DONALDSON LUFKIN & JENRETTE INC /NY/, 424B2, 1996-11-21

DONALDSON LUFKIN & JENRETTE INC /NY/
424B2, 1996-11-21
SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES

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<PAGE>
Filed Pursuant to Rule 424(b)(2)
Registration File No.: 33-80771
PROSPECTUS SUPPLEMENT
NOVEMBER 19, 1996
(TO PROSPECTUS DATED FEBRUARY 6, 1996)

4,000,000 SHARES
DONALDSON, LUFKIN & JENRETTE, INC.
FIXED/ADJUSTABLE RATE CUMULATIVE
PREFERRED STOCK, SERIES A

This Prospectus Supplement relates to 4,000,000 shares of Fixed/Adjustable
Rate Cumulative Preferred Stock, Series A, $50 liquidation preference per
share (the "Series A Preferred Stock"), of Donaldson, Lufkin & Jenrette, Inc.
(the "Company"). Dividends on the Series A Preferred Stock are cumulative
from the date of original issue and are payable quarterly on February 28, May
30, August 30 and November 30 of each year, commencing February 28, 1997, at
a rate of 5.94% per annum through November 30, 2001. Thereafter, the dividend
rate on the Series A Preferred Stock will be the Applicable Rate from time to
time in effect. The Applicable Rate per annum for any dividend period
beginning November 30, 2001 will be equal to 0.50% plus the highest of the
Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year
Constant Maturity Rate (each as defined herein), as determined in advance of
such dividend period. The Applicable Rate per annum for each dividend period
beginning November 30, 2001 will not be less than 6.44% nor greater than
12.44%. The amount of dividends payable in respect of the Series A Preferred
Stock will be adjusted in the event of certain amendments to the Internal
Revenue Code of 1986, as amended (the "Code"), in respect of the dividends
received deduction. See "Description of Series A Preferred Stock--Dividends."

The Series A Preferred Stock is redeemable at any time on and after
November 30, 2001, at the option of the Company, in whole or in part, at $50
per share plus accrued and unpaid dividends (whether or not declared) to the
date fixed for redemption. The Series A Preferred Stock may also be redeemed
prior to November 30, 2001, in whole, at the option of the Company, in the
event of certain amendments to the Code in respect of the dividends received
deduction. See "Description of Series A Preferred Stock--Redemption." For a
description of the rights and preferences of the Series A Preferred Stock,
see "Description of Series A Preferred Stock."

The Series A Preferred Stock has been approved for listing on the New York
Stock Exchange, Inc. (the "NYSE"), subject to official notice of issuance.
See "Underwriting."

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 SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- ------------ -------------- -------------- -------------
Per Share .. $ 50.00 $ 0.625 $ 49.375
- ------------ -------------- -------------- -------------
Total ....... $200,000,000 $2,500,000 $197,500,000
- -----------------------------------------------------------------------------
(1) Plus accrued dividends, if any, from November 22, 1996 to the date of
delivery.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $250,000.

The shares of Series A Preferred Stock are offered by the Underwriters,
subject to prior sale, when, as and if issued to and accepted by it and
subject to approval of certain legal matters by counsel for the Underwriters.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that the Series A
Preferred Stock will be ready for delivery in book-entry form only through
the facilities of the Depository Trust Company of New York on or about
November 22, 1996, against payment therefor in immediately available funds.

DONALDSON, LUFKIN & JENRETTE
Securities Corporation
DEAN WITTER REYNOLDS INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
Incorporated
SMITH BARNEY INC.

<PAGE>

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
PREFERRED STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

S-2

<PAGE>

USE OF PROCEEDS

The proceeds from the sale of the Series A Preferred Stock will be used by
the Company for the reduction of short-term indebtedness.

RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends for the Company for the periods
indicated.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -----------------
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined
fixed charges and preferred
stock dividends (1) ......... -- -- -- 1.09 1.10 1.16
</TABLE>
- ------------
(1) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.

DESCRIPTION OF SERIES A PREFERRED STOCK

The following description of the particular terms of the 4,000,000 shares
of Series A Preferred Stock supplements, and to the extent inconsistent
therewith replaces, the description of the general terms and provisions of
Preferred Stock set forth in the accompanying Prospectus, to which
description reference is hereby made. The description of certain provisions
of the Series A Preferred Stock set forth below does not purport to be
complete and is subject to and qualified in its entirety by reference to the
provisions of the Certificate of Designation relating to the Series A
Preferred Stock, a form of which will be filed with the Securities and
Exchange Commission at or prior to the time of sale of the Series A Preferred
Stock. Capitalized terms not defined herein have the meanings assigned to
such terms in the Prospectus.

GENERAL

The Series A Preferred Stock is a single series consisting of 4,000,000
shares. The holders of Series A Preferred Stock will have no preemptive
rights. The Series A Preferred Stock will not be convertible into shares of
Common Stock of the Company. The Series A Preferred Stock will be fully paid
and nonassessable.

The Series A Preferred Stock will, on the date of original issuance, rank
on a parity as to payment of dividends and distribution of assets upon
dissolution, liquidation or winding up of the Company with each other
outstanding series of Preferred Stock. See "Description of Capital
Stock--Preferred Stock" in the Prospectus. The Series A Preferred Stock,
together with each other series of Preferred Stock, will rank prior to the
Common Stock of the Company as to the payment of dividends and distribution
of assets upon dissolution, liquidation or winding up of the Company.

DIVIDENDS

General. Cumulative cash dividends will be payable on each share of Series
A Preferred Stock when, as and if declared by the Board of Directors of the
Company or a duly authorized committee thereof out of the assets of the
Company legally available therefor.

S-3

<PAGE>

on the Series A Preferred Stock will be payable quarterly, as, if and when
declared by the Board of Directors of the Company on February 28, May 30,
August 30 and November 30 of each year (each a "Dividend Payment Date") at
the annual rate of 5.94% or $2.97 per share through November 30, 2001. After
November 30, 2001, dividends on the Series A Preferred Stock will be payable
on each Dividend Payment Date, as, if and when declared by the Board of
Directors of the Company at the Applicable Rate from time to time in effect.
The Applicable Rate per annum for each dividend period beginning November 30,
2001 will be equal to 0.50% plus the highest of the Treasury Bill Rate, the
Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate
(each as defined below under "Adjustable Rate Dividends"), as determined in
advance of such dividend period. The Applicable Rate per annum for each
dividend period beginning November 30, 2001, will not be less than 6.44% nor
greater than 12.44% (without taking into account any adjustments as described
below under "Changes in the Dividends Received Percentage").

If a Dividend Payment Date is not a business day, dividends (if declared)
on the Series A Preferred Stock will be paid on the next business day,
without interest. A dividend period with respect to a Dividend Payment Date
is the period commencing on the preceding Dividend Payment Date and ending on
the day immediately prior to the next Dividend Payment Date. Dividends will
be payable to holders of record as they appear on the stock books of the
Company on the record date fixed by the Board of Directors of the Company.

Dividends on the Series A Preferred Stock will be cumulative and rights
will accrue to the holders of the Series A Preferred Stock if the Company
fails to declare one or more dividends on the Series A Preferred Stock in any
amount, whether or not the earnings or financial condition of the Company
were sufficient to pay such dividends in whole or in part.

Adjustable Rate Dividends. The "Applicable Rate" per annum for each
dividend period beginning November 30, 2001 will be equal to 0.50% plus the
Effective Rate (as defined below) for such dividend period, but not less than
6.44% nor greater than 12.44% (without taking into account any adjustments as
described below under "Changes in the Dividends Received Percentage") except
as provided below in this paragraph. The "Effective Rate" for each dividend
period beginning November 30, 2001 will be equal to the highest of the
Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty Year
Constant Maturity Rate (each as defined below) for such dividend period. In
the event that the Company determines in good faith that for any reason: (i)
any one of the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the
Thirty Year Constant Maturity Rate cannot be determined for any dividend
period, then the Effective Rate for such dividend period will be equal to the
higher of whichever two of such rates can be so determined; (ii) only one of
the Treasury Bill Rate, the Ten Year Constant Maturity Rate or the Thirty
Year Constant Maturity Rate can be determined for any dividend period, then
the Effective Rate for such dividend period will be equal to whichever one of
such rates as can be so determined; or (iii) none of the Treasury Bill Rate,
the Ten Year Constant Maturity Rate or the Thirty Year Constant Maturity Rate
can be determined for any dividend period, then the Effective Rate for the
preceding dividend period will be continued for the succeeding dividend
period.

The "Treasury Bill Rate" will be the arithmetic average of the two most
recent weekly per annum market discount rates (or the one weekly per annum
market discount rate, if only one such rate is published during the relevant
Calendar Period (as defined below) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board (as defined below) during the
Calendar Period immediately preceding the last ten calendar days preceding
the dividend period for which the dividend rate on the Series A Preferred
Stock is being determined, except as described below in this paragraph. In
the event that the Federal Reserve Board does not publish such a weekly per
annum market discount rate during any such Calendar Period, then the Treasury
Bill Rate for such dividend period will be the arithmetic average of the two
most recent weekly per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate is published during the
relevant Calendar Period) for three-month U.S. Treasury bills, as published
weekly during such Calendar Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the Company. In the event that a
per annum market discount rate for three-month U.S. Treasury bills is not
published by the Federal Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during

S-4

<PAGE>

such Calendar Period, then the Treasury Bill Rate for such dividend period
will be the arithmetic average of the two most recent weekly per annum market
discount rates (or the one weekly per annum market discount rate, if only one
such rate is published during the relevant Calendar Period) for all of the
U.S. Treasury bills then having remaining maturities of not less than 80 nor
more than 100 days, as published during such Calendar Period by the Federal
Reserve Board, or if the Federal Reserve Board does not publish such rates,
by any Federal Reserve Bank or by any U.S. Government department or agency
selected by the Company. In the event that the Company determines in good
faith that for any reason no such U.S. Treasury Bill Rates are published as
provided above during such Calendar Period, then the Treasury Bill Rate for
such dividend period will be the arithmetic average of the per annum market
discount rates based upon the closing bids during such Calendar Period for
each of the issues of marketable non-interest-bearing U.S. Treasury
securities with a remaining maturity of not less than 80 nor more than 100
days from the date of each such quotation, as chosen and quoted daily for
each business day in New York City (or less frequently if daily quotations
are not generally available) to the Company by at least three recognized
dealers in U.S. Government securities selected by the Company. In the event
that the Company determines in good faith that for any reason the Company
cannot determine the Treasury Bill Rate for any dividend period as provided
above in this paragraph, the Treasury Bill Rate for such dividend period will
be the arithmetic average of the per annum market discount rates based upon
the closing bids during such Calendar Period for each of the issues of
marketable interest-bearing U.S. Treasury securities with a remaining
maturity of not less than 80 nor more than 100 days, as chosen and quoted
daily for each business day in New York City (or less frequently if daily
quotations are not generally available) to the Company by at least three
recognized dealers in U.S. Government securities selected by the Company.

The "Ten Year Constant Maturity Rate" will be the arithmetic average of
the two most recent weekly per annum Ten Year Average Yields (as defined
below) (or the one weekly per annum Ten Year Average Yield, if only one such
yield is published during the relevant Calendar Period), as published weekly
by the Federal Reserve Board during the Calendar Period immediately preceding
the last ten calendar days preceding the dividend period for which the
dividend rate on the Series A Preferred Stock is being determined, except as
described below in this paragraph. In the event that the Federal Reserve
Board does not publish such weekly per annum Ten Year Average Yield during
such Calendar Period, then the Ten Year Constant Maturity Rate for such
dividend period will be the arithmetic average of the two most recent weekly
per annum Ten Year Average Yields (or the one weekly per annum Ten Year
Average Yield, if only one such yield is published during the relevant
Calendar Period), as published weekly during such Calendar Period by any
Federal Reserve Bank or by any U.S. Government department or agency selected
by the Company. In the event that a per annum Ten Year Average Yield is not
published by the Federal Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such Calendar Period, then
the Ten Year Constant Maturity Rate for such dividend period will be the
arithmetic average of the two most recent weekly per annum average yields to
maturity (or the one weekly per annum average yield to maturity, if only one
such yield is published during the relevant Calendar Period) for all of the
actively traded marketable U.S. Treasury fixed interest rate securities
(other than Special Securities (as defined below)) then having remaining
maturities of not less than eight nor more than twelve years, as published
during such Calendar Period by the Federal Reserve Board or, if the Federal
Reserve Board does not publish such yields, by any Federal Reserve Bank or by
any U.S. Government department or agency selected by the Company. In the
event that the Company determined in good faith that for any reason the
Company cannot determine the Ten Year Constant Maturity Rate for any dividend
period as provided above in this paragraph, then the Ten Year Constant
Maturity Rate for such dividend period will be the arithmetic average of the
per annum average yields to maturity based upon the closing bids during such
Calendar Period for each of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than Special Securities) with
a final maturity date not less than eight nor more than twelve years from the
date of each such quotation, as chosen and quoted daily for each business day
in New York City (or less frequently if daily quotation are not generally
available) to the Company by at least three recognized dealers in U.S.
Government securities selected by the Company.

S-5

<PAGE>

The "Thirty Year Constant Maturity Rate" will be the arithmetic average
of the two most recent weekly per annum Thirty Year Average Yields (as
defined below) (or the one weekly per annum Thirty Year Average Yield, if
only one such yield is published during the relevant Calendar Period), as
published weekly by the Federal Reserve Board during the Calendar Period
immediately preceding the last ten calendar days preceding the dividend
period for which the dividend rate on the Series A Preferred Stock is being
determined, except at described below in this paragraph. In the event that
the Federal Reserve Board does not publish such a weekly per annum Thirty
Year Average Yield during such Calendar Period, then the Thirty Year Constant
Maturity Rate for such dividend period will be the arithmetic average of the
two most recent weekly per annum Thirty Year Average Yields (or the one
weekly per annum Thirty Year Average Yield, if only one such yield is
published during the relevant Calendar Period), as published weekly during
such Calendar Period by any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. In the event that per annum
Thirty Year Average Yield in not published by the Federal Reserve Board or by
any Federal Reserve Bank or by any U.S. Government department or agency
during such Calendar Period then the Thirty Year Constant Maturity Rate for
such dividend period will be arithmetic average of the two most recent weekly
per annum average yields to maturity (or the one weekly per annum average
yield to maturity, if only one such yield is published during the relevant
Calendar Period) for all of the actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special Securities) than having
remaining maturities of not less than twenty-eight nor more than thirty
years, as published during such Calendar Period by the Federal Reserve Board
or, if the Federal Reserve Board does not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or agency selected by the
Company. In the event that the Company determines in good faith that for any
reason the Company cannot determine the Thirty Year Constant Maturity Rate
for any dividend period as provided above in this paragraph, then the Thirty
Year Constant Maturity Rate for such dividend period will be the arithmetic
average of the per annum average yields to maturity based upon the closing
bids during such Calendar Period for each of the issues of actively traded
marketable U.S. Treasury fixed interest rate securities (other than Special
Securities) with a final maturity date not less than twenty-eight nor more
than thirty years from the date of each such quotation, are chosen and quoted
daily for each business day in New York City (or less frequently if daily
quotations are not generally available) to the Company by at least three
recognized dealers in U.S. Government securities selected by the Company.

The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate will each be rounded to the nearest five
hundredths of a percent.

The Applicable Rate with respect to each dividend period beginning
November 30, 2001 will be calculated as promptly as practicable by the
Company according to the appropriate method described above. The Company will
cause notice of the Applicable Rate for the next dividend period to be
enclosed with each dividend payment check mailed to the holders of Series A
Preferred Stock.

As used above, the term "Calendar Period" means a period of fourteen
calendar days; the term "Federal Reserve Board" means the Board of Governors
of the Federal Reserve System; the term "Special Securities" means securities
which can, at the option of the holder, be surrendered at face value in
payment of any Federal estate tax or which provide tax benefits to the holder
and are priced to reflect such tax benefits or which were originally issued
at a deep or substantial discount; the term "Ten Year Average Yield" means
the average yield to maturity for actively traded marketable U.S. Treasury
fixed interest rate securities (adjusted to constant maturities of ten
years); and the term "Thirty Year Average Yield" means the average yield to
maturity for actively traded marketable U.S. Treasury fixed interest rate
securities (adjusted to constant maturities of thirty years).

Changes in the Dividends Received Percentage. If one or more amendments to
the Internal Revenue Code of 1986, as amended (the "Code"), are enacted which
change the percentage of the dividends received deduction (currently 70%) as
specified in Section 243(a)(1) of the Code or any successor provision (the
"Dividends Received Percentage"), the amount of each dividend on each share
of the Series A Preferred Stock for dividend payments made on or after the
date of enactment of such change

S-6

<PAGE>

will be adjusted by multiplying the amount of the dividend payable determined
as described above under "Dividends" (before adjustment) by a factor, which
will be the number determined in accordance with the following formula (the
"DRD Formula"), and rounding the result to the nearest cent:

1-[.35 (1-.70)]
-----------------------------
1-[.35 (1-DRP)]

For the purposes of the DRD Formula, "DRP" means the Dividends Received
Percentage applicable to the dividend in question. No amendment to the Code,
other than a change in the percentage of the dividends received deduction set
forth in Section 243(a)(1) of the Code or any successor provision, will give
rise to an adjustment. Notwithstanding the foregoing provisions, in the event
that, with respect to any such amendment, the Company will receive either an
unqualified opinion of nationally recognized independent tax counsel selected
by the Company or a private letter ruling or similar form of authorization
from the Internal Revenue Service to the effect that such an amendment would
not apply to dividends payable on the Series A Preferred Stock, then any such
amendment will not result in the adjustment provided for pursuant to the DRD
Formula. The opinion referenced in the previous sentence will be based upon a
specific exception in the legislation amending the DRP or upon a published
pronouncement of the Internal Revenue Service addressing such legislation.
Unless the context otherwise requires, references to dividends in this
Prospectus Supplement will mean dividends as adjusted by the DRD Formula. The
Company's calculation of the dividends payable as so adjusted and as
certified accurate as to calculation and reasonable as to the method by the
independent certified public accountants then regularly engaged by the
Company, will be final and not subject to review.

If any amendment to the Code which reduces the Dividends Received
Percentage is enacted after a record date and before the next Dividend
Payment Date, the amount of dividend payable on such Dividend Payment Date
will not be increased; but instead, an amount, equal to the excess of (x) the
product of the dividends paid by the Company on such Dividend Payment Date
and the DRD Formula (where the DRP used in the DRD Formula would be equal to
the reduced Dividends Received Percentage) and (y) the dividends paid by the
Company on such Dividend Payment Date, will be payable (if declared) to
holders of record on the next succeeding Dividend Payment Date in addition to
any other amounts payable on such date.

In addition, if prior to May 31, 1997, an amendment to the Code is enacted
that reduces the Dividends Received Percentage and such reduction
retroactively applies to a Dividend Payment Date as to which the Company
previously paid dividends on the Series A Preferred Stock (each an "Affected
Dividend Payment Date"), the Company will pay (if declared) additional
dividends (the "Additional Dividends") on the next succeeding Dividend
Payment Date (or if such amendment is enacted after the dividend payable on
such Dividend Payment Date has been declared, on the second succeeding
Dividend Payment Date following the date of enactment) to holders of record
on such succeeding Dividend Payment Date in an amount equal to the excess of
(x) the product of the dividends paid by the Company on each Affected
Dividend Payment Date and the DRD Formula (where the DRP used in the DRD
Formula would be equal to the Dividends Received Percentage applied to each
Affected Dividend Payment Date) and (y) the dividends paid by the Company on
each Affected Dividend Payment Date.

Additional Dividends will not be paid as a result of the enactment of any
amendment to the Code on or after May 31, 1997 which retroactively reduces
the Dividends Received Percentage, or if prior to May 31, 1997, such
amendment would not result in an adjustment due to the Company having
received either an opinion of counsel or tax ruling referred to in the third
preceding paragraph. The Company will only make one payment of Additional
Dividends.

In the event that the amount of dividend payable per share of the Series A
Preferred Stock will be adjusted pursuant to the DRD Formula and/or
Additional Dividends are to be paid, the Company will cause notice of each
such adjustment and, if applicable, any Additional Dividends, to be sent to
the holders of the Series A Preferred Stock with the payment of dividends on
the next Dividend Payment Date after the date of such adjustment.

S-7

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If the Dividends Received Percentage is reduced to 50% or less, the
Company may at its option, redeem the Series A Preferred Stock as a whole but
not in part as described below. See "Redemption." See also "Recent Tax
Proposals" for a discussion of certain Proposals (as defined below) to reduce
the Dividends Received Percentage.

LIQUIDATION PREFERENCE

In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of shares of Series A Preferred Stock
will be entitled to receive out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made on
the Company's Common Stock or any other class or series of stock of the
Company ranking junior to the Series A Preferred Stock upon liquidation,
liquidating distributions in the amount of $50 per share, plus an amount
equal to the sum of all accrued and unpaid dividends including any increase
in dividends payable due to changes in the Dividends Received Percentage and
Additional Dividends (whether or not earned or declared) for the then-current
dividend period and all dividend periods prior thereto. See "Description of
Capital Stock--Preferred Stock" in the accompanying Prospectus.

VOTING RIGHTS

The holders of shares of Series A Preferred Stock will not be entitled to
vote, except as set forth below or as expressly required by applicable law.

If the equivalent of six quarterly dividends payable on the Series A
Preferred Stock or any other class or series of preferred stock are in
default, the number of directors of the Company will be increased by two
(without duplication of any increase made pursuant to the terms of any other
series of preferred stock of the Company), and the holders of the Series A
Preferred Stock, voting as a single class with the holders of shares of any
other class of the Company's preferred stock ranking on a parity with the
Series A Preferred Stock either as to dividends or distribution of assets and
upon which like voting rights have been conferred and are exercisable, will
be entitled to elect such two directors to fill such newly-created
directorships. Such right shall continue until full cumulative dividends for
all past dividend periods on all preferred shares of the Company, including
any shares of the Series A Preferred Stock, have been paid or declared and
set apart for payment. Any such elected directors shall serve until the
Company's next annual meeting of stockholders (notwithstanding that prior to
the end of such term the dividend default shall cease to exist) or until
their respective successors shall be elected and qualify.

The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding shares of the Series A Preferred Stock will be required for any
amendment of the articles of incorporation of the Company (or any certificate
supplemental thereto) which will adversely affect the powers, preferences,
privileges or rights of the Series A Preferred Stock. The affirmative vote or
consent of the holders of at least 66 2/3% of the outstanding shares of the
Series A Preferred Stock and any other series of the Company's preferred
stock ranking on a parity with the Series A Preferred Stock either as to
dividends or upon liquidation, voting as a single class without regard to
series, will be required to issue, authorize or increase the authorized
amount of, or issue or authorize any obligation or security convertible into
or evidencing a right to purchase, any additional class or series of stock
ranking prior to the Series A Preferred Stock as to dividends or upon
liquidation, or to reclassify any authorized stock of the Company into such
prior shares, but such vote will not be required for the Company to take any
such actions with respect to any stock ranking on a parity with or junior to
the Series A Preferred Stock.

REDEMPTION

Prior to November 30, 2001, the Series A Preferred Stock is not
redeemable, except under certain limited circumstances as described below. On
or after such date, each share of Series A Preferred Stock will be
redeemable, in whole or in part, at the option of the Company, at any time
and from time to time upon not less than thirty nor more than sixty days'
notice, at $50 per share, plus accrued and unpaid dividends (whether or not
declared) to the date fixed for redemption, including any increase in
dividends payable due to changes in the Dividends Received Percentage and
Additional Dividends.

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However, if the Dividends Received Percentage is equal to or less than
50% and, as a result, the amount of dividends on the Series A Preferred Stock
payable on any Dividend Payment Date will be or is adjusted upwards as
described above under "Changes in the Dividends Received Percentage," the
Company, at its option, may redeem all, but not less than all, of the
outstanding shares of the Series A Preferred Stock notwithstanding the
preceding paragraph, provided that within sixty days of the date on which an
amendment to the Code is enacted which reduces the Dividends Received
Percentage to 50% or less, the Company sends notice to holders of the Series
A Preferred Stock of such redemption. Any redemption of the Series A
Preferred Stock pursuant to this paragraph will take place on the date
specified in the notice, which will not be less than thirty nor more than
sixty days' from the date such notice is sent to holders of the Series A
Preferred Stock. Any redemption of the Series A Preferred Stock will be at
the applicable redemption price set forth in the following table, in each
case plus accrued and unpaid dividends (whether or not declared) thereon to
the date fixed for redemption, including any increase in dividends payable
due to changes in the Dividends Received Percentage and Additional Dividends.

<TABLE>
<CAPTION>
REDEMPTION
PRICE PER
REDEMPTION PERIOD SHARE
----------------- -------------
<S> <C>
November 22, 1996 to November 29, 1997 $52.50
November 30, 1997 to November 29, 1998 52.00
November 30, 1998 to November 29, 1999 51.50
November 30, 1999 to November 29, 2000 51.00
November 30, 2000 to November 29, 2001 50.50
On or after November 30, 2001 .......... 50.00
</TABLE>

In addition, if the holders of the shares of the Series A Preferred Stock
are entitled to vote upon or consent to a merger or consolidation of the
Company, and if the Company offers to purchase all of the outstanding shares
of the Series A Preferred Stock (the "Offer"), then each holder of Series A
Preferred Stock who does not sell their shares of Series A Preferred Stock
pursuant to the Offer shall be deemed irrevocably to have voted or consented
all shares of Series A Preferred Stock owned by such holder in favor of the
merger or consolidation of the Company without any further action by the
holder. The Offer shall be at a price of $50 per share, together with accrued
and unpaid dividends, if any, to the date fixed for redemption, including any
increase in dividends payable due to increases in the Dividends Received
Percentage and Additional Dividends. The Offer must remain open for
acceptance for a period of at least 30 days.

Holders of Series A Preferred Stock will have no right to require
redemption of the Series A Preferred Stock.

The Series A Preferred Stock is not subject to any mandatory redemption,
sinking fund or other similar provisions.

Transfer Agent and Registrar. The Bank of New York will be the transfer
agent, registrar, dividend disbursing agent and redemption agent for the
Series A Preferred Stock.

S-9

<PAGE>

RECENT TAX PROPOSALS

On March 19, 1996, the Clinton Administration released a budget plan for
the fiscal year 1997 that includes certain tax proposals that may affect
holders of the Series A Preferred Stock. On August 27, 1996, the Clinton
Administration issued additional tax legislative proposals. (The various
Clinton Administrative legislative proposals are referred to hereinafter as
the "Proposals.")

Under the Proposals, the Dividends Received Percentage that is currently
available to corporate shareholders for certain dividends received from
another corporation in which the shareholder owns less than a 20% interest
(by vote and value) would be reduced from 70% to 50%. As proposed, this
provision would be effective for dividends paid after 30 days from the
enactment of the provision. In addition, under the Proposals, the dividends
received deduction would be eliminated for "certain debt-like preferred
stock" (including adjustable rate preferred stock). As proposed, this
provision would be effective for shares issued after the date of enactment.
Thus, if enacted as currently proposed, the Proposal to eliminate the
Dividends Received Deduction for certain preferred stock would not apply to
the Series A Preferred Stock. Furthermore, under current law, the dividends
received deduction is allowed to a corporate shareholder only if the
shareholder satisfies a 46-day holding period for the dividend-paying stock
(or a 91-day period for certain dividends on preferred stock). The Proposals
provide that a taxpayer is not entitled to a dividends received deduction if
the taxpayer's holding period for the dividend-paying stock is not satisfied
over a period immediately before or immediately after the taxpayer becomes
entitled to receive the dividend.

To the extent the Dividends Received Percentage is changed, the amount of
dividends payable per share may be adjusted as described under "Description
of Series A Preferred Stock -- Dividends -- Changes in the Dividends Received
Percentage" and the Company may have the right to redeem the Series A
Preferred Stock as described under "Description of Series A Preferred Stock
- -- Redemption." Due to the inherently uncertain nature of proposed changes to
the tax law such as the Proposals, there can be no assurance as to whether,
or in what form, the Proposals may be enacted into law, as to the effective
dates of any such changes to the law or as to the effect of any changes to
the law on the holders of the Series A Preferred Stock. See "Description of
Series A Preferred Stock -- Dividends -- Changes in the Dividends Received
Percentage" and "--Redemption."

UNDERWRITING

Subject to the terms and conditions set forth in an underwriting agreement
dated the date hereof (the "Underwriting Agreement"), the Company has agreed
to sell to each of the Underwriters named below (the "Underwriters"), and
each of the Underwriters, for whom Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJSC") is acting as representative, has severally agreed to
purchase the number of shares of Series A Preferred Stock set forth opposite
its name below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------- -----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation 675,000
Dean Witter Reynolds Inc. ........................... 665,000
Goldman, Sachs & Co. ................................ 665,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated . 665,000
Morgan Stanley & Co. Incorporated ................... 665,000
Smith Barney Inc. ................................... 665,000
-----------
Total ............................................... 4,000,000
===========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the Series A Preferred Stock
offered hereby are subject to approval of certain legal matters by counsel
and to certain other conditions. If any Series A Preferred Stock are
purchased by the Underwriters pursuant to the Underwriting Agreement, all
such Series A Preferred Stock must be purchased.

The Underwriters propose to offer the Series A Preferred Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $0.40 per share of Series A
Preferred Stock.

S-10

<PAGE>

The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $0.25 per share of Series A Preferred Stock to certain brokers and
dealers. After the Series A Preferred Stock are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by DLJSC.

The Company has agreed not to offer, sell, contract to sell, grant any
option to purchase, or otherwise dispose of any preferred stock or any
securities convertible into or exercisable or exchangeable for such preferred
stock or in any other manner transfer all or a portion of the economic
consequences associated with the ownership of any such preferred stock,
except to the Underwriters, for a period of 30 days after the date of this
Prospectus Supplement without the prior written consent of the majority of
the Underwriters excluding DLJSC.

The Series A Preferred Stock has been approved for listing on the NYSE,
subject to official notice of issuance. DLJSC has advised the Company that it
intends to make a market in the Series A Preferred Stock prior to the
commencement of trading on the NYSE. DLJSC will have no obligation to make a
market in the Series A Preferred Stock, however, and may cease market making
activities, if commenced, at any time without notice.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments that the Underwriters may be required
to make in respect thereof.

DLJSC is a wholly-owned subsidiary of the Company. DLJSC has committed to
purchase from the Company 675,000 shares of the Series A Preferred Stock to
be purchased in the offering on the same basis as the other Underwriters.
Although the amount of proceeds derived from the offering by the Company will
not be affected by DLJSC's participation as an Underwriter to the extent that
part or all of the Series A Preferred Stock to be purchased by DLJSC are not
resold, the Series A Preferred Stock owned by DLJSC will be eliminated in
consolidation and will not be shown as outstanding in the consolidated
financial statements of the Company. DLJSC intends to resell any Series A
Preferred Stock which it is unable to resell in the offering from time to
time, at prevailing market prices. This Prospectus Supplement, together with
the accompanying Prospectus, may also be used by DLJSC in connection with
offers and sales of the Series A Preferred Stock related to market-making
transactions by and through DLJSC, at negotiated prices related to prevailing
market prices at the time of sale or otherwise. DLJSC may act as principal or
agent in such transactions. The offering of the Series A Preferred Stock is
being conducted in accordance with Section 2720 of the NASD Conduct Rules.

Certain Underwriters and their affiliates have engaged and may in the
future engage in commercial banking and investment banking transactions with
the Company and its affiliates in the ordinary course of business.

S-11

<PAGE>

PROSPECTUS
FEBRUARY 6, 1996
$500,000,000
DONALDSON, LUFKIN & JENRETTE, INC.
SENIOR DEBT SECURITIES AND PREFERRED STOCK

Donaldson Lufkin & Jenrette, Inc. (the "Company") may from time to time
offer, together or separately, (i) senior debt securities (the "Senior Debt
Securities") or (ii) shares of its preferred stock, par value $0.01 per share
(the "Preferred Stock"). The Senior Debt Securities and Preferred Stock are
collectively called the "Securities."

The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances in U.S. dollars or in one or more foreign
currencies, currency units or composite currencies and will be limited to an
aggregate public offering price of $500,000,000 (or its equivalent in one or
more foreign currencies, currency units or composite currencies). Specific
terms of the securities in respect of which this Prospectus is being
delivered (the "Offered Securities") will be set forth in an accompanying
Prospectus Supplement (a "Prospectus Supplement"), together with the terms of
the offering of the Offered Securities, the initial price thereof and the net
proceeds from the sale thereof. The Prospectus Supplement will set forth with
regard to the particular Offered Securities, without limitation, the
following: (i) in the case of Senior Debt Securities, the specific
designation, aggregate principal amount, authorized denomination, maturity,
rate (which may be fixed or variable) or method of calculation of interest
and dates for payment thereof, and any exchangeability, conversion,
redemption, prepayment or sinking fund provisions and any listing on a
securities exchange and (ii) in the case of Preferred Stock, the specific
designation, number of shares, purchase price and the rights, preferences and
privileges thereof and any qualifications or restrictions thereon (including
dividends, liquidation value, voting rights, terms for the redemption,
conversion or exchange thereof and any other specific terms of the Preferred
Stock) and any listing on a securities exchange. Unless otherwise indicated
in the Prospectus Supplement, the Company does not intend to list any of the
Securities on a national securities exchange.

The Senior Debt Securities, when issued, will be unsecured and will rank
equally with all other unsecured and unsubordinated indebtedness of the
Company.

The Offered Securities may be offered directly, through agents designated
from time to time, through dealers or through underwriters. Such agents or
underwriters may act alone or with other agents or underwriters. See "Plan of
Distribution." Any such agents, dealers or underwriters will be set forth in
a Prospectus Supplement. If an agent of the Company, or a dealer or
underwriter is involved in the offering of the Offered Securities, the
agent's commission, dealer's purchase price, underwriter's discount and net
proceeds to the Company, as the case may be, will be set forth in, or may be
calculated from, the Prospectus Supplement. Any underwriters, dealers or
agents participating in the offering may be deemed "underwriters" within the
meaning of the Securities Act of 1933, as amended.

This Prospectus may not be used to consummate sales of Offered Securities
unless accompanied by a Prospectus Supplement.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement of which this Prospectus forms a part, as well as reports, proxy
statements and other information filed by the Company, may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. The Company's Common Stock is
listed on the New York Stock Exchange, Inc. and reports and other information
concerning the Company can also be inspected at the office of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

This Prospectus constitutes a part of the Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Offered Securities. This
Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is made to such
Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Offered Securities. Any
statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission or incorporated by reference herein are not necessarily complete,
and in each instance reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement
is qualified in its entirety by such reference.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, previously filed by the Company with the Commission, is
incorporated by reference in this Prospectus.

All documents filed by the Company after the date of this Prospectus
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the termination of the offering of the Offered Securities offered hereby,
shall be deemed to be incorporated herein by reference and to be a part
hereof from the date of filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statements as modified
or superseded shall be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents referred to above which have been or may
be incorporated by reference in this Prospectus (other than certain exhibits
to such documents). Requests for such documents should be directed to
Donaldson, Lufkin & Jenrette, Inc., 140 Broadway, New York, New York 10005,
Attention: Corporate Secretary (Telephone: (212) 504-3000).

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by reference to the
more detailed information and consolidated financial statements, including
the notes thereto, appearing elsewhere in this Prospectus. Each prospective
investor is urged to read this Prospectus in its entirety. Donaldson, Lufkin
& Jenrette, Inc. is a holding company that conducts its businesses through
various subsidiaries. Unless otherwise indicated, all references herein to
the "Company" refer to Donaldson, Lufkin & Jenrette, Inc. and its
consolidated subsidiaries. Certain banking and other terms used herein are
defined in the Glossary, which appears immediately before page F-1.
Statements contained herein regarding the Company's competitive position are
based on publicly available information from independent third party sources.

THE COMPANY

Donaldson, Lufkin & Jenrette, Inc. is a leading integrated investment and
merchant bank that serves institutional, corporate, governmental and
individual clients. The Company's businesses include securities underwriting,
sales and trading; merchant banking; financial advisory services; investment
research; correspondent brokerage services; and asset management. While
results have fluctuated from year to year, for the years 1990 through 1994,
the Company's total revenues and net income increased by a compound annual
growth rate of 19.5% and 75.4%, respectively. The Company's average annual
pre-tax return on common equity for the past five years was 33.6%. At
September 30, 1995, the Company had total assets of $40.8 billion and total
stockholders' equity of $910.4 million.

The Company's principal strategy is to focus its resources on certain core
businesses where management believes the Company can compete profitably and
be among the leading participants in each targeted market. Over the past
several years, the Company has significantly expanded the scope of its
business activities and its customer base, both in the U.S. and
internationally. It has established strong positions in selected high-margin
activities, including equity and high-yield corporate securities underwriting
as well as merchant banking, and has increased its market share in a broad
range of businesses. Key elements of this expansion have been the Company's
recruitment of experienced professionals during periods of turmoil in the
securities industry, the continued development and retention of the Company's
existing personnel at all levels and the continuity of senior management. In
addition, the Company has historically emphasized economic and investment
research in the development of its business, and believes that its commitment
to research has been an important contributor to its success.

The Company conducts its business through three principal operating
groups, each of which is an important contributor to revenues and earnings:
the Banking Group, which includes the Company's Investment Banking, Merchant
Banking and recently formed Emerging Markets groups; the Capital Markets
Group, consisting of the Company's institutional debt and equity businesses
as well as Sprout, its venture capital affiliate; and the Financial Services
Group, comprised of its Pershing clearing division, high-net-worth retail
brokerage and asset management businesses.

<PAGE>

volatility. Its Taxable Fixed-Income division provides institutional clients
with research, trading and sales services for a broad range of taxable
fixed-income products including high-yield corporate, investment-grade
corporate, U.S. government and mortgage-backed securities. The Institutional
Equities division provides institutional clients with research, trading and
sales services in U.S. listed and over-the-counter ("OTC") equity securities.
In addition, the Company's Equity Derivatives division provides a broad range
of equity and index options products, while Sprout is one of the oldest and
largest groups in the private equity investment and venture capital industry.

DESCRIPTION OF SECURITIES

The Company may from time to time offer, together or separately, Senior
Debt Securities and Preferred Stock. Such Securities may be issued in one or
more series or issuances in U.S. dollars or in one or more foreign
currencies, currency units or composite currencies limited to an aggregate
public offering price of $500,000,000 (or its equivalent in one or more
foreign currencies, currency units or composite currencies).

Senior Debt Securities . The Senior Debt Securities will be unsecured
and will rank equally with all other
unsecured and unsubordinated indebtedness of
the Company. See "Description of Senior Debt
Securities" for a description of the
Indenture relating to the Senior Debt
Securities and the possible terms of the
Senior Debt Securities which will be set
forth in the applicable Prospectus
Supplement.

Preferred Stock ........ The Preferred Stock will have priority over
holders of the Company's common stock with
respect to dividend or liquidation rights or
both. See "Description of Capital Stock" for
a description of the possible terms of the
Preferred Stock which will be set forth in
the applicable Prospectus Supplement.

RISK FACTORS

Prospective investors should carefully consider the factors discussed in
detail elsewhere in this Prospectus under the caption "Risk Factors."

INITIAL PUBLIC OFFERING AND SENIOR DEBT OFFERING

On October 30, 1995, the Company completed an initial public offering (the
"Initial Public Offering") of 10,580,000 shares of Common Stock, par value
$0.10 per share, of the Company (the "Common Stock"). Of the 10,580,000
shares of Common Stock sold in the Initial Public Offering, 3,300,000 shares
were sold by the Company and 7,280,000 shares were sold by The Equitable
Companies Incorporated ("EQ" and, together with its subsidiaries other than
the Company, "Equitable"). On October 30, 1995, the Company also completed an
offering (the "Senior Debt Offering") of $500 million aggregate principal
amount of its 6 7/8% Senior Notes due 2005 (the "Senior Notes").

<PAGE>

EQUITY PARTICIPATION OF EMPLOYEES

In order to continue to foster a culture that encourages strong employee
performance and provides ownership incentives to the Company's employees, the
Company has taken certain steps to provide employees with equity
participation in the Company. In particular, in connection with the Initial
Public Offering, approximately 500 employees of the Company exchanged an
aggregate of $100.0 million of their interests under certain cash
compensation arrangements maintained by the Company (the "LTI Restricted
Stock Unit Exchange") for restricted stock units representing an aggregate of
approximately 5.2 million shares of Common Stock. These units are subject to
forfeiture in certain circumstances and will vest annually in specified
proportions from February 1997 through February 2000. See "Management--1995
Restricted Stock Unit Plan."

In addition, these employees were granted options to purchase an aggregate
of approximately 9.2 million shares of Common Stock with an exercise price of
$27.00 per share by foregoing an aggregate of $55.7 million of their future
interests under such cash compensation arrangements (the "LTI Option
Exchange"). See "Management--1995 Stock Option Plan."

In connection with the Initial Public Offering, the Company adopted its
1996 Stock Option Plan, pursuant to which options to purchase an aggregate of
approximately 8.8 million shares of Common Stock are available for grant to
key employees of the Company. See "Management--1996 Stock Option Plan."

Reflecting the equity participation afforded to Company employees through
the LTI Restricted Stock Unit Exchange, the LTI Option Exchange and the 1996
Stock Option Plan, the Company intends to reduce amounts to be paid under the
successor plan to its 1994 long-term compensation plan, commencing in 1997,
by one-third.

