            2,320             740
Basic earnings per share.......        --          --             --               --        $   0.05
Diluted earnings per share.....        --          --             --               --        $   0.05
THREE MONTHS ENDED
                                 ------------------------------------------------------
                                 MARCH 31,    JUNE 30,    SEPTEMBER 30,    DECEMBER 31,
                                   1997         1997          1997             1997
Net revenues...................   $84,448     $85,129       $103,579         $102,599
Income before income taxes.....     6,043       5,040         10,464           10,888
Net income.....................     3,493       2,918          5,967            6,320
Basic earnings per share.......   $  0.24     $  0.20       $   0.42         $   0.45
Diluted earnings per share.....   $  0.24     $  0.20       $   0.41         $   0.42
17.  SUBSEQUENT EVENTS
 
     On March 10, 1998, the Company's Board of Directors approved an increase in
the authorized Capital Stock of the Company to 60,000,000 shares of Common
Stock, $.01 par value per share, and 1,000,000 shares of Preferred Stock, $.01
par value per share, of which none of the preferred stock has been issued. In
addition, the Company's Board of Directors approved a 1.818-for-1 Common Stock
split to be distributed in the form of a stock dividend payable to existing
stockholders immediately prior to the consummation of the Company's public
offering of Common Stock. All references throughout the financial statements to
number of shares, per share amounts and stock options data of the Company's
Common Stock reflect the stock split.
 
     The Company has agreed to acquire, through a merger with a wholly owned
subsidiary of the Company, the regional brokerage firm of Cleary Gull Reiland &
McDevitt Inc. ("Cleary Gull") pursuant to an Agreement and Plan of Merger dated
March 9, 1998. The following is a summary of certain financial information of
Cleary Gull at and for the year ended December 31, 1997 (in thousands):
Total assets................................................  $20,698
Stockholders' equity........................................    7,198
 
Total revenues..............................................  $26,414
Net income..................................................    1,251
F-18
91
 
                                                      
================================================================================
 
     NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
 
                            ------------------------
 
                               TABLE OF CONTENTS
PAGE
Prospectus Summary...................     3
Risk Factors.........................     8
Use of Proceeds......................    18
Dividend Policy......................    18
Capitalization.......................    19
Selected Historical Consolidated
  Financial and Other Data...........    20
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations......................    22
Business.............................    36
Management...........................    50
Principal and Selling Stockholders...    60
Certain Relationships and Related
  Transactions.......................    64
Description of Capital Stock.........    67
Shares Eligible for Future Sale......    70
Plan of Distribution.................    70
Legal Matters........................    72
Experts..............................    72
Additional Information...............    72
Index to Financial Statements........   F-1
------------------------
 
UNTIL           , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENT OR SUBSCRIPTIONS.
 
================================================================================

================================================================================

                                 721,324 SHARES

 
                   [FREEDOM SECURITIES(SM) CORPORATION LOGO]

                                  COMMON STOCK

                           -------------------------
                              P R O S P E C T U S
                           -------------------------

                                          , 1998
 
================================================================================
92
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The expenses payable in connection with the sale of the Common Stock
offered hereby are as follows, all of which will be paid by the Company:
AMOUNT
Commission registration fee.................................  $     3,877
Printing expenses...........................................       50,000
Legal fees and expenses.....................................       50,000
Accounting fees and expenses................................       25,000
Blue sky fees and expenses (including legal fees and
  expenses).................................................       10,000
Transfer agent and registrar fees and expenses..............       10,000
Miscellaneous...............................................       51,123
                                                              -----------
     Total..................................................      200,000
                                                              ===========
------------------------------
* All amounts are estimated, except Commission registration fee.
 
ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
Section 145 of the General Corporation Law of the State of Delaware provides as
follows:
 
     A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interest of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
 
     A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect to any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.

 
                                      II-1
93
 
     In addition, pursuant to its Articles of Organization and Bylaws, the
Company shall indemnify its directors and officers against expenses (including
judgments or amounts paid in settlement) incurred in any action, civil or
criminal, to which any such person is a party by reason of any alleged act or
failure to act in his capacity as such, except as to a matter as to which such
director or officer shall have been finally adjudged not to have acted in good
faith in the reasonable belief that his action was in the best interest of the
corporation.
 
