10-Q 1 b37281tse10-q.txt TUCKER ANTHONY SUTRO 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES X EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ --- TO _________________ Commission File Number 1-13993 TUCKER ANTHONY SUTRO -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 04-3335712 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Beacon Street Boston, Massachusetts 02108 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 725-2000 Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of November 06, 2000 the Company had 23,932,957 shares of common stock outstanding. 2 TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Financial Condition - September 30, 2000 and December 31, 1999 3 Consolidated Statements of Income - Three and nine months ended September 30, 2000 and 1999 4 Consolidated Statements of Cash Flows - Nine months ended September 30, 2000 and 1999 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings 14 Item 2. Changes in Securities and Use of Proceeds 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 14 SIGNATURES EXHIBIT INDEX 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TUCKER ANTHONY SUTRO CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Amounts in thousands, except share data)

See accompanying notes. 3 4 TUCKER ANTHONY SUTRO CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Amounts in thousands, except per share data)

(1) Net of interest expense of $19,643 and $10,206 for the quarters ended September 30, 2000 and 1999, respectively and of $56,215 and $25,300 for the nine months ended September 30, 2000 and 1999, respectively. (2) Summation of the quarters' earnings per share may not equal the annual amounts due to the averaging effect of the number of shares and share equivalents throughout the year. See accompanying notes. 4 5 TUCKER ANTHONY SUTRO CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)

See accompanying notes. 5 6 TUCKER ANTHONY SUTRO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) 1. BASIS OF PRESENTATION Tucker Anthony Sutro (formerly Freedom Securities Corporation) is a holding company which together with its wholly-owned subsidiaries (collectively, the "Company") is a full-service retail brokerage, asset management and investment banking firm. The consolidated financial statements include the accounts of the Company and its operating subsidiaries: Tucker Anthony Incorporated ("Tucker Anthony"), a full-service brokerage and investment banking firm, and its divisions: Tucker Anthony Capital Markets, an investment banking and institutional brokerage firm, Gibraltar Securities, a brokerage and investment advisory firm and Tucker Anthony MidAtlantic, a municipal finance and underwriting brokerage firm; Sutro & Co. Incorporated ("Sutro"), a West Coast brokerage and investment banking firm; Hill, Thompson, Magid & Co., Inc. ("Hill Thompson"), a New Jersey-based wholesale over-the-counter trading firm; Freedom Capital Management Corporation ("Freedom Capital"), a Boston-based asset management firm; and Cleary Gull Investment Management Services, Inc. ("Cleary Gull IMS"), a Milwaukee-based asset management firm. 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. Management believes that the estimates utilized in preparing its financial statements are reasonable and prudent. Actual results could differ from these estimates. Certain prior period amounts have been reclassified to conform with the current period's financial statement presentation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for audited financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The information included in this Form 10-Q should be read in conjunction with the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 2. NET CAPITAL REQUIREMENTS Certain subsidiaries of the Company are subject to the net capital requirements of the New York Stock Exchange, Inc. ("Exchange") and the Uniform Net Capital requirements of the Securities and Exchange Commission ("Commission") under Rule 15c3-1. The Exchange and the Commission rules 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 September 30, 2000, Tucker Anthony had net capital of approximately $16.1 million which was $15.1 million in excess of the $1.0 million amount required to be maintained at that date. 6 7 2. NET CAPITAL REQUIREMENTS (CONTINUED) Sutro is a registered broker and dealer. At September 30, 2000, Sutro had net capital of approximately $15.2 million which was $14.2 million in excess of the $1.0 million amount required to be maintained at that date. Hill Thompson is a registered broker and dealer. At September 30, 2000, Hill Thompson had net capital of approximately $20.4 million which was $19.4 million in excess of the $1.0 million amount required to be maintained at that date. In addition, at September 30, 2000, Hill Thompson had $ 0.2 million in cash segregated in a special reserve bank account for the exclusive benefit of customers pursuant to the reserve formula requirements of Rule 15c 3-3. Cleary Gull IMS is a registered broker and dealer. At September 30, 2000, Cleary Gull IMS had net capital of approximately $0.6 million which was $0.3 million in excess of the $0.3 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 September 30, 2000, FTC's regulatory capital, as defined, was $1.3 million and FTC was in compliance with all such requirements. Under a clearing arrangement with Wexford Clearing Services Corporation ("Wexford"), Tucker Anthony, Sutro and Cleary Gull IMS are required to maintain certain minimum levels of net capital and comply with other financial ratio requirements. At September 30, 2000, Tucker Anthony, Sutro and Cleary Gull IMS were in compliance with all such requirements. 3. 