RELATIONSHIP WITH EQUITABLE

Prior to the Initial Public Offering, EQ and its wholly-owned subsidiary,
The Equitable Life Assurance Society of the United States ("Equitable Life"),
together owned 100% of the outstanding Common Stock of the Company. As of the
date hereof, Equitable continues to be the Company's largest stockholder,
owning approximately 80.2% of the Company's outstanding Common Stock.
Assuming full vesting of restricted stock units acquired by certain employees
of the Company in the LTI Restricted Stock Unit Exchange (but before the
exercise of options granted to certain Company employees under the LTI Option
Exchange and available for grant under the 1996 Stock Option Plan), Equitable
would own approximately 73.1% of the Company's outstanding Common Stock.
Assuming both full vesting of such restricted stock units and the exercise of
the options granted in the LTI Option Exchange (but before the exercise of
options to be granted under the 1996 Stock Option Plan), Equitable would own
approximately 63.1% of the Company's outstanding Common Stock. Equitable has
advised the Company that its current intention is to continue to hold all of
the shares of Common Stock beneficially owned by it. Equitable effectively
has voting control on all matters submitted to stockholders, including the
election of directors and the approval of extraordinary corporate
transactions. See "Ownership of Common Stock of the Company by Equitable and
Officers and Directors of the Company."

While the Company has operated independently of Equitable, its
relationship with Equitable has supported its business and growth.
Transactions between the Company and Equitable, however, do not materially
affect the Company's financial results. See "Certain Transactions."

<PAGE>

Summary Financial Data

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------- ----------------------
1990 1991 1992 1993 1994 1994 1995
(IN MILLIONS, EXCEPT FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues ................... $ 984.1 $1,214.6 $1,664.1 $2,285.3 $2,008.7 $1,454.3 $1,961.3
Income before provision for
income taxes .................... 14.5 89.0 245.0 302.0 205.0 142.5 202.5
Net income ....................... 13.0 57.8 147.0 186.1 123.0 85.5 121.5
OTHER FINANCIAL DATA (AT END OF
PERIOD):
Ratio of net assets to total
stockholders' equity (1) ........ 25.81x 22.86x 22.12x 22.91x 17.01x 22.13x 16.63x
Ratio of long-term borrowings to
total capitalization (2) ........ 0.47 0.42 0.51 0.34 0.30 0.31 0.34
Ratio of earnings to fixed
charges (3) ..................... 1.01 1.07 1.21 1.20 1.10 1.08 1.12
Ratio of earnings to combined
fixed charges and preferred
stock dividends (4) ............. -- -- -- -- 1.09 1.07 1.11
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
----------------------------
ACTUAL AS ADJUSTED (5)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets ....... $40,778.3 $40,835.6
Long-term borrowings 704.3 850.1
Preferred stock .... 225.0 225.0
Stockholders' equity 910.4 1,149.0
</TABLE>
- ------------
(1) Net assets excludes securities purchased under agreements to resell and
securities borrowed.

(2) Long-term borrowings and total capitalization (the sum of long-term
borrowings, preferred stock and stockholders' equity) exclude current
maturities of long-term borrowings.

(3) For the purpose of calculating the ratio of earnings to fixed charges
(i) earnings consist of income before provision for income taxes and
fixed charges and (ii) fixed charges consist of interest expense and
one-third of rental expense which is deemed representative of an
interest factor.

(4) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.

(5) Gives effect to (i) the contribution to the Company by Equitable, prior
to the Initial Public Offering, of shares of common stock of Burlington
Industries Inc., a New York Stock Exchange listed company
("Burlington"), having a market value of $55.0 million at the time of
the contribution (the "Burlington Contribution"), as described under
"Certain Transactions--The Burlington Contribution," which had the
effect of increasing total assets and stockholders' equity by $55.0
million, (ii) the LTI Restricted Stock Unit Exchange, (iii) the sale of
3,300,000 shares of Common Stock by the Company in the Initial Public
Offering at the initial public offering price of $27.00 per share and
the application of the net proceeds to the Company therefrom and (iv)
the Senior Debt Offering and the application of the net proceeds
therefrom.
6

<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered in evaluating the Company and its business
before purchasing the Securities offered hereby.

VOLATILE NATURE OF SECURITIES BUSINESS

The securities business is, by its nature, subject to various risks,
particularly in volatile or illiquid markets, including the risk of losses
resulting from the underwriting or ownership of securities, trading,
arbitrage and merchant banking activities, counterparty failure to meet
commitments, customer fraud, employee fraud, misconduct and errors, failures
in connection with the processing of securities transactions and litigation.

The Company's principal business activities, investment and merchant
banking, securities sales and trading and correspondent brokerage services
are, by their nature, highly competitive and subject to various risks,
volatile trading markets and fluctuations in the volume of market activity.
Consequently, the Company's net income and revenues have been, and may
continue to be, subject to wide fluctuations, reflecting the impact of many
factors beyond the Company's control, including securities market conditions,
the level and volatility of interest rates, competitive conditions and the
size and timing of transactions.

The securities business and its profitability are affected by many factors
of a national and international nature, 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 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. A securities firm's business and its
profitability are also affected by the firm's credit capacity or perceived
creditworthiness and competitive factors, including its ability to attract
and retain highly skilled employees. These and other factors may contribute
to reduced levels of new issue or merger, acquisition, restructuring, and
leveraged capital activities, including leveraged buyouts and high-yield
financings, or the level of participation in financing and investment related
to such activities, generally resulting in lower revenues from investment and
merchant banking fees and underwriting and corporate development investments.
Reduced volume of securities transactions and reduced market liquidity
generally result in lower revenues from dealer and trading activities and
commissions. Lower price levels of securities may result in a reduced volume
of transactions and in losses from declines in the market value of securities
held in trading, investment and underwriting positions. Sudden sharp declines
in market values of securities and the failure of issuers and counterparties
to perform their obligations can result in illiquid markets. In such markets,
the Company may not be able to sell securities and may have difficulty in
covering its securities positions. Such markets, if prolonged, may also lower
the Company's revenues from investment banking, merchant banking and other
investments, and could have a material adverse effect on the Company's
results of operations and financial condition.

SIGNIFICANT COMPETITION

The Company encounters significant competition in all aspects of the
securities business and competes worldwide directly with other domestic and
foreign securities firms, a number of which have greater capital, financial
and other resources than the Company. In addition to competition from firms
currently in the securities business, there has been increasing competition
from other sources, such as commercial banks and investment boutiques. As a
result of anticipated legislative and regulatory initiatives in the U.S. to
remove or relieve certain restrictions on commercial banks, it is possible
that competition in some markets currently dominated by investment banks may
increase in the near future. Such competition could also affect the Company's
ability to attract and retain highly skilled individuals to conduct its
various businesses. The principal competitive factors influencing the
Company's business are its professional staff, the Company's 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

<PAGE>

to compete effectively in securities brokerage and investment banking
activities will also be influenced by the adequacy of its capital levels. In
addition, the Company's ability to expand its business may depend on its
ability to raise additional capital. See "Business--Competition" and "Net
Capital Requirements."

BUSINESS SUBJECT TO EXTENSIVE FEDERAL, STATE AND FOREIGN REGULATION

The Company's business is, and the securities industry generally is,
subject to extensive regulation in the U.S. at both the Federal and state
level, as well as by industry self-regulatory organizations ("SROs"). The
Company is also subject to regulation by various foreign financial regulatory
authorities in the jurisdictions outside the U.S. where it does business,
including by The Securities and Futures Authority of the United Kingdom and
the Securities and Futures Commission of Hong Kong. See "Regulation."

Compliance with many of the regulations applicable to the Company involves
a number of risks, particularly in areas where applicable regulations may be
unclear. The Securities and Exchange Commission (the "Commission"), the
Commodities Futures Trading Commission (the "CFTC"), other governmental
regulatory authorities, including state securities regulators, and SROs,
including the New York Stock Exchange, Inc. (the "NYSE") and other exchanges,
may institute administrative or judicial proceedings or arbitrations which
may result in censure, fine, civil penalties (including treble damages in the
case of insider trading violations), 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 its officers
or employees or other adverse consequences, and, even if none of such actions
is taken, could have a material adverse effect on the Company's perceived
creditworthiness, reputation and competitiveness. Customers of the Company or
others who allege that they have been damaged by the Company's violation of
applicable regulations also may seek to obtain compensation from the Company,
including the unwinding of any transactions with the Company.

Additional legislation and regulations, including those relating to the
activities of affiliates of broker-dealers, changes in rules promulgated by
the Commission, the CFTC or other U.S. or foreign governmental regulatory
authorities and SROs or changes in the interpretation or enforcement of
existing laws and rules may adversely affect the manner of operation and
profitability of the Company.

The Company's businesses may be materially affected not only by
regulations applicable to it as a financial market intermediary, but also by
regulations of general application. For example, the volume of the Company's
underwriting, merger and acquisition and merchant banking businesses in any
year 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 anti-takeover 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 and merchant banking business, which in turn
could adversely affect the Company's underwriting, advisory and trading
revenues related thereto.

MARKET, CREDIT AND LIQUIDITY RISKS ASSOCIATED WITH UNDERWRITING AND TRADING
ACTIVITIES

The Company's underwriting, securities trading, market-making and
arbitrage activities are conducted by the Company as principal and subject
the Company's capital to significant risks, including market, credit
(including counterparty) and liquidity risks. The Company's underwriting,
securities trading, market-making and arbitrage activities often involve the
purchase, sale or short-sale of securities as principal in markets that may
be characterized by relative illiquidity or that may be particularly
susceptible to rapid fluctuations in liquidity. The Company from time to time
has large position concentrations in certain types of securities or
commitments and in the securities of or commitments to a single issuer,
including sovereign governments and other entities, issuers located in a
particular country or geographic area, including Latin America, or issuers
engaged in a particular industry. Through its Emerging Markets group, the
Company engages in proprietary trading of Latin American securities with an
emphasis on Brady Bonds, local debt instruments and Latin American equity
securities, which involve

<PAGE>

risks associated with the political instability and relative currency values
of the nations in which the issuer principally engages in business as well as
the risk of nationalization. In addition, the Company has, from time to time,
substantial position concentrations in or commitments to high-yield issuers.
These securities generally involve greater risk than investment-grade debt
securities due to credit considerations, liquidity of secondary trading
markets and vulnerability to general economic conditions. The level of the
Company's high-yield securities inventories and the impact of such activities
upon the Company's results of operations can fluctuate from period to period
as a result of customer demands and economic and market considerations. 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 may retain significant position
concentrations in individual securities. Such concentrations increase the
Company's exposure to specific credit, market and political risks. In
addition, material fluctuations in foreign currencies vis-a-vis the U.S.
dollar, in the absence of countervailing covering or other procedures, may
result in losses or gains in the carrying value of certain of the Company's
assets located or denominated in non-U.S. jurisdictions or currencies. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Risk Management."

CAPITAL INTENSIVE NATURE OF AND POTENTIAL LOSSES RESULTING FROM MERCHANT
BANKING ACTIVITIES

Securities firms, including the Company, increasingly facilitate major
client transactions and transactions sponsored by their proprietary pools of
capital by using their own capital in a variety of investment activities that
have been broadly described as merchant banking. Such activities include,
among other things, purchasing equity or debt securities or making
commitments to purchase such securities in merger, acquisition, restructuring
and leveraged capital transactions, including leveraged buyouts and
high-yield financings. Such positions and commitments may involve substantial
amounts of capital and significant exposure to any one issuer or business, as
well as market, credit and liquidity risks. Equity securities purchased in
these transactions generally are held for appreciation, are not readily
marketable and typically do not provide dividend income. Debt securities
purchased in such transactions typically rank subordinate to bank debt of the
issuer and may rank subordinate to other debt of the issuer. In addition, the
Company also provides and arranges bridge financing, which assures funding
for major transactions, with the expectation that refinancing will be
obtained through the placement of high-yield debt or other securities. Such
activities may also involve substantial amounts of capital and significant
exposure to any one issuer as well as various risks associated with credit
conditions and vulnerability to general economic conditions. There can be no
assurance that the Company will not experience significant losses as a result
of such activities. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Risk Management" and "Business--Banking
Group--Merchant Banking."

POTENTIALLY GREATER RISKS ASSOCIATED WITH USE OF DERIVATIVE FINANCIAL
INSTRUMENTS

The Company enters into derivatives transactions as part of its principal
trading activities, both to manage its own interest rate and price risks and
as an alternative to investment in the cash markets, and in connection with
providing its clients with certain customized financial products. In
addition, through its Emerging Markets group, the Company engages in the
structuring, placement and trading of derivatives the values of which are
primarily based on prices of Latin American and other foreign securities,
currencies and indices. While the use of derivatives allows 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 derivatives related risks, including market, liquidity
and credit risks, 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

<PAGE>

effect on its results of operations or financial condition in any period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Derivative Financial Instruments."

HOLDING COMPANY STRUCTURE

The operations of the Company are conducted through its subsidiaries and,
therefore the Company is dependent upon the earnings and cash flow of its
subsidiaries to meet its obligations, including obligations under the Offered
Securities. The Offered Securities will be effectively subordinated to all
indebtedness of the Company's subsidiaries. As of September 30, 1995, the
aggregate amount of indebtedness of the Company's subsidiaries to which
holders of the Offered Securities would have been structurally subordinated
was approximately $1.0 billion, substantially all of which was incurred under
customary arrangements utilized by the securities brokerage industry. The
Company's rights and the rights of its creditors, including holders of
Offered Securities, to participate in the distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization will be
subject to prior claims of such subsidiary's creditors, including trade
creditors except to the extent the Company may itself be a creditor with
recognized claims against such subsidiary. In addition, net capital
requirements under the Exchange Act and NYSE rules applicable to certain of
the Company's subsidiaries could limit the payment of dividends and the
making of loans and advances to the Company by such subsidiaries.

DEPENDENCE UPON AVAILABILITY OF CAPITAL AND FUNDING

A substantial portion of the Company's total assets consists of highly
liquid marketable securities and short-term receivables arising from
securities transactions. The highly liquid nature of these assets provides
the Company with flexibility in financing and managing its business. However,
certain of the Company's activities such as merchant banking frequently
involve substantial capital commitments in securities which are often
illiquid. The funding needs of the Company are satisfied from internally
generated funds and capital, including equity, long-term debt and short-term
borrowings which consist of securities sold under agreements to repurchase
("repurchase agreements"), master notes and committed and uncommitted lines
of credit. All repurchase transactions and a portion of the Company's bank
borrowings are made on a collateralized basis. Liquidity management includes
the monitoring of assets available to hypothecate or pledge against
short-term borrowings. The Company maintains borrowing relationships with a
broad range of banks, financial institutions, counterparties and others. The
volume of the Company's borrowings generally fluctuates in response to
changes in the amount of resale transactions outstanding, the level of the
Company's securities inventories and overall market conditions. Availability
of financing to the Company can vary depending upon market conditions, the
volume of certain trading activities, credit ratings, credit capacity and the
overall availability of credit to the securities industry and there can be no
assurance that adequate financing to support the Company's businesses will
continue to be available in the future. See "Management's Discussion and
Analysis of Financial Position and Results of Operations--Liquidity and
Capital Resources."

POTENTIAL RESTRICTIONS ON BUSINESS OF, AND WITHDRAWAL OF CAPITAL FROM,
REGULATED SUBSIDIARIES RESULTING FROM NET CAPITAL REQUIREMENTS

As registered broker-dealers and members of the NYSE, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC"), Pershing Trading Company, L.P.
("Pershing Trading") and Autranet, Inc. ("Autranet") are subject to the
Commission's and the NYSE's net capital rules. These rules, which specify
minimum net capital requirements for registered broker-dealers and NYSE
members, are designed to assure that broker-dealers maintain adequate
regulatory capital in relation to their liabilities and the size of their
customer business and have the effect of requiring that at least a
substantial portion of their assets be kept in cash or highly liquid
investments. Compliance with the net capital requirements could limit those
operations of DLJSC, Pershing Trading and Autranet that require the intensive
use of capital, such as underwriting and trading activities. These rules also
could restrict the Company's ability to withdraw capital from DLJSC, Pershing
Trading and Autranet, even in circumstances where DLJSC, Pershing Trading or
Autranet have more than the minimum amount of required capital, which in
turn, could limit the Company's ability to pay dividends, including on the
Preferred Stock, pay interest, repay debt, including the Senior Debt
Securities, and redeem or repurchase shares of its outstanding capital stock.
See "Net Capital Requirements."

<PAGE>

POTENTIAL SECURITIES LAWS LIABILITY

Many aspects of the Company's business involve substantial risks of
liability. In recent years, there has been an increasing incidence of
litigation involving the securities industry, including class actions that
generally seek substantial damages. Companies engaged in the underwriting and
distribution of securities are exposed to substantial liability under Federal
and state securities laws and the Racketeer Influenced and Corrupt
Organizations Act ("RICO"). See "Business--Legal Proceedings."

DEPENDENCE ON PERSONNEL

Most aspects of the Company's business are dependent on highly-skilled
individuals. The Company devotes considerable resources to recruiting,
training and compensating such individuals and has taken further steps to
encourage such individuals to remain in the Company's employ, including
providing the opportunity for equity participation through the implementation
of the LTI Restricted Stock Unit Exchange and the LTI Option Exchange and
adoption of the 1996 Stock Option Plan. Restricted stock units received in
the LTI Restricted Stock Unit Exchange will vest annually in specified
proportions from February 1997 through February 2000 subject to forfeiture in
certain circumstances. Options received in the LTI Option Exchange will vest
in two equal installments in February 1997 and February 1998, subject to
certain conditions. See "Management--1995 Restricted Stock Unit Plan,"
"--1995 Stock Option Plan" and "--1996 Stock Option Plan." Individuals
employed by the Company may, however, choose to leave the Company at any time
to pursue other opportunities.

CONTROL OF THE COMPANY

Equitable owns approximately 80.2% of the outstanding shares of Common
Stock. Assuming full vesting of restricted stock units acquired by certain
employees of the Company in the LTI Restricted Stock Unit Exchange (but
before the exercise of options granted to certain Company employees under the
LTI Option Exchange and to be granted under the 1996 Stock Option Plan),
Equitable would own approximately 73.1% of the Company's outstanding Common
Stock (approximately 63.1% of the outstanding Common Stock, assuming full
vesting of such restricted stock units and the exercise of options granted to
certain employees under the LTI Option Exchange but before the exercise of
options to be granted under the 1996 Stock Option Plan). Consequently,
Equitable is in a position to elect all of the directors of the Company and,
in general, to determine the outcome of any matter submitted to a vote of the
Company's stockholders for approval. While Equitable has advised the Company
that its current intention is to continue to hold all of the shares of Common
Stock currently beneficially owned by it, there can be no assurance that
Equitable will not decide to sell all or a portion of its holdings at some
future date. See "Certain Transactions."

POTENTIAL CONFLICTS OF INTEREST

Various conflicts of interest between the Company and Equitable could
arise in the future. The Company has in the past entered and expects that it
will in the future enter into various transactions with Equitable and its
affiliates from time to time. The Company does not currently have any formal
mechanism in place for the resolution of future conflicts of interest,
however, the Company intends to submit all material related party
transactions to the Company's Board of Directors for approval. Richard H.
Jenrette, Chairman of the Board, and a majority of the Company's other
directors are also directors and/or officers of Equitable and/or AXA, EQ's
largest stockholder ("AXA"), and/or their respective affiliates.
Cross-directorships could create or appear to create potential conflicts of
interest when directors are faced with decisions that could have different
implications for the Company and Equitable and/or AXA. Nevertheless, the
Company believes that such directors will be able to fulfill their fiduciary
duties to its stockholders. Although there can be no assurance, the Company
anticipates that future transactions with Equitable will be made on an
arm's-length basis in accordance with past practice. "See Certain
Transactions--Other Affiliated Transactions." In addition, by virtue of its
controlling beneficial ownership, because it is the agent for all members of
the EQ consolidated tax group, which will include the Company until such time
as the Company ceases to be a member of such group, and pursuant to a Federal
income tax sharing agreement between the Company and EQ, EQ will have control
over Federal income

<PAGE>

tax matters relating to the Company for periods during which the Company is a
member of such group, which may affect the Company's liability to (or
entitlement to payment from) EQ in respect of Federal income taxes under such
Federal income tax sharing agreement. See "Certain Transactions--Tax Sharing
Agreements." While EQ is obligated under the agreement to act reasonably,
taking into account the best interests of the entire consolidated tax group,
including the Company, decisions made by EQ regarding such Federal income tax
matters may involve conflicts of interest between EQ and the Company. In
addition, Equitable is not restricted in any manner from competing with the
Company. As a result, there can be no assurance that conflicts of interest
will not arise between the Company and Equitable with respect to future
business opportunities or that any such conflicts will be resolved in favor
of the Company.

ABSENCE OF PUBLIC MARKET FOR OFFERED SECURITIES

There is currently no market for the Offered Securities. Unless otherwise
indicated in the Prospectus Supplement, the Company does not intend to apply
for listing of the Offered Securities on any national securities exchange.
The Company has been advised by DLJSC that it currently intends to make a
market in the Offered Securities although it is under no obligation to do so
and may discontinue market-making activities at any time without notice.
Accordingly, there can be no assurance as to whether an active public market
for the Offered Securities will develop or, if a public market develops, as
to the liquidity of the trading market for the Offered Securities.

<PAGE>

USE OF PROCEEDS

Unless otherwise set forth in the applicable Prospectus Supplement,
proceeds from the sale of the Offered Securities will be used by the Company
for general corporate purposes and initially may be temporarily invested in
short-term securities.

<PAGE>

CAPITALIZATION

The following table sets forth the short-term borrowings and
capitalization of the Company as of September 30, 1995, and as adjusted to
give effect to (i) the LTI Restricted Stock Unit Exchange, (ii) the
Burlington Contribution and (iii) the sale by the Company of 3,300,000 shares
of Common Stock offered in the Initial Public Offering (at the initial public
offering price of $27.00 per share) and the sale by the Company of an
aggregate principal amount of $500,000,000 of Senior Notes offered in the
Senior Debt Offering, in each case, after deducting the underwriting
discounts, commissions and estimated offering expenses and the application of
the net proceeds therefrom. See "Certain Transactions--The Burlington
Contribution" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." This
table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements, including the Notes thereto, included
elsewhere herein.

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1995
---------------------------
(IN THOUSANDS)
ACTUAL AS ADJUSTED
<S> <C> <C>
Short-term borrowings ............................................ $1,306,621 $1,079,734
============ =============
Long-term borrowings (1):
Senior Notes .................................................... $ -- $ 493,505
Senior subordinated revolving credit ............................ 250,000 250,000
Term loan agreement ............................................. 242,500 --
Swiss franc bonds ............................................... 105,268 --
Medium-term notes ............................................... 88,000 88,000
Other borrowings ................................................ 18,567 18,567
------------ -------------
Total long-term borrowings ...................................... 704,335 850,072
Cumulative Exchangeable Preferred Stock, at redemption value .... 225,000 225,000
Stockholders' equity:
Common stock ($0.10 par value) 150,000,000 shares authorized;
50,000,000 actual shares issued and outstanding; 53,300,000 as
adjusted shares issued and outstanding ......................... 5,000 5,330
Restricted stock units; no actual units issued and outstanding;
5,179,147 as adjusted units issued and outstanding .......... -- 106,163
Paid-in capital (2) ............................................. 228,080 363,900
Retained earnings ............................................... 677,888 674,190
Cumulative translation adjustment ............................... (558) (558)
------------ -------------
Total stockholders' equity .................................. 910,410 1,149,025
------------ -------------
Total capitalization ...................................... $1,839,745 $2,224,097
============ =============
</TABLE>

- ------------

(1) Long-term borrowings include current maturities of long-term
borrowings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Developments."

(2) Prior to the Initial Public Offering, Equitable contributed to the
Company shares of common stock of Burlington having a market value at
the time of contribution of $55.0 million pursuant to the Burlington
Contribution. See "Certain Transactions--The Burlington Contribution."

<PAGE>

THE COMPANY

The Company is a leading integrated investment and merchant bank that
serves institutional, corporate, governmental and individual clients. The
Company's businesses include securities underwriting, sales and trading;
merchant banking; financial advisory services; investment research;
correspondent brokerage services; and asset management. While results have
fluctuated from year to year, for the years 1990 through 1994, the Company's
total revenues and net income increased by a compound annual growth rate of
19.5% and 75.4%, respectively. The Company's average annual pre-tax return on
common equity for the past five years was 33.6%. At September 30, 1995, the
Company had total assets of $40.8 billion and total stockholders' equity of
$910.4 million.

The Company's principal strategy is to focus its resources on certain core
businesses where management believes the Company can compete profitably and
be among the leading participants in each targeted market. Over the past
several years, the Company has significantly expanded the scope of its
business activities and its customer base, both in the U.S. and
internationally. It has established strong positions in selected high-margin
activities, including equity and high-yield corporate securities underwriting
as well as merchant banking, and has increased its market share in a broad
range of businesses. Key elements of this expansion have been the Company's
recruitment of experienced professionals during periods of turmoil in the
securities industry, the continued development and retention of the Company's
existing personnel at all levels and the continuity of senior management. In
addition, the Company has historically emphasized economic and investment
research in the development of its business and believes that its commitment
to research has been an important contributor to its success.

The Company's Banking Group is a major participant in the raising of
capital and the providing of financial advice to companies throughout the
U.S. and has significantly expanded its activities abroad. Through its
Investment Banking group, the Company manages and underwrites public
offerings of securities, arranges private placements and provides advisory
and other services in connection with mergers, acquisitions, restructurings
and other financial transactions. Since 1990, the Investment Banking group
has raised over $150 billion for clients from the public and private markets
in corporate equity and debt securities and has completed over 300 merger and
acquisition, restructuring and divestiture assignments aggregating
approximately $65 billion. Its Merchant Banking group pursues direct
investments in a variety of areas through a number of investment vehicles
funded with capital provided primarily by institutional investors, the
Company and its employees. Since the Company began investing in leveraged
investments in 1985 through September 30, 1995, it invested over $800 million
on behalf of the Company, its employees and funds it manages in 46 companies
with an aggregate purchase price of over $18 billion and achieved an average
annual internal rate of return substantially in excess of comparable industry
benchmarks. The Emerging Markets group specializes in client advisory
services, merchant banking and the underwriting, sales and trading of
securities in Latin America and Asia.

The Capital Markets Group encompasses a broad range of activities
including trading, research, origination and distribution of equity and
fixed-income securities, private equity investments and venture capital. Its
focus is primarily client-driven, in contrast to that of many other
securities firms which emphasize proprietary trading, an approach that
reduces the Company's exposure to market volatility. Its Taxable Fixed-Income
division provides institutional clients with research, trading and sales
services for a broad range of taxable fixed-income products including
high-yield corporate, investment-grade corporate, U.S. government and
mortgage-backed securities. The Institutional Equities division provides
institutional clients with research, trading and sales services in U.S.
listed and OTC equity securities. The Company's equity sales and trading
capabilities, combined with its research expertise, have contributed to

<PAGE>

commission revenues increasing, for the years 1990 through 1994, at a
compound annual growth rate of 12.9%. In addition, the Company's Equity
Derivatives division provides a broad range of equity and index options
products, while Sprout is one of the oldest and largest groups in the private
equity investment and venture capital industry.

The Financial Services Group provides a broad array of services to
individual investors and the financial intermediaries which represent them.
Pershing is a leading provider of correspondent brokerage services, clearing
transactions for over 500 U.S. brokerage firms which collectively maintain
over one million client accounts. These client accounts held over $110
billion of assets at September 30, 1995. During 1994, Pershing participated
in over 10% of the trading volume on the NYSE. In addition, Pershing's PC
Financial Network (Service Mark), the largest on-line discount broker in the
U.S., has experienced significant growth over the past several years. The
Company's Investment Services Group, which consists of approximately 240
account executives, provides high-net-worth individuals and medium to smaller
size institutions with access to the Company's equity and fixed-income
research, trading services and underwriting and has one of the highest
revenues per account executive in the industry. Through Wood, Struthers &
Winthrop, the Company provides investment management and trust services
primarily to high-net-worth individual investors and institutions, and at
September 30, 1995 had over $2.8 billion in assets under management.

Apart from its three principal operating groups, the Company also
maintains a separate brokerage subsidiary, Autranet, which provides
institutional investors with research generated by independent originators
that are not affiliated with Wall Street brokerage firms.

Founded in 1959, the Company initially focused on providing in-depth
investment research to institutional investors. In 1970, the Company became
the first member firm of the NYSE to be owned publicly. Fifteen years later,
the Company was purchased by Equitable. Equitable is a diversified financial
services organization and one of the world's largest investment management
organizations with approximately $198.7 billion in assets under management at
September 30, 1995. AXA, a French holding company for an international group
of insurance and related financial services companies, is EQ's largest
stockholder, beneficially owning, at September 30, 1995, $392.2 million of
EQ's Series E convertible preferred stock and approximately 60.6% of EQ's
outstanding common stock (without giving effect to the conversion of the
Series E convertible preferred stock beneficially owned by AXA).

The principal executive offices of the Company are located at 140
Broadway, New York, NY, 10005 and its telephone number is (212) 504-3000. The
Company has 16 additional offices in 13 locations in the U.S., and seven
offices in Europe and Asia.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial information is qualified by
reference to, and should be read in conjunction with, the Company's
Consolidated Financial Statements and the Notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained elsewhere in this Prospectus. The selected consolidated statement
of income data for the years ended December 31, 1992, 1993 and 1994 and the
selected consolidated statement of financial condition data as of December
31, 1993 and 1994 are derived from the Company's audited Consolidated
Financial Statements which are included elsewhere herein. The selected
consolidated statement of income data for the nine months ended September 30,
1994 and 1995 and the selected consolidated statement of financial condition
data as of September 30, 1995 are derived from the Company's unaudited
Consolidated Financial Statements also included elsewhere herein that include
all adjustments, consisting of normal recurring adjustments, which the
Company considers necessary for a fair presentation of its financial position
and results of operations for these periods. Operating results for the nine
months ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1995. The
selected consolidated statement of financial condition data as of December
31, 1990, 1991 and 1992 and the selected consolidated statement of income
data for the years ended December 31, 1990 and 1991 are derived from the
audited Consolidated Financial Statements of the Company which are not
included herein.

<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995
(IN MILLIONS, EXCEPT FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Commissions .......................... $ 228.9 $ 257.9 $ 289.7 $ 358.8 $ 376.1 $ 281.0 $ 343.1
Underwritings ........................ 150.3 170.9 350.3 574.6 261.1 179.7 317.5
Fees ................................. 88.9 166.2 158.1 211.3 281.3 176.6 264.0
Interest-net (1) ..................... 362.3 323.0 381.7 657.3 791.9 592.9 638.4
Principal transactions-net:
Trading .............................. 98.9 264.2 272.0 381.5 165.7 141.1 265.7
Investment ........................... 37.9 17.3 195.9 79.9 97.6 58.5 92.2
Other ................................. 16.9 15.1 16.4 21.9 35.0 24.5 40.4
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues .................... 984.1 1,214.6 1,664.1 2,285.3 2,008.7 1,454.3 1,961.3
---------- ----------- ----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Compensation and benefits ............ 413.1 567.9 886.6 1,200.4 897.8 675.2 924.9
Interest ............................. 302.3 236.4 212.3 381.7 503.8 357.3 464.5
Other expenses ....................... 254.2 321.3 320.2 401.2 402.1 279.3 369.4
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total costs and expenses .......... 969.6 1,125.6 1,419.1 1,983.3 1,803.7 1,311.8 1,758.8
---------- ----------- ----------- ----------- ----------- ----------- -----------
Income before provision for income
taxes ................................ 14.5 89.0 245.0 302.0 205.0 142.5 202.5
Provision for income taxes ............ 1.5 31.2 98.0 115.9 82.0 57.0 81.0
---------- ----------- ----------- ----------- ----------- ----------- -----------
Net income ............................ $ 13.0 $ 57.8 $ 147.0 $ 186.1 $ 123.0 $ 85.5 $ 121.5
========== =========== =========== =========== =========== =========== ===========
Dividends on preferred stock .......... -- -- -- -- $ 21.0 $ 16.0 $ 14.9
---------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings applicable to common stock .. $ 13.0 $ 57.8 $ 147.0 $ 186.1 $ 102.0 $ 69.5 $ 106.6
========== =========== =========== =========== =========== =========== ===========
BALANCE SHEET DATA (AT END OF PERIOD):
Securities purchased under agreements
to resell and securities borrowed ... $ 6,405.3 $10,942.5 $14,378.4 $21,575.2 $19,166.9 $24,578.2 $25,640.4
Total assets .......................... 13,997.1 18,721.7 24,436.2 38,766.7 33,116.1 42,116.6 40,778.3
Securities sold under agreements to
repurchase and securities loaned .... 7,619.0 11,200.8 14,732.4 24,116.7 20,385.4 24,296.3 25,577.7
Long-term borrowings .................. 270.5 268.1 478.6 549.0 539.9 539.6 704.3
Preferred stock ....................... -- -- -- 225.0 225.0 225.0 225.0
Stockholders' equity .................. 294.1 340.3 454.6 750.3 820.3 792.6 910.4
OTHER FINANCIAL DATA (AT END OF PERIOD):
Ratio of net assets to stockholders'
equity (2) ........................... 25.81x 22.86x 22.12x 22.91x 17.01x 22.13x 16.63x

Ratio of long-term borrowings to total
capitalization (3) ................... 0.47 0.42 0.51 0.34 0.30 0.31 0.34
Ratio of earnings to fixed ............
charges (4) .......................... 1.01 1.07 1.21 1.20 1.10 1.08 1.12
Ratio of earnings to combined fixed
charges and preferred stock
dividends (5) ........................ -- -- -- -- 1.09 1.07 1.11
</TABLE>
- ------------
(1) Interest is net of interest expense to finance U.S. government and
agency instruments of $901.3 million, $1,008.0 million, $918.4 million,
$1,083.6 million, $1,612.8 million, $1,181.9 million and $1,499.6
million, respectively.
(2) Net assets excludes securities purchased under agreements to resell and
securities borrowed.
(3) Long-term borrowings and total capitalization (the sum of long-term
borrowings, preferred stock and stockholders' equity) exclude current
maturities of long-term borrowings.
(4) For the purpose of calculating the ratio of earnings to fixed charges
(i) earnings consist of income before provision for income taxes and
fixed charges and (ii) fixed charges consist of interest expense and
one-third of rental expense which is deemed representative of an
interest factor.
(5) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with "Selected Consolidated
Financial Data" and the Company's Consolidated Financial Statements and the
Notes thereto contained elsewhere in this Prospectus.

BUSINESS ENVIRONMENT

The Company's principal business activities, investment and merchant
banking, securities sales and trading and correspondent brokerage services,
are, by their nature, highly competitive and subject to general market
conditions, volatile trading markets and fluctuations in the volume of market
activity. Consequently, the Company's net income and revenues have been and
are likely to continue to be, subject to wide fluctuations, reflecting the
impact of many factors beyond the Company's control, including securities
market conditions, the level and volatility of interest rates, competitive
conditions and the size and timing of transactions.

While interest rates fluctuated between 1990 and 1994, during this period
they gradually declined to their lowest level in over twenty years. As a
result of this decline, investors generally sought higher returns by shifting
away from short-term fixed-income securities to longer-term debt and equity
securities. Many corporate issuers took advantage of this low interest rate
environment to restructure their balance sheets through the issuance of new
equity and the refinancing of short-term and long-term debt. This trend
resulted in unprecedented levels of new debt and equity issuances in 1993. In
addition, many individuals moved to improve their own financial position by
refinancing their home mortgages.

In February 1994, the Federal Reserve Board raised the discount rate in an
attempt to curb U.S. inflation and moderate economic growth. The Federal
Reserve Board raised the discount rate five additional times during the
balance of 1994. These actions caused an increase in the level of short-term
interest rates and narrowed the spread between short-term and long-term
interest rates. The increase in short-term interest rates and uncertainty
over their future direction caused a reduction in demand for fixed-income
products and a reduction in the value of most fixed-income instruments. The
declining fixed-income markets also adversely affected the equity markets
during early 1994 and resulted in reduced underwriting activity for both
fixed-income and equity securities. All of these factors, combined with a
falling U.S. dollar, unsettled global markets and reduced foreign investment
in U.S. financial markets, contributed to lower earnings for most of the
securities industry.

In addition to the market volatility in 1994 caused by interest rate
movements and investor concerns, the derivatives business became a focal
point of media, congressional and regulatory scrutiny as a result of the
large losses suffered by certain institutional investors, corporations and
municipalities. The volatility of these instruments and the continuing
negative publicity caused by certain of these cases has contributed to
investor uncertainty and resulted in decreased derivatives business
throughout the securities industry. The decline in the derivatives business,
among other factors, adversely affected the mortgage-backed securities
market, which experienced significant losses.

While market conditions in certain sectors of the securities industry were
depressed throughout most of 1994, merger and acquisition ("M&A") activity
and other investment banking advisory activities increased significantly. The
stronger economy in 1994 and the improved operating results of companies that
had restructured their balance sheets from 1990 to early 1994 encouraged many
companies to seek new acquisitions.

The securities industry experienced improved market conditions during the
first nine months of 1995 compared to 1994. During the first half of 1995,
expectations for lower U.S. interest rates prompted strong rallies in the
stock and bond markets. On July 6, 1995, the Federal Reserve Board lowered
the federal funds rate, leading to a strong rally in the bond market. In the
first nine months of 1995, merger and acquisition activity continued to
outpace the very strong activity in 1994. Trading volumes on all major
exchanges reached record levels during the first nine months of 1995, and
underwriting in nearly all areas increased due to the improved market
conditions.

<PAGE>

RECENT DEVELOPMENTS

On October 30, 1995, the Company completed the Initial Public Offering. Of
the 10.6 million shares of Common Stock sold in the Initial Public Offering,
7.3 million shares were sold by Equitable and 3.3 million shares were sold by
the Company. Upon completion of the Initial Public Offering, Equitable's
ownership percentage was reduced from 100% to 80.2%. In connection with the
Initial Public Offering, approximately 500 employees acquired forfeitable
restricted stock units and stock options to purchase Common Stock of the
Company. Such restricted stock units and options will vest and become
exercisable over a four-year period beginning in February 1997. Assuming full
vesting of such forfeitable restricted stock units acquired in the LTI
Restricted Stock Unit Exchange (but before the exercise of options granted in
the LTI Option Exchange and available for grant under the 1996 Stock Option
Plan), Equitable would own approximately 73.1% of the Company's outstanding
Common Stock and such employees would own approximately 8.7%. Assuming both
full vesting of such forfeitable restricted stock units and the exercise of
such options granted in the LTI Option Exchange (but before the exercise of
options available for grant under the 1996 Stock Option Plan), Equitable
would own approximately 63.1% of the outstanding Common Stock and such
employees would own approximately 21.2%. Concurrently, the Company completed
the Senior Debt Offering. The Company's net proceeds from the Initial Public
Offering totaled $81.2 million and its net proceeds from the Senior Debt
Offering totaled $492.3 million. The Company is using the net proceeds from
the Initial Public Offering and the Senior Debt Offering primarily to repay
certain outstanding indebtedness, which will have the effect of lengthening
the average maturity of the Company's borrowings. The Company did not receive
any part of the proceeds from the sale of shares of Common Stock by Equitable
in the Initial Public Offering. Prior to these offerings, Equitable made a
capital contribution to the Company of common stock of Burlington having a
market value at the time of contribution of $55.0 million. See "Certain
Transactions--The Burlington Contribution."

In 1994, the Company entered into a lease agreement in conjunction with
its plan to move its principal offices from 140 Broadway to 277 Park Avenue
in New York City. The anticipated date of the move is March 1996. The Company
expects to finance substantially all of the expenditures related to the move,
consisting primarily of leasehold improvements, furnishings and
communications equipment, which are estimated to aggregate approximately
$200.0 million. In conjunction with the anticipated move, in the fourth
quarter of 1994, the Company accelerated amortization of existing leasehold
improvements to the termination date of the current lease. In addition, the
Company is currently expensing certain costs that would typically have been
capitalized. These actions have increased occupancy costs during 1995. As a
result, the Company does not expect that its occupancy costs will increase
materially from current levels following the move.

In early 1995, the Company made a strategic decision to discontinue its
public finance business. However, the Company will continue sales and trading
of municipal bonds to facilitate customer transactions. The Company recorded
a charge to earnings of $7.2 million in the first quarter of 1995 in
conjunction with this action, $4.8 million of which was compensation related
expenses, which includes $4.0 million of severance related costs, with the
balance representing other closing costs. Historically, the results of this
business have not been material to the Company's results of operations. The
Company does not expect additional charges related to this business in the
future.

In 1995, the Company formed an Emerging Markets group as part of the
Banking Group. The Emerging Markets group specializes in client advisory
services, merchant banking and the underwriting, sales and trading of
securities in Latin America and Asia. The financial results of this group
during the first nine months of 1995 were not material to the Company's
overall results of operations.

During the third quarter of 1995, the Company provided for the potential
loss with respect to a bridge loan aggregating $150 million to a company
experiencing financial difficulties. This loss was substantially offset by
gains from other principal investments. See "Business--Banking
Group--Merchant Banking--DLJ Bridge Fund."