     The Company maintains directors and officers liability insurance for the
benefit of its directors and certain of its officers and has entered into
indemnification agreements with its directors and certain of its officers.
 
ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES
 
     During the past three years, the Company has issued the following
securities, none of which have been registered under the Securities Act:
 
          (a) On November 29, 1996, the Company sold an aggregate of 826,281
     shares of Common Stock for an aggregate consideration of $4,545,000 in
     transactions exempt from registration pursuant to Rule 701 under the
     Securities Act.
 
          (b) On November 29, 1996, in transactions exempt from registration
     pursuant to Section 4(2) of the Securities Act, the Company sold an
     aggregate of 13,526,200 shares of Common Stock to accredited investors for
     an aggregate consideration of $74,401,540.
 
          (c) During 1997 the Company granted options to purchase 2,336,652
     shares of Common Stock to certain employees of the Company, each with an
     exercise price of $5.50, in transactions exempt from registration pursuant
     to Section 4(2) and Rule 701 under the Securities Act.
 
          (d) During 1997, in transactions exempt from registration pursuant to
     Section 4(2) of the Securities Act, the Company sold an aggregate of
     488,148 shares of Common Stock for aggregate consideration of $3,265,061 to
     employees of the Company and its subsidiaries who were accredited
     investors. In addition, Hancock exercised its pre-emptive right to purchase
     an aggregate of 31,099 shares of Common Stock for aggregate consideration
     of $208,006.
 
          (e) During 1998, in transactions exempt from registration pursuant to
     section 4(2) of the Securities Act, the Company has sold an aggregate of
     56,776 shares of Common Stock for aggregate consideration of $390,700 to
     employees of the Company's Subsidiaries.
 
          (f) On May 1, 1998, the Company issued, in a transaction exempt from
     registration pursuant to Section 4(2) of the Securities Act, an aggregate
     of 889,878 shares of Common Stock to the former stockholders of Cleary Gull
     in connection with the Company's acquisition of Cleary Gull.
 