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. The Company has been named as defendant in a number of civil actions and arbitrations primarily relating to its broker-dealer activities. The Company is also involved, from time to time, in proceedings with, and investigations by, governmental agencies and self regulatory organizations. While the ultimate outcome of litigation involving the Company cannot be predicted with certainty, management believes, based on currently available information, that it has meritorious defenses to all such actions and intends to defend each of these vigorously. While there can be no assurance that such actions, proceedings, investigations and litigation will not have a material adverse effect on the financial position or results of operations of the Company in any future period, it is the opinion of management that the resolution of any such actions, proceedings, investigations and litigation will not have a material adverse effect on the consolidated financial position and results of operations of the Company. The Company has outstanding 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. Transactions which were open at September 30, 2000 have subsequently settled and had no material effect on the consolidated statements of income and financial condition. 7 8 4. 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):

(a) Options to purchase 38,292 shares of the Company's common stock were outstanding at September 30, 1999 but were not included in the computation of diluted earnings per share. The inclusion of such options would have had an antidilutive effect on the dilutive earnings per share calculation because the options' exercise prices were greater than the average market price of the Company's common shares for the 1999 third quarter. 5. SEGMENT REPORTING DATA The Company has two reportable segments: broker-dealer and asset management. The Company's broker-dealer segment includes the retail operations, equity capital markets and trading businesses of Tucker Anthony, Sutro and Hill Thompson since they generally offer similar products and services and are subject to uniform regulatory requirements. The Company offers its broker-dealer clients a wide range of products and services, including retail brokerage, investment banking, institutional sales and fixed income products. The asset management segment includes Freedom Capital, Cleary Gull IMS and asset management business from Tucker Anthony and Sutro. The Company offers its asset management clients investment advisory, portfolio management and custodial services. Substantially all of the Company's business is transacted in the United States. The following table presents information about reported segments (amounts in thousands):

8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Company's consolidated financial statements and notes thereto appearing in Item 1 of this report. This Form 10-Q may contain statements which constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Prospective investors are cautioned that any such forward-looking statements are not guarantees for future performance and involve risks and uncertainties, including but not limited to those identified in the following paragraph, and that actual results may differ materially from those contemplated by such forward-looking statements. BUSINESS ENVIRONMENT The Company's retail securities brokerage activities, as well as its investment banking, asset management, institutional sales, trading and equity research services, are in highly competitive markets and subject to various risks including volatile trading markets and fluctuations in the volume of market activity. These markets are affected by general economic and market conditions, including fluctuations in interest rates, volume and price levels of securities, flows of investor funds into and out of mutual funds and pension plans and by factors that apply to particular industries such as technological advances and changes in the regulatory environment. The 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. COMPANY DEVELOPMENTS On October 2, 2000, the Company closed its previously announced acquisition of Branch, Cabell & Co. Inc. ("Branch Cabell") in an all-stock transaction valued at approximately $19.6 million based on the average of the daily high and low sale prices of the Company's common stock for the ten trading days immediately preceding the closing date. In connection with the acquisition, the Company entered into employment agreements with certain employees of Branch Cabell and established a retention program totaling approximately $4.5 million. Branch Cabell, founded in 1904, is a full-service regional brokerage and investment firm headquartered in Richmond, Virginia. Branch Cabell will ultimately operate as a division of Tucker Anthony Incorporated and within the Company's broker-dealer segment. The transaction will be accounted for as a pooling of interests. COMPONENTS OF REVENUES AND EXPENSES REVENUES Commission revenues include retail and institutional commissions received by the Company as an agent in securities transactions, including all exchange listed, over-the-counter agency, mutual fund, insurance and annuity transactions. Principal transactions revenues include principal sales credits as well as gains and losses from the trading of securities by the Company. Investment banking revenues include selling concessions, underwriting fees and management fees received from the underwriting of corporate or municipal securities as well as fees earned from providing merger and acquisition and other financial advisory services. Asset management revenues include fees generated from providing investment advisory, portfolio management and custodial services to clients, as well as managed account fees and 12b-1 distribution fees. Other revenues primarily consist of retirement plan revenue, third party correspondent clearing fees and other transaction fees. Net interest income equals interest income less interest expense. Interest income includes interest earned on margin loans made to customers, securities purchased under agreements to resell, fixed income securities held in the Company's trading accounts as well as dividends earned on proprietary arbitrage positions. Interest expense includes interest paid under its Wexford financing arrangement and on bank borrowings, securities sold under agreements to repurchase and cash balances in customer accounts held by Wexford. 