EQUITY PARTICIPATION OF EMPLOYEES

In order to continue to foster a culture that encourages strong employee
performance and provides ownership incentives to the Company's employees, the
Company has taken certain steps to provide

<PAGE>

employees with equity participation in the Company. In particular, in
connection with the Initial Public Offering, approximately 500 employees of
the Company exchanged an aggregate of $100.0 million of their interests under
certain cash compensation arrangements maintained by the Company for
restricted stock units representing an aggregate of approximately 5.2 million
shares of Common Stock. These units are subject to forfeiture in certain
circumstances and will vest annually in specified portions from February 1997
through February 2000. See "Management--1995 Restricted Stock Unit Plan." In
connection with the LTI Restricted Stock Unit Exchange, the Company will
recognize a compensation charge in the fourth quarter of 1995 equal to $6.2
million, which is the difference between the fair value of the restricted
stock units of $20.50 per unit and the amount of cash compensation exchanged
therefor of $19.31 per unit multiplied by the number of restricted stock
units issued. The fair value of the restricted stock units was determined by
management using a valuation analysis prepared by an independent investment
banking firm. Such valuation considered, among other factors: (i) the limits
on the sale or transferability of restricted stock units; (ii) the vesting
provisions of the restricted stock units; (iii) restrictions on the sale of
the Common Stock when issued; and (iv) empirical studies which addressed the
issue of discounts related to restrictions on marketability. Such analysis
also took into consideration the expected offering price of the Common Stock.

In addition, these employees acquired options to purchase an aggregate of
approximately 9.2 million shares of Common Stock with an exercise price of
$27.00 per share by foregoing an aggregate of $55.7 million of their future
interests under such cash compensation arrangements. Future long-tem
incentive compensation expense is expected to be reduced by $55.7 million
during the 15 month period ended December 31, 1996. See "Management--1995
Stock Option Plan."

The majority of the restricted stock units and options referred to above
were awarded to participants in the Company's 1991 and 1994 LTI Plans, in
exchange for reductions in the value of awards under those plans. See
"Management--1994 LTI Plan." In connection therewith, these participants
agreed with the Company to modify the 1991 and 1994 LTI Plans as necessary to
accomplish these reductions in value. The remaining restricted stock units
and options were awarded to certain employees who do not participate in the
1991 or 1994 LTI Plans. In exchange for such awards, these employees agreed
to reductions in the amount of their cash compensation in respect of 1995 and
1996.

Employees who elected not to participate in the LTI Restricted Stock Unit
Exchange or the LTI Option Exchange will receive the full amount of the
compensation otherwise payable to such employees under the cash compensation
arrangements referred to above. There will be no disadvantage to such
employees except that such employees will not benefit from future
appreciation, if any, in the value of their foregone restricted stock units
and options. Substantially all of the employees offered the right to
participate in the LTI Restricted Stock Unit Exchange and the LTI Option
Exchange did so.

In connection with the Initial Public Offering, the Company also adopted
the 1996 Stock Option Plan pursuant to which options to purchase an aggregate
of approximately 8.8 million shares of Common Stock will be available for
grant to key employees of the Company. See "Management--1996 Stock Option
Plan."

Reflecting the equity participation afforded to Company employees through
the LTI Restricted Stock Unit Exchange, the LTI Option Exchange and the 1996
Stock Option Plan, the Company also intends to reduce amounts to be paid
under the successor plan to its 1994 long-term compensation plan, commencing
in 1997, by one-third.

RESULTS OF OPERATIONS

QUARTER ENDED SEPTEMBER 30, 1995 COMPARED TO QUARTER ENDED SEPTEMBER 30,
1994

Total revenues for the quarter ended September 30, 1995 were $687.5
million an increase of $214.5 million or 45.3% over the quarter ended
September 30, 1994. Revenues increased in most of the Company's major areas
of activity during the third quarter of 1995.

Commission revenues increased by $31.4 million or 36.2% to $118.1 million
due to increased business with correspondent, institutional and retail
customers consistent with the overall growth in listed share volume on major
exchanges.

<PAGE>

Underwriting revenues increased by $106.1 million or 263.5% to $146.3
million. The Company experienced increases in all areas of underwriting in
the third quarter of 1995.

Fee revenues increased by $26.8 million or 42.2% to $90.5 million due
primarily to record levels of M&A activity and other advisory fees in the
Investment Banking group.

Interest, net of interest expense to finance U.S. government, agency and
mortgage-backed securities, increased by $13.3 million or 6.6% to $214.9
million. Pershing accounted for most of the increase which related to higher
rates earned on comparable levels of customer margin balances and securities
loaned/borrowed activity.

Principal trading transaction revenues increased by $68.9 million or
164.8% to $110.7 million during the third quarter of 1995 relating primarily
to improved trading results in mortgage-backed securities.

Principal investment transaction revenues decreased by $36.6 million or
123.3% to $(6.9) million. Realized gains on investments were $27.4 million.
Net changes in unrealized carrying values were $(34.3) million, which
includes a reduction in net unrealized appreciation of $3.1 million on
investments sold and a decrease in net unrealized appreciation of $31.2
million on retained investments due principally to an estimated loss of $28.8
million on a merchant banking bridge loan. See "--Recent Developments."

Other revenues consisting primarily of dividends and miscellaneous
transaction revenues increased by $4.6 million or 49.0% to $13.9 million. The
increase consists primarily of dividends received on equity securities and
investments.

Total costs and expenses for the third quarter of 1995 were approximately
$617.5 million, an increase of $187.0 million or 43.4% over the third quarter
of 1994.

Compensation and benefits increased by $128.8 million or 65.1% to $326.8
million. Most of the increase was due to increased variable incentive and
production-related compensation, which resulted from higher revenues and
operating results. Incentive and production-related compensation increased by
87.6% during the third quarter of 1995, while base compensation, including
benefits and all payroll taxes, increased by 24.3% primarily due to expansion
in various business groups.

Interest expense increased $19.4 million or 14.2% to $155.6 million. Most
of this increase was related to higher financing costs on receivables from
brokers, dealers and customers at Pershing.

Other expenses, as noted below, increased by $38.8 million or 40.3% to
$135.1 million for the third quarter of 1995.

Brokerage, clearing, exchange fees and other expenses increased by $15.2
million due to increased share volume, underwriting related expenses and
transaction fee payments. Occupancy and equipment costs increased by $6.1
million as a result of the decision to relocate certain of the Company's
overseas and U.S. offices. See "--Recent Developments." Communications costs
for the third quarter of 1995 increased by $1.4 million and all other
operating expenses, which include data processing, professional fees, travel
and entertainment and printing and stationery, increased by $16.1 million.

The Company's income tax provision for the third quarter of 1995 and 1994
was $28.0 million and $17.0 million, respectively, which represented a 40%
effective tax rate for both periods.

Net earnings for the quarter ended September 30, 1995 were $42.0 million,
up $16.5 million or 64.7% from 1994. Pro forma earnings per common share
giving effect to the dilutive effect of the restricted stock units using the
treasury method were $0.72 and $0.40 for the third quarters of 1995 and 1994,
respectively.

NINE MONTHS SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1994

Total revenues for the first nine months of 1995 were approximately $2.0
billion, an increase of $507.0 million or 34.9% over the first nine months of
1994. Revenues increased in all of the Company's major areas of activity
during the first nine months of 1995.

Commission revenues increased by $62.1 million or 22.1% to $343.1 million
due to increased business in all areas and generally consistent with the
overall growth in listed share volume on major equity exchanges.

<PAGE>

Underwriting revenues increased by $137.8 million or 76.7% to $317.5
million. The Company experienced increases in all areas of underwriting in
the first nine months of 1995.

Fee revenues increased by $87.5 million or 49.5% to $264.0 million due
primarily to increased M&A and other advisory fees in the Investment Banking
group.

Interest, net of interest expense to finance U.S. government, agency and
mortgage-backed securities, increased by $45.5 million or 7.7% to $638.4
million. Higher rates earned at Pershing on comparable levels of customer
margin balances and securities loaned/borrowed activity accounted for most of
the increase.

Principal trading transaction revenues increased by $124.6 million or
88.3% to $265.7 million. Most of this increase was due to improved trading
results in mortgage-backed and high-yield securities both of which had
negative trading results in 1994.

Principal investment transaction revenues increased by $33.6 million or
57.5% to $92.2 million. Realized gains on investments were $162.7 million.
Net changes in unrealized carrying values were $(70.5) million, which
includes a reduction in net unrealized appreciation of $44.9 million on
investments sold and a reduction in net unrealized appreciation of $25.6
million on retained investments due principally to an estimated loss of $28.8
million on a merchant banking bridge loan. See "--Recent Developments."

Other revenues consisting primarily of dividends and miscellaneous
transaction revenues, increased by $15.9 million or 64.8% to $40.4 million.
The increase consists primarily of dividends received on equity securities
and investments.

Total costs and expenses for the first nine months of 1995 were
approximately $1.8 billion, an increase of $447.0 million or 34.1% over the
first nine months of 1994.

Compensation and benefits increased $249.7 million or 37.0% to $924.9
million. Most of the increase was due to increased variable incentive and
production-related compensation, which resulted from higher revenues and
operating results. Incentive and production-related compensation increased by
43.5% for the first nine months of 1995, while base compensation, including
benefits and all payroll taxes, increased by 22.5% primarily due to expansion
in various business groups.

Interest expense increased $107.2 million or 30.0% to $464.5 million due
primarily to higher financing costs on receivables from brokers, dealers and
customers in the correspondent clearing business at Pershing.

Other expenses, as noted below, increased by $90.1 million or 32.3% to
$369.4 million for the first nine months of 1995.

Brokerage, clearing, exchange fees and other expenses increased by $28.9
million due to increased share volume, underwriting related expenses and
transaction fee payments. Occupancy and equipment costs increased by $25.5
million as a result of the decision to relocate certain of the Company's
overseas and U.S. offices. See "--Recent Developments." Communications costs
for the first nine months of 1995 increased by $4.5 million and all other
operating expenses, which include data processing, professional fees, travel
and entertainment and printing and stationery, increased by $31.2 million.

The Company's income tax provision for the first nine months of 1995 and
1994 was $81.0 million and $57.0 million, respectively, which represented a
40% effective tax rate for both periods.

For the first nine months of 1995, net earnings were $121.5 million, up
$36.0 million or 42.1% or from the comparable 1994 period. Pro forma earnings
per common share giving effect to the dilutive effect of the restricted stock
units using the treasury method were $2.07 and $1.35 for the first nine
months of 1995 and 1994, respectively.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Total revenues for 1994 were approximately $2.0 billion, a decrease of
$276.6 million or 12.1% from 1993. Six discount rate increases by the Federal
Reserve Board caused the fixed-income and equities markets to become very
volatile. This environment reduced revenues from both underwriting and
principal trading transactions.

<PAGE>

Commission revenues increased by $17.3 million or 4.8% to $376.1 million
due principally to an increase in commissions in the Institutional Equities
division.

Underwriting revenues decreased by $313.5 million or 54.6% to $261.1
million. Consistent with the overall decline in the industry mentioned above
there were declines in all areas of underwriting, including equities,
mortgage-backed securities and high-yield securities. The Taxable
Fixed-Income division incurred losses during 1994 on mortgage-backed
securities positions related to underwriting activities.

Fee revenues increased by $70.0 million or 33.1% to $281.3 million due
primarily to increased M&A and other advisory fees in the Investment Banking
group.

Interest, net of interest expense to finance U.S. government, agency and
mortgage-backed securities, increased by $134.6 million or 20.5% to $791.9
million. Pershing experienced increased interest reflecting higher rates
earned on increased levels of customer margin balances. In addition, interest
increased in the Equity Derivatives division due to higher rates and
increased levels of financial instruments used to cover certain of its
derivatives activities.

Principal trading transaction revenues decreased by $215.8 million or
56.6% to $165.7 million. This decline was due to significantly reduced
trading results in certain areas of the Taxable Fixed-Income division
including mortgage-backed securities, high-yield securities and
investment-grade corporate bonds. In particular, a significant disruption in
the mortgage-backed securities and CMO markets resulted in substantial losses
in the Company's mortgage-backed securities business. These results were
partially offset by increased activity in the Equity Derivatives division.

Principal investment transaction revenues increased by $17.7 million or
22.2% to $97.6 million. Realized gains on investments were $80.1 million. Net
changes in unrealized carrying values were $17.5 million, which included a
reduction in net unrealized appreciation of $16.6 million on investments sold
and an increase in net unrealized appreciation of $34.1 million on retained
investments.

Other revenues, consisting primarily of dividends and miscellaneous
transaction revenues, increased by $13.1 million or 59.8% to $35.0 million.
The increase consists primarily of dividends received on equity securities
used to cover positions in the Equity Derivatives division.

Total costs and expenses for 1994 were approximately $1.8 billion, a
decrease of $179.6 million or 9.1% from 1993.

Compensation and benefits decreased $302.6 million or 25.2% to $897.8
million. Compensation and benefits as a percentage of total revenues
decreased to 44.7% from 52.5% in 1993 due principally to a reduction in
incentive and production-related compensation levels, which declined 36.1% in
1994. These reductions in variable compensation were partially offset by
planned increases in personnel. At December 31, 1994, full-time personnel
totaled 4,566 compared to 4,123 at the end of 1993, an increase of 443 or
10.7%. Most of the increase in personnel consisted of more highly compensated
professionals in the Banking Group and certain sales and trading areas as
well as technology personnel. Overall base compensation, including benefits
and all payroll taxes, increased by 19.0% in 1994.

Interest expense increased $122.1 million or 32.0% to $503.8 million. Most
of this increase was related to higher financing costs on receivables from
brokers, dealers and customers at Pershing. The remaining increase was
attributable to increased interest rates to finance inventories and
receivables in the Equity Derivatives division and the impact of higher
interest rates on significantly reduced inventory levels in the Taxable
Fixed-Income division.

Other expenses, as noted below, increased by $0.9 million or 0.2% to
$402.1 million in 1994.

Brokerage, clearing, exchange fees and other expenses increased by $1.8
million due to increased volume which was partially offset by lower
transaction fee payments. Occupancy and equipment costs increased $10.1
million due to the upgrading and expansion of various trading and support
operations. Communications costs increased by $4.7 million principally from
increased volume usage and costs to expand capacity to accommodate increases
in personnel. All other operating costs decreased by $15.7 million.

<PAGE>

The Company's 1994 income tax provision was $82.0 million and represented
a 40.0% effective tax rate. In 1993 the income tax provision was $115.9
million and represented a 38.4% effective tax rate. The effective tax rate in
1994 increased as a result of higher state and local income taxes.

Net income for 1994 was $123.0 million, a decrease of $63.1 million or
33.9% compared to 1993.

YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992

Total revenues for 1993 were approximately $2.3 billion, an increase of
$621.2 million or 37.3% over 1992.

Commission revenues increased by $69.1 million or 23.9% to $358.8 million.
Most of the increase occurred at Pershing and the Investment Services Group.
The Institutional Equities division also experienced increased revenues.

Underwriting revenue increased by $224.3 million or 64.0% to $574.6
million. All major underwriting areas experienced significant improvements in
activity with the largest increases coming in equity and high-yield
securities underwriting.

Fee income increased by $53.2 million or 33.6% to $211.3 million, due
primarily to increased M&A and other advisory fees in the Investment Banking
group.

Interest, net of interest expense to finance U.S. government, agency and
mortgage-based instruments, increased by $275.6 million or 72.2% to $657.3
million. Interest in the Taxable Fixed-Income division increased
significantly reflecting an increase in inventory levels. The remaining
increases included higher inventory levels of debt instruments used to cover
derivatives activities in the Equity Derivatives division and increased
customer margin balances at Pershing.

Principal trading transaction revenues increased by $109.5 million or
40.3% to $381.5 million as a result of trading gains in all of the Company's
major trading areas. The largest increases were recorded in the Taxable
Fixed-Income and Equity Derivatives divisions.

Principal investment transaction revenues decreased by $116.0 million or
59.2% to $79.9 million. Realized gains on investments were $136.3 million.
Net changes in unrealized carrying values were $(56.4) million, which
included a reduction in net unrealized appreciation of $55.3 million on
investments sold and a decrease in net unrealized appreciation of $1.1
million on retained investments.

Other revenues increased by $5.5 million or 33.5% to $21.9 million. The
increase relates primarily to dividends on equity securities used to cover
positions in the Equity Derivatives division as well as increases in other
charges for services to correspondents of Pershing.

Total costs and expenses were approximately $2.0 billion, an increase of
$564.2 million or 39.8% in 1993.

Compensation and benefits increased $313.8 million or 35.4% to $1.2
billion due primarily to increased incentive and production-related
compensation. However, compensation and benefits as a percentage of total
revenues declined to 52.5% from 53.3% in 1992. Variable compensation
increased by 41.5% in 1993, while base compensation, including benefits and
all payroll taxes, increased by only 15.2%, due mainly to an increase in the
number of employees. At December 31, 1993 full-time personnel totaled 4,123
compared to 3,622 at the end of 1992, an increase of 501 or 13.8%.

Interest expense increased $169.4 million or 79.8% to $381.7 million. Most
of this increase was related to higher financing costs on inventories and
receivables in the Taxable Fixed-Income division. The remaining increase was
related to increased interest rates to finance receivables at Pershing and
inventories in the Equity Derivatives division.

Other expenses, as noted below, increased by $81.0 million or 25.3% to
$401.2 million in 1993.

Brokerage, clearing, exchange fees and other expenses increased by $19.7
million as a result of increased trading volume and increases in transaction
fee payments. Occupancy and equipment costs increased $8.8 million due to
expansion in U.S. regional and overseas offices as well as the upgrading and

<PAGE>

expansion of trading and support operations. Communications costs increased
by $3.2 million principally from increased volume usage and costs to expand
capacity to accommodate increases in personnel. All other operating costs
increased by $49.3 million due mainly to a favorable legal settlement in 1992
which reduced other operating costs in that year.

The Company's 1993 income tax provision was $115.9 million and represented
a 38.4% effective tax rate. In 1992, the provision was $98.0 million and
represented a 40.0% effective tax rate. The effective tax rate in 1993
decreased as a result of lower state and local income taxes.

Net income for 1993 was $186.1 million, an increase of $39.1 million or
26.6% compared to 1992.

LIQUIDITY AND CAPITAL RESOURCES

The Company's assets are highly liquid with the majority consisting of
securities inventories and collateralized receivables, both of which
fluctuate depending on the levels of customer business and proprietary
trading. Such collateralized receivables consist primarily of securities
purchased under agreements to resell ("resale agreements") and securities
borrowed, both of which are secured by U.S. government and agency securities
and highly marketable corporate debt and equity securities. In addition, the
Company has significant receivables from customers, brokers and dealers which
turn over rapidly. As a securities dealer, the Company may carry significant
levels of trading inventories to meet client trading needs. As such, the
Company's total assets or the individual components of total assets vary
significantly from period to period because of changes relating to customer
needs, economic and market conditions and proprietary trading strategies. A
relatively small percentage of total assets is fixed or held for a period of
longer than one year. The Company's total assets at September 30, 1995,
December 31, 1994 and December 31, 1993 were $40.8 billion, $33.1 billion and
$38.8 billion, respectively.

The majority of the Company's assets are financed through daily operations
by securities sold under repurchase agreements, securities sold not yet
purchased, securities loaned, bank loans, and through payables to customers,
brokers and dealers. Short-term funding is generally obtained at rates
related to Federal funds, LIBOR and money market rates. Other borrowing costs
are negotiated depending upon prevailing market conditions. The Company
monitors overall liquidity by tracking the extent to which unencumbered
marketable assets exceed short-term unsecured borrowings. The Company
maintains borrowing relationships with a broad range of banks, financial
institutions, counterparties and others, including $5.0 billion, at September
30, 1995, in uncommitted and committed bank credit lines with 50 domestic and
international banks. These include $3.4 billion of uncommitted bank credit
lines, $1.3 billion of secured committed bank lines and $340.0 million of
unsecured committed bank lines.

Certain of the Company's businesses are capital intensive. In addition to
normal operating requirements, capital is required to cover financing and
regulatory charges on securities inventories, merchant banking investments
and investments in fixed assets. The Company's overall capital needs are
continually reviewed to ensure that its capital base can appropriately
support the anticipated needs of its business units. As a result of these
ongoing reviews, the Company has been active in raising additional long-term
financing over the past several years, including obtaining $150.0 million of
new equity capital from Equitable in 1993 and the issuance of $225.0 million
of Cumulative Exchangeable Preferred Stock in 1993, extending the maturity of
its senior subordinated revolving credit agreement of $250.0 million and
increasing the amount of the credit available thereunder to $325.0 million in
1995 (of which $250.0 million was outstanding as of September 30, 1995). As
noted in "--Recent Developments" above, in October 1995, the Company also
completed the Initial Public Offering and Senior Debt Offering which resulted
in net proceeds of approximately $81.2 million and $492.3 million,
respectively. Such net proceeds are being used to repay certain indebtedness
of the Company, including the $250.0 million four year secured term loan
referred to below of which $242.5 million was outstanding at the time of
repayment. In addition, in October 1995, Equitable contributed additional
capital of $55.0 million in the form of shares of a publicly traded company.

During the fourth quarter of 1994, the Company repurchased for $263.2
million certain mortgage-related securities previously underwritten by the
Company which repurchase was financed in part by a $250.0 million four year
secured term loan. The Company believed that, due to poor property

<PAGE>

management practices, the operating income and the value of the real estate
properties underlying the securities were deteriorating. Since its repurchase
of these securities, the Company has replaced the manager of the properties,
commenced foreclosure proceedings and intends to hold these assets while the
properties are rehabilitated. While the Company has been a defendant in
various lawsuits filed in connection with such transactions and two of its
subsidiaries are the subject of an investigation by the Commission with
respect to such transactions, the Company is carrying these assets at fair
value and believes that the ultimate outcome of these transactions, lawsuits
and investigation will not have a material effect on the Company's results of
operations and financial condition. These securities are included in
mortgages, other receivables collateralized by real estate assets and real
estate owned. Such securities were carried at fair value of $251.2 million at
December 31, 1994. The decrease in fair value of $12.0 million was included
as a reduction in principal transactions-trading, net in the consolidated
statement of income for the year ended December 31, 1994. The fair value of
these assets was determined by the Company using a commonly used methodology
for valuing securities and mortgages known as a Derived Investment Value
("DIV") which is a measure of value for income producing real estate assets
and assets collateralized by real estate. This concept of value represents a
computation of the net present value of the estimated cash flows an investor
would receive from the assets during the holding period including the net
present value of the estimated sales proceeds at the end of the holding
period. The Company monitors the fair value of these assets by completing DIV
calculations on a periodic basis, in addition to monitoring the
rehabilitation and operation of the properties.

The Company estimates that it will require approximately $200 million to
finance projected expenditures in connection with the move of its principal
offices in 1996. See "--Recent Developments" above. In addition to the
Initial Public Offering and Senior Debt Offering, the Company expects that it
will, from time to time, engage in additional financings as the need arises
to support the growth of its businesses.

DLJSC is subject to the capital requirements of the Commission, the NYSE,
the CFTC and the Chicago Board of Trade ("CBOT"), all of which are intended
to ensure the general capital adequacy and liquidity of broker-dealers and
futures commission merchants. DLJSC has consistently maintained capital in
excess of the minimum requirements of such capital rules. At September 30,
1995, DLJSC had aggregate regulatory "net capital," after adjustments
required by Rule 15c3-1 under the Exchange Act, of approximately $620.4
million, which exceeded minimum net capital requirements by $566.0 million
and which exceeded the net capital required by DLJSC's most restrictive debt
covenants by $446.3 million.

The Company's overall capital and funding needs are continually reviewed
to ensure that its capital base can support the estimated needs of its
business units. These reviews take into account business needs as well as the
regulatory capital requirements of subsidiaries. Based upon these analyses,
management believes that the Company's debt and equity base is adequate for
current operating levels.

CASH FLOWS

The Company's statements of consolidated cash flows classify cash flow
into three broad categories: cash flows from operating activities, investing
activities and financing activities. The Company's net cash flows are
principally associated with operating and financing activities, which support
the Company's trading, customer and banking activities.

NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

Cash and cash equivalents at September 30, 1995 and 1994 totaled $61.0
million and $143.8 million, respectively, an increase (decrease) of $(33.9)
million and $0.9 million, respectively, for the comparable nine-month
periods.

Cash provided by operating activities totaled $2.0 billion and $2.3
billion in the first nine months of 1995 and 1994, respectively, and reflects
an increase in operating liabilities. In the first nine months of 1995, there
were increases in securities sold not yet purchased of $1.7 billion,
securities loaned of $593.4 million and all other receivables and payables,
net, which rose by $340.5 million. These increases in operating liabilities
were partly offset by increases in assets including trading inventories of
$881.2 million.

<PAGE>

For the first nine months of 1994, there were increases in securities sold
not yet purchased of $3.7 billion, offset by increases in trading inventories
of $628.3 milllion, securities borrowed of $257.5 million and decreases in
securities loaned of $372.6 million and in other receivables and payables,
net, of $463.0 million.

During the first nine months of 1995, investing activities of $122.8
million consisted primarily of fixed asset purchases in connection with the
Company's planned move of its principal offices in 1996. In the first nine
months of 1994, investing activities used cash of $127.4 million relating
principally to the purchase of mortgages, other receivables collateralized by
real estate assets and real estate owned. During the first nine months of
1995 and 1994, cash of $1.9 billion and $2.2 billion, respectively, was used
by financing activities (principally repurchase agreements) in the normal
course of operations.

YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

Cash and cash equivalents at December 31, 1994, 1993 and 1992 totaled
$94.9 million, $142.9 million and $137.1 million, respectively, a decrease of
$48.0 million for the year ended 1994 compared to increases for the years
ended 1993 and 1992 of $5.8 million and $53.3 million, respectively.

For the full year 1994, cash provided from operating activities was used
to repay short-term financings (repurchase agreements), while in 1993 and
1992, cash provided by financing activities was used primarily for operating
activities.

Cash provided by operating activities totaled $2.1 billion in 1994 while
cash used for operating activities totaled $4.4 billion in 1993. In 1994,
there were decreases in trading inventory levels of $2.6 billion and
securities borrowed of $1.3 billion. These were partly offset by decreases in
payables from securities loaned which declined by $1.2 billion and
liabilities including securities sold not yet purchased, which were reduced
by $470.1 million. In 1994, all other receivables and payables-net, increased
by $538.4 million. During 1993, operating assets including trading
inventories increased $5.3 billion and securities borrowed increased $2.2
billion, offset by increases in liabilities including securities sold not yet
purchased of $1.9 billion, securities loaned of $859.3 million and a decrease
in all other receivables and payables-net, of $386.1 million. In 1992, cash
used in operating activities was $2.2 billion which resulted primarily from
an increase in securities borrowed of $2.1 billion.

In 1994 and 1993, the Company used $267.5 million and $237.0 million,
respectively, for investing activities, which was comprised primarily of
$162.5 million and $203.0 million, respectively, of increases in other assets
(primarily reflecting receivables and advances acquired relating to the whole
loan securitization business). In 1992, cash provided by investing activities
of $30.2 million resulted primarily from $47.1 million of sales, net of
purchases, of merchant banking assets which was offset by purchases of $18.0
million of fixed assets.

In 1994, cash of $1.9 billion was used to repay short-term funding
(principally repurchase agreements). In 1993, proceeds from short-term
funding activities were $4.3 billion. Additionally, in 1993, $225.0 million
of Cumulative Exchangeable Preferred Stock was raised, and $150.0 million of
capital was contributed by Equitable Life. In 1992, $2.3 billion of cash was
provided by financing activities, of which $2.0 billion was provided by
short-term funding (principally repurchase agreements) and $305.5 million was
provided by long-term borrowings.

DERIVATIVE FINANCIAL INSTRUMENTS

Derivatives are financial instruments the payments on which are linked to
the prices, or relationships between prices, of securities or commodities,
interest rates, currency exchange rates or other financial measures
(collectively referred to as "cash market instruments"). Derivatives enable
the Company and its clients to manage their exposure to interest rates and
currency exchange rates, and security and other price risks. Derivatives
include structured notes, swaps, futures or forward contracts and options.
Certain types of derivatives, including forwards and certain options, are
traded in the OTC markets. Other types of derivatives, including futures
contracts and listed options, are traded on regulated exchanges. The
Company's involvement in derivative products is related primarily to revenue
generation through the provision of products to its clients as opposed to
hedges against the Company's own positions.

<PAGE>

The Company's derivative activities are not as extensive as many of its
competitors. Instead, the Company has focused its derivative activities on
writing OTC options to accommodate its customers needs, trading in forward
contracts in U.S. government and agency issued or guaranteed securities and
in futures contracts on equity based indices, interest rate instruments and
currencies, and issuing structured notes. The Company's involvement in swap
contracts, which generally involve greater risk and volatility, is not
significant.

Option Writing. As part of its Equity Derivatives division, Taxable
Fixed-Income division, and Emerging Markets group, the Company writes OTC
options, typically for a term of not more than thirteen months, primarily for
its institutional clients, and enters into related covering transactions. As
a writer of OTC options, the Company generally receives a premium on entering
into an option and, until the expiration of the option, bears the risk of
unfavorable changes in the value of the cash market instrument to which the
option relates. The Company covers its market risk associated with the
writing of OTC options primarily by entering into transactions in the cash
markets, as well as by entering into forward and futures contracts and by
purchasing options.

Revenues from the Company's option writing activities (net of related
financing expense) were approximately $65.7 million and $82.8 million for the
nine months ended September 30, 1995 and 1994, respectively. Option writing
revenues arise primarily from the amortization of option premiums. The
decrease in revenues primarily resulted from lower levels of activity, both
in size and number of transactions, by the Company's institutional customers.
These reductions were caused by a number of factors including increased
competition from other financial institutions. In addition, the market for
derivative instruments generally has been adversely affected by extensive
negative publicity.

The average monthly fair value of written options was approximately $110.5
million for the nine months ended September 30, 1995, and at September 30,
1995, the fair value of written options was approximately $147.9 million,
which amount was included as a liability in the Company's consolidated
statements of financial condition. The "fair value" of a written option
contract is generally equivalent to the amount, determined based on market
prices, that the Company would be required to pay to terminate its
obligations under such option.

The notional value of written options contracts outstanding was
approximately $4.2 billion and $5.3 billion at September 30, 1995 and 1994,
respectively. The overall decrease in the notional value of all options and
particularly the options on foreign sovereign debt securities and currencies
is reflective of the reduced levels of interest in these products by the
Company's customers. The increase in the notional value of other options was
due primarily to increases in market activity and to higher price levels in
the domestic equity cash markets.

Such written options contracts are substantially covered by the following
financial instruments that the Company had purchased or sold as principal and
which are shown below at the notional contractual value for derivatives
instruments and at market value for cash instruments at September 30, 1994
and 1995:
<TABLE>
<CAPTION>
AS OF SEPTEMBER
30,
------------------
1994 1995
(IN MILLIONS)
<S> <C> <C>
U.S. government, and mortgage-backed securities
and options thereon ........................... $1,279 $1,618
Foreign sovereign debt securities .............. 1,289 468
Currency forward contracts ..................... 592 --
Forward rate agreements and options ............ 465 43
Equity swaps ................................... 145 398
Futures contracts .............................. 735 630
Equities and other ............................. 836 1,028
-------- --------
Total ........................................ $5,341 $4,185
======== ========
</TABLE>
Forward and Futures Trading. As part of its trading activities, including
trading activities in the related cash market instruments, the Company enters
into forward and futures contracts primarily

<PAGE>

involving various securities, foreign currencies, indices and forward rate
agreements. Such forward and futures contracts are entered into as part of
the Company's covering transactions and are not used for speculative
purposes. Forward contracts generally call for the purchase or sale by the
Company, on a delayed settlement basis, of debt securities or currencies or
other financial instruments. Futures contracts are exchange traded contracts
which settle daily and generally call for the purchase or sale by the Company
of a financial instrument at a specified future date at a specified price.
The Company generally profits when the value of assets that it has purchased
on a delayed settlement basis rises or the value of assets that it has sold
on a delayed settlement basis falls. Conversely, the Company generally incurs
losses when assets purchased for delayed settlement decline in value or sold
assets increase in value. Forward and futures contracts, unlike cash market
transactions in the financial instruments to which such forwards or futures
relate, have both on-and off-balance sheet implications. The notional
contractual value of forward and futures contracts are treated as off-balance
sheet items, while the related unrealized gains and losses are included in
assets and liabilities.

The average monthly net unrealized losses were approximately $4.8 million
for forward contracts and $6.7 million for futures contracts for the nine
months ended September 30, 1995. Net unrealized gains of approximately $0.8
million related to forward contracts and net unrealized losses of
approximately $16.1 million related to futures contracts at September 30,
1995, were included in the payables to brokers, dealers and other caption in
the Company's consolidated statements of financial condition. Unrealized
gains and losses on forward and futures contracts are recorded in earnings.
For the nine months ended September 30, 1995, net trading gains on forward
contracts were $126.3 million and net trading losses on futures contracts
were $53.3 million. Net trading gains from the Company's forward and futures
contract activities were approximately $100.0 million, $76.3 million and
$38.7 million for the years ended December 31, 1994, 1993 and 1992,
respectively. The increase in revenues resulted primarily from higher levels
of activity both in value and number of transactions by the Company's
institutional customers.

Structured Notes. Structured notes are customized derivative instruments
in which the amount of interest or principal paid on a debt obligation is
linked to movements in the value of cash market financial instruments. Prior
to March 31, 1995, structured notes were offered only by the Equities
Derivatives division. In 1995 the newly formed Emerging Markets group also
began offering derivatives in the form of structured notes linked to Latin
American sovereign debt and equity securities. At September 30, 1995 and
1994, the Company had issued structured notes with principal amounts of $61.5
million and $99.4 million outstanding, respectively. The Company expects the
volume of this activity to increase in the future. The Company covers its
obligations on structured notes primarily by purchasing and selling the
securities to which the value of its structured notes are linked.

See Note 7 of Notes to Consolidated Financial Statements for additional
information on the Company's derivative activities.

MERCHANT BANKING TRANSACTIONS

As part of the Company's merchant banking activities, it participates from
time to time in principal investments. As part of these activities, the
Company purchases equity or debt securities or makes commitments to purchase
such securities in merger, acquisition, restructuring and leveraged capital
transactions, including leveraged buyouts. Such positions and commitments may
involve substantial amounts of capital and significant exposure to any one
issuer or business, as well as market, credit and liquidity risks. In
addition, the Company may also provide or arrange bridge financing, which
assures clients of funding for major transactions, with the expectation that
refinancing will be obtained through the placement of high-yield debt or
other securities. Such activities may also involve substantial amounts of
capital and significant exposure to any one issuer as well as various risks
associated with credit conditions and vulnerability to general economic
conditions. See "Business--Banking Group--Merchant Banking." The Company
accounts for these investments at estimated fair market value as determined
by the Board of Directors. Changes in unrealized appreciation arising from
changes in fair value or gains or losses or upon realization are reflected in
principal transactions-net, investments. At September 30, 1995, December 31,
1994 and December 31, 1993, the Company's share in its merchant banking
funds, including bridge loan funds, amounted to $237.5 million, $297.9
million, and $286.3 million, respectively.

<PAGE>

Merchant banking activities, which have historically been a significant
contributor to the Company's revenues and earnings, are not predictable and
are not necessarily correlated with general market conditions. These results,
which in any one reporting period may be influenced by a limited number of
transactions, can vary widely from year to year.

HIGH-YIELD TRANSACTIONS

The Company participates in the underwriting, trading and sales of
high-yield, non-investment-grade securities. These securities generally
involve greater risk than investment-grade debt securities due to credit
considerations, liquidity of secondary trading markets and vulnerability to
general economic conditions. The Company accounts for such inventory
positions on a market value basis with unrealized gains and losses being
recognized currently in earnings. At September 30, 1995, December 31, 1994
and December 31, 1993, the Company had long inventory of $375.2 million,
$275.7 million and $528.7 million, respectively, and short inventory of
$192.9 million, $102.6 million and $174.6 million, respectively, of
high-yield securities, which accounted for less than 7.5% of the Company's
overall inventory positions.

RISK MANAGEMENT

Exposure to risk and the ways in which the Company manages the various
types of risks on a day-to-day basis is critical to its survival and
financial success. The Company monitors its market and counterparty risk on a
daily basis through a number of control procedures designed to identify and
evaluate the various risks to which the Company is exposed.

The Company often acts as principal in customer-related transactions in
financial instruments which expose the Company to market risks. The Company
also engages in proprietary trading and arbitrage activities and makes dealer
markets in equity securities, investment-grade corporate debt, high-yield
securities, U.S. government and agency securities, mortgages and
mortgage-backed securities. In addition, the Company's Emerging Markets group
trades a variety of securities, including Brady Bonds, local fixed-income
securities and options and issues structured notes. As such, the Company may
be required to maintain certain amounts of inventories in order to facilitate
customer order flow. The Company covers its exposure to market risk by
limiting its net long or short position by selling or buying similar
instruments and by utilizing various derivative financial instruments such as
futures and forward and option contracts.

The Company manages risk exposure utilizing mechanisms involving various
levels of management. Position limits in trading and inventory accounts are
established and monitored on an ongoing basis. Current and proposed
underwriting, corporate development, merchant banking and other commitments
are subject to due diligence reviews by senior management as well as
professionals in the appropriate business and support units involved.

Trading activities generally result in the creation of inventory
positions. Position and exposure reports are prepared daily by operations
staff in each of the business groups engaged in trading activities for
traders, trading managers, department managers, divisional management and
group management personnel. Such reports are reviewed independently on a
daily basis by the Company's corporate accounting group. In addition, the
corporate accounting group prepares a consolidated summarized position report
indicating both long and short exposure along with approved limits which is
distributed to various levels of management throughout the Company, including
to the Chief Executive Officer, and which enables senior management to
control inventory levels and monitor results of the trading groups. The
Company also reviews and monitors, at various levels of management, inventory
aging, pricing, concentration and securities ratings.

In addition to position and exposure reports, the Company produces a daily
revenue report which summarizes the trading, interest, commissions, fees,
underwriting and other revenue items for each of the business groups. Daily
revenue is reviewed for various risk factors and is independently verified by
the corporate accounting group. The daily revenue report is distributed to
various levels of management throughout the Company, including to the Chief
Executive Officer, and together with the position and exposure report enables
senior management to monitor and control overall activity of the trading
groups.

<PAGE>

Credit risk related to various financing activities is reduced by the
industry practice of obtaining and maintaining collateral. The Company
monitors its exposure to counterparty risk on a daily basis through the use
of credit exposure information and the monitoring of collateral values. The
Company has several credit departments which are responsible for reviewing
counterparties to establish appropriate exposure limits for a variety of
transactions. In addition, the Company actively manages the credit exposure
relating to its trading activities by entering into master agreements which
permit netting when feasible, monitoring the creditworthiness of
counterparties and their related trading limits on an ongoing basis,
requesting additional collateral when deemed necessary and limiting the
amount and duration of exposure to individual counterparties.

The Company has established various committees to assist senior management
in managing risk associated with investment banking and merchant banking
transactions. The objectives of the committees are to review potential
clients and engagements, utilize experience with similar clients and
situations, perform credit analysis for certain commitments and to analyze
the Company's potential role as a principal investor. The Company seeks to
control the risks associated with its banking activities by a thorough review
by various committees of the details of significant transactions prior to
accepting an engagement. Some of the committees which have been formed are
the Fairness and Valuation Opinion Committee, the Private Placement
Committee, the Restructuring Coordinating Committee, the Equity Commitment
Committee, the High-Yield Underwriting Committee, the Bridge Commitment
Committee and the Banking Review Committee.

From time to time, the Company makes investments in certain merchant
banking transactions or other long-term corporate development investments.
DLJ Merchant Banking Partners, L.P. and its affiliated entities ("DLJMBP")
has its own investment committee, which acts as a fiduciary to the limited
partners and makes all investment and disposition decisions with respect to
its potential and current portfolio companies. In addition, senior officers
of the Company meet on a quarterly basis to review merchant banking and
corporate development investments. After a discussion of the financial and
operational aspects of the companies involved, recommendations regarding
carrying values are made for each investment to the Finance Committee which
then recommends valuations for subsequent consideration by the Board of
Directors of the Company. A determination is then made by the Board of
Directors following a review of such recommendations.

<PAGE>

BUSINESS

The Company conducts its business through three principal operating
groups, each of which is an important contributor to revenues and earnings:
the Banking Group, which includes the Company's Investment Banking, Merchant
Banking and recently formed Emerging Markets groups; the Capital Markets
Group, consisting of the Company's Taxable Fixed-Income, Institutional
Equities and Equity Derivatives divisions, as well as Sprout, its venture
capital affiliate; and the Financial Services Group, comprised of Pershing,
the Investment Services Group and Wood Struthers & Winthrop.

Banking Group. The Company's Banking Group is a major participant in the
raising of capital and the providing of financial advice to companies
throughout the U.S. and has significantly expanded its activities abroad.
Through its Investment Banking group, the Company manages and underwrites
public offerings of securities, arranges private placements and provides
advisory and other services in connection with mergers, acquisitions,
restructurings and other financial transactions. Its Merchant Banking group
pursues direct investments in a variety of areas through a number of
investment vehicles funded with capital provided primarily by institutional
investors, the Company and its employees. The Emerging Markets group
specializes in client advisory services for mergers, acquisitions and
financial restructurings, as well as merchant banking and the underwriting,
placement and trading of equity, debt and derivative securities in Latin
America and Asia.