                                      II-2
94
 
ITEM 16.  EXHIBITS
EXHIBITS
  NO.                         DESCRIPTION OF DOCUMENTS
--------                      ------------------------
+3.1     Restated Certificate of Incorporation of the Registrant
   +3.2     Bylaws of the Registrant to be effective prior to
            effectiveness of the Registration Statement
    5.1     Form of Opinion of Hutchins, Wheeler & Dittmar, A
            Professional Corporation
  +10.1     Contribution Agreement by and among the Registrant, Hancock,
            THL and SCP, dated as of October 4, 1996
  +10.2     Stockholders Agreement by and among the Registrant 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     Revolving Credit Agreement by and among the Registrant and
            The First National Bank of Boston, as agent for the lenders
            listed on Schedule 1 thereto, dated as of November 29, 1996
  +10.4     Additional Share Agreement by and between the Registrant and
            Hancock, dated as of November 29, 1996
  +10.5     Tax Matters Agreement by and between the Registrant and
            Hancock, dated as of November 29, 1996
  +10.6     Contribution and Indemnity Agreement by and between the
            Registrant and John H. Goldsmith, dated as of November 29,
            1996
  +10.7     Management Agreement by and between the Registrant and THL,
            dated as of November 29, 1996
  +10.8     Management Agreement by and between the Registrant and SCP,
            dated as of November 29, 1996
  +10.9     1996 Stock Option Plan
  +10.10    Employment Agreement by and between the Registrant and John
            H. Goldsmith, dated as of November 29, 1996
  +10.11    Employment Agreement by and between the Registrant and
            Gregory N. Thomas, dated as of December 3, 1997
  +10.12    Letter Agreement by and between the Registrant and William
            C. Dennis, Jr., dated as of April 2, 1997
  +10.13    Agreement, by and among Prudential Securities Incorporated,
            John Hancock Clearing Corporation, Tucker Anthony
            Incorporated and Sutro & Co. Incorporated
  +10.14    Form of TAMP Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated as of July 1, 1989
  +10.15    Form of TAMP II Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated as of February 28, 1995
  +10.16    Form of TAMM II Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated April 8, 1984
  +10.17    Form of Sutro Venture Partners I, L.P. Limited Partnership
            Agreement, dated as of March 21, 1996
  +10.18    Form of Sutro Venture Partners II, L.P. Limited Partnership
            Agreement, dated as of March 21, 1996
  +10.19    Form of Operating Agreement for Sutro Investment Partners
            IV, LLC dated as of June 30, 1997
  +10.20    Agreement and Plan of Merger, by and among the Registrant,
            CGRM Merger Corp. and Cleary Gull Reiland & McDevitt Inc.,
            dated March 9, 1998.
  +10.21    Cleary Gull Registration Rights Agreement.
  +10.22    Chattel Leasing Security Agreement by and between T.A.
            Leasing, Inc. and BancBoston Leasing, Inc., dated November
            29, 1996.
II-3
95
EXHIBITS
  NO.                         DESCRIPTION OF DOCUMENTS
--------                      ------------------------
+10.23    Amended and Restated Chattel Leasing Promissory Note, by and
            between T.A. Leasing, Inc. and BancBoston Leasing, Inc.,
            dated February 28, 1997.
  +10.24    Chattel Leasing Security Agreement by and between Sutro
            Leasing Inc. and BancBoston Leasing, Inc., dated February
            28, 1997.
  +10.25    Chattel Leasing Promissory Note by and between Sutro Leasing
            Inc. and BancBoston Leasing, Inc., dated February 28, 1997.
  +10.26    1998 Long Term Incentive Plan.
  +10.27    1998 Executive Performance Bonus Plan.
  +10.28    Amendment No. 1 to the Stockholders Agreement.
  +10.29    Amendment No. 2 to the Stockholders Agreement, as of March
            10, 1998.
  +10.30    Amendment No. 3 to the Stockholders Agreement, dated as of
            March 25, 1998.
  *10.31    David P. Prokupek Employment Agreement.
  +21.1     Subsidiaries of the Registrant
   23.1     Consent of Ernst & Young LLP
  +23.2     Consent of Hutchins, Wheeler & Dittmar, A Professional
            Corporation (included in Exhibit 5.1)
  +24.1     Power of Attorney (included on page II-6)
  +27.1     Financial Data Schedule
---------------
 
 * To be filed by amendment.
 
 + Previously filed with the Commission on Form S-1 (File No. 333-44931).
 
     Schedules and exhibits to certain exhibits have been omitted, which
schedules shall be furnished to the Commission upon request.
 
ITEM 17.  UNDERTAKINGS
 
     The undersigned registrant hereby undertakes:
 
     (1)  To file, during any period in which offers or sales are being made, a
     post-effective amendment to this registration statement:
 
        (i)   To include any prospectus required by section 10(a)(3) of the
        Securities Act of 1933;
 
        (ii)   To reflect in the prospectus any facts or events arising after
        the effective date of the registration statement (or the most recent
        post-effective amendment thereof) which, individually or in the
        aggregate, represent a fundamental change in the information set forth
        in the registration statement. Notwithstanding the foregoing, any
        increase or decrease in volume of securities offered (if the total
        dollar value of securities offered would not exceed that which was
        registered) and any deviation from the low or high end of the estimated
        maximum offering range may be reflected in the form of prospectus filed
        with the Commission pursuant to Rule 424(b) if, in the aggregate, the
        changes in volume and price represent no more than a 20% change in the
        maximum aggregate offering price set forth in the "Calculation of
        Registration Fee" table in the effective registration statement.
 
        (iii)  To include any material information with respect to the plan of
        distribution not previously disclosed in the registration statement or
        any material change to such information in the registration statement.
 

                                      II-4
96
 
     (2)  That, for the purpose of determining any liability under the
     Securities Act of 1933, each such post-effective amendment shall be deemed
     to be a new registration statement relating to the securities offered
     therein, and the offering of such securities at that time shall be deemed
     to be initial bona fide offering thereof.
 