9 10 EXPENSES Compensation and benefits expense includes sales, trading and incentive compensation, which are primarily variable based on revenue production and/or business unit profit contribution, and salaries, payroll taxes and employee benefits which are relatively fixed in nature. Incentive compensation, including bonuses for eligible employees, is accrued proratably throughout the year based on actual or estimated annual amounts. Occupancy and equipment expense includes rent and operating expenses for facilities, expenditures for repairs and maintenance, and depreciation and amortization of furniture, fixtures and leasehold improvements. Communications expense includes charges for telecommunications, news and market data services. Brokerage and clearance expense includes the cost of securities clearance, floor brokerage and exchange fees. Promotional expense includes travel, entertainment and advertising. Other expenses include general and administrative expenses, such as professional services, litigation expenses, goodwill amortization, data processing and other miscellaneous expenses. RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 The following table compares third quarter results (amounts in millions) in 2000 and 1999:

(a) Certain amounts have been reclassified to conform with 2000 financial statement presentation. (b) Net interest income is net of interest expense of $19.6 million in 2000 and $10.2 million in 1999. Net income was $9.1 million for the quarter ended September 30, 2000, up 30% over net income of $7.0 million in the third quarter of 1999. Earnings per share (diluted) for the quarter were $0.38, a 12% increase from $0.34 per share in the same period a year ago. Net revenues increased 19% in the third quarter to $159.7 million compared with $133.7 million in the third quarter of 1999. Commission revenues increased $11.9 million or 22% to $64.8 million in the third quarter of 2000 from $52.9 million in the same period a year ago. The higher commission revenues stem from an increase in new investment executives as a result of acquisitions and the Company's recruiting efforts as well as increased productivity per investment executive. 10 11 Revenues from principal transactions rose to $41.5 million in the third quarter of 2000, up $10.9 million or 36% from $30.6 million a year ago. The acquisitions of Hill Thompson and Gibraltar in late 1999 contributed $10.2 million of the increase in the current quarter which was partially offset by a $2.8 million decrease in convertible arbitrage trading profits. Investment banking revenues were $17.1 million in the third quarter of 2000 compared with $22.9 million in the 1999 third quarter reflecting an industry-wide slowdown in this year's third quarter as well as the timing of transactions. Asset management revenues grew 25% to $21.0 million in the third quarter of 2000 compared with $16.8 million in the third quarter of 1999, mainly due to growth in assets under management, which grew to $12.9 billion at September 30, 2000 from $10.2 billion at September 30, 1999. Net interest income was $12.5 million for the current quarter, up $4.2 million or 51% from $8.3 million in the 1999 third quarter, primarily due to higher customer margin balances. Non-interest expenses were $143.9 million in the third quarter of 2000, an increase of 17% from the $122.9 million in the third quarter of 1999 due in part to $10.1 million of increased costs from the Hill Thompson and Gibraltar acquisitions made in 1999. Compensation and benefits expense as a percentage of net revenues was down to 65% from 67% in the prior year quarter in part due to the reversal of certain discretionary compensation-related items in the current quarter. Non-compensation operating expenses increased to $40.3 million in the third quarter of 2000 from $34.4 million a year ago partly because of $2.6 million of expenses from Hill Thompson and Gibraltar as well as growth in the Company's net revenues. Despite an increase in costs of 17% from last year, non-compensation operating expenses as a percentage of net revenues was 25.2% for the current quarter, essentially flat compared with 25.7% a year ago. The Company's income tax provisions for the quarters ended September 30, 2000 and 1999 were $6.7 million and $3.8 million, respectively. The effective tax rate was 42% in the third quarter of 2000 up from 35% in last year's third quarter primarily due to an increase in transactions that are not subject to preferential tax treatment. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 The following table compares first nine months results (dollars in millions) in 2000 and 1999:

(a) Certain amounts have been reclassified to conform with 2000 financial statement presentation. (b) Net interest income is net of interest expense of $56.2 million in 2000 and $25.3 million in 1999. 11 12 Net income increased 88% to $40.1 million in the first nine months of 2000, up $18.8 million from net income of $21.3 million in the same period a year ago. Earnings per share (diluted) for the first nine months of 2000 were $1.71, up 66% from $1.03 for the first nine months of 1999. Net revenues in the first nine months of 2000 were $574.5 million, a 48% increase over net revenues of $386.9 million a year ago. Commission revenues rose 37% to $222.2 million in the first nine months of 2000 from $161.8 million in the same period a year ago. The higher commission revenues stem from an increase in new investment executives as a result of acquisitions and the Company's recruiting efforts throughout 1999 and 2000 as well as increased productivity per investment executive. Revenues from principal transactions were $177.6 million for the nine months ended September 30, 2000, up $86.3 million or 94% from $91.3 million a year ago, primarily due to the acquisitions of Hill Thompson and Gibraltar in late 1999 which contributed $78.3 million of the increase in the first nine months of 2000. Of the $78.3 million increase attributable to Hill Thompson and Gibraltar, $59.7 million or 76% stems from Hill Thompson which benefited from high levels of market activity in OTC traded securities during the first quarter of 2000. Investment banking revenues increased $15.9 million or 30% to $69.2 million in the first nine months of 2000 from $53.3 million for the nine months ended September 30, 1999 primarily due to increased advisory and merger/acquisition fees in the first half of 2000 and, to a lesser extent, from private transactions. Asset management revenues grew 28% to $60.5 million in the first nine months of 2000 compared with $47.4 million in the first nine months of 1999, mainly due to growth in assets under management, which grew to $12.9 billion at September 30, 2000 from $10.2 billion at September 30, 1999. Net interest income was $36.3 million for the nine months ended September 30, 2000, up $9.8 million or 37% from $26.5 million in the same period a year ago, primarily due to higher customer margin balances. Non-interest expenses were $506.2 million in the first nine months of 2000, an increase of 44% from the $352.3 million in the first nine months of 1999. The increase is partly attributable to costs of $31.2 million from Hill Thompson which was acquired in the fourth quarter of 1999 and $25.9 million from Gibraltar which was acquired in September 1999. Compensation and benefits expense as a percentage of net revenues for the first nine months of 2000 was 65% down from 66% a year ago. Non-compensation operating expenses were $135.6 million in the first nine months of 2000 versus $98.9 million a year ago due in part to $12.9 million of expenses from Hill Thompson and Gibraltar as well as growth in the Company's net revenues. Despite the increase in costs, non-compensation operating expenses as a percentage of net revenues declined to 23.6% for the first nine months of 2000 from 25.6% a year ago. The Company's income tax provisions for the first nine months of 2000 and 1999 were $28.2 million and $13.3 million, respectively. The effective tax rate was 41% for the first nine months of 2000, up from 38% for the same period last year mainly due to an increase in transactions that are not subject to preferential tax treatment. LIQUIDITY AND CAPITAL RESOURCES The Company receives dividends, interest on loans and other payments from its subsidiaries, which are the Company's main source of funds to pay expenses, service debt and pay dividends. Distributions and interest payments to the Company from its registered broker-dealer subsidiaries, the Company's primary sources of liquidity, are restricted as to amounts which may be paid by applicable law and regulations. The net capital rules are the primary regulatory restrictions regarding capital resources. The Company's rights to participate in the assets of any subsidiary are also subject to prior claims of the subsidiary's creditors, including customers of the broker-dealer subsidiaries. The assets of the Company's primary operating subsidiaries are highly liquid with the majority of their assets consisting of securities inventories and collateralized receivables, both of which fluctuate depending on the levels of customer business. Collateralized receivables consist mainly of securities purchased under agreements to resell, which are secured by U.S. government and agency securities. The majority of the subsidiaries' assets are financed through Wexford, by securities sold under repurchase agreements and by securities sold, not yet purchased. The Company's principal source of short-term financing stems from its 12 13 clearing arrangement with Wexford under which the Company can borrow on an uncommitted, collateralized basis against its proprietary inventory positions. This financing generally is obtained from Wexford at rates based upon prevailing market conditions. The Company monitors overall liquidity by tracking the extent to which unencumbered marketable assets exceed short-term unsecured borrowings. Repurchase agreements are used primarily for customer accommodation purposes and to finance the Company's inventory positions in U.S. government and agency securities. These positions provide products and liquidity for customers and are not maintained for the Company's investment or market speculation. The level of activity fluctuates depending on customer and inventory needs; however, these fluctuations have not materially affected liquidity or capital resources. The Company monitors the collateral position and counterparty risk of these transactions daily. The subsidiaries' total assets and short-term liabilities and the individual components thereof may vary significantly from period to period because of changes relating to customer needs and economic and market conditions. The Company's operating activities generate cash resulting from net income earned during the period and fluctuations in its current assets and liabilities. In addition to normal operating requirements, capital is required to satisfy financing and regulatory requirements. The Company's overall capital needs are continually reviewed to ensure that its capital base can appropriately support the anticipated capital needs of the subsidiaries. The excess regulatory net capital of the Company's broker-dealer subsidiaries