Capital Markets Group. The Capital Markets Group encompasses a broad range
of activities including trading, research, origination and distribution of
equity and fixed-income securities, private equity investments and venture
capital. Its Taxable Fixed-Income division provides institutional clients
with research, trading and sales services for a broad range of taxable
fixed-income products, including high-yield corporate, investment-grade
corporate, U.S. government and mortgage-backed securities. The Institutional
Equities division provides institutional clients with research, trading and
sales services in U.S. listed and OTC equity securities. In addition, the
Company's Equity Derivatives division provides a broad range of equity and
index options products, while Sprout is one of the oldest and largest groups
in the private equity investment and venture capital industry.

Financial Services Group. The Financial Services Group provides a broad
array of services to individual investors and the financial intermediaries
which represent them. Pershing is a leading provider of correspondent
brokerage services, clearing transactions for over 500 U.S. brokerage firms
which collectively maintain over one million client accounts. The Company's
Investment Services Group provides high-net-worth individuals and medium to
smaller sized institutions with access to the Company's equity and
fixed-income research, trading services and underwriting. Through Wood,
Struthers & Winthrop, the Company provides investment management and trust
services primarily to high-net-worth individual investors and institutions.

While each of the Company's principal operating groups has its own
specific strategy for growth and profitability, the Company also emphasizes
the interrelationships and synergies among the groups and their various
divisions. In particular, over the past several years, the Company has
capitalized on its institutional research capabilities, distribution
strengths and securities expertise to expand its investment banking business.
Such expansion has in turn increased the volume and diversity of products
available for the Company's sales force and trading operations and has
generated internal synergies between the Banking Group's investment banking
and merchant banking activities. The following table illustrates the
Company's revenue breakdown by its principal operating groups, net of all
interest. Net revenues, however, are not necessarily indicative of the
profitability of each group.

<PAGE>

NET REVENUES BY OPERATING GROUP

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------------------------------- -----------------------
1990 1991 1992 1993 1994 1994 1995
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Banking Group ............ $ 152.4 $ 192.1 $ 428.4 $ 491.8 $ 390.0 $ 270.5 $ 439.2
Capital Markets Group ... 275.7 506.6 713.0 994.6 638.1 476.0 571.0
Financial Services Group 229.3 273.9 336.9 455.3 458.2 340.0 452.4
Other .................... 24.4 5.6 (26.5) (38.1) 18.6 11.0 34.1
--------- --------- ---------- ---------- ---------- ----------- ----------
Total net revenues ....... $681.8 $ 978.2 $1,451.8 $1,903.6 $1,504.9 $ 1,097.5 $ 1,496.7
========= ========= ========== ========== ========== =========== ==========
</TABLE>

The Company currently conducts its operations through 17 offices in 13
locations in the U.S., including Atlanta, Boston, Chicago, Dallas, Houston,
Jersey City, Los Angeles, Menlo Park, Miami, New York, Oak Brook,
Philadelphia and San Francisco. The Company also has seven international
offices located in six cities, including Geneva, Hong Kong, London, Lugano,
Paris and Tokyo.

BANKING GROUP

The Company's Banking Group is a major participant in the raising of
capital, the investing of capital and the providing of financial advice to
companies throughout the U.S. and has significantly expanded its activities
abroad, through its Investment Banking group, Merchant Banking group and its
recently formed Emerging Markets group. The Banking Group's approximately 440
professionals operate from seven of the Company's domestic offices and two of
its international offices.

INVESTMENT BANKING

The Company's Investment Banking group provides a full range of capital
raising and financial advisory services to its clients. The Investment
Banking group underwrites public offerings of securities and arranges private
placements and has a particular focus on capital raising transactions in the
public equity and high-yield debt markets. Since 1990, the Company has raised
over $150 billion for its clients from the public and private markets in debt
and equity securities.

The Company's investment banking strategy is to concentrate a major
portion of its business development efforts within those industries in which
the Company has established a leadership position in providing investment
banking services. This focus on certain sectors allows the Company to compete
effectively without the reduced profitability resulting from a larger, more
costly infrastructure. Industry specialty groups include Chemicals, Energy,
Entertainment, Environmental, Financial Services, Forest Products, Gaming,
Health Care, Industrial, Insurance, Media/Communications, Oil and Gas, Real
Estate Finance, Retailing, Satellite, Technology and Utilities. These groups
are responsible for initiating, developing and maintaining client
relationships and for executing transactions involving these clients. The
Investment Banking group has focused primarily on those industries in which
the Company also has a strong research capability. See "--Capital Markets
Group--Institutional Equities--Equity Research."

In addition to being structured according to distinct industry groups, the
Company has a number of professionals who specialize in specific types of
transactions. These include M&A, equity offerings, high-yield securities and
other transaction specialties.

Mergers and Acquisitions. The Company is active in arranging various M&A
transactions for its clients. The Company participates in a broad range of
domestic and international assignments including acquisitions, divestitures,
strategic restructurings, proxy contests, leveraged buyouts and defenses
against unsolicited takeover approaches. From January 1, 1990 through
September 30, 1995, the Company provided advice in over 300 assignments
representing approximately $80 billion of completed domestic and
international transactions.

The Company's M&A professionals have developed a broad base of knowledge
and expertise in a wide variety of industries. This expertise is reinforced
by the close involvement of professionals from the industry specialty groups
and other areas of the Company, and therefore ensures that the analytical
skills,

<PAGE>

creativity and resources of the entire Company are available to its clients.
The group's success is reflected in the Company's growth in volume of
business and market share in M&A, as indicated in the following table:

U.S. MERGERS AND ACQUISITIONS (1)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- ----------------
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Number of transactions ................. 34 35 38 56 70 52 46
Total transaction values (in billions) $7.1 $5.2 $3.9 $10.7 $17.3 $13.3 $16.9
Rank based on transaction values ...... 12 12 9 11 11 11 9
Market share (2) ....................... 3.9% 4.3% 3.6% 6.2% 6.6% 7.1% 6.6%
</TABLE>
- ------------
(1) Source: Investment Dealers' Digest. Includes completed domestic
transactions only.
(2) Market share based on transaction values.

Equity Offerings. The equity capital markets group focuses on providing
financing for issuers of equity and convertible equity securities in the
public markets. The group assists in the origination, and is responsible for
the structuring and execution, of transactions for a broad range of Banking
Group clients. The following table illustrates the Company's ranking in lead
managed offerings for existing public companies and initial public offerings.

LEAD MANAGED EQUITY ISSUES (1)(2)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -- --------------
1990 1991 1992 1993 1994 1994 1995
ALL COMMON STOCK OFFERINGS:
<S> <C> <C> <C> <C> <C> <C> <C>
Number of issues ............................. 2 17 26 48 22 18 32
Amount of capital underwritten (in billions) $0.1 $1.3 $2.0 $4.2 $1.9 $1.3 $3.8
Rank based on dollar volume .................. 25 8 6 7 10 9 4

INITIAL PUBLIC OFFERINGS:
Number of issues ............................. 1 8 14 24 15 11 18
Amount of capital underwritten (in billions) $0.0 $0.3 $1.0 $2.2 $1.3 $0.7 $1.3
Rank based on dollar volume .................. 17 13 6 7 7 8 5
</TABLE>
- ------------
(1) Source: Investment Dealers' Digest. Includes domestic transactions
only.
(2) Excluding closed-end funds.

High-Yield Securities. The high-yield securities group focuses on
providing high-yield debt financing in the public and private capital markets
to non-investment-grade issuers. The group is responsible for originating,
structuring and executing high-yield transactions across a wide range of
companies and industries, as well as managing client relationships with both
high-yield corporate issuers and financial sponsors of leveraged
transactions.

As illustrated in the following table, the Company ranks among the leaders
in high-yield underwriting volume. Between 1990 and 1994, the Company has
underwritten as lead manager over $35 billion in publicly registered and
privately placed high-yield securities representing over 150 issuers.

LEAD MANAGED PUBLIC HIGH-YIELD DEBT ISSUES (1)(2)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- --------------
1990 1991 1992 1993 1994 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Number of issues ............................. 0 3 24 52 26 22 11
Amount of capital underwritten (in billions) $ 0 $0.6 $3.8 $8.2 $4.2 $3.4 $2.4
Rank based on dollar volume .................. -- 4 3 1 2 3 1
</TABLE>
- ------------
(1) Source: Data published in or provided by Investment Dealers' Digest.
Includes domestic transactions only.
(2) Excludes split rated issues and private placements.

<PAGE>

Other Transaction Specialties. The Company is also active in a variety of
other transaction specialties which provide capital raising and advisory
services for its clients. The private placements group raises capital within
the private debt and equity markets and has managed over $7 billion in
placements of these securities since 1990. Formed in 1994, the Company's
private fund group raises private limited partnership capital, primarily from
institutional investors, for direct investment by domestic and international
investment firms and for certain of the Company's merchant banking
activities. The private fund group has raised over $2.5 billion in private
capital in its first year of operation. The project finance group raises
non-recourse financing for a diverse client base of publicly and privately
held companies for specific projects. Additionally, the Company's
restructuring group provides advisory services to financially distressed
companies. The counter cyclical nature of the restructuring business acts as
a balance to other investment banking activities. The Company also
participates in the structured finance industry through its asset-backed
transactions group, and specializes in securitizing cash flow generating
assets through public or private offerings of debt or pass-through
certificates.

MERCHANT BANKING

The Company entered the merchant banking investment business in 1985 and
believes that it has one of the most consistently successful records in this
area over the past ten years. Through the Merchant Banking group, the Company
has grown to become a major participant in the asset management business by
pursuing direct investments in a variety of areas and managing capital
provided primarily by pension funds, endowments, charitable organizations,
high-net-worth individuals, the Company and its employees. The Merchant
Banking group is closely integrated with other parts of the Company drawing
upon all of its resources including principal investing, debt and equity
research and high-yield financing as well as the industry specialty groups
within the Investment Banking group.

The Merchant Banking group manages four distinct capital funds with total
committed capital of approximately $2.7 billion. These funds include DLJ
Merchant Banking Partners, L.P. and affiliated entities ("DLJMBP"), which
focuses primarily on equity investments in leveraged transactions, the DLJ
Bridge Fund (as described below), a leader in domestic bridge financing, DLJ
Investment Partners, L.P., which focuses on opportunities in lower risk
investments in debt or equity mezzanine securities and corporate joint
ventures, and DLJ Real Estate Capital Partners, L.P., which makes investments
in public and private debt and equity in the real estate markets. The Company
expects to operate a fifth fund, DLJ Global Retail Partners, which is
anticipated to commence operations in the first quarter of 1996. This fund
will principally pursue investment opportunities in early stage retailers.

In addition, several other investment vehicles are in the process of being
formed, including the DLJ Senior Debt Fund, which will be aimed at providing
senior debt financing to clients in place of traditional senior bank
financing. The Company is also considering expanding its fund management in
the future to include additional areas of investment. Future funds may
include an emerging markets merchant banking fund, which will target
investment opportunities across a variety of industries in Latin America and
Asia; other industry-specific funds in sectors where the Company possesses
industry expertise or has a history of successful client relationships; and
DLJ Merchant Banking Partners II, which is anticipated to commence activity
in fiscal 1996.

Leveraged Equity Investing. Since the Company began investing in leveraged
transactions in 1985 through September 30, 1995, it invested in 46 companies
with an aggregate purchase price of over $18 billion. Until 1992, the Company
raised funds to pursue these investments on a transaction by transaction
basis. In 1992, the Company established DLJMBP, a dedicated $952 million fund
which includes commitments of up to $300 million by the Company and its
employees. Employee participation ranges from approximately 30% to 40% of the
Company's and its affiliates' overall investment in each transaction. DLJMBP
makes investments in equity and mezzanine securities arising from leveraged
acquisitions, leveraged recapitalizations, restructurings of over-leveraged
companies and other similar types of transactions which generally involve
significant financial leverage. DLJ Merchant Banking, Inc., a wholly-owned
subsidiary of the Company, is the General Partner of DLJMBP.

From May 1992 through September 30, 1995, DLJMBP invested $580 million in
20 portfolio companies and has realized $610 million (or $560 million net of
the General Partner's carried interest) in

<PAGE>

seven of these transactions (including partial and whole realizations), which
had an aggregate cost basis of $142 million. In 1994 the Company made
investments in eight portfolio companies. Three additional investments were
made in the nine months ended September 30, 1995. The Company believes that
its 31 realized investments (including partial and whole realizations)
resulting from direct investments by the Company and its employees and
through side by side investments in and along with investments by DLJMBP have
generated an average annual internal rate of return substantially in excess
of comparable industry benchmarks. The Company believes that its remaining 15
unrealized investments have an aggregate fair value in excess of their cost.
However, the values of these unrealized investments are uncertain and may
affect the aggregate returns of the Company's merchant banking activities
adversely. There can be no assurance that the Company's merchant banking
activities will achieve comparable rates of return in the future.

DLJ Bridge Fund. One of the Company's strengths has been its bridge
lending business. Established in 1987, DLJ Bridge Finance, Inc., a
wholly-owned subsidiary of the Company, manages a $1.28 billion bridge
facility (the "DLJ Bridge Fund") that provides short-term loans in connection
with merchant banking transactions for the Company's clients and the
Company's own merchant banking activities. The DLJ Bridge Fund includes a
$750 million commitment of subordinated debt from Equitable and a $500
million commitment of senior revolving debt by a commercial bank syndicate.
Commitments by Equitable and the commercial bank syndicate are subject to
approval by each of Equitable and the commercial bank syndicate, as the case
may be, on a transaction by transaction basis. Such commitments will expire
December 31, 1997. Equitable's commitment is also subject to annual review
and approval by the State of New York Insurance Department. In addition, the
Company has committed to invest up to $31.3 million through an equity
commitment of 2-1/2% of the DLJ Bridge Fund.

Since the Company began making bridge commitments in 1985, over $12.0
billion of bridge loans have been committed to facilitate 74 transactions, of
which approximately $5.7 billion of such commitments have been funded. At
September 30, 1995, the DLJ Bridge Fund had $230.0 million of bridge loans
outstanding. The DLJ Bridge Fund has been instrumental in generating business
for other areas of the Company's Banking Group such as M&A, equity and
high-yield underwritings and potential merchant banking investment
opportunities.

The Company has agreed to pay Equitable the first $25 million of aggregate
principal losses incurred by Equitable with respect to all bridge loans
outstanding on September 30, 1995 and the first $25 million of aggregate
principal losses incurred by Equitable with respect to bridge loans made
after September 30, 1995. To the extent such payments by the Company do not
fully cover any such losses incurred by Equitable, Equitable is entitled to
receive all other distributions otherwise payable to the Company with respect
to DLJ Bridge Fund activities until such losses have been recovered. The
Company has also agreed to pay Equitable the amount, if any, by which any
principal loss on an individual loan exceeds $150 million. The DLJ Bridge
Fund does not currently have any individual bridge loan outstanding in excess
of $150 million. In addition, Equitable is entitled to one-third of any
equity securities obtained in connection with any bridge loan. Pursuant to
arrangements between the Company and the commercial bank syndicate, the
Company is at risk for a significant portion of any bank loans funded by such
banks. However, substantially all of the bridge loans have been made without
using the bank commitment.

Bridge lending involves significant risk based upon both the underlying
credit of the borrower and market conditions governing refinancing of the
loan. The DLJ Bridge Fund currently has outstanding a bridge loan aggregating
$150 million to a borrower which is experiencing financial difficulties. The
Company has reserved for any expected loss to it from such bridge loan. If
the amount of the loss from such bridge loan is in excess of $25 million,
distributions to the Company with respect to DLJ Bridge Fund activities would
be eliminated until such loss has been recovered. The Company does not
believe that the loss of future income from DLJ Bridge Fund activities would
have a material adverse impact on its results of operations or financial
condition.

DLJ Investment Partners. DLJ Investment Partners L.P. commenced operation
in December 1995 to pursue investments primarily in debt or equity mezzanine
securities and corporate joint ventures. The fund has committed capital of
$250 million of which $50 million will be provided by the Company and its
employees.

<PAGE>

DLJ Real Estate Capital Partners. DLJ Real Estate Capital Partners L.P.,
which commenced operation in December 1995, focuses on debt and equity
investments in a broad range of real estate and real estate-related assets.
The fund has committed capital of approximately $215 million from its general
and limited partners, including the Company and its employees.

EMERGING MARKETS

The Emerging Markets group, formed in February 1995, is a growing
participant in the financial services industry in certain developing
economies in Latin America and Asia. The group combines specialized market
and geographic knowledge and experience with the traditional strengths and
skills of the Company. The group employs approximately 40 professionals who
are responsible for originating and executing transactions in their
respective areas of expertise, maintaining client relationships and building
the Company's presence in targeted markets where the Company believes it can
be a leading financial services provider or investor.

In Latin America, the group has four principal lines of business:
investment banking, which focuses on international capital raising and
financial advisory services; merchant banking, which utilizes the Company's
expertise in this area to target growth companies and other specific
investment opportunities; sales and trading, which is involved primarily in
principal trading of Latin American debt securities, with an emphasis on
Brady Bonds, local debt instruments and Latin American equity securities; and
Latin American derivatives, in particular the structuring, placement and
trading of products which are based on Latin American securities, currencies
and indices.

The group is also active in the Asia-Pacific region and offers investment
banking services through the Company's Hong Kong office which is dedicated to
building the Company's capital raising, financial advisory and merchant
banking presence in this region.

In addition, the Company has recently committed to invest approximately $7
million in Pleiade Investments, a South African merchant bank affiliated with
New Africa Investment Ltd. The Company believes that this new alliance will
enhance its ability to develop investment banking relationships in the
region.

CAPITAL MARKETS GROUP

The Capital Markets Group encompasses a broad range of activities
including trading, research, origination and distribution of equity and
fixed-income securities, private equity investments and venture capital
through its Taxable Fixed-Income division, Institutional Equities division,
Equity Derivatives division and Sprout. The Company's focus is primarily
client-driven, in contrast to that of many other securities firms which
emphasize proprietary trading. The Capital Markets Group has approximately
830 professionals.

TAXABLE FIXED-INCOME

The Taxable Fixed-Income division provides institutional clients with
research, trading and sales services for a broad range of taxable
fixed-income products, and distributes fixed-income securities in connection
with offerings underwritten by the Company. Its principal areas of activity
are in high-yield corporate, investment-grade corporate, U.S. government and
mortgage-backed securities. The division believes it differentiates itself
through the quality of its product origination, research expertise,
market-making and value-added approach to sales, complemented by strict risk
management skills. The Taxable Fixed-Income division has over 450
professionals located in seven of the Company's domestic offices and two of
its international offices, including 77 traders, 125 institutional
salespeople and 54 research professionals. Institutional Investor magazine
has ranked the Company among the top firms in each of its annual
"All-America" fixed-income research surveys since the inception of that
survey in 1992. The Taxable Fixed-Income division's research professionals
include credit analysis teams knowledgeable in high-yield corporate,
investment-grade corporate and mortgage-backed securities as well as
quantitative and economic research.

<PAGE>

High-Yield Securities. The High-Yield Securities department provides
institutional clients with research, trading and sales services and
distributes non-investment-grade securities in connection with offerings
underwritten by the Company. Since 1985, the Company has become a leader in
the underwriting and distribution of high-yield securities. Management
attributes the Company's success in this business to a sustained firm-wide
commitment to building a balanced origination and distribution capability.

The High-Yield Securities department has also become a leader in the
secondary trading of high-yield securities. Its traders make markets in over
500 issues, its specialist sales force covers all of the major high-yield
institutional participants and its research analysts provide credit analysis
and investment recommendations on approximately 250 corporations to portfolio
managers and analyst counterparts at the Company's client institutions. See
"--Banking Group--High-Yield Securities" for more information on the
underwriting performance of this group.

Investment-Grade Corporate Bonds. The Company has been a major participant
in the secondary trading and distribution of investment-grade corporate debt
instruments and has consistently ranked as one of the top providers of credit
research on those securities. While its emphasis has traditionally been on
trading and distributing secondary issues, the Corporate Bond department has
played an increasing role in the distribution of primary issues.

Government Bonds. The Company is a primary dealer in U.S. government
securities designated by the Federal Reserve Bank of New York. The Government
Bond department's activities include making secondary markets in, and
participating in the underwriting of, U.S. treasury bills, notes and bonds,
and securities of Federal agencies. The Company is a member of every major
agency underwriting group, including Fannie Mae, Federal Farm Credit, Federal
Home Loan Bank and Sallie Mae. The Company also engages in the "stripping" of
government and government-guaranteed bonds to create zero-coupon securities.
It also trades treasury futures and options and develops hedging programs for
its clients. The Government Bond department also maintains a money desk which
provides financing for its daily trading inventory positions, and to a lesser
extent those of other fixed-income departments through the use of repurchase
agreements and also acts as an intermediary between borrowers and lenders of
short-term funds utilizing repurchase and reverse repurchase agreements. The
department's economic research group provides analyses and forecasts of
macroeconomic and government policy trends, together with advice on
interest-rate fluctuations, for the benefit of institutional clients and the
Company's trading operations.

Mortgage Securities. The Company trades and makes markets in Government
National Mortgage Association securities, Federal Home Loan Mortgage
Corporation participation certificates, Fannie Mae obligations, non-agency
mortgage-backed securities, and various asset-backed securities. The Mortgage
Securities department also issues, trades and makes markets in CMOs, which
are debt obligations secured by the cash flow from a pool of mortgages or
mortgage securities, as well as in other mortgage-related derivative
products. In addition, the Company's wholly-owned subsidiary, DLJ Mortgage
Capital, Inc. ("DLJMC"), purchases fixed-rate and adjustable-rate
residential, multifamily and commercial whole loans to securitize into rated
or non-rated mortgage pass-through securities both as a principal and as an
agent. Finally, the Company has built a leading mortgage research group,
which plays an important role in analyzing complex mortgage products on
behalf of clients as well as supporting the Mortgage Securities department's
trading and structuring areas.

The Mortgage Securities department has emphasized the development of
proprietary securitized products utilizing agency and whole loan mortgages
and other securitizable assets. With the significant recent decline in CMO
issuance, the department has also emphasized its proprietary relationships
with originators of residential and commercial whole loan collateral in order
to provide a more stable flow of product.

INSTITUTIONAL EQUITIES

The Institutional Equities division provides institutional clients with
research, trading and sales services in U.S. listed and OTC equities, and
distributes equity securities in connection with offerings

<PAGE>

underwritten by the Banking Group. Since its founding in 1959 as a firm that
emphasized the provision of in-depth investment research to institutional
investors, the Company has established a leadership position in the field of
institutional equity brokerage through the continued quality of its research,
trading and sales services.

Domestic Institutional Sales and Listed Equity Trading. The Company's
equity trading operations and sales coverage of major U.S. institutions are
conducted by over 100 traders and institutional equity salespeople from eight
of the Company's domestic offices. Smaller U.S. institutions are covered by
account executives in the regional offices of the Investment Services Group,
which is part of the Company's Financial Services Group.

In listed equity securities, the Company acts as both an agent and
principal in executing trades in the secondary market. Much of the Company's
institutional business consists of large block trades of 10,000 or more
shares. In such transactions, the Company frequently provides its clients
with liquidity by taking a long or short position as a principal to
facilitate the client's purchase or sale of stock in the event that a
counterparty buyer or seller is not immediately available.

A negotiated commission is received on each listed equity transaction, and
the Company's total commission revenues are determined by the value to its
clients of the research services, trading expertise and liquidity it
provides. For the years 1990 through 1994, commission revenues increased at a
compound annual growth rate of 12.9%. As one of the industry's leading
distributors of securities to institutional clients, the Company's
institutional equity sales force is highly effective in distributing the
Company's equity underwritings.

International Sales. The Company's international equity sales organization
consists of approximately 50 salespeople operating from six of the Company's
offices worldwide. The international sales staff has made consistent progress
in marketing the Company's research and trading services and in distributing
the Company's equity underwritings throughout Europe and Asia.

Over-the-Counter Trading. The Company makes markets in approximately 350
securities traded on the National Association of Securities Dealers ("NASD")
Automated Quotation System ("Nasdaq") ("Nasdaq securities"). The Company
conducts these activities as a dealer, buying and selling the securities as a
principal. The Company's market-making is concentrated in stocks that are
followed by the equity research department or underwritten by the Company.
The Company's market-making strengths are in the communications, consumer,
entertainment, financial services, health care and technology sectors.

The Company has experienced rapid growth in Nasdaq securities in the past
five years. Approximately 30 professionals in New York coordinate activities
with four of the Company's other branch offices. Today, the Company is an
active OTC dealer in a market that has generally been growing faster than the
listed market. This position has been achieved by selective hiring and the
close integration with equity research, listed trading and the institutional,
retail and international sales groups. OTC activity has grown at a compound
annual growth rate of 23.5% from 1990 to 1994.

Equity Research. The Company's Equity Research department consists of
approximately 95 professional investment research analysts and associates who
are engaged in the analysis of economic trends and a broad range of
industries and companies. The department produces publications, studies and
forecasts on economic conditions, financial markets, portfolio strategy,
quantitative analysis, industry developments and individual companies. The
Equity Research department develops investment recommendations and publishes
market information on approximately 75 industries. Within those industries,
the Company follows nearly 1,000 companies, including approximately 95% of
the Standard & Poor's Corporation ("S&P") 500. Since its founding, one of the
Company's objectives has been to supply clients with successful investment
ideas based on in-depth research.

The Company's equity research analysts are also utilized as important
resources in obtaining investment banking business and assessing merchant
banking transactions, as well as developing and maintaining banking
relationships with clients through continued involvement after the execution
of specific transactions.

<PAGE>

The Company's ability to sustain a leading position in institutional
equities since its inception in 1959 is due in large part to its reputation
for excellence in research. The Company has maintained the strength of its
research franchise through its success in hiring, developing and retaining a
number of experienced industry analysts who are leaders in their fields of
specialization. Institutional Investor magazine has continually recognized
the Company for its demonstrated research excellence in its annual
"All-America" research survey, and the Company is one of only two firms that
have ranked in the top ten in each of the 22 years of the survey's existence.

EQUITY RESEARCH (1)

<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Company industry analysts ......... 32 32 35 36 41
"All-America" positions (2) ...... 37 43 45 44 36
Rank .............................. 3 4 4 3 2
"Completion Percentage" rank (3) . 1 1 1 2 2
</TABLE>
- ------------
(1) Source: Institutional Investor.

(2) The number of times during a particular year that the Company's
analysts appeared in Institutional Investor's "All-America" Research
Teams compiled for various industries. The number of the Company's
"All-America" positions is greater than the number of the Company's
analysts because a number of the Company's analysts cover more than one
industry.

(3) The Company's rank based on the ratio of the number of "All-America"
positions held by the Company's analysts to the total number of the
Company's analysts.

EQUITY DERIVATIVES

The Equity Derivatives division provides institutional clients with
research, trading and sales services in a broad range of equity options
products and in convertible securities.

Equity Options. The Company's activities in equity derivative products
have focused primarily on product innovations in the design and origination
of custom-tailored OTC options to meet the specific needs of customers rather
than on the assumption of trading risk or on an emphasis on execution volume.
The Company now offers options based on U.S. equities and equity indices; 11
foreign currencies; equities from 12 European and Asian countries;
commodities such as oil, gold and platinum; and over ten various fixed-income
instruments in both domestic and international markets. The Company has
expanded its sales effort for its proprietary options and futures products
into Europe in recent years.

Convertible Securities. The Company is a market-maker in convertible
securities, dealing primarily with an expanding base of institutional
clients. While its emphasis has been in trading and distributing secondary
issues, the Company has also been effective in the primary distribution of
convertible securities underwritten by the Company.

See also "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Derivative Financial Instruments."

SPROUT

Founded in 1969, Sprout is one of the oldest and largest groups in the
private equity investment and venture capital industry. Since the
capitalization of Sprout's first fund at $11.5 million, eight major
investment partnerships have been formed primarily for large institutional
investors. Present funds under management have original capital of
approximately $1 billion, and include, among others, Sprout VII, a
multi-stage venture fund; and Sprout Growth II, a late-stage equity fund.
Each of Sprout's funds has consistently ranked in the top quartile of venture
capital funds as measured by investment performance as reported by Venture
Economics.

Sprout's professionals comprise an experienced group of investment
managers with particular expertise in business services, computer graphics,
computer peripherals, health care, leveraged transac-

<PAGE>

tions, office automation, retailing and telecommunications. Sprout's
professionals are located in offices in Menlo Park and New York. Sprout also
works closely with other areas of the Company, including the Equity Research
department and the Investment Banking group.

FINANCIAL SERVICES GROUP

The Financial Services Group is comprised of Pershing, a leading provider
of correspondent brokerage services, the Investment Services Group, which
provides the full range of the Company's investment products and services to
high-net-worth individuals and medium to smaller sized institutions, and
Wood, Struthers & Winthrop, an investment counselor primarily for
high-net-worth individuals and institutions. The Financial Services Group's
approximately 1,000 professionals operate out of 11 of the Company's domestic
offices and one of the Company's international offices.

PERSHING DIVISION

Pershing is one of the leading providers of correspondent brokerage
services to the world's financial institutions, including DLJSC. Founded in
1939 and acquired by the Company in 1977, Pershing operates out of seven of
the Company's domestic offices and the Company's office in London. Pershing
provides execution and clearance services to over 500 correspondent U.S.
brokerage firms, ranging from small investment boutiques to large financial
institutions, which collectively maintain over one million client accounts
holding more than $110 billion of assets at September 30, 1995. During 1994,
Pershing participated in over 10% of the trading volume on the NYSE. Pershing
maintains broad execution coverage of all U.S. securities exchanges,
supported by extensive in-house trading desks for institutional block and
retail orders, as well as OTC securities, all fixed-income products, mutual
funds and money market funds. As a wholesaler of trading, execution, clearing
and information management activities, Pershing offers its service on a
fee-for-service basis.

Pershing's PC Financial Network (Service Mark), which began operations in
1989, provides securities transaction services to the subscribers of
PRODIGY(Registered Trademark), America On-Line (Service Mark), Reuters Money
Network, Apple's e-World(Registered Trademark) and On-Line Resources'
Screenphone(Registered Trademark), and has become the nation's largest
on-line discount broker. Between 1990 and 1994, the average daily number of
transactions executed through PC Financial Network (Service Mark) grew at a
compound annual growth rate of 128% and for the first nine months of 1995
increased an additional 42.4%.

Through their affiliation with Pershing, correspondent firms also have
access to a broad selection of investment products for their customers,
including investment related insurance products, retirement plans, a precious
metals storage program, central asset accounts, and managed wrap accounts. In
addition, Pershing makes available to its correspondents information and
recommendations provided through its own research analysts' action-oriented
opinions and advice.

Sophisticated communications and information management are a cornerstone
of Pershing's service. Pershing's computer-directed communications system
provides Pershing's correspondents with a link to major financial markets
around the world. Pershing's proprietary software systems allow on-line order
entry and reporting. Pershing also maintains extensive operational and
informational systems for its correspondents.

SELECTED PERFORMANCE MEASURES FOR PERSHING

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------------ 1995
1990 1991 1992 1993 1994
(IN BILLIONS, UNLESS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C>
Client assets held in custody (at period end) $ 25.0 $ 20.0 $ 45.0 $ 65.0 $ 75.0 $111.0
Active customer accounts (in thousands) ...... 557 556 666 831 1,057 1,255
Average Pershing trades per day (in thousands) 24.5 25.8 28.9 37.7 35.4 45.1
Equity shares processed ....................... 7.7 8.4 10.4 12.6 13.8 13.5
</TABLE>

<PAGE>

INVESTMENT SERVICES GROUP

The Investment Services Group offers a full range of investment and
portfolio services to high-net-worth individual investors and medium to
smaller size financial institutions, corporations and professional investors.
These services are provided by approximately 240 account executives located
in ten of the Company's domestic offices.

Due to the close working relationships between account executives and the
Company's research analysts and traders, the group's clients are provided
with the same comprehensive coverage that characterizes the Company's
traditional institutional businesses. The group also offers the "Portfolio
Advisory Service" ("PAS") to its clients, a wrap fee account based solely on
the Company's research, which currently has over $400 million in assets under
management.

INVESTMENT SERVICES GROUP STATISTICS

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------- 1995
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Number of account executives .............. 127 137 170 190 233 242
Assets in customer accounts (in billions) $ 2.5 $ 3.2 $ 4.5 $ 6.0 $ 8.0 $11.1
</TABLE>

WOOD, STRUTHERS & WINTHROP

Wood, Struthers & Winthrop, founded in 1871 and acquired by the Company in
1977, is a growing asset manager, managing over $2.8 billion in assets for
approximately 340 clients at September 30, 1995. Wood, Struthers & Winthrop
targets sophisticated individual investors, as well as charitable endowments,
foundations and trusts, corporations and Employee Retirement Income Security
Act of 1974 ("ERISA") plans. Wood, Struthers & Winthrop manages portfolios of
both stocks and bonds, balancing risk and return to meet a client's objective
for growth and capital preservation. The 30 person professional staff of
Wood, Struthers & Winthrop is experienced in portfolio management, investment
research, tax advice, financial planning and in providing personalized
service to all of its clients.

Wood, Struthers & Winthrop is the investment adviser to the Company's
Winthrop Focus Funds, a domestic family of diversified open-end mutual funds
which are distributed principally through the Company and Equitable. The
Focus Funds consist of three U.S. equity funds and two fixed-income funds and
aggregate approximately $425 million. In addition, Wood, Struthers & Winthrop
is the adviser to the Winthrop Opportunity Funds, a family of diversified
open-end international mutual funds currently being developed. These funds
will consist of a developing markets equity fund and an established markets
equity fund, and will be distributed through the Company and Equitable.

In May 1995, Wood, Struthers & Winthrop established a limited purpose
trust company subsidiary, Winthrop Trust Company, in order to provide
personal fiduciary services to its high-net-worth individual and family
clients. At September 30, 1995, Winthrop Trust Company had received fiduciary
appointments aggregating in excess of $175 million.

AUTRANET

Autranet is active in the distribution of investment research products
purchased from approximately 450 sources known as "independent originators."
Independent originators are research specialists, not primarily employed by
securities firms, and range in size and scope from large economic consulting
firms to individual freelance analysts. Autranet generates its revenues from
a client base of over 400 domestic and international institutions.

COMPETITION

<PAGE>

currently in the securities business, there has been increasing competition
from other sources, such as commercial banks and investment boutiques. As a
result of pending legislative and regulatory initiatives in the U.S. to
remove or relieve certain restrictions on commercial banks, it is anticipated
that competition in some markets currently dominated by investment banks may
increase in the near future. Such competition could also affect the Company's
ability to attract and retain highly skilled individuals to conduct its
various businesses. The principal competitive factors influencing the
Company's business are its professional staff, the firm's 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. See
"Net Capital Requirements."

EMPLOYEES

At September 30, 1995, the Company had an aggregate of 4,781 employees,
including 447 professionals in the Banking Group, 834 professionals in the
Capital Markets Group and 1,017 professionals in the Financial Services
Group. Most professional personnel receive salary as well as incentive
compensation in the form of bonus through long-term incentive and/or other
compensation plans. Most of the Company's securities sales force personnel
receive a percentage of their gross revenues or a percentage of a specified
revenue pool as compensation. Other employees receive a salary and, in
certain cases, overtime compensation and compensation in the form of profit
sharing. None of the Company's North American employees is represented by a
labor union.

PROPERTIES

The Company's principal executive offices are presently located at 140
Broadway, New York, New York and occupy approximately 519,000 square feet
under a lease which permits termination at March 31, 1996. The Company also
leases space at 120 Broadway, New York, New York, aggregating approximately
94,000 square feet. This lease expires in 2006.

During 1994, the Company entered into lease agreements which commence in
1996 and expire in 2016 for approximately 728,000 square feet at 277 Park
Avenue, New York, New York. The Company anticipates that it will relocate its
principal executive offices to 277 Park Avenue by March 1996. The Company
expects to finance substantially all expenditures related to the move,
consisting primarily of leasehold improvements, furnishings and
communications equipment, which are estimated to be approximately $200
million. See "Management's Discussion and Analysis and Results of
Operations--Recent Developments."

Pershing also leases approximately 393,000 square feet in Jersey City, New
Jersey, under leases which expire at various dates through 2009.

The Company leases an aggregate of approximately 340,000 square feet for
its domestic and international regional offices, the leases for which expire
at various dates through 2014. Other domestic offices are located in Atlanta,
Boston, Chicago, Dallas, Houston, Los Angeles, Menlo Park, Miami, Oak Brook,
Philadelphia, and San Francisco. Its foreign office locations are Geneva,
Hong Kong, London, Lugano, Paris and Tokyo.

The Company believes that its present facilities, including its new
facilities at 277 Park Avenue, are adequate for its current needs.

LEGAL PROCEEDINGS

Beginning on March 25, 1991, Dayton Monetary Associates and Charles
Davison, along with more than 200 other plaintiffs, filed several complaints
against DLJSC and a number of other financial institutions and several
individuals in the U.S. District Court for the Southern District of New York.
The plaintiffs allege that DLJSC and other defendants violated civil
provisions of RICO by inducing plaintiffs to invest over $40 million during
the years 1978 through 1982 in The Securities Groups, a number of tax shelter
limited partnerships. The plaintiffs seek recovery of the loss of their
entire investment and an

<PAGE>

approximately equivalent amount of tax-related damages. Judgments for damages
under RICO are subject to trebling. DLJSC believes that it has meritorious
defenses to the complaints and is contesting the suits vigorously. Discovery
is ongoing and no trial date has been set by the court. The Company does not
believe that the litigation will have a material adverse effect on its
results of operations or financial condition.

On June 12, 1995, a purported purchaser of certain securities issued by
Spectravision Inc. ("Spectravision"), filed a class action complaint against
DLJSC and certain other defendants for unspecified damages in the United
States District Court for the Northern District of Texas. The suit was
brought on behalf of the purchasers of $260,795,000 of securities issued by
Spectravision in November 1992, and alleges violations of federal securities
laws and the Texas Securities Act, and common law fraud and negligent
misrepresentation. The securities were issued by Spectravision pursuant to a
prepackaged bankruptcy reorganization plan. DLJSC served as financial advisor
to Spectravision in its reorganization and as Dealer Manager for
Spectravision's 1992 issuance of the securities. DLJSC is also being sued as
a seller of certain notes of Spectravision acquired and resold by DLJSC. The
complaint seeks to hold DLJSC liable for various alleged misstatements and
omissions contained in prospectuses and other materials issued between July
1992 and June 1994. DLJSC intends to defend itself vigorously against all of
the allegations contained in the complaint. On June 8, 1995, Spectravision
filed a Chapter 11 petition in the United States Bankruptcy Court for the
District of Delaware. On January 5, 1996, the district court in the
litigation involving DLJSC ordered a partial stay of discovery until
Spectravision has emerged from bankruptcy or six months from the date of the
stipulated stay (whichever comes first). Accordingly, discovery of DLJSC has
not yet occurred. Although there can be no assurance, the Company does not
believe that the ultimate outcome of this litigation will have a material
adverse effect on its financial condition. Due to the early stage of such
litigation, based upon information currently available to it, management
cannot make an estimate of loss or predict whether or not such litigation
will have a material adverse effect on the Company's results of operations in
any particular period.

Plaintiff's counsel in the class action against DLJSC described above has
also filed another securities class action based on similar factual
allegations. Such suit names as defendants Spectravision and its directors,
and was brought on behalf of a class of purchasers of $209,000,000 of stock
and $77,000,000 of notes issued by Spectravision in October 1993. DLJSC
served as the managing underwriter for both of these issuances. DLJSC has not
been named as a defendant in this suit, although it has been reported to
DLJSC that plaintiff's counsel is contemplating seeking to amend the
complaint to add DLJSC as a defendant in that action.

In October 1995, DLJSC was named as a defendant in a purported class
action filed in a Texas State Court on behalf of the holders of $550 million
principal amount of subordinated redeemable discount debentures of National
Gypsum Corporation ("NGC") cancelled in connection with a Chapter 11 plan of
reorganization for NGC consummated in July 1993. The State Court named
plaintiff also filed an adversary proceeding in the Bankruptcy Court for the
Northern District of Texas seeking a declaratory judgment that the confirmed
NGC plan of reorganization does not bar the class action claims. Subsequent
to the consummation of NGC's plan of reorganization, NGC's shares traded for
values substantially in excess of, and in 1995 NGC was acquired for a value
substantially in excess of, the values upon which NGC's plan of
reorganization was based. The two actions arise out of DLJSC's activities as
financial advisor to NGC in the course of NGC's Chapter 11 reorganization
proceedings. The class action complaint alleges that the plan of
reorganization submitted by NGC was based upon projections by NGC and DLJSC
which intentionally understated forecasts, and provided misleading and
incorrect information in order to hide NGC's true value and that defendants
breached their fiduciary duties by, among other things, providing false,
misleading or incomplete information to deliberately understate the value of
NGC. The class action complaint seeks compensatory and punitive damages
purportedly sustained by the class. The Texas State Court action has
subsequently been removed to the Bankruptcy Court, which removal is being
opposed by the plaintiff. DLJSC intends to defend itself vigorously against
all of the allegations contained in the complaint. Although there can be no
assurance, the Company does not believe that the ultimate outcome of this
litigation will have a material adverse effect on its financial

<PAGE>

condition. Due to the early stage of such litigation, based upon the
information currently available to it, management cannot make an estimate of
loss or predict whether or not such litigation will have a material adverse
effect on the Company's results of operations in any particular period.