     (3)  To remove from registration by means of a post-effective amendment any
     of the securities being registered which remain unsold at the termination
     of the offering.
 
     (4)  If the registrant is a foreign private issuer, to file a
     post-effective amendment to the registration statement to include any
     financial statements required by sec.210.3-19 of this chapter at the start
     of any delayed offering or throughout a continuous offering. Financial
     statements and information otherwise required by Section 10(a)(3) of the
     Act need not be furnished, provided that the registrant includes in the
     prospectus, by means of a post-effective amendment, financial statements
     required pursuant to this paragraph (a)(4) and other information necessary
     to ensure that all other information in the prospectus is at least as
     current as the date of those financial statements. Notwithstanding the
     foregoing, with respect to registration statements on Form F-3, a
     post-effective amendment need not be filed to include financial statements
     and information required by Section 10(a)(3) of the Act of sec.210.3-19 of
     this chapter if such financial statements and information are contained in
     periodic reports filed with or furnished to the Commission by the
     registrant pursuant to Section 13 or Section 15(d) of the Securities
     Exchange Act of 1934 that are incorporated by reference in the Form F-3.
 
 
                                      II-5
97
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in Boston,
Massachusetts, on September 3, 1998.
 
                                          FREEDOM SECURITIES CORPORATION
 
                                          By:     /s/ JOHN H. GOLDSMITH
                                            ------------------------------------
                                          Name: John H. Goldsmith
                                          Title: Chief Executive Officer
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints John H. Goldsmith and Gregory N. Thomas, and each
of them, with the power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him or in his name, place and stead, in any and all capacities to sign any
and all amendments or post-effective amendments to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or either of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
 
     Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE                                   TITLE                         DATE
/s/ JOHN H. GOLDSMITH               Chairman, Director and Chief          September 3, 1998
------------------------------------------    Executive Officer as well as Chief
            John H. Goldsmith                 Executive Officer of Tucker
                                              Anthony and Chairman of Sutro
 
        /s/ WILLIAM C. DENNIS, JR.            Chief Financial Officer               September 3, 1998
------------------------------------------
          William C. Dennis, Jr.
 
           /s/ DAVID V. HARKINS               Director                              September 3, 1998
------------------------------------------
             David V. Harkins
 
            /s/ C. HUNTER BOLL                Director                              September 3, 1998
------------------------------------------
              C. Hunter Boll
 
          /s/ THOMAS M. HAGERTY               Director                              September 3, 1998
------------------------------------------
            Thomas M. Hagerty
 
            /s/ SETH W. LAWRY                 Director                              September 3, 1998
------------------------------------------
              Seth W. Lawry
 
         /s/ WINSTON J. CHURCHILL             Director                              September 3, 1998
------------------------------------------
           Winston J. Churchill
 
           /s/ JOHN F. LUIKART                Director                              September 3, 1998
------------------------------------------
             John F. Luikart
II-6
98
SIGNATURE                                   TITLE                         DATE
/s/ ROBERT H. YEVICH               Director                              September 3, 1998
------------------------------------------
             Robert H. Yevich
 
          /s/ GREGORY N. THOMAS               Director                              September 3, 1998
------------------------------------------
            Gregory N. Thomas
 
          /s/ DAVID P. PROKUPEK               Director                              September 3, 1998
------------------------------------------
            David P. Prokupek
 
            /s/ HUGH R. HARRIS                Director                              September 3, 1998
------------------------------------------
              Hugh R. Harris
II-7
99
 