may fluctuate throughout the year reflecting changes in inventory levels and/or composition, investment banking commitments and balance sheet components. For example, Tucker Anthony's net capital declined at September 30, 2000 primarily due to higher securities inventory positions and increased receivables from affiliates. For a description of the Company's net capital requirements, see Note 2 of the Notes to the Financial Statements. Management believes that existing capital, funds provided by operations, the credit arrangement with Wexford and funds available from a revolving credit agreement will be sufficient to finance the operating subsidiaries' ongoing businesses. In 1999 and 2000, the Company financed acquisitions with cash, stock or a combination of both. Future acquisitions, if any, would likely be financed in the same manner. Funds available from a revolving credit agreement are expected to be sufficient to finance the cash component of acquisitions in the near future. The Company maintains a revolving credit agreement (the "Credit Agreement") whereby participating banks have made commitments totaling $100 million. At September 30, 2000, the Company had borrowings of $50.0 million at interest rates ranging from 1% to 1.45% above the federal funds rate. In addition, the Company must pay a commitment fee of 0.20% on the unused available credit. The Credit Agreement matures in November 2003 with all outstanding notes payable at that date. The Company must comply with certain financial covenants under the Credit Agreement and was in compliance with such covenants at September 30, 2000. The Company maintains, through two subsidiaries, a fixed asset credit facility (the "Fixed Asset Facility") secured by certain of the Company's fixed assets. At September 30, 2000, the Company had borrowings outstanding under the Fixed Asset Facility of $7.6 million, of which $5.8 million is payable in monthly installments until December 2001 and $1.8 million is payable in monthly installments through June 2003. The Company has historically financed capital expenditures through internal cash generation and through the Fixed Asset Facility. For the nine months ended September 30, 2000 and 1999, the Company had capital expenditures of $6.4 million and $6.1 million, respectively, which were funded from operations. The Company has had a stock repurchase program that permits it to purchase approximately two million shares of its common stock outstanding. To date, the Company has funded its stock repurchases from internal sources and, as of September 30, 2000, the Company had 906,758 shares available for purchase under the program. On October 2, 2000 the Company announced that its Board of Directors terminated the stock repurchase program in connection with its acquisition of Branch Cabell because the Company plans to account for the transaction as a pooling of interests. CASH FLOWS For the nine months ended September 30, 2000, cash and cash equivalents decreased $3.1 million. Funds generated from operating activities were $13.3 million including net income of $40.1 million and depreciation, amortization and other non-cash charges to net income of $30.2 million. 13 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information about market risks for the three months ended September 30, 2000 does not differ materially from that discussed under Item 7a of the Company's Annual Report on Form 10-K for the year ended December 31, 1999. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company has been named as defendant in a number of civil actions and arbitrations primarily relating to its broker-dealer activities. The Company is also involved, from time to time, in proceedings with, and investigations by, governmental agencies and self regulatory organizations. While the ultimate outcome of litigation involving the Company cannot be predicted with certainty, management believes, based on currently available information, that it has meritorious defenses to all such actions and intends to defend each of these vigorously. While there can be no assurance that such actions, proceedings, investigations and litigation will not have a material adverse effect on the financial position or results of operations of the Company in any future period, it is the opinion of management that the resolution of any such actions, proceedings, investigations and litigation will not have a material adverse effect on the consolidated financial position and results of operations of the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (c) UNREGISTERED SECURITIES: During the third quarter of 2000 the Company issued 6,276 shares of common stock in private placement transactions exempt under section 4(2) of the Securities Act to John Hancock Subsidiaries, Inc. pursuant to the Additional Share Agreement entered into in connection with the acquisition of the Company's subsidiaries from John Hancock in 1996. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - The following exhibits are included herein or are incorporated by reference; 10.33a John F. Luikart - Renewal of Employment Agreement 10.34a Kevin J. McKay - Renewal of Employment Agreement 27 Financial Data Schedule (b) Reports on Form 8-K None 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TUCKER ANTHONY SUTRO (REGISTRANT) DATE: November 13, 2000 BY: /s/ JOHN H. GOLDSMITH ------------------------------------ JOHN H. GOLDSMITH CHAIRMAN AND CHIEF EXECUTIVE OFFICER DATE: November 13, 2000 BY: /s/ KENNETH S. KLIPPER -------------------------------------- KENNETH S. KLIPPER CHIEF FINANCIAL OFFICER 15 16 EXHIBIT INDEX ITEM NO. DESCRIPTION SEQUENTIAL PAGE NO. -------- ----------- ------------------- 10.33a John F. Luikart - Renewal of Employment Agreement 17 10.34a Kevin J. McKay - Renewal of Employment Agreement 18 27 Financial Data Schedule 19 16

TUCKER ANTHONY SUTRO 10-Q