In November and December 1995, DLJSC, along with various other parties,
was named as a defendant in a number of purported class actions filed in the
U.S. District Court for the Eastern District of Louisiana. The complaints
allege violations of the Federal securities laws arising out of a public
offering in 1994 of $435 million of first mortgage notes of Harrah's Jazz
Company and Harrah's Jazz Finance Corp. The complaints seek to hold DLJSC
liable for various alleged misstatements and omissions contained in the
prospectus dated November 9, 1994. DLJSC intends to defend itself vigorously
against all of the allegations contained in the complaints. Although there
can be no assurance, the Company does not believe that the ultimate outcome
of this litigation will have a material adverse effect on its financial
condition. Due to the early stage of this litigation, based upon the
information currently available to it, management cannot make an estimate of
loss or predict whether or not such litigation will have a material adverse
effect on the Company's results of operations in any particular period.

On January 26, 1996, a purported purchaser of certain notes and warrants
to purchase shares of common stock of Rickel Home Centers, Inc. ("Rickel")
filed a class action complaint against DLJSC and certain other defendants for
unspecified compensatory and punitive damages in the United States District
Court for the Southern District of New York. The suit was brought on behalf
of the purchasers of 126,457 units consisting of $126,457,000 aggregate
principal amount 13 1/2% senior notes due 2001 and 126,457 warrants to
purchase shares of common stock of Rickel (the "Units") issued by Rickel in
October 1994. The complaint alleges violations of federal securities laws and
common law fraud against DLJSC, as the underwriter of the Units and as an
owner of 7.3% of the common stock of Rickel, Eos Partners, L.P., and General
Electric Capital Corporation, each as owners of 44.2% of the common stock of
Rickel, and members of the Board of Directors of Rickel, including a DLJSC
Managing Director. The complaint seeks to hold DLJSC liable for alleged
misstatements and omissions contained in the prospectus and registration
statement filed in connection with the offering of the Units, alleging that
the defendants knew of financial losses and a decline in value of Rickel in
the months prior to the offering and did not disclose such information. The
complaint also alleges that Rickel failed to pay its semi-annual interest
payment due on the Units on December 15, 1995 and that Rickel filed a
voluntary petition for reorganization pursuant to Chapter 11 of the United
States Bankruptcy Code on January 10, 1996. DLJSC intends to defend itself
vigorously against all of the allegations contained in the complaint.
Although there can be no assurance, the Company does not believe that the
outcome of this litigation will have a material adverse effect on its
financial condition. Due to the early stage of this litigation, based on the
information currently available to it, management cannot make an estimate of
loss or predict whether or not such litigation will have a material adverse
effect on the Company's results of operations in any particular period.

In addition to the matters described above, the Company has been named as
a defendant in various civil actions and arbitrations arising out of its
activities as a broker-dealer in securities, as an underwriter and as an
employer and arising out of alleged employee misconduct. The Company is also
involved from time to time, in proceedings with, and investigations by,
governmental agencies and SROs. See "Regulation." In particular, the Company
has been a defendant in various lawsuits filed in connection with certain
mortgage related securities previously structured and/or underwritten by the
Company and two of its subsidiaries are the subject of an investigation by
the Commission with respect to these transactions. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources." The Company does not believe
that any such matters, claims or investigations will have a material adverse
effect on its results of operations or its financial condition.

DLJSC has consented to the entry of certain administrative orders,
pursuant to which it has been ordered to permanently cease and desist from
committing or causing any current or future violation of certain Federal
securities laws. In particular, on September 22, 1992, the Commission
initiated an administrative proceeding pursuant to Section 8A of the
Securities Act and Sections 15(b), 19(h) and 21C of the Exchange Act, against
DLJSC, as respondent, relating to the 1986 initial public offering of common

<PAGE>

stock of Matthews & Wright Group Inc. ("M&W"), in which DLJSC acted as a
co-managing underwriter. Simultaneously, without admitting or denying the
Commission's findings, and prior to a hearing pursuant to the Commission's
Rules of Practice, DLJSC settled the proceeding by consenting to the entry of
the administrative order finding that in light of all the information known
and available to DLJSC, DLJSC failed to adequately and reasonably investigate
certain aspects of M&W's business activities and therefore did not have a
reasonable basis to believe that certain representations in the registration
statement regarding bond offerings underwritten by M&W and closed by M&W in
December 1985 and August 1986 were accurate and complete. The administrative
order censured DLJSC and ordered that DLJSC permanently cease and desist from
committing or causing any violation, and from committing or causing any
future violation, of Section 17(a) and Section 10(b) of the Exchange Act and
Rule 10b-5 thereunder. As part of the settlement, DLJSC applied for and
received a determination that the entry of the administrative order would not
disqualify DLJSC from the exemptions under Commission Regulations A, B, D and
E promulgated under the Securities Act.

<PAGE>

REGULATION

The Company's business and the securities industry in general are subject
to extensive regulation in the U.S. at both the Federal and state level, as
well as by industry SROs. A number of Federal regulatory agencies are charged
with safeguarding the integrity of the securities and other financial markets
and with protecting the interests of customers participating in those
markets. The Commission is the Federal agency that is primarily responsible
for the regulation of broker-dealers and investment advisers doing business
in the U.S., and the CFTC is primarily responsible for the regulation of
futures commission merchants. In addition, the Department of the Treasury and
the Municipal Securities Rulemaking Board have the authority to promulgate
regulations relating to U.S. government and agency securities and to
municipal securities, respectively, and the Board of Governors of the Federal
Reserve System promulgates regulations applicable to securities credit
transactions involving broker-dealers and certain other U.S. institutions.
Broker-dealers and investment advisers are subject to registration and
regulation by state securities regulators in those states in which they
conduct business. Industry SROs, each of which has authority over the firms
that are its members, include the NASD, the NYSE and other securities
exchanges, the National Futures Association (the "NFA") and the commodities
exchanges.

Each of DLJSC, Pershing Trading and Autranet (collectively, the "U.S.
Broker-Dealers") is registered as a broker-dealer with the Commission and is
a member of, and subject to regulation by, a number of securities industry
SROs, including the NYSE and the NASD. Both DLJSC and Pershing Trading are,
in addition to being NYSE members, members of most other major U.S.
securities exchanges. DLJSC is also registered as a broker-dealer in all 50
states and the District of Columbia, as a futures commission merchant with
the CFTC, as an investment adviser with the Commission and in certain states,
and is also designated a primary dealer in U.S. government securities by the
Federal Reserve Bank of New York. In connection with its business as a
futures commission merchant, DLJSC is also a member of, and subject to
regulation by, the NFA and the CBOT. Both Pershing Trading and Autranet are
registered as broker-dealers in a number of states. Wood, Struthers &
Winthrop is registered with the Commission and in certain states as an
investment adviser. The Company also has certain other direct and indirect
subsidiaries that are registered with the Commission and certain states or
with other regulatory authorities as broker-dealers or investment advisers.
Winthrop Trust Company is regulated by the New York State Banking Department.

As a result of registration and SRO memberships, the U.S. Broker-Dealers
are subject to overlapping schemes of regulation which cover all aspects of
their securities business. Such regulations cover matters including capital
requirements, the use and safekeeping of customers' funds and securities,
recordkeeping and reporting requirements, supervisory and organizational
procedures intended to assure compliance with securities laws and rules of
the SROs and to prevent the improper trading on "material nonpublic"
information, employee-related matters, limitations on extensions of credit in
securities transactions, and clearance and settlement procedures. A
particular focus of the applicable regulations concerns the relationship
between broker-dealers and their customers. As a result, the U.S.
Broker-Dealers in some instances may be required to make "suitability"
determinations as to certain customer transactions, are limited in the
amounts that they may charge customers, cannot trade ahead of their customers
and must make certain required disclosures to their customers.

As investment advisers registered with the Commission, Wood, Struthers &
Winthrop and DLJSC are subject to the requirements of the Investment Advisers
Act of 1940 and the Commission's regulations thereunder. Such requirements
relate to, among other things, limitations on the ability of investment
advisers to charge performance-based or non-refundable fees to clients,
recordkeeping and reporting requirements, disclosure requirements,
limitations on principal transactions between an adviser or its affiliates
and advisory clients, as well as general anti-fraud prohibitions. The state
securities law requirements applicable to registered investment advisers are
in certain cases more comprehensive than those imposed under the Federal
securities laws.

DLJSC, as a registered futures commission merchant, is subject to the
capital and other requirements of the CFTC under the Commodity Exchange Act.
These requirements include the provision of certain disclosure documents,
prohibitions against trading ahead of customers and other fraudulent trading
practices, provisions as to the handling of customer funds and reporting and
recordkeeping requirements.

<PAGE>

The U.S. Broker-Dealers are also subject to "Risk Assessment Rules"
imposed by the Commission and, in the case of DLJSC, by the CFTC. These rules
require, among other things, that certain broker-dealers and futures
commission merchants maintain and preserve certain information, describe risk
management policies and procedures and report on the financial condition of
certain affiliates whose financial and securities activities are reasonably
likely to have a material impact on the financial and operational condition
of the broker-dealers or futures commission merchants. Affiliates of the U.S.
Broker-Dealers and the activities conducted by such affiliates may not be
subject to regulation by the Commission or the CFTC. However, the possibility
exists that, on the basis of the information that they obtain from the Risk
Assessment Rules, the Commission or CFTC could seek legislative or regulatory
changes in order to expand their authority over the Company's unregulated
subsidiaries either directly or through their existing authority over the
Company's regulated subsidiaries.

In addition to being regulated in the U.S., the Company's business is
subject to regulation by various foreign governments and regulatory bodies.
The Company has broker-dealer subsidiaries that are subject to regulation by
The Securities and Futures Authority of the United Kingdom pursuant to the
United Kingdom Financial Services Act of 1986, which governs all aspects of a
United Kingdom investment business, including regulatory capital, sales and
trading practices, use and safekeeping of customer funds and securities,
recordkeeping, margin practices and procedures, registration standards for
individuals, periodic reporting and settlement procedures. In addition, the
Company has subsidiaries that are broker-dealers subject to regulation,
including capital requirements imposed by the Securities and Futures
Commission of Hong Kong and the Ontario Securities Commission.

In addition, several states, including New York, which is Equitable Life's
state of domicile, regulate transactions between an insurer and its
affiliates under insurance holding company acts. Under such laws and an
undertaking submitted by Equitable Life to the New York State Insurance
Department, certain transactions between the Company, on the one hand, and
Equitable Life and its subsidiaries on the other, may be subject to prior
notice or approval of the New York State Insurance Department depending on
the size of such transactions.

<PAGE>

NET CAPITAL REQUIREMENTS

As broker-dealers registered with the Commission and member firms of the
NYSE, each of DLJSC, Pershing Trading and Autranet is subject to the capital
requirements of the Commission and of the NYSE. These capital requirements
specify minimum levels of capital, computed in accordance with regulatory
requirements ("net capital"), that the U.S. Broker-Dealers are required to
maintain and also limit the amount of leverage that the U.S. Broker-Dealers
are able to obtain in their businesses. As a futures commission merchant,
DLJSC is also subject to the capital requirements of the CFTC and the CBOT.

Each of the U.S. Broker-Dealers has elected to compute its net capital
requirement under the "alternative method" permitted by the Commission. Under
this alternative method, each U.S. Broker-Dealer is required by the
Commission to maintain regulatory net capital, computed in accordance with
the Commission's regulations, equal to the greater of $250,000 and 2% of the
amount of its securities "customer-related receivables," calculated in
accordance with Commission regulations. The NYSE imposes certain more
stringent capital requirements on its member firms than those imposed by the
Commission. Further, under CFTC and CBOT capital regulations, DLJSC must
maintain capital in an amount equal to at least 4% of the funds required to
be segregated under the Commodity Exchange Act.

The customer-related receivables referred to in the preceding paragraph
(also referred to as "aggregate debit items") are the money owed to a
broker-dealer by its customers and certain other customer-related assets.
"Net capital" is essentially defined as net worth (assets minus liabilities,
as determined under generally accepted accounting principles), plus
qualifying subordinated borrowings, less the value of all of a
broker-dealer's assets that are not readily convertible into cash (such as
goodwill, furniture, prepaid expenses, exchange seats and unsecured
receivables), and further reduced by certain percentages (commonly called
"haircuts") of the market value of a broker-dealer's positions in securities
and other financial instruments.

A failure by a U.S. Broker-Dealer to maintain its minimum required capital
would require it to cease executing customer transactions until it came back
into capital compliance, and could cause it to lose its membership on an
exchange, its right to registration with the Commission or CFTC, or require
its liquidation. Further, the decline in a U.S. Broker-Dealer's net capital
below certain "early warning levels," even though above minimum capital
requirements, could cause material adverse consequences to the firm. For
example, the Commission's capital regulations prohibit payment of dividends,
redemption of stock and the prepayment of subordinated indebtedness if a
broker-dealer's net capital thereafter would be less than 5% of aggregate
debit items (or 7% of the funds required to be segregated pursuant to the
Commodity Exchange Act) and prohibit principal payments in respect of
subordinated indebtedness if a broker-dealer's net capital thereafter would
be less than 5% of aggregate debit items (or 6% of the funds required to be
segregated pursuant to the Commodity Exchange Act). 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 Commodity Exchange
Act) for 15 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 15 consecutive days.

The Commission's capital rules also (i) require that the U.S.
Broker-Dealers notify the Commission and the NYSE and, in the case of DLJSC,
the CFTC, 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
U.S. Broker-Dealer from withdrawing or otherwise distributing equity capital
or making related party loans if after such distribution or loan, the U.S.
Broker-Dealer has net capital of less than $300,000 or 5% of aggregate debit
items (or 7% of the funds required to be segregated pursuant to the Commodity
Exchange Act) and in

<PAGE>

certain other circumstances, and (iii) provide that the Commission may, by
order, prohibit withdrawals of capital from the U.S. Broker-Dealers 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 the Commission
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.

Compliance with regulatory capital requirements could limit those
operations of the U.S. Broker-Dealers that require the intensive use of
capital, such as DLJSC's underwriting and trading activities, and the
financing of customer account balances, and also could restrict the Company's
ability to withdraw capital from the U.S. Broker-Dealers, which in turn could
limit the Company's ability to pay dividends, pay interest, repay debt,
including the Senior Notes, and redeem or purchase shares of its outstanding
capital stock.

The Company believes that at all times the U.S. Broker-Dealers have been
in compliance in all material respects with the applicable minimum capital
rules of the Commission, the NYSE, the CFTC and the CBOT. As of September 30,
1995, DLJSC was required to maintain minimum "net capital," in accordance
with Commission and CFTC rules, of approximately $54.4 million and had total
net capital of approximately $620.4 million (including $302.9 million of
subordinated debt borrowed under various agreements), or approximately $566.0
million in excess of 2% of aggregate debit items and approximately $496.2
million in excess of 5% of aggregate debit items.

<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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 S. Chalsty ...... 62 President, Chief Executive Officer and Director
Joe L. Roby .......... 56 Chief Operating Officer and Director
Richard H. Jenrette . 66 Chairman and Director
Carl B. Menges ....... 65 Vice Chairman and Director
Anthony F. Daddino .. 55 Executive Vice President, Chief Financial
Officer and Director
Hamilton E. James ... 44 Chairman, Banking Group
Richard S. Pechter .. 50 Chairman, Financial Services Group and Director
Theodore P. Shen .... 50 Chairman, Capital Markets Group and Director
Michael M. Bendik ... 47 Senior Vice President and Chief Accounting Officer
Michael A. Boyd ...... 58 Senior Vice President and General Counsel
Gerald B. Rigg ....... 59 Senior Vice President and Director of Human Resources
Henri de Castries ... 41 Director
Jerry M. de St. Paer 53 Director
Kevin C. Dolan ....... 42 Director
Louis Harris ......... 74 Director
Henri G. Hottinguer . 60 Director
Francis Jungers ...... 69 Director
W. Edwin Jarmain .... 57 Director
Joseph J. Melone .... 64 Director
W. J. Sanders ........ 59 Director
John C. West ......... 73 Director
</TABLE>

JOHN S. CHALSTY has been President and Chief Executive Officer of the
Company since 1986 after having served as Chairman of the Capital Markets
Group for more than two years. Mr. Chalsty joined the firm in 1969 as an oil
analyst. He was named Director of Research and elected to the Board of
Directors in 1971, was appointed head of investment banking in 1979, and
named Chairman of the Capital Markets Group in 1984. Mr. Chalsty is also a
director of IBP, Inc. and Anchor Glass Container Corporation. From 1990 to
1994 he served as Vice Chairman of the NYSE. Mr. Chalsty is a member of the
Board of Trustees of Columbia University.

JOE L. ROBY was appointed Chief Operating Officer of the Company in
November 1995. Previously, Mr. Roby had served as Chairman of the Company's
Banking Group since 1989. Mr. Roby joined the Company as a Vice President in
the Investment Banking group in 1972 and became head of the group in 1984.
Mr. Roby was elected to the Board of Directors in 1989. He is also a director
of Advanced Micro Devices, Inc. and Sybron International Corporation.

RICHARD H. JENRETTE, a founder of the Company, served as its Chairman and
Chief Executive Officer until 1985, when the Company was acquired by
Equitable. Mr. Jenrette continues to serve as the Company's Chairman of the
Board and has been Chairman of the Board of EQ since July 1991 and Chief
Executive Officer of EQ since May 1992. Mr. Jenrette was Chairman of
Equitable Life from June 1987 to February 1994 and Chief Executive Officer
from May 1990 to September 1992 and has been a director since February 1985.
Mr. Jenrette is also a director of the following other principal subsidiaries
of Equitable Life: Alliance Capital Management Corporation and Equitable Real
Estate Investment Management, Inc. ("Equitable Real Estate"). Mr. Jenrette is
also a director of AXA and The McGraw-Hill Companies.

<PAGE>

CARL B. MENGES was elected Vice Chairman of the Board of the Company in
1987. Mr. Menges joined the Company in 1965 as an institutional salesman and
has held various executive positions at the Company since then, including
Director of the International division, Managing Director of the Equities
division, Chairman of the Financial Services Group and Chairman of Wood,
Struthers & Winthrop. Mr. Menges was elected to the Board of Directors in
1979. He is also a director of Gtech Holdings Corporation.

ANTHONY F. DADDINO was appointed Executive Vice President and Chief
Financial Officer of the Company in 1983 and also serves as Chairman of the
Finance Committee. Mr. Daddino was elected to the Board of Directors in 1985.
He joined the Company in 1976 from the accounting firm of Peat, Marwick,
Mitchell & Co. where he was a Partner. He served as the Company's Chief
Accountant and as a Group Managing Director prior to 1983. He is also a
director of International Commodities Export Corp.

HAMILTON E. JAMES was appointed Chairman of the Company's Banking Group in
November 1995. Mr. James joined the Company as an Associate in the Investment
Banking group in 1975 and since then has held various executive positions in
the group until his appointment as Chairman of the Banking Group. Mr. James
is a director of Price/Costco, Inc. and County Seat Holdings, Inc.

RICHARD S. PECHTER was appointed Chairman of the Company's Financial
Services Group in 1987. Mr. Pechter joined the Company in 1969 as a research
analyst and has held various executive positions at the Company since then,
including Chief Financial Officer, Executive Vice President and Chief
Administrative Officer, and Chief Executive Officer of the Company's Pershing
Division. Mr. Pechter was elected to the Board of Directors in 1979. He is
also a director of Interstate/Johnson Lane, Inc., the Depository Trust
Company and the Securities Industry Association.

THEODORE P. SHEN was appointed Chairman of the Company's Capital Markets
Group in 1986. Mr. Shen joined the Company in 1968 as a research analyst and
has held various executive positions at the Company since then, including
Senior Vice President of Corporate Planning, Director of Research and
Managing Director of the Equities division. Mr. Shen was elected to the Board
of Directors in 1984.

MICHAEL M. BENDIK was appointed Senior Vice President and Chief Accounting
Officer in 1983. Mr. Bendik joined the Company as an accounting supervisor in
1974 and since then has held various executive positions at the Company until
his appointment as Senior Vice President and Chief Accounting Officer.

MICHAEL A. BOYD was appointed Senior Vice President and General Counsel in
1975. Mr. Boyd joined the Company in 1971 as an Associate General Counsel of
the Company and General Counsel of its then subsidiary Alliance Capital
Management Corporation.

GERALD B. RIGG was appointed Senior Vice President and Director of Human
Resources in 1986. Mr. Rigg joined the Company in 1971 as a salesman in the
Company's Institutional Equities division. Since then, Mr. Rigg has held
various executive positions at the Company until his election as Senior Vice
President and Director of Human Resources.

HENRI DE CASTRIES was elected to the Board of Directors in 1993. Mr. de
Castries has been Executive Vice President--Financial Services and Life
Insurance Activities of AXA since 1993. Prior thereto, he was General
Secretary from 1991 to 1993 and Central Director of Finances from 1989 to
1991 of AXA. He is also a director or officer of various subsidiaries and
affiliates of the AXA Group and a director of France Telecom (communications
services). He has been a director of EQ since May 1994 and of Equitable Life
since September 1993. He is also a director of Alliance Capital Management
Corporation and Equitable Real Estate.

JERRY M. DE ST. PAER was elected to the Board of Directors in 1993. He has
served as Executive Vice President and Chief Financial Officer of EQ since
May 1992 and as Executive Vice President of Equitable Life since December
1990 and its Chief Financial Officer since April 1992. Mr. de St. Paer also
served Equitable Life as Senior Vice President and Treasurer from June to
December 1990, Treasurer from February 1993 to September 1993 and Vice
President from March 1988 to June 1990. Mr. de St. Paer was also Senior Vice
President from January 1987 to January 1991 and Treasurer from June 1988 to
January 1991 of Equitable Investment Corporation. He is also a director of
Alliance Capital Management

<PAGE>

Corporation, Equitable Real Estate, Equitable Variable Life Insurance Company
("EVLICO"), Nicos Seimei Hoken (formerly Equitable Seimei Hoken) and
Economic-Sciences Corporation, and a member of the Advisory Board of
Directors of Peter Wodtke (U.K.) and (U.S.).

KEVIN C. DOLAN was elected to the Board of Directors in 1995. Mr. Dolan
has been an Executive Vice President of AXA Asset Management since 1993.
Between 1988 and 1993, Mr. Dolan was associated in various executive
capacities with the New York affiliates of Banque Francaise du Commerce
Exterieur, a French banking organization. He is a director of various
subsidiaries and affiliates of the AXA Group and a director of Alliance
Capital Management Corporation.

LOUIS HARRIS was elected to the Board of Directors in 1995. Mr. Harris has
been an independent public opinion consultant since 1992. Prior thereto, Mr.
Harris was President of Louis Harris and Associates, Inc., an opinion
research company he founded in 1956. Mr. Harris had previously served on the
Board of Directors of the Company from 1971 to 1985 and had been an Advisory
Director of the Company from 1985 until his re-election to the Board in 1995.

HENRI G. HOTTINGUER was elected to the Board of Directors in 1992. He has
been a partner of Hottinguer & Company since 1968. Mr. Hottinguer is also a
President/General Director of Banque Hottinguer and Soci|fet|fe Financiere pour
le Financement de Bureaux et d'Usines-Sofibus, a Vice President, General
Director and Administrator of Financi|f4re Hottinguer, an Administrator of
Investissement Hottinguer S.A., AXA, AXA Assurances IARD, UNI Europe
Assurances, ALPHA Assurances Vie, AXA Assurances Vie, UNI Europe Vie, Finaxa
and Lor Finance, and the Controller of Didot Bottin, Caisse d'Escompte du
Midi and Financi|f4re Provence de Participations-FPP. He serves as a General
Director of Intercom and Sofides. He is a Permanent Representative of La
Banque Hottinguer aupr|f4s de I.F.D., La Banque Hottinguer aupres de AXIVA, AXA
aupres d'AXA Mill|fesimes and Cie Financi|f4re SGTE au sein de la Soci|fet|fe
SCHNEIDER S.A., is the Associate Gerant of Hottinguer & Cie Zurich, and is a
Vice President of Gaspee. In addition, he is the Chairman of the Board of
Hottinguer Capital Corp., a director of the Swiss Helvetia Fund, Inc.,
Hottinguer U.S., Inc., the President/Counsel of AXA Belgium, the
Administrator of Hestia Fund, ECU Invest, and Hottinguer Gestion Luxembourg
and is a Member of Council of Surveillance d'EMBA N.V. Mr. Hottinguer is also
a director of Alliance Capital Management Corporation.

FRANCIS JUNGERS was elected to the Board of Directors in 1995. Mr. Jungers
is an independent consultant on energy and the Middle East and has been so
since 1978 when he retired as Chairman of the Board and Chief Executive
Officer of Arabian American Oil Company, an oil producing company with which
Mr. Jungers was associated for over thirty years. Mr. Jungers had previously
served on the Board of Directors of the Company from 1978 to 1985 and had
been an Advisory Director of the Company from 1985 until his re-election to
the Board in 1995. Mr. Jungers is also a director of The AES Corporation,
Dual Drilling Company, Georgia-Pacific Corporation, Pacific Rehabilitation &
Sports Medicine, Inc., Star Technologies, Inc., Thermo Ecotek Corporation,
Thermo Electron Corporation and Thermo Instrument Systems, Inc.

W. EDWIN JARMAIN was elected to the Board of Directors in 1992. Mr.
Jarmain is President of Jarmain Group Inc. (a private investment holding
company), a position he has held since 1979, and is also an officer or
director of several affiliated companies. Mr. Jarmain is non-executive
Chairman and director of FCA International Ltd., a holding company whose
subsidiaries are engaged in the financial collection business, where he also
served as President and Chief Executive Officer, as well as director, from
1992 through 1993. Mr. Jarmain has also been a director of EQ and Equitable
Life since July 1992. He is also a director of AXA Insurance (Canada), Axa
Pacific Insurance Company and Anglo-Canada General Insurance Co.

JOSEPH J. MELONE was elected to the Board of Directors in 1991. Mr. Melone
has been President and Chief Operating Officer of EQ since May 1992. He has
been Chairman of Equitable Life since February 1994, its Chief Executive
Officer since September 1992 and a director since November 1990. Mr. Melone
was President of The Prudential Insurance Company of America from December
1984 until October 1990. He is currently a director of EVLICO, where he is
also Chairman and Chief Executive Officer, and Alliance Capital Management
Corporation. He is also a director of AXA Equity & Law, an AXA affiliate,
AT&T Capital Corporation and Foster Wheeler Corporation.

<PAGE>

W. J. SANDERS was elected to the Board of Directors in 1995. Mr. Sanders
is Chairman of the Board and Chief Executive Officer of Advanced Micro
Devices, Inc., a semiconductor manufacturer he founded in 1969. Mr. Sanders
had previously served on the Board of Directors of the Company from 1979 to
1985 and had been an Advisory Director of the Company from 1985 until his
re-election to the Board in 1995.

JOHN C. WEST was elected to the Board of Directors in 1995. Mr. West is an
attorney who has served as the United States Ambassador to the Kingdom of
Saudi Arabia and as the Governor of the State of South Carolina. Mr. West had
previously served on the Board of Directors of the Company from 1981 to 1985
and had been an Advisory Director of the Company from 1985 until his
re-election to the Board in 1995. Mr. West is a director of Siebels Bruce
Group, Inc.

There are no family relationships among the directors and executive
officers.

The audit committee of the Board of Directors of the Company is comprised
of Messrs. Jungers and Jarmain.

DIRECTOR COMPENSATION

The Company's policy is not to pay compensation to Directors who are also
employees of the Company, Equitable or any affiliates of Equitable. Of the
other Directors, Mr. Hottinguer received $14,000 and Mr. Jarmain received
$13,000 for service as Directors during 1994. On November 16, 1995, the
Company established a new compensation policy for independent directors. The
new policy is to pay such independent directors an annual retainer of $25,000
plus $1,000 for each Board Meeting attended and $500 for each meeting of a
Committee of the Board attended.

For 1994, Equitable paid Mr. Jenrette, its Chairman and Chief Executive
Officer, $7,000,000 in short-term incentive compensation pursuant to its
Short-Term Incentive Compensation Plan for Senior Officers for services
rendered to EQ and its subsidiaries, including the Company. The Company
reimbursed Equitable in the amount of $3,000,000 for management services
rendered to the Company, the substantial portion of which was rendered by Mr.
Jenrette.

Prior to the 1985 acquisition of the Company by Equitable, Mr. Jenrette,
who was then the Chairman and Chief Executive Officer of the Company,
participated in various employee benefit plans and arrangements. Mr. Jenrette
is not currently accruing benefits under any of the Company's plans. However,
Mr. Jenrette has outstanding rights under such plans and arrangements.

In 1982, the Company entered into an agreement with Mr. Jenrette under
which Mr. Jenrette became entitled to receive certain benefits from the
Company in exchange for his agreement to provide post-retirement consulting
services and not to compete with the Company. Under the agreement, Mr.
Jenrette has received benefits at a rate of $200,000 per year since attaining
age 65. After Mr. Jenrette's death, his beneficiary may elect to receive
either (i) monthly payments equivalent to $200,000 per year until the time
Mr. Jenrette would have attained his 75th birthday or (ii) a lump sum which
is the equivalent of the discounted present value of such monthly payments.
These benefits are in addition to the retirement benefits payable to Mr.
Jenrette under the plans maintained by Equitable Life. The Company has funded
its obligation to Mr. Jenrette under the agreement through the purchase of an
annuity. Amounts paid to Mr. Jenrette under this agreement in 1994 and the
first nine months of 1995 were $133,333 and $150,000, respectively.

EXECUTIVE COMPENSATION

The information set forth below describes the components of the total
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers of the Company, based on 1994 salary and
annual bonuses (the "Named Executive Officers"). The principal components of
such individuals' current cash compensation are the annual base salary and
annual bonus included in the Summary Compensation Table. Also described below
is the future compensation such individuals can receive under the Company's
retirement plans.

<PAGE>

The following table sets forth the compensation earned by the Named
Executive Officers for the year ended December 31, 1994.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION SALARY (1) BONUS (1) COMPENSATION COMPENSATION
<S> <C> <C> <C> <C>
John S. Chalsty ............. $465,385 $7,500,000 $133,470 (2) $157,956 (3)
President & Chief Executive
Officer
Carl B. Menges .............. 190,000 2,000,000 33,386 (4) 0
Vice Chairman
Anthony F. Daddino .......... 175,000 3,600,000 27,971 (5) 0
Executive Vice President &
Chief Financial Officer
Michael A. Boyd ............. 150,000 600,000 15,963 (6) 0
Senior Vice President &
General Counsel
Michael M. Bendik ........... 140,000 900,000 10,734 (7) 0
Senior Vice President &
Chief Accounting Officer
<FN>
- ------------
(1) Includes amounts contributed by each of the Named Executive Officers
under various deferred compensation plans maintained by the Company.

(2) The amount shown in the table for Mr. Chalsty includes the value of an
automobile leased on his behalf by the Company (as well as an allowance
for related operating expenses), the value of financial planning
services provided on his behalf by the Company, and a $90,000
contribution by the Company toward the cost of an apartment for Mr.
Chalsty. The value of the automobile leased on Mr. Chalsty's behalf has
not been reduced by the proportion of the automobile's use for business
rather than personal reasons.

(3) The amount shown in the table reflects premiums paid by the Company on
Mr. Chalsty's behalf under a split-dollar life insurance policy. The
amount represents the present value of the interest projected, on an
actuarial basis, to accrue for Mr. Chalsty's benefit on the portion of
the 1994 premium paid by the Company.

(4) Of the amount shown in the table for Mr. Menges, $20,594 reflects the
value of an automobile leased on his behalf by the Company (as well as
an allowance for related operating expenses). This amount has not been
reduced by the proportion of the automobile's use for business rather
than personal reasons. In addition, $12,792 of the amount shown
reflects the value of financial planning services provided on Mr.
Menges' behalf by the Company.

(5) Of the amount shown in the table for Mr. Daddino, $18,832 reflects the
value of an automobile leased on his behalf by the Company (as well as
an allowance for related operating expenses). This amount has not been
reduced by the proportion of the automobile's use for business rather
than personal reasons. In addition, $9,139 of the amount shown reflects
the value of financial planning services provided on Mr. Daddino's
behalf by the Company.

(6) Of the amount shown in the table for Mr. Boyd, $12,963 reflects the
value of an automobile leased on his behalf by the Company (as well as
an allowance for related operating expenses). This amount has not been
reduced by the proportion of the automobile's use for business rather
than personal reasons.

(7) The entire amount shown in the table for Mr. Bendik reflects the value
of an automobile leased on his behalf by the Company (as well as an
allowance for related operating expenses). This amount has not been
reduced by the proportion of the automobile's use for business rather
than personal reasons.
</TABLE>
56

<PAGE>

DEFERRED COMPENSATION PLANS

Certain employees, including the Named Executive Officers, deferred a
portion of their 1983 or 1984 compensation in return for which the Company
agreed to pay each of them a specified annual benefit for 15 years beginning
at age 65. Benefits are based upon the participant's age and the amount
deferred and are calculated to yield an approximate 12.5% annual compound
return. In the event of the participant's disability or death, an equal or
lesser amount is to be paid to the participant or his beneficiary. After age
55, participants the sum of whose age and years of service is equal to or
greater than 80 may elect to have their benefits begin before age 65, in an
actuarially reduced amount. The Company has funded its obligation through the
purchase of life insurance policies. The table below shows as to each Named
Executive Officer the estimated annual benefit payable at age 65. Each of
these individuals is fully vested in the applicable benefit.

<TABLE>
<CAPTION>
ESTIMATED ANNUAL
NAME BENEFITS
<S> <C>
John S. Chalsty ..... $ 47,053
Carl B. Menges ....... 33,047
Anthony F. Daddino ... 107,313
Michael A. Boyd ..... 75,369
Michael M. Bendik .... 91,781
</TABLE>

1994 LTI PLAN

The following table describes performance units that were granted to the
Named Executive Officers in 1994 pursuant to the Company's 1994-1996 Long
Term Incentive Plan (the "1994 LTI Plan"). The following summary of the 1994
LTI Plan is qualified in its entirety by reference to the full text of the
1994 LTI Plan, a copy of which has been filed with the Commission.

Participants in the 1994 LTI Plan were granted a designated number of
performance units, the value of which is based on the Company's cumulative
net income before 1994 LTI Plan accruals and taxes, but after dividends on
preferred stock, during a three-year performance period commencing with
fiscal 1994 ("1994-1996 Earnings"). Under the 1994 LTI Plan, prior to certain
reductions in the value of units as described below, if 1994-1996 Earnings
were to exceed an average return on equity of 12.85%, the aggregate value of
units awarded under the plan would be equal to 33.3% of 1994-1996 Earnings.
If 1994-1996 Earnings were to fall below an average return on equity of
12.85%, the aggregate value of units awarded under the plan would be equal to
the entire amount, if any, by which 1994-1996 Earnings exceeded an average
return on equity of 8.75%.

Awards under the 1994 LTI Plan vest in three equal installments at the end
of 1994, 1995 and 1996. In the event of a "change in control" prior to
December 31, 1996, any unvested awards will vest. A "change in control" is
generally defined, for this purpose, as (i) the transfer by Equitable to any
one unaffiliated buyer of an ownership interest of more than 20% of the
Company, or (ii) the sale or transfer of more than a 50% ownership interest
in EQ. After completion of the performance period, the awards are to be paid
in a first installment of 50% payable within 120 days of the end of the
performance period, and another installment of 50%, plus interest, payable
one year thereafter. Receipt of the second installment payment is contingent
on the recipient's refraining from activities competitive with the Company.

Messrs. Chalsty, Menges, Daddino and Boyd do not participate in the 1994
LTI Plan. Instead, these executives, as well as several others, agreed with
the Company in 1993 to extend the performance period with respect to which
the value of their awards under a prior plan, the 1991-1993 Long Term
Incentive Plan (the "1991 LTI Plan"), is determined. The 1991 LTI Plan is
substantially identical to the 1994 LTI Plan except that, as initially
adopted, the value of awards was based on the three-year period commencing
with fiscal 1991. Under the agreements referred to above, the 1991 LTI Plan
was amended so as to base the value of awards for the individuals referred to
above on the Company's cumulative net earnings during the six-year period
commencing with fiscal 1991. A copy of the 1991 LTI Plan has been filed with
the Commission.

<PAGE>

In connection with the Initial Public Offering, certain employees of the
Company reduced the value of their units in the 1991 or 1994 LTI Plans
attributable to 1994-1996 Earnings in exchange for restricted stock units and
options to purchase shares of Common Stock. See "1995 Restricted Stock Unit
Plan" and "1995 Stock Option Plan," below.

LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR OTHER ESTIMATED FUTURE PAYOUT
SHARES, UNITS PERIOD UNTIL UNDER NON-STOCK PRICED
NAME OR OTHER RIGHTS MATURATION OR PAYOUT PLANS (1)
<S> <C> <C> <C>
Michael M. Bendik .... 1,500 12/31/96 $694,260
<FN>
- ------------
(1) The estimated future payout in the table is projected assuming the
Company's cumulative net income before taxes in each of 1995 and 1996
is equal to its cumulative net income in 1994. The estimated payout
does not reflect the reduction in value of Mr. Bendik's 1994 LTI Plan
award as a result of his exchange of a portion of the award in return
for restricted stock units and options to purchase Common Stock, as
described above.
</TABLE>

1995 RESTRICTED STOCK UNIT PLAN

Prior to the Initial Public Offering, the Board of Directors of the
Company adopted the Company's 1995 Restricted Stock Unit Plan (the "1995
Restricted Stock Unit Plan") and Equitable as the sole stockholder of the
Company approved the adoption of the 1995 Restricted Stock Unit Plan. The
following summary of the 1995 Restricted Stock Unit Plan is qualified in its
entirety by reference to the full text of the 1995 Restricted Stock Unit
Plan, a copy of which has been filed with the Commission.

Each restricted stock unit represents the right to receive a share of
Common Stock, subject to certain conditions described below.

Approximately 5.2 million restricted stock units were authorized to be
granted under the 1995 Restricted Stock Unit Plan. All of the restricted
stock units authorized for grant under the 1995 Restricted Stock Unit Plan
were awarded to employees at the time of the Initial Public Offering. The
majority of the restricted stock units were awarded to certain participants
in the 1991 and 1994 LTI Plans in exchange for reductions in the value of the
participants' units in those plans attributable to 1994-1996 Earnings. The
remaining restricted stock units were awarded to certain employees who do not
participate in the 1991 or 1994 LTI Plans, in exchange for reductions in
those recipients' cash compensation in respect of 1995. The aggregate
reduction in the value of LTI units and other cash compensation exchanged by
employees for restricted stock units was $100.0 million.

Units awarded under the 1995 Restricted Stock Unit Plan fall into two
categories: "Base Units" and "Premium Units." The number of units awarded in
each category was a function of the initial public offering price of the
Common Stock under the Initial Public Offering. Approximately 3.7 million
restricted stock units are Base Units, and the remaining approximately 1.5
million units are Premium Units.

Except as otherwise noted below, upon vesting of Base Units or Premium
Units, the Company will issue to the recipient shares of Common Stock,
subject to deferral at the prior election of the recipient.

Base Units will vest in two equal installments in February 1997 and
February 1998. If a participant's employment is terminated by the Company
with cause or by the recipient without the Company's consent prior to
February 1998, all unvested Base Units will be forfeited. Upon the forfeiture
of a Base Unit, the recipient will not be entitled to any refund in respect
of the cash compensation exchanged therefor. In the event of a "change in
control" of the Company, or if a recipient's employment is terminated prior
to February 1998 (i) by reason of death or disability, (ii) by the Company
without cause, or (iii) due to retirement or with the mutual consent of the
recipient and the Company, all unvested Base Units will

<PAGE>

become fully vested on the last day of the month following that in which such
change of control or termination of employment occurs, and the corresponding
shares of Common Stock will be issued (subject to deferral at the prior
election of the participant) on the date they would otherwise have been
issued if the Base Units had vested according to the two-year vesting
schedule described above. In the case of a change in control, or in any case
described in clause (ii) or (iii) of the preceding sentence, the Base Units
originally scheduled to vest in February 1998 will be forfeited if, prior to
such date, the recipient engages in activities competitive with the Company.
"Change in control" is defined, for purposes of the 1995 Restricted Stock
Unit Plan, in a manner similar to the definition in the 1994 LTI Plan.

Premium Units will vest in three equal installments in February 1998,
February 1999 and February 2000. In the event of a participant's death or
termination of employment due to disability prior to February 2000, all
unvested Premium Units will vest on the last day of the month following that
in which death or termination due to disability occurs. If a participant's
employment is terminated by the Company with cause or by the recipient
without the Company's consent prior to February 2000, all unvested Premium
Units will be forfeited. Upon the forfeiture of a Premium Unit, the recipient
will not be entitled to any refund in respect of the cash compensation
exchanged therefor. Should a recipient's employment with the Company be
terminated prior to February 2000 without cause, due to retirement, or with
the mutual consent of the recipient and the Company, the Premium Units will
continue to vest as if the recipient's employment had not terminated, except
that if the recipient engages in activities competitive with the Company any
unvested Premium Units will be forfeited. Vesting of Premium Units will not
be accelerated upon a change in control.