                                 EXHIBIT INDEX
EXHIBITS
  NO.                         DESCRIPTION OF DOCUMENTS                    PAGE
--------                      ------------------------                    ----
+3.1     Restated Certificate of Incorporation of the Registrant
   +3.2     Bylaws of the Registrant to be effective prior to
            effectiveness of the Registration Statement
   *5.1     Form of Opinion of Hutchins, Wheeler & Dittmar, A
            Professional Corporation
  +10.1     Contribution Agreement by and among the Registrant, Hancock,
            THL and SCP, dated as of October 4, 1996
  +10.2     Stockholders Agreement by and among the Registrant 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     Revolving Credit Agreement by and among the Registrant and
            The First National Bank of Boston, as agent for the lenders
            listed on Schedule 1 thereto, dated as of November 29, 1996
  +10.4     Additional Share Agreement by and between the Registrant and
            Hancock, dated as of November 29, 1996
  +10.5     Tax Matters Agreement by and between the Registrant and
            Hancock, dated as of November 29, 1996
  +10.6     Contribution and Indemnity Agreement by and between the
            Registrant and John H. Goldsmith, dated as of November 29,
            1996
  +10.7     Management Agreement by and between the Registrant and THL,
            dated as of November 29, 1996
  +10.8     Management Agreement by and between the Registrant and SCP,
            dated as of November 29, 1996
  +10.9     1996 Stock Option Plan
  +10.10    Employment Agreement by and between the Registrant and John
            H. Goldsmith, dated as of November 29, 1996
  +10.11    Employment Agreement by and between the Registrant and
            Gregory N. Thomas, dated as of December 3, 1997
  +10.12    Letter Agreement by and between the Registrant and William
            C. Dennis, Jr., dated as of April 2, 1997
  +10.13    Agreement, by and among Prudential Securities Incorporated,
            John Hancock Clearing Corporation, Tucker Anthony
            Incorporated and Sutro & Co. Incorporated
  +10.14    Form of TAMP Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated as of July 1, 1989
  +10.15    Form of TAMP II Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated as of February 28, 1995
  +10.16    Form of TAMM II Incentive Plan Limited Partnership Limited
            Partnership Agreement, dated April 8, 1984
  +10.17    Form of Sutro Venture Partners I, L.P. Limited Partnership
            Agreement, dated as of March 21, 1996
  +10.18    Form of Sutro Venture Partners II, L.P. Limited Partnership
            Agreement, dated as of March 21, 1996
  +10.19    Form of Operating Agreement for Sutro Investment Partners
            IV, LLC dated as of June 30, 1997
  +10.20    Agreement and Plan of Merger, by and among the Registrant,
            CGRM Merger Corp. and Cleary Gull Reiland & McDevitt Inc.,
            dated March 9, 1998.
  +10.21    Cleary Gull Registration Rights Agreement
  +10.22    Chattel Leasing Security Agreement by and between T.A.
            Leasing, Inc. and BancBoston Leasing, Inc., dated November
            29, 1996.
100
EXHIBITS
  NO.                         DESCRIPTION OF DOCUMENTS                    PAGE
--------                      ------------------------                    ----
+10.23    Amended and Restated Chattel Leasing Promissory Note, by and
            between T.A. Leasing, Inc. and BancBoston Leasing, Inc.,
            dated February 28, 1997.
  +10.24    Chattel Leasing Security Agreement by and between Sutro
            Leasing Inc. and BancBoston Leasing, Inc., dated February
            28, 1997.
  +10.25    Chattel Leasing Promissory Note by and between Sutro Leasing
            Inc. and BancBoston Leasing, Inc., dated February 28, 1997.
  +10.26    1998 Long Term Incentive Plan.
  +10.27    1998 Executive Performance Bonus Plan.
  +10.28    Amendment No. 1 to the Stockholders Agreement dated January
            30, 1998.
  +10.29    Form of Amendment No. 2 to the Stockholders Agreement.
  +10.30    Form of Amendment No. 3 to the Stockholders Agreement.
  *10.31    David P. Prokupek Employment Agreement.
  +21.1     Subsidiaries of the Registrant
   23.1     Consent of Ernst & Young LLP
  +23.2     Consent of Hutchins, Wheeler & Dittmar, A Professional
            Corporation (included in Exhibit 5.1)
  +24.1     Power of Attorney (included on page II-6)
  +27.1     Financial Data Schedule
---------------
 
* To be filed by Amendment.
 
 + Previously filed with the Commission on Form S-1 (File No. 333-44938).
 
     Schedules and exhibits to certain exhibits to this Registration Statement
have been omitted, which schedules shall be furnished to the Commission upon
request.