The 1995 Restricted Stock Unit Plan is administered by the compensation
committee of the Company's Board of Directors (the "Compensation Committee").
Each member of the Compensation Committee must be a "disinterested person,"
within the meaning of Rule 16b-3 promulgated under the Exchange Act. The
Compensation Committee is authorized to establish rules and regulations for
administration of the 1995 Restricted Stock Unit Plan, and to make
determinations and interpretations under the plan.

In the event restricted stock units are forfeited by a recipient, the
forfeited units will be available for additional grants, in the discretion of
the Compensation Committee, to other key employees, consultants or other
service providers of the Company or its subsidiaries. Any recipient of
previously forfeited units will be required, as a condition of receiving the
units, to agree to a reduction in his or her compensation by an amount not
less than the product of the number of units received multiplied by the per
share book value of the Company as of the end of the most recent fiscal
quarter. In the case of any such grant of forfeited units, a portion of the
units equal to the total number of units received, multiplied by a fraction
whose numerator is the applicable per share book value of the Company and
whose denominator is the fair market value of a share of Common Stock on the
date of grant, will be treated as Base Units. The remaining portion of the
units granted will be treated as Premium Units. Base Units and Premium Units
awarded in any such additional grant will be subject to vesting and
forfeiture provisions equivalent to those described above.

The total number of shares of Common Stock that may be allocated pursuant
to awards made under the 1995 Restricted Stock Unit Plan or that may be
allocated to any one individual, and other terms and conditions of restricted
stock units may be equitably adjusted by the Compensation Committee in the
event of changes in the Company's capital structure resulting from certain
corporate transactions, including a spin-off, stock dividend, stock split or
a subdivision, recapitalization, reorganization, combination or
reclassification of shares, a merger or consolidation, change of control or
similar event.

<PAGE>

Pursuant to the exchanges described above, the Named Executive Officers,
executive officers as a group, and all other employees as a group, acquired
restricted stock units under the 1995 Restricted Stock Unit Plan as follows:

1995 RESTRICTED STOCK UNIT PLAN

<TABLE>
<CAPTION>
NAME EXCHANGE AMOUNT NUMBER OF UNITS
<S> <C> <C>
John S. Chalsty ......... $ 6,940,518 359,459
Carl B. Menges .......... 722,970 37,444
Anthony F. Daddino ...... 2,892,031 149,775
Michael A. Boyd ......... 433,782 22,466
Michael M. Bendik ....... 216,891 11,233

Executive officer group 30,726,400 1,591,358

Non-executive officer
employee group ......... 69,273,451 3,587,789
</TABLE>

1995 STOCK OPTION PLAN

Prior to the Initial Public Offering, the Board of Directors of the
Company adopted the Company's 1995 Stock Option Plan and Equitable as the
sole stockholder of the Company approved the adoption of the 1995 Stock
Option Plan. The following summary of the 1995 Stock Option Plan is qualified
in its entirety by reference to the full text of the plan, a copy of which
has been filed with the Commission.

Approximately 9.2 million options were authorized to be granted under the
1995 Stock Option Plan. All of the options authorized for grant under the
1995 Stock Option Plan were awarded to employees at the time of the Initial
Public Offering. The majority of the options were awarded to certain
participants in the 1991 and 1994 LTI Plans for reductions in the overall
value of such participants' units in those plans attributable to future
1994-1996 Earnings. The remaining options were awarded to certain employees
who do not participate in the 1991 or 1994 LTI Plans for reductions in those
recipients' future cash compensation.

The exercise price of options under the 1995 Stock Option Plan is $27.00
per share, which is equal to the initial public offering price. The options
will not be exercisable until they vest, as described below. The options will
be exercisable for a period of ten years from the date of grant, and will be
non-qualified under the Code.

The options granted under the 1995 Stock Option Plan will vest in two
equal installments in February 1997 and February 1998. If a participant's
employment is terminated by the Company with cause or by the recipient
without the Company's consent prior to February 1998, all unvested options
will be forfeited. In the event of a "change in control" of the Company, or
if a recipient's employment is terminated prior to February 1998 (i) by
reason of death or disability, (ii) by the Company without cause, or (iii)
due to retirement or with the mutual consent of the recipient and the
Company, all unvested options will become fully vested on the last day of the
month following that in which such change of control or termination of
employment occurs, and will be exercisable on the date they would otherwise
have become exercisable if they had vested according to the two-year vesting
schedule described above. In the case of a change in control, or in any case
described in clause (ii) or (iii) of the preceding sentence, the options
originally scheduled to vest in February 1998 will be forfeited if, prior to
such date, the recipient engages in activities competitive with the Company.
"Change in control" is defined, for purposes of the 1995 Stock Option Plan,
in a manner similar to the definition in the 1994 LTI Plan.

The 1995 Stock Option Plan is administered by the Compensation Committee.
Each member of the Compensation Committee must be a "disinterested person,"
within the meaning of Rule 16b-3 promulgated under the Exchange Act. The
Compensation Committee is authorized to establish rules and regulations for
administration of the 1995 Stock Option Plan, and to make determinations and
interpretations under the plan.

The exercise price of options granted under the 1995 Stock Option Plan, as
well as any amounts required to be withheld upon exercise, may be paid in
cash, stock or a combination of the two. Shares

<PAGE>

otherwise receivable upon exercise using the stock payment method may be
deferred at the prior election of the optionee. Should a recipient's
employment with the Company be terminated, any vested, exercisable options
held by the recipient will be exercisable for the remainder of their ten-year
term. Notwithstanding the preceding sentence, any vested, exercisable options
held by the recipient must be exercised within 30 days of the Compensation
Committee's reasonable determination that the recipient has engaged in an
activity competitive with the Company. If any such options remain unexercised
at the expiration of such 30-day period, the options will lapse.

In the event (i) options granted under the 1995 Stock Option Plan are
forfeited by a recipient, or (ii) shares are surrendered to pay withholding
or the exercise price of options, the shares covered by the forfeited
options, or the surrendered shares, will be available for additional grants
under the 1996 Stock Option Plan at the discretion of the Compensation
Committee. See "--1996 Stock Option Plan," below. Any such additional grant
will be subject to the terms of the 1996 Stock Option Plan.

The total number of shares of Common Stock that may be allocated pursuant
to awards made under the 1995 Stock Option Plan or that may be allocated to
any one individual, the number of shares of Common Stock subject to
outstanding options, the exercise price for such options and other terms and
conditions of options may be equitably adjusted by the Compensation Committee
in the event of changes in the Company's capital structure resulting from
certain corporate transactions, including a spin-off, stock dividend, stock
split or a subdivision, recapitalization, reorganization, combination or
reclassification of shares, a merger or consolidation, change of control or
similar event.

The Named Executive Officers, executive officers as a group, and all other
employees as a group, acquired options under the 1995 Stock Option Plan as
follows:

1995 STOCK OPTION PLAN

<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS
<S> <C>
John S. Chalsty ......... 636,357
Carl B. Menges .......... 66,287
Anthony F. Daddino ...... 265,149
Michael A. Boyd ......... 39,772
Michael M. Bendik ....... 19,886

Executive officer group 2,817,206

Non-executive officer
employee group ......... 6,351,472
</TABLE>

1996 STOCK OPTION PLAN

Prior to the Initial Public Offering, the Board of Directors of the
Company adopted the Company's 1996 Stock Option Plan (the "1996 Stock Option
Plan") and Equitable as the sole stockholder of the Company approved the
adoption of the 1996 Stock Option Plan. While options may be granted under
the 1996 Stock Option Plan during the ten year period following such
stockholder approval, it is currently contemplated that all such options will
be granted under the 1996 Stock Option Plan within five years after the 1996
Stock Option Plan is adopted. The following summary of the 1996 Stock Option
Plan is qualified in its entirety by reference to the full text of the plan,
a copy of which has been filed with the Commission.

The 1996 Stock Option Plan provides for the granting of options to key
employees, consultants or other service providers of the Company or its
subsidiaries. Eligibility for options under the 1996 Stock Option Plan is
primarily limited to persons who are (i) hired or retained by the Company or
its subsidiaries after the Initial Public Offering, or (ii) promoted (with
respect to title or scope of responsibility) after that date. No options may
be awarded under the 1996 Stock Option Plan prior to January 1, 1996.

The 1996 Stock Option Plan is a discretionary plan and accordingly, it is
not possible to determine the amount or form of any award which may be
granted to any individual during the term of the plan. The maximum number of
options that may be granted during the term of the 1996 Stock Option Plan is
approximately 8.8 million plus the number of shares covered by options
forfeited or surrendered under the 1995 Stock Option Plan described above.
The total number of options that may be granted under the

<PAGE>

1996 Stock Option Plan may be adjusted in the event of certain capital
changes as described below. Options under the 1996 Stock Option Plan may be
granted in the form of either "incentive stock options" pursuant to the
restrictions of Section 422 of the Code, or other options. The maximum number
of shares of Common Stock subject to grants to any one individual annually
under the 1996 Stock Option Plan is two million shares, subject to adjustment
as described below. The maximum number of shares of Common Stock which may be
granted as "incentive stock options" is eight million shares, subject to
adjustment as described below.

The exercise price of all options granted under the 1996 Stock Option Plan
will be equal to the fair market value of Common Stock on the date of grant.
The options will not be exercisable until they vest, as described below.

The options granted under the 1996 Stock Option Plan will be exercisable
for up to ten years and will vest in four equal annual installments. In the
event of a participant's death or termination of employment due to disability
or retirement prior to the final vesting date, all unvested options will vest
on the last day of the month following that in which death or termination due
to disability occurs and will become exercisable at the rate of 25% of the
number of the options granted on each of the first four anniversaries of the
date of grant. Notwithstanding the foregoing, no options will become
exercisable prior to February 1997. If a participant's employment is
terminated by the Company with cause or by the recipient (other than by
reason of retirement) without the Company's consent prior to the final
vesting date, all unvested options will be forfeited. Any vested, exercisable
options held by the recipient must be exercised within 30 days of the
Compensation Committee's reasonable determination that the recipient has
engaged in an activity competitive with the Company. If any such options
remain unexercised at the expiration of such 30-day period, the options will
lapse.

The exercise price of options granted under the 1996 Stock Option Plan, as
well as any amounts required to be withheld upon exercise, may be paid in
cash, stock or a combination of the two. Shares otherwise receivable upon
exercise using the stock payment method may be deferred at the prior election
of the optionee.

The 1996 Stock Option Plan is administered by the Compensation Committee.
Each member of the Compensation Committee must be a "disinterested person,"
within the meaning of Rule 16b-3 promulgated under the Exchange Act. The
Compensation Committee is authorized to establish rules and regulations for
administration of the 1996 Stock Option Plan, to make determinations and
interpretations under the 1996 Stock Option Plan and to grant awards pursuant
to the 1996 Stock Option Plan.

Shares that (i) are related to prior grants that are forfeited,
terminated, canceled, expire unexercised, settled in cash or in any other
manner are not issued as shares of Common Stock, or (ii) are used to pay the
exercise price or required withholding in connection with the exercise of
other options, shall again become eligible for grant under the 1996 Stock
Option Plan.

The total number of shares of Common Stock that may be allocated pursuant
to awards made under the 1996 Stock Option Plan or that may be allocated to
any one individual, the number of shares of Common Stock subject to
outstanding options, the exercise price for such options and other terms and
conditions of options may be equitably adjusted by the Compensation Committee
in the event of changes in the Company's capital structure resulting from
certain corporate transactions, including a spin-off, stock dividend, stock
split or a subdivision, recapitalization, reorganization, combination or
reclassification of shares, a merger or consolidation, change of control or
similar event.

The Board of Directors of the Company may terminate or amend the 1996
Stock Option Plan, except that any such amendment shall require stockholder
approval if such approval is necessary to comply with any regulatory
exemption or to qualify for any special status with which or for which the
Board deems it necessary or desirable to comply or qualify.

1997 LTI PLAN

Reflecting the equity participation afforded to Company employees through
the LTI Restricted Stock Unit Exchange, the LTI Option Exchange and the 1996
Stock Option Plan, the Company intends to reduce amounts paid under the
successor to the 1994 LTI Plan, commencing in 1997, by one-third.

<PAGE>

TAX TREATMENT

The following is a brief summary of the Federal income tax rules currently
generally applicable to restricted stock units granted under the 1995
Restricted Stock Unit Plan, and to stock options granted under the 1995 and
1996 Stock Option Plans.

The grant of a restricted stock unit will have no immediate tax
consequences to the recipient or to the Company. When shares of Common Stock
are distributed after vesting of restricted stock units, the recipient will
recognize ordinary income (and the Company will generally be entitled to a
deduction) in an amount equal to the fair market value of the distributed
shares. Upon a subsequent sale of shares of Common Stock acquired pursuant to
the vesting of restricted stock units, any difference between the recipient's
tax basis in the shares and the amount realized on the sale will be treated
as long-term or short-term capital gain or loss, depending on the holding
period of the shares.

The grant of an incentive stock option will have no immediate tax
consequences to the optionee or to the Company. The exercise of an incentive
stock option by the payment of cash to the Company will generally have no
immediate tax consequences to the optionee (except to the extent it is an
adjustment in computing alternative minimum taxable income) or to the
Company. If an optionee holds the shares acquired pursuant to the exercise of
an incentive stock option for the required holding period, the optionee
generally will realize long-term capital gain or long-term capital loss upon
a subsequent sale of the shares in the amount of the difference between the
amount realized upon the sale and the purchase price of the shares (i.e., the
exercise price). In such a case, no deduction will be allowable to the
Company in connection with the grant or exercise of the incentive stock
option or the sale of shares of Common Stock acquired pursuant to such
exercise.

If, however, an optionee disposes of the shares prior to the expiration of
the required holding period (a "disqualifying disposition"), the optionee
will recognize ordinary income (and the Company will generally be entitled to
a deduction) equal to the excess of the fair market value of the shares of
Common Stock on the date of exercise (or the proceeds of the disposition, if
less) over the exercise price. Special rules apply in the event all or a
portion of the exercise price is paid in the form of stock.

The grant of a stock option other than an incentive stock option (a
"non-qualified stock option") will have no immediate tax consequences to the
optionee or to the Company. Upon the exercise of a non-qualified stock
option, the optionee will recognize ordinary income (and the Company will
generally be entitled to a deduction) in an amount equal to the excess of the
fair market value of the shares of Common Stock on the date of the exercise
of the option over the exercise price. The optionee's tax basis in the shares
will be the exercise price plus the amount of ordinary income recognized by
the optionee, and the optionee's holding period will commence on the date the
shares are transferred. Special rules apply in the event all or a portion of
the exercise price is paid in the form of stock. Other special rules may also
apply to a participant who is subject to Section 16 of the Exchange Act.

Upon a subsequent sale of shares of Common Stock acquired pursuant to the
exercise of a non-qualified stock option, any difference between the
optionee's tax basis in the shares and the amount realized on the sale is
treated as long-term or short-term capital gain or loss, depending on the
holding period of the shares.

Certain limitations apply to the Company's deduction of compensation
payable to the person serving as its Chief Executive Officer or to any of its
four other most highly compensated executives in office as of the end of the
year in which such compensation would otherwise be deductible. In general,
the Company may not deduct compensation, other than "performance-based"
compensation, payable to such an executive in excess of $1 million for any
year.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

A compensation committee of the Board of Directors was formed prior to the
Initial Public Offering. The compensation committee is currently comprised of
Messrs. Jarmain, Harris and West. The committee determines compensation for
the executive officers of the Company.

<PAGE>

OWNERSHIP OF COMMON STOCK OF THE COMPANY BY EQUITABLE
AND DIRECTORS AND OFFICERS OF THE COMPANY

The following table provides certain information regarding the beneficial
ownership of the Company's Common Stock:

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
-----------------------
NUMBER OF
SHARES PERCENT
<S> <C> <C>
AXA (1) ..................................................... 42,720,000 80.2%
23 Avenue Matignon,
75008 Paris, France
The Equitable Companies Incorporated (2) .................... 42,720,000 80.2
787 Seventh Avenue
New York, New York 10019
The Equitable Life Assurance Society of the
United States (3) ........................................... 19,230,770 36.1
787 Seventh Avenue
New York, New York 10019
</TABLE>
- ------------
(1) AXA is EQ's largest stockholder, beneficially owning $392.2 million of
EQ's Series E convertible preferred stock and approximately 60.6% of
EQ's outstanding common stock (without giving effect to the conversion
of the Series E convertible preferred stock owned by AXA). As of
January 1, 1995, a group of five French mutual insurance companies (the
"Mutuelles AXA") owned directly or indirectly, through various holding
companies, a majority of the issued shares and voting power of AXA. For
insurance regulatory purposes the shares of capital stock of EQ
beneficially owned by AXA and its subsidiaries have been deposited into
a voting trust to ensure that certain of the indirect minority
shareholders of AXA do not exercise control over EQ or certain of its
insurance subsidiaries.

(2) Includes shares of Common Stock beneficially owned by EQ's wholly-owned
subsidiary, Equitable Life.

(3) Held indirectly through its wholly-owned subsidiary, Equitable Holding
Corporation.

Pursuant to the LTI Restricted Stock Unit Exchange, in connection with the
Initial Public Offering, approximately 500 employees of the Company exchanged
an aggregate of $100.0 million of their interests under certain cash
compensation arrangements, including the 1991 and 1994 LTI Plans, for
restricted stock units representing an aggregate of 5,179,147 shares of
Common Stock. See "Management--1995 Restricted Stock Unit Plan." These units
will be subject to forfeiture in certain circumstances and will vest annually
in specified proportions from February 1997 through February 2000. In
addition, pursuant to the LTI Option Exchange, these employees have acquired
options to purchase an aggregate of 9,168,678 shares of Common Stock at a
price of $27.00 per share by foregoing an aggregate of $55.7 million of their
future interests under such cash compensation arrangements. See
"Management--1995 Stock Option Plan." The following table provides certain
information regarding the beneficial ownership of the Company's Common Stock
by AXA, EQ, Equitable Life, each of the Company's executive officers and all
employees as a group assuming the issuance of all approximately 14.3 million
shares of Common Stock pursuant to such restricted stock units and options.

<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
GIVING EFFECT TO
BENEFICIAL OWNERSHIP LTI RESTRICTED
GIVING EFFECT TO LTI STOCK UNIT EXCHANGE
RESTRICTED AND LTI OPTION
BENEFICIAL OWNERSHIP STOCK UNIT EXCHANGE EXCHANGE
----------------------- ----------------------- -----------------------
NUMBER OF NUMBER OF NUMBER OF
SHARES PERCENT SHARES PERCENT SHARES PERCENT
<S> <C> <C> <C> <C> <C> <C>
AXA .......................... 42,720,000 80.2% 42,720,000 73.1% 42,720,000 63.1%
The Equitable Companies
Incorporated ................ 42,720,000 80.2 42,720,000 73.1 42,720,000 63.1
The Equitable Life Assurance
Society of the United States 19,230,770 36.1 19,230,770 32.9 19,230,770 28.4
John S. Chalsty .............. -- -- 359,459 0.6 995,816 1.5
Joe L. Roby .................. -- -- 269,595 0.5 746,863 1.1
Carl B. Menges ............... -- -- 37,444 0.1 103,731 0.2
Anthony F. Daddino ........... -- -- 149,775 0.3 414,924 0.6
Hamilton E. James ............ -- -- 187,218 0.3 518,654 0.8
Richard S. Pechter ........... -- -- 269,595 0.5 746,863 1.1
Theodore P. Shen ............. -- -- 269,595 0.5 746,863 1.1
Michael A. Boyd .............. -- -- 22,466 0.0 62,238 0.1
Gerald B. Rigg ............... -- -- 14,978 0.0 41,493 0.1
Michael M. Bendik ............ -- -- 11,233 0.0 31,119 0.0
All employees as a group .... -- -- 5,179,147 8.9 14,347,825 21.2
</TABLE>

<PAGE>

CERTAIN TRANSACTIONS

THE BURLINGTON CONTRIBUTION

Prior to the Initial Public Offering, Equitable contributed to the Company
shares of non-voting common stock having a market value at the time of
contribution of $55.0 million of Burlington, a diversified manufacturer of
textile products and a NYSE listed company. These shares will continue to be
non-voting while held by the Company and will represent approximately 7% of
the total shares of common stock of Burlington outstanding. Upon sale,
transfer or other disposition by the Company to a person not affiliated with
Equitable Life, the shares of non-voting common stock may be exchanged for
the same number of shares of ordinary voting common stock of Burlington. Such
contribution will provide an additional source of capital to the Company in
the form of securities with a liquid trading market.

REGISTRATION RIGHTS AND INDEMNIFICATION AGREEMENT

Under a Registration Rights and Indemnification Agreement between the
Company and EQ, the Company has granted Equitable the right to require the
Company to register shares of Common Stock held by Equitable for sale in
accordance with Equitable's intended method of disposition thereof (a "demand
registration"). Equitable may require up to six such demand registrations,
with no more than one every six months. Additionally, the Company has granted
to Equitable the right subject to certain exceptions to participate in
registrations of Common Stock initiated by the Company on its own behalf or
on behalf of its stockholders (a "piggy-back registration"). The Company is
required to pay expenses (other than underwriting discounts and commissions)
incurred by Equitable in connection with the demand and piggy-back
registrations. Subject to certain limitations specified in the Registration
Rights and Indemnification Agreement, Equitable's registration rights are
assignable to third parties. The Registration Rights and Indemnification
Agreement provides for indemnification and contribution by the Company for
the benefit of Equitable and permitted assigns and their related persons
relating to the demand and piggy-back registrations. In addition, such
Agreement provides for indemnification and contribution by the Company for
the benefit of Equitable and its related persons with respect to other
securities offerings by the Company (including any offering hereunder) and
financial and other information provided by the Company to Equitable and in
Exchange Act reports. The foregoing summary description of the Registration
Rights and Indemnification Agreement is qualified in its entirety by
reference to the Registration Rights and Indemnification Agreement, a copy of
which has been filed with the Commission.

TAX SHARING AGREEMENTS

The Company is included in EQ's consolidated tax group for Federal income
tax purposes and will continue to be included therein until such time as the
Company ceases to be eligible for inclusion in EQ's consolidated tax group.
In connection with the Initial Public Offering, the Company and EQ entered
into a Federal income tax sharing agreement (the "Federal Income Tax Sharing
Agreement"). Pursuant to the Federal Income Tax Sharing Agreement, the
Company and EQ will generally make payments between them such that, with
respect to any period in which the Company is a member of EQ's consolidated
tax group for Federal income tax purposes (a "Pre-Deconsolidation Period"),
the amount of Federal income taxes to be paid by the Company will be
determined as though the Company were to file for such period and all prior
periods separate Federal income tax returns (generally including any amounts
determined to be due as a result of a redetermination of the Federal income
tax liability of the EQ consolidated group arising from an audit or
otherwise) as the common parent of an affiliated group of corporations filing
a consolidated return rather than being a consolidated subsidiary of EQ. The
Company is also entitled to receive certain payments from EQ in respect of
carrybacks of tax assets, if any, of the Company, determined on a separate
return basis, arising in a Pre-Deconsolidation Period beginning after the
completion of the Initial Public Offering. The amount of any such payment
will generally be determined, in the case of a carryback to a
Pre-Deconsolidation Period ending on or before the completion of the Initial
Public Offering, by the actual tax benefit received by the EQ consolidated
group from such carryback, or, in the case of a carryback to any
Pre-Deconsolidation Period beginning after the completion of the Initial
Public Offering, by the benefit that the Company would have received from
such carryback on a separate return basis.

<PAGE>

While the Company remains part of the EQ consolidated group, EQ will
continue to have all the rights of a common parent of a consolidated group,
will be the sole and exclusive agent for the Company in any and all matters
related to the Federal income tax liability of the Company, and will be
responsible for the preparation and filing of consolidated Federal income tax
returns. In addition, each member of a consolidated group for Federal income
tax purposes is jointly and severally liable for the Federal income tax
liability of each other member of its consolidated group. Accordingly, under
the Federal Income Tax Sharing Agreement, EQ has agreed to indemnify the
Company against such liabilities to the extent that they relate to the
Federal income tax liability of the EQ consolidated group for periods that
the Company is included in the EQ consolidated group, except to the extent
attributable to the Company.

It is likely that the Company will cease to be eligible for inclusion in
EQ's consolidated tax group if Common Stock is issued in respect of units
which vest pursuant to the 1995 Restricted Stock Unit Plan. See
"Management--1995 Restricted Stock Unit Plan" above. The Federal Income Tax
Sharing Agreement also contains provisions in respect of certain Federal
income tax matters relating to a carryback of a tax asset, if any, of the
Company from a period beginning on or after the date on which the Company
ceases to be eligible for inclusion in EQ's consolidated group (a
"Post-Deconsolidation Period") to a Pre-Deconsolidation Period. Under the
Federal Income Tax Sharing Agreement, (i) the Company will agree to forego
the carryback of any net operating losses to a Pre-Deconsolidation Period
unless EQ consents to such carryback, which consent shall not be unreasonably
withheld, and (ii) the Company may be entitled to receive certain payments
from EQ in respect of any tax assets carried back to Pre-Deconsolidation
Periods.

The Company has also filed combined, consolidated or unitary income tax
returns with ACMC, Inc. ("ACMC"), an indirect wholly-owned subsidiary of EQ,
in certain states and localities, and will continue to do so until such time,
if at all, that the Company is no longer required to file combined,
consolidated or unitary income tax returns with ACMC. The Company and ACMC
have entered into a tax sharing agreement (the "State Tax Sharing
Agreement"), pursuant to which the Company and ACMC have agreed that with
respect to any period in which the Company and ACMC have filed or file a
combined, consolidated or unitary income tax return in a state or local
taxing jurisdiction, the amount of combined, consolidated or unitary income
taxes to be paid by ACMC will be determined as though ACMC were to file for
such period and all prior periods separate income tax returns with respect to
such state or local taxing jurisdiction. The Company has agreed to indemnify
ACMC against any combined, consolidated or unitary income taxes for periods
in which the Company files combined, consolidated or unitary income tax
returns with ACMC, except to the extent attributable to ACMC. The foregoing
summary descriptions of the Federal Income Tax Sharing Agreement and the
State Tax Sharing Agreement are qualified in their entirety by reference to
such agreements, copies of which have been filed with the Commission.

EMPLOYEES' SECURITIES COMPANIES

Selected employees of the Company, including executive officers, are
offered the opportunity to become members, on an after-tax basis, of the DLJ
First ESC L.L.C. (the "ESC"), an investment vehicle which qualifies as an
"employees' securities company" for purposes of the Investment Company Act of
1940, as amended. The ESC invests in the Company's merchant banking portfolio
companies, typically acquiring between 30% and 40% of the Company's
investment in such companies. The amounts invested by members are augmented
in the ratio of 4:1 by a combination of recourse loans from the Company and
preferred contributions to the ESC by the Company which have a capped return
equal to the prime rate plus 1-3/4% each of which is repaid to the Company
upon realization of the applicable portfolio investment. Prior to the
formation of the ESC in 1994, similar opportunities for coinvestment in the
Company's merchant banking portfolio were made available to the Company's
employees.

<PAGE>

Amounts invested in the ESC, or in predecessor arrangements, by each of
the Company's executive officers in 1992, 1993, 1994 and the nine months
ended September 30, 1995 are set forth below:

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------- 1995
NAME 1992 1993 1994
<S> <C> <C> <C> <C>
Michael M. Bendik . $0 $ 14,334 $ 8,000 $0
Michael A. Boyd ... 0 16,103 10,000 0
John S. Chalsty ... 0 375,883 240,000 0
Anthony F. Daddino 0 114,370 80,000 0
Hamilton E. James . 0 216,312 140,402 0
Carl B. Menges ..... 0 68,113 40,000 0
Richard S. Pechter 0 143,469 80,000 0
Gerald B. Rigg ..... 0 16,103 10,000 0
Joe L. Roby ........ 0 286,943 160,000 0
Theodore P. Shen .. 0 143,469 90,000 0
</TABLE>

The amount of loans made to the Company's executive officers and preferred
contributions made in the ESC by the Company on behalf of the Company's
executive officers in 1992, 1993, 1994 and the first nine months of 1995 are
set forth below.

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------- 1995
NAME 1992 1993 1994
<S> <C> <C> <C> <C>
Michael M. Bendik . $0 $ 36,811 $ 27,246 $ 35,774
Michael A. Boyd ... 0 38,762 34,023 43,039
John S. Chalsty ... 0 887,854 817,051 1,018,240
Anthony F. Daddino 0 252,258 272,351 330,327
Hamilton E. James . 0 783,606 599,341 835,265
Carl B. Menges ..... 0 169,828 136,180 175,526
Richard S. Pechter 0 368,657 272,337 357,912
Gerald B. Rigg ..... 0 38,762 34,023 43,039
Joe L. Roby ........ 0 737,320 544,679 715,754
Theodore P. Shen .. 0 368,657 294,952 376,865
</TABLE>

DLJ FUND INVESTMENT PARTNERS, L.P.

Selected employees of the Company, including certain executive officers,
are limited partners of DLJ Fund Investment Partners, L.P. ("FIP"), an
investment vehicle organized to allow these employees to invest on a
leveraged basis in funds and other investment vehicles sponsored by certain
of the Company's clients and potential clients and on a co-investment basis
in transactions in which the Company's clients also invest. Amounts invested
by the limited partners are augmented in the ratio of 2:1 by preferred
contributions to FIP by the Company which have a capped return equal to the
prime rate plus 1-3/4%. Total commitments to FIP amount to $171.9 million, of
which $56.7 million are commitments from the limited partners. Through
September 30, 1995, $56.2 million has been committed to 16 investment
opportunities and $14 million of the limited partners' commitments and $4.5
million of the Company's commitments have been drawn down.

<PAGE>

Amounts committed to FIP by each of the Company's executive officers are
set forth below:

<TABLE>
<CAPTION>
NAME AMOUNT
<S> <C>
Michael M. Bendik ........ $ 0
Michael A. Boyd ........... 0
John S. Chalsty ........... 2,000,000
Anthony F. Daddino ........ 500,000
Hamilton E. James ......... 2,000,000
Carl B. Menges ............. 1,000,000
Richard S. Pechter ........ 750,000
Gerald B. Rigg ............. 0
Joe L. Roby ............... 2,000,000
Theodore P. Shen .......... 1,000,000
</TABLE>

The amounts of preferred contributions made to FIP by the Company on
behalf of each of the Company's executive officers in 1994 and the first nine
months of 1995 are set forth below:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, NINE MONTHS ENDED
NAME 1994 SEPTEMBER 30, 1995
<S> <C> <C>
Michael M. Bendik .. $ 0 $ 0
Michael A. Boyd ... 0 0
John S. Chalsty ... 158,601 157,936
Anthony F. Daddino . 39,650 39,484
Hamilton E. James .. 158,601 157,936
Carl B. Menges ..... 79,300 78,968
Richard S. Pechter . 59,475 59,226
Gerald B. Rigg ..... 0 0
Joe L. Roby ........ 158,601 157,936
Theodore P. Shen .. 79,300 78,969
</TABLE>

OTHER AFFILIATED TRANSACTIONS

The Company, Equitable and their respective affiliates engage in a variety
of transactions in the ordinary course of their respective businesses. As a
general rule, the Company has not retained an independent third party to
evaluate transactions with Equitable and there has been no independent
committee of the Board of Directors to evaluate such transactions.
Notwithstanding this fact, the Company believes that each of the arrangements
described below was made on an arm's-length basis. This belief is based on
the fact that the terms and conditions of such transactions (including the
fees or other amounts paid by the Company in connection with such
transactions) were established through arm's-length negotiations which took
into account (i) the terms and conditions of transactions of the same or a
similar nature entered into by the Company with unaffiliated third parties,
(ii) the terms and conditions of transactions of the same or a similar nature
entered into by Equitable with unaffiliated third parties, and/or (iii) the
terms and conditions of market transactions of the same or a similar nature
entered into by unaffiliated third parties. Notwithstanding the foregoing,
there can be no assurance that the Company could not have obtained more
favorable terms from an unaffiliated third party. While there can be no
assurance, the Company anticipates that future transactions with Equitable
will be made on an arm's-length basis consistent with past practice. See
"Risk Factors--Potential Conflicts of Interests."

FINANCIAL SERVICES PROVIDED BY OR TO THE COMPANY

DLJSC from time to time provides investment banking and other services,
including administrative services to EQ, AXA and their subsidiaries. The fees
related to investment banking services were $7.3 million, $7.9 million, $3.1
million and $84,000 in 1992, 1993, 1994 and the first nine months of 1995,
respectively. The fees related to administrative services were $596,000,
$694,000, $704,000 and $650,000 in 1992, 1993, 1994 and the first nine months
of 1995, respectively. DLJSC from time to time also provides

<PAGE>

brokerage and research services to EQ, AXA and their subsidiaries. Such
services were provided on an arm's-length basis in the ordinary course of
business at rates comparable to those paid at the time by unaffiliated third
parties.

DLJSC and Pershing distribute certain Alliance Capital Management, L.P.
("Alliance") sponsored funds and cash management products and receive
standard sales concessions and distribution payments. In addition, Alliance
and Pershing have an agreement pursuant to which Pershing recommends to
certain of its correspondent firms the use of Alliance cash management
products for which it is allocated a portion of the revenues derived by
Alliance from sales through the Pershing correspondents. Amounts paid by
Alliance to the Company in connection with the above distribution services
during 1992, 1993, 1994 and the first nine months of 1995 totaled $9.5
million, $10.9 million, $13.7 million and $12.5 million, respectively.

Equico Securities Inc., a wholly-owned subsidiary of Equitable Life
("Equico"), has arrangements with each of DLJSC and Wood, Struthers &
Winthrop pursuant to which Equico's registered representatives are
compensated for referring investment advisory clients to DLJSC and Wood,
Struthers & Winthrop. Referral amounts paid by DLJSC and Wood, Struthers &
Winthrop during 1992, 1993, 1994 and the first nine months of 1995 totaled
$40,000, $228,000, $445,000 and $426,000, respectively.

Equico distributes Wood, Struthers & Winthrop's mutual funds for which it
received standard sales concessions, which during 1992, 1993, 1994 and the
first nine months of 1995 totaled $0, $26,000, $1,440,000 and $1,125,000,
respectively.

Equico and the Company are parties to a portfolio manager agreement with
respect to Equitable Classic Strategies, a wrap fee investment program
offered through Equico. Amounts paid to Equico by the Company were $6,416,
$183,522, $413,677, and $384,356 in 1992, 1993, 1994 and for the first nine
months of 1995, respectively.

Alliance and Wood, Struthers & Winthrop share investment management
responsibility for a number of institutional accounts. The amount of advisory
fees received from such accounts that were allocated to Wood, Struthers &
Winthrop during 1992, 1993, 1994 and the first nine months of 1995 totaled
$263,000, $232,000, $286,000 and $230,000, respectively.

Certain directors, officers and employees of the Company, EQ, AXA and
their subsidiaries maintain margin accounts with DLJSC. Margin account
transactions for such directors, officers and employees are conducted by
DLJSC in the ordinary course of business and are substantially on the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with unaffiliated persons and did not
involve more than the normal risk of collectibility or present other
unfavorable features. DLJSC also, from time to time and in the ordinary
course of business, enters into transactions involving the purchase or sale
of securities from or to such directors, officers and employees and members
of their immediate families, as principal. Such transactions on a principal
basis are effected on substantially the same terms as similar transactions
with unaffiliated third parties. DLJSC offers its employees reduced
commission rates.

On December 26, 1995, DLJSC issued 300,000 shares of its non-voting
Adjustable Rate Cumulative Preferred Stock, for an aggregate purchase price
of $30.0 million, to WSW 1995 Exchange Fund, L.P. The General Partner of such
partnership is a subsidiary of Wood, Struthers and Winthrop. Such preferred
stock will automatically be redeemed by DLJSC 15 years from the date of
issuance thereof and may be redeemed at the option of DLJSC at any time prior
to such date.

INSURANCE COVERAGE OBTAINED FROM EQUITABLE

DLJSC is a member of the Securities Investor Protection Corporation
("SIPC") which provides coverage to protect brokerage customers in the event
of, among other things, the insolvency of a member brokerage firm. SIPC
coverage is limited to $500,000 for each brokerage account covered, which
includes a limit of $100,000 on cash claims. In addition, DLJSC purchases
excess insurance coverage from Equitable Casualty Insurance Company of
Vermont, an indirect wholly-owned subsidiary of EQ,

<PAGE>

protecting securities in customers' accounts up to an additional $24.5
million and up to an additional $49.5 million for managed accounts. Amounts
paid by the Company to Equitable Casualty Insurance Company were $800,000,
$600,000, $391,233, and $700,000 in 1992, 1993, 1994, and the first nine
months of 1995, respectively.

The Company purchased split-dollar life insurance policies on its Chief
Executive Officer from Equitable at rates comparable to those paid at the
time by unaffiliated third parties. The aggregate amount of premiums for
these policies borne by the Company during each of the years 1992, 1993, 1994
and the first nine months of 1995 was approximately $175,000.

Equitable arranges for directors and officers liability insurance coverage
for itself and its subsidiaries, including the Company under a policy written
by insurance companies unaffiliated with Equitable. Based on a review of
market rates, the Company believes that such rates are at least as favorable
to the Company as could be obtained from unaffiliated third parties. During
1992, 1993, 1994 and the first nine months of 1995, the Company paid
Equitable $400,320, $208,993, $229,982 and $0, respectively, as its share of
the premiums on these policies.

FINANCIAL SERVICES OBTAINED FROM AFFILIATES

Alliance provides investment management services to certain of the
Company's employee benefit plans at rates comparable to those paid at the
time by unaffiliated third parties. Advisory fees from these accounts during
1992, 1993, 1994 and the first nine months of 1995 totalled $331,000,
$402,000, $922,000 and $513,000, respectively.

An affiliate of AXA, AXA Asset Management Partenaires ("AXA Asset
Management"), provides investment management services to the Winthrop
Opportunity Funds (the "Funds"), a series of mutual funds sponsored by Wood,
Struthers & Winthrop pursuant to a sub-advisory agreement between Wood,
Struthers & Winthrop and AXA Asset Management. AXA Asset Management began
providing services to the Funds in September 1995. No advisory fees had been
paid by the Funds to AXA Asset Management as of September 30, 1995.

LOANS AND ADVANCES

The aggregate outstanding amount of payables, primarily inter-company tax
allocations, between the Company and Equitable and its affiliates was $79.2
million, $158.6 million, $95.0 million and $156.9 million as of December 31,
1992, 1993, 1994 and September 30, 1995, respectively.

OTHER TRANSACTIONS WITH EQUITABLE

During 1993, Equitable Life contributed $150 million to the Company's
capital, including $50 million in cash and the conversion of a $100 million
note issued by the Company in March 1992. The Company paid an aggregate of
$12.2 million in interest on the $100 million note to Equitable Life in 1992
and 1993. In 1993 in connection with the conversion of the Note the Company
also paid a fee to Equitable Life, of $6.3 million. In addition, during 1993
Equitable Life purchased 200,000 shares of the Company's Cumulative
Exchangeable Preferred Stock for $20 million. The Company paid dividends on
the Cumulative Exchangeable Preferred Stock to Equitable Life of $0, $1.9
million and $1.3 million in 1993, 1994 and the first nine months of 1995.
Such dividends were paid on a pro rata basis to all investors, including
unaffiliated third parties.

Equitable has committed, subject to approval by Equitable on a
transaction-by-transaction basis, to provide $750 million of subordinated
debt financing to the DLJ Bridge Fund. Interest payments and other
distributions to Equitable Life from the DLJ Bridge Fund during 1992, 1993,
1994 and the first nine months of 1995 totaled $20.1 million, $18.0 million,
$15.8 million and $23.0 million, respectively. The Company has agreed to pay
Equitable the first $25 million of aggregate principal losses incurred by
Equitable with respect to all bridge loans outstanding on September 30, 1995
and the first $25 million of aggregate principal losses incured by Equitable
with respect to bridge loans made after September 30, 1995. To the extent
such payments by the Company do not fully cover any such losses incurred by

<PAGE>

Equitable, Equitable is entitled to receive all other distributions otherwise
payable to the Company with respect to DLJ Bridge Fund activities until such
losses have been recovered. The Company has also agreed to pay Equitable the
amount, if any, by which any principal loss on an individual loan exceeds
$150.0 million. In addition, Equitable is entitled to one-third of any equity
securities obtained in connection with any bridge loan. See
"Business--Banking Group--Merchant Banking--DLJ Bridge Fund."

Column Financial, Inc. ("Column") was created as a joint venture between
Equitable Real Estate Investment Management, Inc., an indirect wholly-owned
subsidiary of EQ, and DLJMC in July 1993. Column originates and underwrites
mortgage loans for securitization and sale in the form of CMOs through DLJMC.
DLJMC has committed to purchase, at Column's option, all mortgage loans held
for sale at the face amount of such loans. DLJMC initially invested $350,000
in Column in return for its equity interest and contributed an additional
$375,000 to Column's capital in 1994. Column has a line of credit with DLJMC
which bears interest at 30-day LIBOR plus 2 1/8% secured by mortgage loans
held for sale. During 1993, 1994 and the first nine months of 1995 (i) the
maximum aggregate amount outstanding under such line of credit at any
month-end was $5.3 million, $149.7 million and $219.6 million, respectively,
(ii) the aggregate interest expense paid to DLJMC was $1.0 million, $4.9
million and $8.8 million, respectively, (iii) the aggregate amount of fees
paid to Column by DLJMC for originating and underwriting services was $0,
$726,964 and $1,790,183, respectively, and (iv) the aggregate amount of
mortgages purchased from Column by DLJMC was $0, $94.1 million and $258.1
million, respectively.

Equitable Life and its wholly-owned subsidiary, EVLICO, have invested an
aggregate of $38.0 million in Sprout Growth, L.P., Sprout Growth II, Sprout
Capital V, Sprout Capital VI, and Sprout Capital VII (collectively, the
"Sprout Funds"), venture capital funds sponsored by Sprout, a division of the
Company. Distributions to Equitable Life and EVLICO from the Sprout Funds
during 1992, 1993, 1994 and the first nine months of 1995 were $6.9 million,
$7.8 million, $2.6 million and $6.9 million, respectively. Such distributions
were paid on a pro rata basis to all investors, including unaffiliated third
parties.

The Company currently leases certain of its office facilities from joint
ventures in which Equitable participates. Total lease payments by the Company
with respect to such facilities were $645,000, $890,000, $1,036,000 and
$918,000 for 1992, 1993, 1994 and the first nine months of 1995,
respectively.

<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 150,000,000 shares
of Common Stock, par value $0.10 per share and 25,000,000 shares of Preferred
Stock, par value $0.01 per share. As of September 30, 1995, the Company had
50,000,000 shares of Common Stock and 2,250,000 shares of Cumulative
Exchangeable Preferred Stock outstanding. The following summary description
of the capital stock of the Company is qualified in its entirety by reference
to the Certificate of Incorporation and the Bylaws of the Company, copies of
which have been filed with the Commission.

COMMON STOCK

Subject to the rights of the holders of any Preferred Stock which may be
outstanding, each holder of Common Stock on the applicable record date is
entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor, and, in the event of
liquidation, to share pro rata in any distribution of the Company's assets
after payment or providing for the payment of liabilities and the liquidation
preference of any outstanding Preferred Stock. Each holder of Common Stock is
entitled to one vote for each share held of record on the applicable record
date on all matters presented to a vote of stockholders, including the
election of directors. Holders of Common Stock have no cumulative voting
rights or preemptive rights to purchase or subscribe for any stock or other
securities and there are no conversion rights or redemption or sinking fund
provisions with respect to such stock. All outstanding shares of Common Stock
are fully paid and nonassessable.

The Common Stock is listed on the NYSE under the symbol "DLJ."

The transfer agent for the Common Stock is First Chicago Trust Company of
New York.

PREFERRED STOCK

The Company's Certificate of Incorporation authorizes 25,000,000 shares of
Preferred Stock. The Company's Board of Directors has the authority to issue
shares of Preferred Stock in one or more series and to fix, by resolution,
the terms of such securities, without any further vote or action by the
stockholders.

The applicable Prospectus Supplement will describe the following terms of
any Preferred Stock in respect of which this Prospectus is being delivered
(to the extent applicable to such Preferred Stock): (i) the specific
designation, number of shares, seniority and purchase price; (ii) any
liquidation preference per share; (iii) any date of maturity; (iv) any
redemption, repayment or sinking fund provisions; (v) any dividend rate or
rates and the dates on which any such dividends will be payable (or the
method by which such rates or dates will be determined); (vi) any voting
rights; (vii) if other than the currency of the United States of America, the
currency or currencies including composite currencies in which such Preferred
Stock is denominated and/or in which payments will or may be payable; (viii)
the method by which amounts in respect of such Preferred Stock may be
calculated and any commodities, currencies or indices, or value, rate or
price, relevant to such calculation; (ix) whether such Preferred Stock is
convertible or exchangeable and, if so, the securities or rights into which
such Preferred Stock is convertible or exchangeable, and the terms and
conditions upon which such conversions or exchanges will be effected
including the initial conversion or exchange prices or rates, the conversion
or exchange period and any other related provisions; (x) the place or places
where dividends and other payments on the Preferred Stock will be payable;
and (xi) any additional voting, dividend, liquidation, redemption and other
rights, preferences, privileges, limitations and restrictions.

All shares of Preferred Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will, when issued, be fully paid and
non-assessable. Any shares of Preferred Stock so issued would have priority
over the Common Stock with respect to dividend or liquidation rights or both.
As of September 30, 1995, the Company had 2,250,000 shares of Cumulative
Exchangeable Preferred Stock outstanding.

CUMULATIVE EXCHANGEABLE PREFERRED STOCK

Dividends. Each holder of Cumulative Exchangeable Preferred Stock is
entitled to receive when, as and if declared by the Board of Directors, out
of funds legally available therefor, cumulative cash dividends of $8.83 per
share per annum, payable quarterly in arrears.

<PAGE>

Liquidation. Upon the dissolution, liquidation or winding up of the
Company, the holders of the Cumulative Exchangeable Preferred Stock will be
entitled to receive out of the assets of the Company available for
distribution to stockholders, an amount in cash equal to (i) the Optional
Redemption Price (as defined below), if such dissolution, liquidation or
winding up is voluntary or (ii) $100 per share plus an amount in cash equal
to all dividends accrued and unpaid thereon to the date fixed for
distribution plus accrued interest thereon if such dissolution, liquidation
or winding up is involuntary, in either case before any payment or
distribution shall be made on the Common Stock or on any other class or
series of capital stock of the Company ranking junior to the Cumulative
Exchangeable Preferred Stock.

Exchangeability. Subject to certain conditions, after October 15, 1996,
the Company may exchange the Cumulative Exchangeable Preferred Stock for an
equal principal amount of subordinated notes of the Company bearing a rate of
interest of 9.58% per annum and having the same redemption provisions as the
Cumulative Exchangeable Preferred Stock described below.

Voting Rights. The holders of the Cumulative Exchangeable Preferred Stock
are not entitled to vote at any meeting of stockholders of the Company,
except as set forth below or as otherwise required by law. In the event that
(i) the Company has failed to pay in full the dividends accumulated on the
outstanding shares of the Cumulative Exchangeable Preferred Stock for any six
quarterly dividend payment periods, whether or not consecutive, or (ii) the
Company shall have failed to comply with the provisions for mandatory
redemption described below, then, in each case, the number of directors of
the Company shall be increased by two and holders of shares of Cumulative
Exchangeable Preferred Stock will have the right, voting together as a single
class, to elect such additional directors at the next annual meeting of
stockholders of the Company and at each annual meeting thereafter until the
full dividends accumulated have been paid or the mandatory redemption
provisions have been complied with, as the case may be. Upon termination of
such voting rights, the term of office of each director elected by holders of
the Cumulative Exchangeable Preferred Stock shall terminate and the number of
directors constituting the entire Board of Directors shall be reduced
accordingly. The holders of the Cumulative Exchangeable Preferred Stock will
also be entitled to vote separately as a class in connection with certain
actions by the Company, including (i) any amendment to the Company's
Certificate of Incorporation or the Certificate of Designation relating to
the Cumulative Exchangeable Preferred Stock so as to adversely affect any
powers, preferences or special rights of the Cumulative Exchangeable
Preferred Stock, (ii) any increase in the authorized number of Cumulative
Exchangeable Preferred Stock, (iii) any authorization or issuance of a class
or series of securities ranking senior to the Cumulative Exchangeable
Preferred Stock or (iv) in certain circumstances, a merger or consolidation
or sale, exchange or conveyance of all or substantially all of the assets,
property or business of the Company.

Mandatory Redemption. The Company will redeem all the outstanding shares
of Cumulative Exchangeable Preferred Stock out of funds legally available
therefor at $100 per share plus accrued and unpaid dividends and any accrued
interest thereon on October 15, 2003.

In the event of a Change of Control (as defined below), the Company shall
notify the holders of the Cumulative Exchangeable Preferred Stock in writing
of such event and offer to purchase all of the outstanding shares of the
Cumulative Exchangeable Preferred Stock at $100 per share plus accrued and
unpaid dividends and any accrued interest thereon. "Change of Control" is
defined as (i) other than in the ordinary course of business, the sale or
other disposition of all or substantially all of the assets of the Company to
any person other than EQ or any wholly-owned subsidiary thereof, (ii) the
merger, sale or consolidation of the Company with the effect that EQ ceases
to own directly or indirectly at least 51% of the total voting power of the
surviving corporation or (iii) EQ ceases to own directly or indirectly at
least 51% of the voting stock of Equitable Life. In addition, if prior to
October 15, 2003, the Company shall sell more than 20% of the shares of
common stock of DLJSC, the Company shall notify holders of the Cumulative
Exchangeable Preferred Stock in writing of such event and offer to purchase
all the outstanding shares of Cumulative Exchangeable Preferred Stock at the
Optional Redemption Price (as defined below).

<PAGE>

Optional Redemption. The Cumulative Exchangeable Preferred Stock may be
redeemed in whole or in part at the option of the Company at any time at the
greater of (A) $100 plus accrued and unpaid dividends and any accrued
interest thereon and (B) the present value of the future mandatory redemption
and dividend payments which would have been made except for such optional
redemption plus accrued and unpaid dividends and any accrued interest thereon
(the "Optional Redemption Price"). In addition, at any time, at the option of
the Company, up to 750,000 shares of the Cumulative Exchangeable Preferred
Stock may be redeemed with proceeds from any public offering of Common Stock
of the Company at the Optional Redemption Price calculated using a higher
discount rate.

Limitation on Payments. The Cumulative Exchangeable Preferred Stock also
contains certain restrictions on the ability of the Company to pay cash
dividends on, or redeem, repurchase or otherwise acquire or retire any shares
of its capital stock and on the ability of the Company to make payments under
long-term incentive compensation plans.

<PAGE>

DESCRIPTION OF SENIOR DEBT SECURITIES

The Senior Debt Securities will be issued under an indenture dated as of
October 25, 1995 (the "Indenture") between Donaldson, Lufkin & Jenrette,
Inc., as issuer (the "Issuer"), and The Bank of New York, as trustee (the
"Trustee").

A copy of the Indenture has been incorporated by reference as an exhibit
to the Registration Statement of which this Prospectus is a part and is also
available for inspection at the office of the Trustee. The Indenture is
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Section references contained herein are to the
Indenture. The following summaries of certain provisions of the Indenture do
not purport to be complete, and where reference is made to particular
provisions of the Indenture, such provisions, including definitions of
certain terms, are incorporated by reference as a part of such summaries or
terms, which are qualified in their entirety by such reference.

GENERAL

The Indenture does not limit the aggregate principal amount of Senior Debt
Securities which may be issued thereunder and provides that the Senior Debt
Securities may be issued from time to time in one or more series. The Senior
Debt Securities will be direct, unsecured and unsubordinated obligations of
the Issuer. Except as described under "--Negative Pledge," the Indenture does
not limit other indebtedness or securities which may be incurred or issued by
the Issuer or any of its subsidiaries or contain financial or similar
restrictions on the Issuer or any of its subsidiaries. The operations of the
Issuer are conducted through its subsidiaries, and, therefore, the Issuer is
dependent upon the earnings and cash flow of its subsidiaries to meet its
obligations, including obligations under the Senior Debt Securities. The
Senior Debt Securities will be effectively subordinated to all indebtedness
of the Issuer's subsidiaries. As of September 30, 1995, the aggregate amount
of indebtedness of the Issuer's subsidiaries to which holders of the Senior
Debt Securities would have been structurally subordinated was approximately
$1.0 billion, substantially all of which was incurred under customary
arrangements utilized by the securities brokerage industry. The Issuer's
rights and the rights of its creditors, including holders of Senior Debt
Securities, to participate in the distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization will be subject to prior
claims of such subsidiary's creditors, including trade creditors, except to
the extent the Issuer may itself be a creditor with recognized claims against
such subsidiary. In addition, net capital requirements under the Exchange Act
and NYSE rules applicable to certain of the Issuer's subsidiaries could limit
the payment of dividends and the making of loans and advances to the Issuer
by such subsidiaries. See "Net Capital Requirements."

The Prospectus Supplement which accompanies this Prospectus sets forth
where applicable the following terms of and information relating to the
Senior Debt Securities offered thereby: (i) the designation of such Senior
Debt Securities; (ii) the aggregate principal amount of such Senior Debt
Securities; (iii) the date or dates on which principal of and premium, if
any, on such Senior Debt Securities is payable; (iv) the rate or rates at
which such Senior Debt Securities shall bear interest, if any, or the method
by which such rate shall be determined, and the basis on which interest shall
be calculated if other than a 360-day year consisting of twelve 30-day
months, the date or dates from which such interest will accrue and on which
such interest will be payable and the related record dates; (v) if other than
the offices of the Trustee, the place where the principal of and any premium
or interest on such Senior Debt Securities will be payable; (vi) any
redemption, repayment or sinking fund provisions; (vii) if other than
denominations of $1,000 or multiples thereof, the denominations in which such
Senior Debt Securities will be issuable; (viii) if other than the principal
amount thereof, the portion of the principal amount due upon acceleration;
(ix) if other than U.S. dollars, the currency or currencies (including
composite currencies) in which such Senior Debt Securities are denominated or
payable; (x) whether such Senior Debt Securities shall be issued in the form
of a Global Security or securities; (xi) any other specific terms of such
Senior Debt Securities; and (xii) the identity of any trustees, depositories,
authenticating or paying agents, transfer agents or registrars with respect
to such Senior Debt Securities. (Section 2.3)

<PAGE>

The Senior Debt Securities will be issued either in certificated, fully
registered form, without coupons, or as global securities under a book-entry
system, as specified in the accompanying Prospectus Supplement. See
"--Book-Entry System."

Unless otherwise specified in the accompanying Prospectus Supplement,
principal and premium, if any, will be payable, and the Senior Debt
Securities will be transferable and exchangeable without any service charge,
at the office of the Trustee. However, the Issuer may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection with any such transfer or exchange. (Sections 2.7, 4.1 and 4.2)

Unless otherwise specified in the accompanying Prospectus Supplement,
interest on any series of Senior Debt Securities will be payable on the
interest payment dates set forth in the accompanying Prospectus Supplement to
the persons in whose names the Senior Debt Securities are registered at the
close of business on the related record date and will be paid, at the option
of the Issuer, by wire transfer or by checks mailed to such persons.
(Sections 2.7, 4.1 and 4.2)

If the Senior Debt Securities are issued as Original Issue Discount
Securities (bearing no interest or interest at a rate which at the time of
issuance is below market rates) to be sold at a substantial discount below
their stated principal amount, the federal income tax consequences and other
special considerations applicable to such Original Issue Discount Securities
will be generally described in the Prospectus Supplement.

BOOK-ENTRY SYSTEM

If so specified in the accompanying Prospectus Supplement, Senior Debt
Securities of any series may be issued under a book-entry system in the form
of one or more global Senior Debt Securities (each a "Global Security"). Each
Global Security will be deposited with, or on behalf of a depositary, which,
unless otherwise specified in the accompanying Prospectus Supplement, will be
The Depository Trust Company, New York, New York (the "Depositary"). The
Global Securities will be registered in the name of the Depositary or its
nominee.

The Depositary has advised the Issuer that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
"banking organization" within the meaning of the New York banking law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of section 17A of the Exchange Act. The
Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. The Depositary's participants include securities
brokers and dealers, banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.

Upon the issuance of a Global Security in registered form, the Depositary
will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Senior Debt Securities represented by
such Global Security to the accounts of participants. The accounts to be
credited will be designated by the underwriters, dealers or agents. Ownership
of beneficial interests in the Global Security will be limited to
participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in the Global Security will
be shown on, and the transfer of that ownership interest will be effected
only through, records maintained by such participants. The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such laws may impair the
ability to own, transfer or pledge beneficial interest in a Global Security.

So long as the Depositary or its nominee is the registered owner of a
Global Security, it will be considered the sole owner or holder of the Senior
Debt Securities represented by such Global Security for all purposes under
the Indenture. Except as set forth below, owners of a beneficial interest in
such

<PAGE>

Global Security will not be entitled to have the Senior Debt Securities
represented thereby registered in their names, will not receive or be
entitled to receive physical delivery of certificates representing the Senior
Debt Securities represented thereby and will not be considered the owners or
holders thereof under the Indenture. Accordingly, each person owning a
beneficial interest in such Global Security must rely on the procedures of
the Depositary and, if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder under the Indenture. The Issuer understands that under
existing practice, in the event that the Issuer requests any action of a
holder or a beneficial owner desires to take any action a holder is entitled
to take, the Depositary would act upon the instructions of, or authorize, the
participant to take such action.

Payment of principal of, and interest on, the Senior Debt Securities will
be made to the Depositary or its nominee, as the case may be, as the
registered owner and holder of the Global Security representing such Senior
Debt Securities. None of the Issuer, the Trustee, any paying agent or
registrar for the Senior Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.

The Issuer has been advised by the Depositary that the Depositary will
credit participants' accounts with payments of principal or interest on the
payment date thereof in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Security as shown on the
records of the Depositary. The Issuer expects that payments by participants
to owners of beneficial interests in the Global Security held through such
participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers registered in "street name," and will be the responsibility of such
participants.

A Global Security may not be transferred except as a whole by the
Depositary to a nominee or successor of the Depositary or by a nominee of the
Depositary to another nominee of the Depositary. A Global Security
representing all but not part of the Senior Debt Securities being offered
hereby is exchangeable for Senior Debt Securities in definitive form of like
tenor and terms if (i) the Depositary notifies the Issuer that it is
unwilling or unable to continue as depositary for such Global Security or if
at any time the Depositary is no longer eligible to be, or in good standing
as, a clearing agency registered under the Exchange Act, and in either case,
a successor depositary is not appointed by the Issuer within 90 days of
receipt by the Issuer of such notice or of the Issuer becoming aware of such
ineligibility, or (ii) the Issuer in its sole discretion at any time
determines not to have all of the Senior Debt Securities represented by a
Global Security and notifies the Trustee thereof. A Global Security
exchangeable pursuant to the preceding sentence shall be exchangeable for
Senior Debt Securities registered in such names and in such authorized
denominations as the Depositary for such Global Security shall direct.

NEGATIVE PLEDGE

The Indenture provides that the Issuer and any successor corporation will
not, and will not permit any Subsidiary to, create, assume, incur or
guarantee any indebtedness for borrowed money secured by a pledge, lien or
other encumbrance except for Permitted Liens (as defined in the Indenture) on
the Voting Stock of DLJSC or any other Subsidiary of the Issuer which shall
hereafter succeed by merger or otherwise to all or substantially all of the
business of DLJSC (a "DLJSC Successor"), without making effective provision
whereby the Senior Debt Securities will be secured equally and ratably with
such secured indebtedness. (Section 4.3)

CERTAIN DEFINITIONS

The term "Holder" or "Securityholder" as defined in the Indenture means
the registered holder of any Senior Debt Security with respect to registered
Senior Debt Securities and the bearer of any unregistered Senior Debt
Security or any coupon appertaining thereto, as the case may be.

"Original Issue Discount Security" as defined in the Indenture means any
Senior Debt Security that provides for an amount less than the principal
amount thereof to be due and payable upon declaration of acceleration of the
maturity thereof pursuant to Section 6.2 of the Indenture.

<PAGE>

The term "Subsidiary" as defined in the Indenture means with respect to
any Person, any corporation, association or other business entity of which
more than 50% of the outstanding Voting Stock (as defined in the Indenture)
is owned directly or indirectly, by such Person and one or more other
Subsidiaries of such Person.

RESTRICTIONS ON MERGERS AND SALES OF ASSETS

Under the Indenture, the Issuer shall not consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to,
any Person (other than a consolidation with or merger with or into a
Subsidiary or a sale, conveyance, transfer, lease or other disposition to a
Subsidiary) or permit any Person to merge with or into the Issuer unless: (a)
either (i) the Issuer shall be the continuing Person or (ii) the Person (if
other than the Issuer) formed by such consolidation or into which the Issuer
is merged or that acquired or leased such property and assets of the Issuer
shall be a corporation organized and validly existing under the laws of the
United States of America or any jurisdiction thereof and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee,
all of the obligations of the Issuer on all of the Senior Debt Securities and
under the Indenture and the Issuer shall have delivered to the Trustee an
opinion of counsel stating that such consolidation, merger or transfer and
such supplemental indenture complies with this provision and that all
conditions precedent provided for in the Indenture relating to such
transaction have been complied with and that such supplemental indenture
constitutes the legal, valid and binding obligation of the Issuer or such
successor enforceable against such entity in accordance with the terms,
subject to customary exceptions; and (b) the Issuer shall have delivered to
the Trustee an officers' certificate to the effect that immediately after
giving effect to such transaction, no Default (as defined in the Indenture)
shall have occurred and be continuing and an opinion of counsel as to the
matters set forth in paragraph (a) above. (Section 5.1)

EVENTS OF DEFAULT

Events of Default defined in the Indenture with respect to the Senior Debt
Securities of any series are: (a) the Issuer defaults in the payment of all
or any part of the principal of any Senior Debt Security of such series when
the same becomes due and payable at maturity, upon acceleration, redemption
or mandatory repurchase, including as a sinking fund installment, or
otherwise; (b) the Issuer defaults in the payment of any interest on any
Senior Debt Security of such series when the same becomes due and payable,
and such default continues for a period of 30 days; (c) the Issuer defaults
in the performance of or breaches any other covenant or agreement of the
Issuer in the Indenture with respect to any Senior Debt Security of such
series or in the Senior Debt Securities of such series and such default or
breach continues for a period of 60 consecutive days after written notice
thereof has been given to the Issuer by the Trustee or to the Issuer and the
Trustee by the Holders of 25% or more in aggregate principal amount of the
Senior Debt Securities of all series affected thereby; (d) an involuntary
case or other proceeding shall be commenced against the Issuer or DLJSC
(including for purposes of paragraph (d) and (e) hereof any DLJSC Successor)
with respect to the Issuer or DLJSC or their respective debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of the Issuer or DLJSC or for any substantial part of
the property and assets of the Issuer or DLJSC, and such involuntary case or
other proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Issuer or DLJSC
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (e) the Issuer or DLJSC (i) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary
case under any such law, (ii) consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or DLJSC or for all or
substantially all of the property and assets of the Issuer or DLJSC or (iii)
effects any general assignment for the benefit of creditors; (f) an event of
default, as defined in any one or more indentures or instruments evidencing
or under which the Issuer has at the date of the Indenture or shall
thereafter have outstanding an aggregate of at least $25,000,000 aggregate
principal amount of

<PAGE>

indebtedness for borrowed money, shall happen and be continuing and such
indebtedness shall have been accelerated so that the same shall be or become
due and payable prior to the date on which the same would otherwise have
become due and payable, and such acceleration shall not be rescinded or
annulled within ten days after notice thereof shall have been given to the
Issuer by the Trustee (if such event be known to it), or to the Issuer and
the Trustee by the holders of at least 25% in aggregate principal amount of
the Senior Debt Securities at the time outstanding; provided that if such
event of default under such indentures or instruments shall be remedied or
cured by the Issuer or waived by the holders of such indebtedness, then the
Event of Default under the Indenture by reason thereof shall be deemed
likewise to have been thereupon remedied, cured or waived without further
action upon the part of either the Trustee or any of the Securityholders; (g)
failure by the Issuer to make any payment at maturity, including any
applicable grace period, in respect of at least $25,000,000 aggregate
principal amount of indebtedness for borrowed money and such failure shall
have continued for a period of ten days after notice thereof shall have been
given to the Issuer by the Trustee (if such event be known to it), or to the
Issuer and the Trustee by the holders of at least 25% in aggregate principal
amount of the Senior Debt Securities at the time outstanding; provided that
if such failure shall be remedied or cured by the Issuer or waived by the
holders of such indebtedness, then the Event of Default under the Indenture
by reason thereof shall be deemed likewise to have been thereupon remedied,
cured or waived without further action upon the part of either the Trustee or
any of the Securityholders; or (h) any other Event of Default established
with respect to any series of Senior Debt Securities issued pursuant to the
Indenture occurs. (Section 6.1)

The Indenture provides that if an Event of Default described in clauses
(a) or (b) of the immediately preceding paragraph with respect to the Senior
Debt Securities of any series then outstanding occurs and is continuing,
then, and in each and every such case, except for any series of Senior Debt
Securities the principal of which shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Senior Debt Securities of any such affected series then
outstanding under the Indenture (each such series treated as a separate
class) by notice in writing to the Issuer (and to the Trustee if given by
Securityholders), may declare the entire principal amount (or, if the Senior
Debt Securities of any such series are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms of such
series established pursuant to the Indenture) of all Senior Debt Securities
of such affected series, and the interest accrued thereon, if any, to be due
and payable immediately, and upon any such declaration the same shall become
immediately due and payable. If an Event of Default described in clauses (c)
or (h) of the immediately preceding paragraph with respect to the Senior Debt
Securities of one or more series then outstanding occurs and is continuing,
then, in each and every such case, except for any series of Senior Debt
Securities the principal of which shall have already become due and payable,
either the Trustee or the Holders of not less than 25% in aggregate principal
amount (or, if the Senior Debt Securities of any such series are Original
Issue Discount Securities, such portion of the principal as may be specified
in the terms thereof established pursuant to the Indenture) of the Senior
Debt Securities of all such affected series then outstanding under the
Indenture (treated as a single class) by notice in writing to the Issuer (and
to the Trustee if given by Securityholders), may declare the entire principal
amount (or, if the Senior Debt Securities of any such series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of such series established pursuant to the Indenture)
of all Senior Debt Securities of all such affected series, and the interest
accrued thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default described in clauses (d) or (e) of the immediately preceding
paragraph occurs and is continuing, then the principal amount (or, if any
Senior Debt Securities are Original Issue Discount Securities, such portion
of the principal as may be specified in the terms thereof established
pursuant to the Indenture) of all the Senior Debt Securities then outstanding
and interest accrued thereon, if any, shall be and become immediately due and
payable, without any notice or other action by any Holder or the Trustee to
the full extent permitted by applicable law. If an Event of Default described
in clauses (f) or (g) of the immediately preceding paragraph, or in clauses
(c) or (h) of the immediately preceding paragraph with respect to the Senior
Debt Securities of all series then outstanding, occurs and is continuing,
then, in each and every such case, either the Trustee or the Holders of not
less than 25% in aggregate principal amount (or, if the Senior Debt
Securities of any outstanding series are Original Issue Discount Securities,
such portion of the

<PAGE>

principal as may be specified in the terms thereof established pursuant to
the Indenture) of all Senior Debt Securities of any series then outstanding
under the Indenture except for any series of Senior Debt Securities the
principal of which shall have already become due and payable (treated as a
single class) by notice in writing to the Issuer (and to the Trustee if given
by Securityholders), may declare the entire principal amount (or, if the
Senior Debt Securities of any such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of such series established pursuant to the Indenture) of all Senior
Debt Securities of any series then outstanding, and the interest accrued
thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. Upon certain
conditions such declarations may be rescinded and annulled and past defaults
may be waived by the Holders of a majority in principal of the then
outstanding Senior Debt Securities of all such series that have been
accelerated (voting as a single class). (Section 6.2) Because the ability of
Holders to declare the Senior Debt Securities of any series due and payable
upon an Event of Default under clauses (c), (f), (g) or (h) of the
immediately preceding paragraph depends on the requisite action by Holders of
all affected series of Senior Debt Securities, if there is more than one
series of Senior Debt Securities outstanding, Holders of a particular series
of Senior Debt Securities may be unable to declare the Senior Debt Securities
due and payable upon an Event of Default described in clauses (c), (f), (g)
or (h) of the immediately preceding paragraph without action by Holders of
such other series. In the Senior Debt Offering, the Company issued
$500,000,000 in aggregate principal amount of 6 7/8% Senior Notes due 2005
under the Indenture, all of which were outstanding as of the date hereof.

The Indenture contains a provision under which, subject to the duty of the
Trustee during a default to act with the required standard of care, (i) the
Trustee may rely and shall be protected in acting or refraining from acting
upon any officers' certificate, opinion of counsel (or both), resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to
have been signed or presented by the proper person or persons and the Trustee
need not investigate any fact or matter stated in the document, but the
Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit; (ii) before the Trustee acts or
refrains from acting, it may require an officers' certificate and/or an
opinion of counsel, which shall conform to the requirements of the Indenture
and the Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate or opinion; subject to the
terms of the Indenture, whenever in the administration of the trusts of the
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting to take any
action under the Indenture, such matter (unless other evidence in respect
thereof be specifically prescribed in the Indenture) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by an officers' certificate delivered to
the Trustee, and such certificate, in the absence of negligence or bad faith
on the part of the Trustee, shall be full warrant to the Trustee for any
action taken, suffered or omitted to be taken by it under the provisions of
the Indenture upon the faith thereof; (iii) the Trustee may act through its
attorneys and agents not regularly in its employ and shall not be responsible
for the misconduct or negligence of any agent or attorney appointed with due
care; (iv) any request, direction, order or demand of the Issuer mentioned in
the Indenture shall be sufficiently evidenced by an officers' certificate
(unless other evidence in respect thereof be specifically prescribed in the
Indenture); and any Board Resolution may be evidenced to the Trustee by a
copy thereof certified by the secretary or an assistant secretary of the
Issuer; (v) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by the Indenture at the request, order or
direction of any of the Holders, unless such Holders shall have offered to
the Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request,
order or direction; (vi) the Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or
within its rights or powers or for any action it takes or omits to take in
accordance with the direction of the Holders in accordance with the Indenture
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under the Indenture; (vii) the Trustee may consult with
counsel of its selection and the advice of such counsel or any opinion of
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken

<PAGE>

by it under the Indenture in good faith and in reliance thereon; and (viii)
prior to the occurrence of an Event of Default under the Indenture and after
the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, officers' certificate, opinion of counsel, Board
Resolution, statement, instrument, opinion, report, notice, request, consent,
order, approval, appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing so to do by the Holders of not
less than a majority in aggregate principal amount of the Senior Debt
Securities of all series affected then outstanding; provided that, if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation
is, in the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of the Indenture, the Trustee may
require reasonable indemnity against such expenses or liabilities as a
condition to proceeding. (Section 7.2)

Subject to such provisions in the Indenture for the indemnification of the
Trustee and certain other limitations, the Holders of at least a majority in
aggregate principal amount (or, if any Senior Debt Securities are Original
Issue Discount Securities, such portion of the principal as may be specified
in the terms thereof established pursuant to the Indenture) of the
outstanding Senior Debt Securities of all series affected (voting as a single
class) may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the Senior Debt Securities of such
series by the Indenture; provided, that the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith
may be unduly prejudicial to the rights of Holders not joining in the giving
of such direction; and provided further, that the Trustee may take any other
action it deems proper that is not inconsistent with any directions received
from Holders of Senior Debt Securities pursuant to this paragraph. (Section
6.5)

Subject to various provisions in the Indenture, the Holders of at least a
majority in principal amount (or, if the Senior Debt Securities are Original
Issue Discount Securities, such portion of the principal as may be specified
in the terms thereof established pursuant to the Indenture) of the
outstanding Senior Debt Securities of all series affected (voting as a single
class), by notice to the Trustee, may waive an existing Default or Event of
Default with respect to the Senior Debt Securities of such series and its
consequences, except a Default in the payment of principal of or interest on
any Senior Debt Security as specified in clauses (a) or (b) of Section 6.1 of
the Indenture or in respect of a covenant or provision of the Indenture which
cannot be modified or amended without the consent of the Holder of each
outstanding Senior Debt Security affected. Upon any such waiver, such Default
shall cease to exist, and any Event of Default with respect to the Senior
Debt Securities of such series arising therefrom shall be deemed to have been
cured, for every purpose of the Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto. (Section 6.4)

The Indenture provides that no Holder of any Senior Debt Securities of any
series may institute any proceeding, judicial or otherwise, with respect to
the Indenture or the Senior Debt Securities of such series, or for the
appointment of a receiver or trustee, or for any other remedy under the
Indenture, unless: (i) such Holder has previously given to the Trustee
written notice of a continuing Event of Default with respect to the Senior
Debt Securities of such series; (ii) the Holders of at least 25% in aggregate
principal amount of outstanding Senior Debt Securities of all such series
affected shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
under the Indenture; (iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such request; (iv)
the Trustee for 60 days after its receipt of such notice, request and offer
of indemnity has failed to institute any such proceeding; and (v) during such
60-day period, the Holders of a majority in aggregate principal amount of the
outstanding Senior Debt Securities of all such affected series have not given
the Trustee a direction that is inconsistent with such written request. A
Holder may not use the Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over such other Holder. (Section 6.6)

The Indenture contains a covenant that the Issuer will file with the
Trustee, within 15 days after the Issuer is required to file the same with
the Commission, copies of the annual reports and of the information,
documents and other reports which the Issuer may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act.
(Section 4.5)

<PAGE>

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE

The Indenture provides with respect to each series of Senior Debt
Securities that the Issuer may terminate its obligations under the Senior
Debt Securities of any series and the Indenture with respect to Senior Debt
Securities of such series if: (i) all Senior Debt Securities of such series
previously authenticated and delivered, with certain exceptions, have been
delivered to the Trustee for cancellation and the Issuer has paid all sums
payable by it under the Indenture; or (ii) (a) the Senior Debt Securities of
such series mature within one year or all of them are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
giving the notice of redemption, (b) the Issuer irrevocably deposits in trust
with the Trustee, as trust funds solely for the benefit of the Holders of
such Senior Debt Securities for that purpose, money or U.S. Government
Obligations or a combination thereof sufficient (unless such funds consist
solely of money, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee), without consideration of any reinvestment, to pay
the principal of and interest on the Senior Debt Securities of such series to
maturity or redemption, as the case may be, and to pay all other sums payable
by it under the Indenture, and (c) the Issuer delivers to the Trustee an
officers' certificate and an opinion of counsel, in each case stating that
all conditions precedent provided for in the Indenture relating to the
satisfaction and discharge of the Indenture with respect to the Senior Debt
Securities of such series have been complied with. With respect to the
foregoing clause (i), only the Issuer's obligations to compensate and
indemnify the Trustee under the Indenture shall survive. With respect to the
foregoing clause (ii), only the Issuer's obligations to execute and deliver
Senior Debt Securities of such series for authentication, to set the terms of
the Senior Debt Securities of such series, to maintain an office or agency in
respect of the Senior Debt Securities of such series, to have moneys held for
payment in trust, to register the transfer or exchange of Senior Debt
Securities of such series, to deliver Senior Debt Securities of such series
for replacement or to be canceled, to compensate and indemnify the Trustee
and to appoint a successor trustee, and its right to recover excess money
held by the Trustee shall survive until such Senior Debt Securities are no
longer outstanding. Thereafter, only the Issuer's obligations to compensate
and indemnify the Trustee, and its right to recover excess money held by the
Trustee shall survive. (Section 8.1)

The Indenture provides that the Issuer (i) will be deemed to have paid and
will be discharged from any and all obligations in respect of the Senior Debt
Securities of any series, and the provisions of the Indenture will, except as
noted below, no longer be in effect with respect to the Senior Debt
Securities of such series ("legal defeasance") and (ii) may omit to comply
with any term, provision or condition of the Indenture described above under
"--Negative Pledge" (or any other specific covenant relating to such series
provided for in a Board Resolution or supplemental indenture which may by its
terms be defeased pursuant to the Indenture), and such omission shall be
deemed not to be an Event of Default under clauses (c) or (h) of the first
paragraph of "--Events of Default" with respect to the outstanding Senior
Debt Securities of a series ("covenant defeasance"); provided that the
following conditions shall have been satisfied: (a) the Issuer has
irrevocably deposited in trust with the Trustee as trust funds solely for the
benefit of the Holders of the Senior Debt Securities of such series, for
payment of the principal of and interest on the Senior Debt Securities of
such series, money or U.S. Government Obligations or a combination thereof
sufficient (unless such funds consist solely of money, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee) without consideration
of any reinvestment and after payment of all federal, state and local taxes
or other charges and assessments in respect thereof payable by the Trustee,
to pay and discharge the principal of and accrued interest on the outstanding
Senior Debt Securities of such series to maturity or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee), as
the case may be; (b) such deposit will not result in a breach or violation
of, or constitute a default under, the Indenture or any other material
agreement or instrument to which the Issuer is a party or by which it is
bound; (c) no Default with respect to such Senior Debt Securities of such
series shall have occurred and be continuing on the date of such deposit; (d)
the Issuer shall have delivered to the Trustee an opinion of counsel that (1)
the Holders of the Senior Debt Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of the
Issuer's exercise of its option under this provision of the Indenture and
will be subject to federal income tax on the same amount and in the same
manner

<PAGE>

and at the same times as would have been the case if such deposit and
defeasance had not occurred and (2) the Holders of the Senior Debt Securities
of such series have a valid security interest in the trust funds subject to
no prior liens under the Uniform Commercial Code, and (e) the Issuer has
delivered to the Trustee an officers' certificate and an opinion of counsel,
in each case stating that all conditions precedent provided for the Indenture
relating to the defeasance contemplated have been complied with. In the case
of legal defeasance under clause (i) above, the opinion of counsel referred
to in clause (d)(1) above may be replaced by a ruling directed to the Trustee
received from the Internal Revenue Service to the same effect. Subsequent to
legal defeasance under clause (i) above, the Issuer's obligations to execute
and deliver Senior Debt Securities of such series for authentication, to set
the terms of the Senior Debt Securities of such series, to maintain an office
or agency in respect of the Senior Debt Securities of such series, to have
moneys held for payment in trust, to register the transfer or exchange of
Senior Debt Securities of such series, to deliver Senior Debt Securities of
such series for replacement or to be canceled, to compensate and indemnify
the Trustee and to appoint a successor trustee, and its right to recover
excess money held by the Trustee shall survive until such Senior Debt
Securities are no longer outstanding. After such Senior Debt Securities are
no longer outstanding, in the case of legal defeasance under clause (i)
above, only the Issuer's obligations to compensate and indemnify the Trustee
and its right to recover excess money held by the Trustee shall survive.
(Sections 8.2 and 8.3)

MODIFICATION OF THE INDENTURE

The Indenture provides that the Issuer and the Trustee may amend or
supplement the Indenture or the Senior Debt Securities of any series without
notice to or the consent of any Holder: (1) to cure any ambiguity, defect or
inconsistency in the Indenture; provided that such amendments or supplements
shall not materially and adversely affect the interests of the Holders; (2)
to comply with Article 5 of the Indenture in connection with a consolidation
or merger of the Issuer or the sale, conveyance, transfer, lease or other
disposal of all or substantially all of the property and assets of the
Issuer; (3) to comply with any requirements of the Commission in connection
with the qualification of the Indenture under the Trust Indenture Act; (4) to
evidence and provide for the acceptance of appointment under the Indenture
with respect to the Securities of any or all series by a successor Trustee;
(5) to establish the form or forms or terms of Senior Debt Securities of any
series or of the coupons pertaining to such Senior Debt Securities as
permitted under the Indenture; (6) to provide for uncertificated or
unregistered Senior Debt Securities and to make all appropriate changes for
such purpose; or (7) to make any change that does not materially and
adversely affect the rights of any Holder. (Section 9.1)

The Indenture also contains provisions whereby the Issuer and the Trustee,
subject to certain conditions, without prior notice to any Holders, may amend
the Indenture and the outstanding Senior Debt Securities of any series with
the written consent of the Holders of a majority in principal amount of the
Senior Debt Securities then outstanding of all series affected by such
amendment (all such series voting as one class), and the Holders of a
majority in principal amount of the outstanding Senior Debt Securities of all
series affected thereby (all such series voting as one class) by written
notice to the Trustee may waive future compliance by the Issuer with any
provision of the Indenture or the Senior Debt Securities of such series.
Notwithstanding the foregoing provisions, without the consent of each Holder
affected thereby, an amendment or waiver, including a waiver pursuant to
Section 6.4 of the Indenture, may not: (i) extend the stated maturity of the
principal of, or any sinking fund obligation or any installment of interest
on, such Holder's Senior Debt Security, or reduce the principal thereof or
the rate of interest thereon (including any amount in respect of original
issue discount), or any premium payable with respect thereto, or adversely
affect the rights of such Holder under any mandatory redemption or repurchase
provision or any right of redemption or repurchase at the option of such
Holder, or reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon an acceleration of the maturity
thereof or the amount thereof provable in bankruptcy, or change any place of
payment where, or the currency in which, any Senior Debt Security or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the due date
therefor; (ii) reduce the percentage in principal amount of outstanding
Senior Debt Securities of the relevant series the consent of whose Holders is
required for any such supplemental indenture, for any waiver of compliance
with certain provisions of the Indenture or certain Defaults and

<PAGE>

their consequences provided for in the Indenture; (iii) waive a Default in
the payment of principal of or interest on any Senior Debt Security of such
Holder; or (iv) modify any of the provisions of this provision of the
Indenture, except to increase any such percentage or to provide that certain
other provisions of the Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Senior Debt Security affected
thereby. A supplemental indenture which changes or eliminates any covenant or
other provision of the Indenture which has expressly been included solely for
the benefit of one or more particular series of Senior Debt Securities, or
which modifies the rights of Holders of Senior Debt Securities of such series
with respect to such covenant or provision, shall be deemed not to affect the
rights under the Indenture of the Holders of Senior Debt Securities of any
other series or of the coupons appertaining to such Senior Debt Securities.
It shall not be necessary for the consent of any Holder under this provision
of the Indenture to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof. After an amendment, supplement or waiver under this
section of the Indenture becomes effective, the Issuer shall give to the
Holders affected thereby a notice briefly describing the amendment,
supplement or waiver. The Issuer will mail supplemental indentures to Holders
upon request. Any failure of the Issuer to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture or waiver. (Section 9.2)

GOVERNING LAW

The Indenture and the Senior Debt Securities will be governed by the laws
of the State of New York. (Section 10.8)

CONCERNING THE TRUSTEE

The Issuer and its subsidiaries maintain ordinary banking relationships
with The Bank of New York and its affiliates.

<PAGE>

PLAN OF DISTRIBUTION

Offered Securities may be sold (i) through agents, (ii) through
underwriters, (iii) through dealers or (iv) directly to purchasers.

Offers to purchase Offered Securities may be solicited by agents
designated by the Company from time to time. Any such agent involved in the
offer or sale of the Offered Securities will be named, and any commissions
payable by the Company to such agent will be set forth, in the Prospectus
Supplement. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its
appointment. Any such agent may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the Offered Securities so offered and
sold.

If an underwriter or underwriters are utilized in the sale of Offered
Securities, the Company will execute an underwriting agreement with such
underwriter or underwriters at the time an agreement for such sale is
reached, and the names of the specific managing underwriter or underwriters,
as well as any other underwriters, and the terms of the transactions,
including compensation of the underwriters and dealers, if any, will be set
forth in the Prospectus Supplement, which will be used by the underwriters to
make resales of Offered Securities.

If a dealer is utilized in the sale of Offered Securities, the Company
will sell such Offered Securities to the dealer, as principal. The dealer may
then resell such Offered Securities to the public at varying prices to be
determined by such dealer at the time of resale. The name of any such dealer
and the terms of the transactions, if any, will be set forth in the
Prospectus Supplement relating thereto.

Offers to purchase Offered Securities may be solicited directly by the
Company and sales thereof may be made by the Company directly to
institutional investors or others. The terms of any such sales will be
described in the Prospectus Supplement relating thereto.

Agents, underwriters and dealers may be entitled under agreements which
may be entered into with the Company, to indemnification by the Company
against certain liabilities, including liabilities under the 1933 Act, and
any such agents, underwriters or dealers, or their affiliates may be
customers of, engage in transactions with or perform services for the
Company, in the ordinary course of business.

If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Offered Securities from the Company at the public offering price set forth in
the Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date stated in the
Prospectus Supplement. Such Contracts will be subject to only those
conditions set forth in the Prospectus Supplement. A commission indicated in
the Prospectus Supplement will be paid to underwriters and agents soliciting
purchases of Offered Securities pursuant to any such Contracts accepted by
the Company.

This Prospectus, together with the Prospectus Supplement, may also be used
by DLJSC in connection with offers and sales of Offered Securities related to
market-making transactions by and through DLJSC, at negotiated prices related
to prevailing market prices at the time of sale or otherwise. DLJSC may act
as principal or agent in such transactions.

LEGAL MATTERS

Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Securities and certain other legal matters in connection with
the offering of the Securities will be passed upon by Michael A. Boyd, Senior
Vice President and General Counsel to the Company, and Davis Polk & Wardwell.
Mr. Boyd owns restricted stock units of the Company and holds options to
purchase shares of Common Stock. See "Management." Davis Polk & Wardwell from
time to time provides legal services to the Company.

<PAGE>

EXPERTS

The consolidated statements of financial condition of the Company as of
December 31, 1993 and 1994 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the years ended December 31,
1992, 1993 and 1994 have been included herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.

<PAGE>

GLOSSARY

The following Glossary includes definitions of certain general banking and
finance terms as well as terms relating specifically to the Company.

ARBITRAGE: Profiting through the buying and selling of securities
exhibiting price disparities in different markets or profiting through the
buying and selling of a security and an option on that security.

BRADY BONDS: Bonds which are denominated in U.S. dollars, collateralized
by zero-coupon U.S. Treasury bonds and often issued by sovereign countries or
their government agencies. These bonds are issued mainly to allow the
restructuring of bank loans of emerging economies.

BRIDGE FINANCING/BRIDGE LOANS: Financing or loans which are short term and
are undertaken as an interim step before the issuance of securities or while
longer term financing or loans are being sought.

BROKER: Intermediary between buyer and seller acting as agent.

BROKER CALL RATE: Rate of interest charged to brokers for funds borrowed
to finance their client's margin accounts.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS): Debt obligations secured by
the cash flow from a pool of mortgages or mortgage securities, as well as
other mortgage-related derivative products.

COMMERCIAL BANKING: Traditional banking activities which include the
accepting of savings, time or demand deposits and the making of loans,
usually short or intermediate term, with such deposited funds.

CONVERTIBLE SECURITIES: Securities of a company which may be exchanged
under preset circumstances for other securities of such company.

CORRESPONDENT BROKERAGE SERVICES: Brokerage services provided to
institutions or other organizations in markets to which they do not have
access.

DEALER: One who, in the regular course of business, buys and sells
securities for his own account and risk, as principal.

DERIVATIVES: Financial instruments, the payments on which are linked to
the prices, or relationships between prices, of securities or commodities,
interest rates, currency exchange rates or other financial measures.

FANNIE MAE: The Federal National Mortgage Association. This
government-sponsored, publicly owned corporation buys mortgages from approved
holders using proceeds from the sale of Fannie Mae issued debt securities.

FEDERAL FUNDS RATE: The interest rate charged by banks when loaning
reserves deposited with a Federal Reserve bank. These loaned reserves are
usually those in excess of federal bank reserve requirements.

FORWARD CONTRACTS: Contracts which call for the purchase or sale, on a
delayed settlement basis, of debt securities or currencies or other financial
instruments.

FUTURES CONTRACTS: Contracts which call for the purchase or sale of a
financial instrument at a specified future date at a specified price. These
contracts are traded on exchanges and are settled daily.

HIGH-YIELD: Securities having a rating of BB+ (Standard & Poor's) or Ba1
(Moody's) or lower. This term is usually used in reference to bonds or other
debt securities.

INVESTMENT BANKING: Banking activities which involve assisting
corporations with their capital-market and other financing transactions. Such
activities include underwriting public offerings of securities, arranging
private placements, and advising with respect to mergers, acquisitions, and
restructurings.

INVESTMENT-GRADE: Securities having one of the top four ratings, AAA to
BBB-(Standard & Poor's) or Aaa to Baa3 (Moody's). This term is usually used
in reference to bonds or other debt securities.

LEVERAGED BUYOUT: The acquisition of a company using a significant amount
of debt.

<PAGE>

LIBOR: The London Inter-Bank Offered Rate.

MAKING A MARKET: The creation of a market in a security, usually by a
broker-dealer, by maintaining firm bid and offer prices and standing ready to
purchase or sell the security at such prices.

MARGIN ACCOUNT: Brokerage account maintained by a client so as to allow
that client to purchase securities using money borrowed from the broker or
loaned securities in a short sale.

MASTER NOTES: Loan agreement by which two non-bank entities agree to
borrow and lend money.

MERCHANT BANKING: Banking transactions which include purchasing equity or
debt securities, making commitments to purchase such securities in merger,
acquisition, restructuring and leveraged capital transactions, or providing
bridge financing.

MEZZANINE SECURITIES: Preferred stock or convertible subordinated
debentures.

MONEY MARKET RATE: Interest rate on money market securities, primarily
commercial paper and bank certificates of deposit, which have short-term
maturities.

MORTGAGE-BACKED SECURITIES: Securities which consist of shares
representing ownership in the interest and principal payments of pooled
mortgages.

OPEN END MUTUAL FUND: Mutual fund which will issue new shares to meet
increased investment demand.

OVER THE COUNTER (OTC): Any market or transaction in a market which does
not involve the use of a securities exchange.

PORTFOLIO COMPANIES: Companies in which an equity investment has been made
by DLJMBP.

PRIVATE PLACEMENT: Sale of securities to a small group of people, often
institutional investors, in such a manner which exempts the sale from
registration under the Securities Act.

PROPRIETARY TRADING: Trading by a broker-dealer for the brokerage firm's
own account.

SALLIE MAE: The Student Loan Marketing Association. This
government-sponsored, private organization buys, sells, services, and holds
educational loans made to qualified students.

STRUCTURED NOTES: Customized derivative instruments in which the amount of
interest or principal paid on a debt obligation is linked to movements in the
value of cash market financial instruments.

UNDERWRITING: Process by which investment banks assume part or all of the
risk associated with an offering of securities by agreeing to buy the
securities prior to resale to the public.

VENTURE CAPITAL: Capital which is invested in a new, untried or turnaround
business.

WRAP FEE ACCOUNT: Brokerage account for which the broker-dealer hires a
money manager, pays the manager's wages out of the client's assets and
executes the manager's buy or sell orders. The broker-dealer receives a fee
for these services.

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. & SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report .......................................................... F-2
Consolidated Statements of Financial Condition at December 31, 1993 and 1994 and at
September 30, 1995 (Unaudited) ...................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1992, 1993 and 1994
and the nine months ended September 30, 1994 and 1995 (Unaudited) ................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years ended
December 31, 1992, 1993 and 1994 and the nine months ended September 30, 1995
(Unaudited) ......................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1992, 1993 and
1994 and the nine months ended September 30, 1994 and 1995 (Unaudited) .............. F-6
Notes to Consolidated Financial Statements ............................................ F-8
Schedule I ............................................................................ F-23
Condensed Statements of Financial Condition (Parent Company Only) at
December 31, 1993 and 1994 and at September 30, 1995 (Unaudited) .................... F-23
Condensed Statements of Income (Parent Company Only) for the years ended December 31,
1992, 1993 and 1994 and the nine months ended September 30, 1994 and 1995 (Unaudited) F-24
Condensed Statements of Cash Flows (Parent Company Only) for the years ended December
31, 1992, 1993 and 1994 and the nine months ended September 30, 1994 and 1995
(Unaudited) ......................................................................... F-25
Notes to Condensed Financial Statements (Parent Company Only) ....................... F-26
</TABLE>

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Donaldson, Lufkin & Jenrette, Inc.

We have audited the accompanying consolidated statements of financial
condition of Donaldson, Lufkin & Jenrette, Inc. and subsidiaries as of
December 31, 1993 and 1994, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Donaldson, Lufkin & Jenrette, Inc. and subsidiaries as of December 31,
1993 and 1994, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1994, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth herein.

KPMG Peat Marwick LLP

New York, New York
February 3, 1995

F-2

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------------- 1995
1993 1994
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ....................................... $ 142,898 $ 94,854 $ 60,984
Cash and securities segregated for regulatory purposes or
deposited with clearing organizations .......................... 930,782 733,010 865,632
Securities purchased under agreements to resell ................. 11,547,685 10,476,420 17,006,164
Securities borrowed ............................................. 10,027,488 8,690,431 8,634,243
Receivables:
Customers ...................................................... 1,263,838 1,487,004 1,873,068
Brokers, dealers and other ..................................... 2,453,837 1,607,366 1,415,776
Securities owned, at value:
U.S. government and agencies ................................... 6,082,216 4,701,140 4,988,863
Corporate debt ................................................. 3,450,252 3,420,950 3,082,853
Foreign sovereign debt ......................................... 1,254,190 274,837 538,698
Mortgage whole loans ........................................... 411,240 132,596 653,407
Equities and other ............................................. 391,950 440,481 587,405
Long-term corporate development investments .................... 325,692 361,972 312,646
Mortgages, other receivables collateralized by real estate
assets and real estate owned ................................... 202,989 365,506 374,811
Property, equipment and leasehold improvements, at cost (net of
accumulated depreciation and amortization of $95,125, $107,905
and $114,206, respectively) .................................... 62,864 87,851 153,593
Other assets .................................................... 218,761 241,670 230,162
------------- ------------- ---------------
Total Assets ................................................. $38,766,682 $33,116,088 $40,778,305
============= ============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings ........................................... $ 1,772,630 $ 1,416,632 $ 1,306,621
Securities sold under agreements to repurchase .................. 20,923,471 18,356,731 22,955,663
Securities loaned ............................................... 3,193,203 2,028,665 2,622,076
Payables:
Customers ...................................................... 2,289,417 1,869,428 2,175,176
Brokers, dealers and other ..................................... 1,965,652 1,187,982 1,180,389
Securities sold not yet purchased, at value:
U.S. government and agencies ................................... 4,687,699 4,090,196 5,979,730
Corporate debt ................................................. 642,750 364,308 344,176
Foreign sovereign debt ......................................... 91,008 347,349 233,569
Equities and other ............................................. 580,517 730,065 681,732
Accounts payable and accrued expenses ........................... 911,388 947,299 1,184,100
Other liabilities and deferred amounts .......................... 184,646 192,281 275,328
------------- ------------- ---------------
37,242,381 31,530,936 38,938,560
------------- ------------- ---------------
Long-term borrowings ............................................ 549,007 539,861 704,335
------------- ------------- ---------------
Total liabilities ............................................ 37,791,388 32,070,797 39,642,895
------------- ------------- ---------------
Cumulative Exchangeable $8.83 Preferred Stock, at redemption
value .......................................................... 225,000 225,000 225,000
------------- ------------- ---------------
Stockholders' Equity:
Common Stock ($0.10 par value; 150,000,000 shares authorized;
50,000,000 shares issued and outstanding) ................... 1,000 1,000 5,000
Paid-in capital ............................................... 232,080 232,080 228,080
Retained earnings ............................................. 518,049 587,555 677,888
Cumulative translation adjustment ............................. (835) (344) (558)
------------- ------------- ---------------
Total stockholders' equity .................................. 750,294 820,291 910,410
------------- ------------- ---------------
Total Liabilities and Stockholders' Equity ...................... $38,766,682 $33,116,088 $40,778,305
============= ============= ===============
</TABLE>

See accompanying notes to consolidated financial statements.

F-3

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1992 1993 1994 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Commissions ....................... $ 289,666 $ 358,783 $ 376,072 $ 280,968 $ 343,117
Underwritings ..................... 350,317 574,568 261,094 179,720 317,508
Fees .............................. 158,123 211,296 281,293 176,557 264,020
Interest, net of interest to
finance U.S. government, agency
and mortgage-backed securities of
$918,418, $1,083,606, $1,612,823,
$1,181,860 and 1,499,614,
respectively .................... 381,694 657,346 791,888 592,921 638,436
Principal transactions-net:
Trading .......................... 272,015 381,529 165,727 141,064 265,655
Investment ....................... 195,852 79,873 97,588 58,517 92,148
Other ............................. 16,465 21,910 35,021 24,505 40,376
----------- ----------- ----------- ----------- -----------
Total revenues ................. 1,664,132 2,285,305 2,008,683 1,454,252 1,961,260
----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Compensation and benefits ......... 886,612 1,200,418 897,828 675,192 924,898
Interest .......................... 212,291 381,697 503,832 357,318 464,486
Brokerage, clearing, exchange fees
and other ....................... 114,103 133,805 135,623 93,645 122,579
Occupancy and equipment ........... 71,225 79,964 90,059 63,136 88,645
Communications .................... 28,741 31,941 36,585 26,820 31,313
Other operating expenses .......... 106,160 155,480 139,756 95,641 126,839
----------- ----------- ----------- ----------- -----------
Total costs and expenses ........ 1,419,132 1,983,305 1,803,683 1,311,752 1,758,760
----------- ----------- ----------- ----------- -----------
Income before provision for income
taxes .............................. 245,000 302,000 205,000 142,500 202,500
----------- ----------- ----------- ----------- -----------
Provision for income taxes .......... 98,000 115,900 82,000 57,000 81,000
----------- ----------- ----------- ----------- -----------
Net income .......................... $ 147,000 $ 186,100 $ 123,000 $ 85,500 $ 121,500
=========== =========== =========== =========== ===========
Dividends on preferred stock ....... $ 0 $ 0 $ 20,970 $ 16,005 $ 14,901
=========== =========== =========== =========== ===========
Earnings applicable to
common shares ...................... $ 102,030 $ 69,495 $ 106,599
=========== =========== ===========
Pro forma weighted average
common shares outstanding .......... 51,475 51,475
=========== ===========
Pro forma earnings per common share $ 1.98 $ 2.07
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993, 1994 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
CUMULATIVE
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1991 ..... $ 10 $ 83,070 $ 256,962 $ 251 $ 340,293
Net income ......................... -- -- 147,000 -- 147,000
Cash dividends on common stock
($0.63 per share) ................. -- -- (31,638) -- (31,638)
Translation adjustment ............. -- -- -- (1,013) (1,013)
-------- ---------- ----------- ------------- -----------
Balances at December 31, 1992 ..... 10 83,070 372,324 (762) 454,642
Net income ......................... -- -- 186,100 -- 186,100
Cash dividends on common stock
($0.81 per share) ................. -- -- (40,375) -- (40,375)
Additional capital contributions .. -- 150,000 -- -- 150,000
Stock split ........................ 990 (990) -- -- --
Translation adjustment ............. -- -- -- (73) (73)
-------- ---------- ----------- ------------- -----------
Balances at December 31, 1993 ..... 1,000 232,080 518,049 (835) 750,294
Net income ......................... -- -- 123,000 -- 123,000
Cash dividends:
Common stock ($0.65 per share) ... -- -- (32,524) -- (32,524)
Preferred stock ($9.32 per share) -- -- (20,970) -- (20,970)
Translation adjustment ............. -- -- -- 491 491
-------- ---------- ----------- ------------- -----------
Balances at December 31, 1994 ..... 1,000 232,080 587,555 (344) 820,291
Net income ......................... -- -- 121,500 -- 121,500
Cash dividends:
Common stock ($0.33 per share) ... -- -- (16,266) -- (16,266)
Preferred stock ($6.62 per share) -- -- (14,901) -- (14,901)
Stock split ........................ 4,000 (4,000) -- -- 0
Translation adjustment ............. -- -- -- (214) (214)
-------- ---------- ----------- ------------- -----------
Balances at September 30, 1995 .... $5,000 $228,080 $677,888 $ (558) $910,410
</TABLE>

See accompanying notes to consolidated financial statements.

F-5

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- ----------------------------
1992 1993 1994 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income ................................. $ 147,000 $ 186,100 $ 123,000 $ 85,500 $ 121,500
-------------- -------------- ------------- ------------- -------------
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization ............. 12,005 14,242 24,382 16,521 22,573
Deferred taxes ............................ 22,392 (93,635) (55,805) (83,000) (41,904)
(Increase) decrease in unrealized
appreciation of long-term corporate
development investments ................. (70,202) 56,391 (17,481) 42,678 70,528
Other-net ................................. (16,319) 981 982 736 736
-------------- -------------- ------------- ------------- -------------
94,876 164,079 75,078 62,435 173,433
(Increase) decrease in operating assets:
Cash and securities segregated for
regulatory purposes or deposited with
clearing organizations ................... (6,024) (216,129) 197,772 264,263 (132,622)
Securities purchased under agreements to
resell ................................... (1,692,405) (2,505,207) 620,133 1,852,833 (5,379,608)
Securities borrowed ........................ (2,115,109) (2,243,446) 1,337,057 (257,542) 56,188
Receivables from customers ................. (287,201) (253,543) (223,166) (244,900) (386,064)
Receivables from brokers, dealers and other (621,783) (1,069,664) 846,471 352,092 191,590
Securities owned, at value ................. (1,255,124) (5,340,103) 2,619,844 (628,267) (881,222)
Other assets ............................... (5,636) (82,241) 13,853 (20,971) 15,473
Increase (decrease) in operating liabilities:
Securities sold under agreements to
repurchase ............................... 1,692,405 2,505,207 (620,133) (1,852,833) 5,379,608
Securities loaned .......................... 85,455 859,344 (1,164,538) (372,586) 593,411
Payables to customers ...................... 169,224 658,755 (419,989) (444,816) 305,748
Payables to brokers, dealers and other ..... 268,544 842,535 (777,670) (112,599) (7,593)
Securities sold not yet purchased, at value 1,096,386 1,906,997 (470,056) 3,675,844 1,707,289
Accounts payable and accrued expenses ...... 354,177 208,041 35,911 (12,758) 236,801
Other liabilities and deferred amounts ..... (10,014) 164,226 63,440 47,946 124,951
Translation adjustment ..................... (1,013) (73) 491 159 (214)
-------------- -------------- ------------- ------------- -------------
Net cash (used in) provided by operating
activities .................................. $(2,233,242) $(4,401,222) $ 2,134,498 $ 2,308,300 $ 1,997,169
============== ============== ============= ============= =============
</TABLE>

See accompanying notes to consolidated financial statements.

F-6

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ----------------------------
1992 1993 1994 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from investing activities:
Net proceeds from (payments for):
Purchases of long-term corporate
development investments .............. $ (88,391) $ (77,296) $ (77,450) $ (42,761) $ (66,858)
Sales of long-term corporate development
investments .......................... 135,527 51,293 58,650 36,077 45,656
Purchases of property, equipment and
leasehold improvements ............... (18,045) (22,043) (48,630) (34,492) (87,759)
Purchases of mortgages, other
receivables collateralized by real
estate assets and real estate owned .. -- (202,989) (290,404) (181,183) (24,864)
Sales of mortgages, other receivables
collateralized by real estate assets
and real estate owned ................ -- -- 127,887 80,315 15,559
Other assets ........................... 1,122 14,074 (37,500) 14,614 (4,521)
------------ ------------ ------------- ------------- -------------
Net cash provided by (used in) investing
activities .............................. 30,213 (236,961) (267,447) (127,430) (122,787)
------------ ------------ ------------- ------------- -------------
Cash flows from financing activities:
Net proceeds from (payments for):
Short-term financings .................. 1,982,687 4,339,878 (1,851,473) (2,126,482) (2,040,823)
Secured term loan agreement ............ -- -- -- -- 250,000
Subordinated promissory note payable to
Equitable ............................ 100,000 (100,000) -- -- --
Subordinated debt financings ........... (255) 69,430 49,586 49,587 175
Other long-term debt ................... 105,528 -- (41,714) (41,714) (86,437)
Senior notes payable ................... 100,000 -- (18,000) (18,000) --
Additional capital contributions ....... -- 150,000 -- -- --
Issuance of preferred stock ............ -- 225,000 -- -- --
Dividends paid ......................... (31,638) (40,375) (53,494) (43,394) (31,167)
------------ ------------ ------------- ------------- -------------
Net cash provided by (used in) financing
activities .............................. 2,256,322 4,643,933 (1,915,095) (2,180,003) (1,908,252)
------------ ------------ ------------- ------------- -------------
Increase (decrease) in cash and cash
equivalents ............................. 53,293 5,750 (48,044) 867 (33,870)
Cash and cash equivalents at beginning of
period .................................. 83,855 137,148 142,898 142,898 94,854
------------ ------------ ------------- ------------- -------------
Cash and cash equivalents at end of
period .................................. $ 137,148 $ 142,898 $ 94,854 $ 143,765 $ 60,984
============ ============ ============= ============= =============
</TABLE>

See accompanying notes to consolidated financial statements.

F-7

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF SEPTEMBER 30, 1995 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1994 AND 1995 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include Donaldson, Lufkin &
Jenrette, Inc. and its subsidiaries ("DLJ" or the "Company"). All significant
intercompany balances and transactions have been eliminated. These
consolidated financial statements reflect, in the opinion of management, all
adjustments (consisting of normal, recurring accruals) necessary for a fair
presentation of the consolidated financial position and results of operations
of the Company. The Company is wholly-owned by The Equitable Companies
Incorporated and its subsidiaries (together, "Equitable"). The Company was
acquired by Equitable in 1985. The Company's separate financial statements
reflect Equitable's cost basis established at the time of Equitable's
acquisition of the Company. See Note 17.

Substantially all of the Company's financial assets and liabilities, as
well as financial instruments with off-balance sheet risk, are carried at
market or fair values or are carried at amounts which approximate current
fair value because of their short-term nature. Estimates of current value are
made at a specific point in time, based on relevant market information and
information about the financial instrument, specifically, the value of the
underlying financial instrument. These estimates do not reflect any premium
or discount that could result from offering for sale at one time the
Company's entire holdings of a particular financial instrument.

Accounts receivable from and payable to customers include amounts due on
cash and margin transactions. Securities owned by customers are held as
collateral for these receivables. Such collateral is not reflected in the
consolidated financial statements.

Securities borrowed and securities loaned are financing arrangements which
are recorded at the amount of cash collateral advanced or received.
Securities borrowed transactions require the Company to deposit cash, letters
of credit or other collateral with the lender. With respect to securities
loaned, the Company receives collateral in the form of cash or other
collateral in an amount generally in excess of the market value of securities
loaned. The Company monitors the market value of securities borrowed and
loaned on a daily basis with additional collateral obtained or refunded as
necessary.

Securities sold under agreements to repurchase (repurchase agreements) and
securities purchased under agreements to resell (resale agreements) are
treated as financing arrangements and are carried at contract amounts
reflective of the amounts at which the securities will be subsequently
reacquired or resold as specified in the respective agreements. Interest is
accrued on such contract amounts and is included in receivables from and
payables to brokers, dealers and other in the accompanying consolidated
statements of financial condition. The Company takes possession of the
underlying assets purchased under agreements to resell and obtains additional
collateral when the market value falls below the contract value. Repurchase
and resale agreements with the same counterparty, same maturity date, settle
through the Federal reserve system, and which are subject to master netting
agreements are presented net in the consolidated financial statements.

U.S. government and agency securities, mortgage-backed securities,
options, futures and forward transactions and certain other debt obligations
are recorded in the consolidated financial statements on a trade date basis.
All other securities are recorded on a settlement date basis and adjustments
are made to a trade date basis, if significant.

Securities owned (other than long-term corporate development investments)
are carried at market value. Changes in unrealized appreciation
(depreciation) arising from fluctuations in market value or upon realization
of security positions are reflected in revenues, principal transactions-net,
trading.

Long-term corporate development investments represent the Company's
involvement in private debt and equity investments which generally have no
readily available market or may otherwise be restricted

F-8

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

as to resale under the Securities Act of 1933. Accordingly, these investments
are carried at estimated fair value as determined by the Board of Directors.
The cost of these investments was $237.1 million, $255.9 million and $277.1
million at December 31, 1993, 1994 and September 30, 1995, respectively. The
increase (decrease) in net unrealized appreciation of long-term corporate
development investments amounted to $70.2 million, $(56.4) million, $17.5
million, $(42.7) million and $(70.5) million for the years ended December 31,
1992, 1993 and 1994 and the nine months ended September 30, 1994 and 1995,
respectively. Changes in unrealized appreciation arising from changes in fair
value or upon realization are reflected in revenues, principal
transactions-net, investment.

Mortgages and other receivables collateralized by real estate assets
generally represent the Company's interest in mortgages receivable and are
carried at amounts approximating fair value, determined by reference to the
cash flows and/or estimated sales prices of the underlying properties.

Property and equipment are carried at cost and are depreciated on a
straight-line basis over the estimated useful life of the related assets
ranging from three to eight years. Leasehold improvements are amortized over
the lesser of the useful life of the improvement or term of the lease.
Exchange memberships owned by the Company are included in other assets and
are carried at cost.

Assets and liabilities of foreign subsidiaries denominated in non-U.S.
dollar currencies are translated at exchange rates prevailing at the date of
the consolidated statements of financial condition. Revenues and expenses are
translated at average exchange rates during the period. The gains or losses
resulting from translating foreign currency financial statements into U.S.
dollars are included as a separate component of stockholders' equity. Gains
or losses resulting from foreign currency transactions are included in the
consolidated statements of income.

The Company and its subsidiaries are included in the consolidated Federal
income tax returns filed by Equitable. DLJ and its subsidiaries provide taxes
as if the Company files a separate tax return. Related current and deferred
tax receivables or liabilities with Equitable are included in other assets or
liabilities in the consolidated statements of financial condition. Deferred
tax expenses and benefits are recognized in the consolidated financial
statements for the changes in deferred tax liabilities and assets. Income
taxes for interim period consolidated financial statements have been accrued
using the Company's estimated annual effective tax rates. Under a tax sharing
agreement with Equitable, all Federal taxes payable by the Company are
payable to Equitable for periods while the Company is at least 80% owned by
Equitable.

All liabilities related to postretirement and postemployment benefits have
been provided for and the amounts related to such accruals are not
significant.

For purposes of the consolidated statements of cash flows, the Company
considers all demand deposits held in banks, and highly liquid investments
with maturities of 90 days or less other than those held for sale in the
ordinary course of business to be cash equivalents.

Certain reclassifications have been made to prior year financial
statements to conform to the 1994 presentation.

2. RELATED PARTY TRANSACTIONS

In the normal course of business, the Company provides brokerage services
including clearance, investment banking and related activities for Equitable
and certain of its affiliates. The amounts related to such activities are not
significant. The Company manages a bridge facility that provides short-term
loans in connection with merchant banking transactions. The facility includes
a $500 million commitment of senior revolving debt from a commercial bank
syndicate and a $750 million commitment of subordinated debt from Equitable.
The Company has agreed to pay Equitable the first $25 million of aggregate
principal losses incurred by Equitable with respect to all bridge loans
outstanding on September 30, 1995 and the first $25 million of aggregate
principal losses incurred by Equitable with respect to bridge loans made
after September 30, 1995, plus the amount, if any, by which any individual
loss exceeds $150

F-9

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

million. Amounts payable to Equitable and its affiliates consisting primarily
of Federal income taxes payable to Equitable amounted to $158.6 million,
$95.0 million and $156.9 million at December 31, 1993, 1994 and September 30,
1995, respectively, and were included in other liabilities and deferred
amounts in the accompanying consolidated statements of financial condition.
The Company does not pay or receive interest on the outstanding balances with
Equitable. The average balances outstanding amounted to $52.0 million, $85.5
million, $128.1 million and $116.7 million at December 31, 1992, 1993, 1994
and September 30, 1995.

3. CASH AND SECURITIES SEGREGATED UNDER FEDERAL AND OTHER REGULATIONS

Cash of $104.2 million, $134.3 million and $8.3 million and securities
with a market value of $790.3 million, $547.2 million and $793.5 million as
of December 31, 1993, 1994 and September 30, 1995, respectively, have been
segregated in special reserve bank accounts for the benefit of customers in
accordance with regulations of the Securities and Exchange Commission and the
Commodities Futures Trading Commission.

4. BORROWINGS

Short-term borrowings are from banks and other financial institutions and
are generally demand obligations, at interest rates approximating Federal
fund rates. Such borrowings are generally used to finance securities
inventories, to facilitate the securities settlement process and to finance
securities purchased by customers on margin. At December 31, 1993, 1994 and
September 30, 1995, securities owned by the Company, aggregating $484.7
million, $583.9 million and $490.5 million, respectively, were pledged to
secure certain of these borrowings.

Short-term borrowings and repurchase agreements and the weighted average
interest rates related to these borrowings at December 31, 1993, 1994, and
September 30, 1995 are as follows:

<TABLE>
<CAPTION>
AMOUNTS WEIGHTED AVERAGE INTEREST RATES
------------------------------------- ---------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
-------------------- ------------- ---------------- -------------
1993 1994 1995 1993 1994 1995
(UNAUDITED) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Securities sold under
agreements to repurchase ..... $20,923 $18,357 $22,956 3.16% 5.91% 6.12%
Bank loans ..................... 1,189 740 854 3.67 6.37 6.69
Borrowings from other financial
institutions .................. 584 677 453 3.90 6.57 6.66
</TABLE>

The Company also finances its activities through long-term borrowing
arrangements. Long-term borrowings, including current maturities of $37.6
million, $82.0 million and $110.1 million at December 31, 1993, 1994 and
September 30, 1995, respectively, consist of the following:

F-10

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------- 1995
1993 1994
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Senior subordinated revolving credit agreement due in
1998 .................................................... $200,000 $250,000 $250,000
Secured term loan agreement due 1999 ..................... -- -- 242,500
Medium term notes, 6.65%--7.88% due through 1997 ........ 130,000 112,000 88,000
Swiss franc bonds, 10.55% due in 1996 .................... 103,550 104,532 105,268
Secured notes, 6.40% due in 1995 ......................... 90,581 51,367 --
Other .................................................... 24,876 21,962 18,567
---------- ---------- ---------------
Total long-term borrowings ............................. $549,007 $539,861 $704,335
========== ========== ===============
</TABLE>

Scheduled maturities of long-term borrowings are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------- 1995
1993 1994
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
1994 ... $ 37,627 $ -- $ --
1995 ... 105,386 82,090 --
1996 ... 306,533 358,310 110,138
1997 ... 99,250 99,250 101,461
1998 ... 126 126 250,126
1999 ... 85 85 242,610
---------- ---------- ---------------
$549,007 $539,861 $704,335
========== ========== ===============
</TABLE>

The commitment under the senior subordinated revolving credit agreement
was increased to $325 million in January 1995. Interest on the senior
subordinated revolving credit agreement is 4.625% at December 31, 1993,
7.063% at December 31, 1994 and 6.75% at September 30, 1995 and is calculated
based on the London Interbank Offered Rate ("LIBOR").

The secured term loan agreement of $242.5 million bears interest based on
various indices. Interest on the agreement is 7.625% at September 30, 1995.
The loan, which is collateralized by bonds secured by real estate and due in
1999, was repaid in full in October 1995. See Note 17--Subsequent Events

The Swiss franc borrowing in the aggregate principal amount of Sfr. 200
million bears interest at 5.625% and matures in 1996. The proceeds from the
bond issue, net of issuance costs, amounted to approximately $93 million. In
order to eliminate the exposure to changes in foreign currency exchange
rates, a currency exchange agreement was entered into with a third party
financial institution which effectively changes the Swiss franc denominated
principal and interest obligations into U.S. denominated obligations. The
Company's accounting policy relative to such borrowing and related currency
exchange agreement is such that interest expense is accrued over the life of
the obligation for annual interest payments made to the third party financial
institution. The principal amount due at maturity also includes approximately
$9.8 million of additional accreted principal which is treated as interest
expense over the life of the obligation, thereby increasing the effective
interest rate to approximately 10.55%. The fee for the currency exchange
agreement was nominal and was charged to expense at the inception of the
borrowing.

Interest paid on all borrowings and financing arrangements amounted to
$1.1 billion, $1.4 billion, $2.1 billion, $1.5 billion and $2.0 billion for
the years ended December 31, 1992, 1993 and 1994 and for the nine months
ended September 30, 1994 and 1995, respectively.

F-11

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At September 30, 1995 the Company has entered into committed credit
facilities which enables it to borrow up to $1.25 billion on a secured basis
and $340 million on an unsecured basis. Interest rates to be charged are
based upon Federal funds, Eurodollar or negotiated rates, as applicable.
There were no borrowings outstanding at December 31, 1993, 1994 and September
30, 1995 under these agreements.

5. INCOME TAXES

Income taxes included in the consolidated statements of income represent
the following:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
(IN THOUSANDS)
<S> <C> <C> <C>
Year ended December 31, 1992:
U.S. Federal ................ $ 57,125 $ 19,875 $ 77,000
State and local ............. 18,483 2,517 21,000
---------- -------------- ----------
$ 75,608 $ 22,392 $ 98,000
========== ============== ==========
Year ended December 31, 1993:
U.S. Federal ................ $187,949 $(85,199) $102,750
State and local ............. 21,586 (8,436) 13,150
---------- -------------- ----------
$209,535 $ (93,635) $115,900
========== ============== ==========
Year ended December 31, 1994:
U.S. Federal ................ $115,067 $(45,417) $ 69,650
State and local ............. 22,738 (10,388) 12,350
---------- -------------- ----------
$137,805 $(55,805) $ 82,000
========== ============== ==========
</TABLE>

The difference between the "expected" Federal tax rate and expense
computed by applying the statutory tax rate to income before provision for
income taxes (dollar amounts in thousands) and the effective tax rate and
expense is as follows:

<TABLE>
<CAPTION>
1992 1993 1994
------------------------ ------------------------ ------------------------
PERCENT OF PERCENT OF PERCENT OF
PRE-TAX PRE-TAX PRE-TAX
AMOUNT EARNINGS AMOUNT EARNINGS AMOUNT EARNINGS
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax
provision ................... $ 83,300 34.0% $105,700 35.0% $ 71,750 35.0%
Non-taxable income and
expense items ............... 840 0.3 1,652 0.5 2,223 1.1
State and local taxes, net of
related Federal income tax
benefit ..................... 13,860 5.7 8,548 2.8 8,027 3.9
---------- ------------ ---------- ------------ ---------- ------------
$98,000 40.0% $115,900 38.3% $82,000 40.0%
========== ============ ========== ============ ========== ============
</TABLE>

F-12

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December
31, 1993 and December 31, 1994 are as follows:

<TABLE>
<CAPTION>
1993 1994
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Inventory .............................. $ 8,447 $ 4,957
Investments ............................ 30,011 32,234
Other liabilities and accrued expenses 125,595 191,089
Fixed assets ........................... 1,200 3,019
Other .................................. 1,873 93
Deferred tax liabilities:
Investments ............................ (76,952) (80,996)
Fixed assets ........................... (732) (746)
Other .................................. (1,573) (5,976)
---------- ----------
Net deferred tax asset .................. $ 87,869 $143,674
========== ==========
</TABLE>

There are no valuation allowances recorded against deferred tax assets at
December 31, 1993 and 1994 since management has determined that there is
sufficient taxable income from carryback years and future reversals of
existing taxable temporary differences to offset the tax benefit of
deductible temporary differences.

An affiliate of Equitable is included in the combined returns for certain
state and local tax returns filed by the Company.

Net Federal income tax equivalents paid to Equitable were $46.6 million,
$112.9 million, $87.0 million, $87.0 million and $93.1 million for the years
ended December 31, 1992, 1993, 1994 and the nine months ended September 30,
1994 and 1995, respectively.

6. NET CAPITAL

The Company's wholly-owned principal subsidiary, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") is a registered broker-dealer, a
registered futures commission merchant and member firm of The New York Stock
Exchange, Inc. (the "NYSE") and, accordingly is subject to the minimum net
capital requirements of the Securities and Exchange Commission, the NYSE and
the Commodities Futures Trading Commission. As such, it is subject to the
NYSE's net capital rule which conforms to the Uniform Net Capital Rule
pursuant to rule 15c3-1 of the Securities Exchange Act of 1934. Under the
alternative method permitted by this rule, the required net capital, as
defined, shall not be less than two percent of aggregate debit balances
arising from customer transactions, as defined, or four percent of segregated
funds, as defined, whichever is greater. The NYSE may also require a member
firm to reduce its business if its net capital is less than four percent of
aggregate debit balances and may prohibit a member firm from expanding its
business and declaring cash dividends if its net capital is less than five
percent of aggregate debit balances. At December 31, 1994, DLJSC's net
capital of approximately $504.5 million was 28% of aggregate debit balances
and in excess of the minimum requirement by approximately $467.0 million and
at September 30, 1995, DLJSC's net capital of approximately $620.4 million
was 27% of aggregate debit balances and in excess of the minimum requirement
by approximately $566.0 million.

Certain U.S. and foreign subsidiaries of the Company are subject to net
capital requirements of their respective regulatory agencies. At December 31,
1993, 1994 and September 30, 1995 the Company and its subsidiaries were in
compliance with all applicable regulatory capital adequacy requirements.

7. DERIVATIVE FINANCIAL INSTRUMENTS

Substantially all of the Company's business related to derivatives is by
its nature trading activities which are primarily for the purpose of customer
accommodations. The Company's derivative activities

F-13

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

consist of option writing and trading in forward and futures contracts.
Derivative financial instruments have both on-and-off balance sheet
implications depending on the nature of the contracts. The Company's
involvement in swap contracts is not significant.

ACCOUNTING POLICIES

Changes in unrealized gains or losses on all derivative instruments are
included in the consolidated statements of income in principal transactions
trading, net. Changes in the value of options contracts are included in the
consolidated statements of income. Fair value of the options includes the
premiums which are deferred and are recognized as revenue over the life of
the option contracts on a straight-line basis. The notional amount of forward
and futures contracts are treated as off-balance sheet items. Changes in
unrealized gains and losses on forward and futures contracts are included in
the consolidated statements of income with corresponding offsetting amounts
reflected as assets or liabilities.

OPTIONS

As part of customer accommodations the Company writes option contracts
specifically designed to meet customers' needs. As a writer of over the
counter ("OTC") option contracts, the Company receives a cash premium at the
beginning of the contract period and bears the risk of unfavorable changes in
the value of the financial instruments underlying the options. Options
written do not expose the Company to credit risk since they obligate the
Company (not its counterparty) to perform. With respect to these
transactions, the Company makes a determination that credit exposures are
appropriate for the particular counterparty with whom business is conducted.
All counterparties are reviewed on a regular basis to establish appropriate
exposure limits for a variety of transactions. In certain cases, specific
transactions are analyzed to determine the amount of potential exposure that
could arise, and the counterparty's credit is reviewed to determine whether
it supports such exposure. In addition to the counterparty's credit status,
the Company analyzes market movements that could affect exposure levels. The
Company considers four main factors that may affect trades in determining
trading limits: the settlement method; the time it will take for a trade to
settle (i.e., the maturity of the trade); the volatility that could affect
the value of the securities involved in the trade; and the size of the trade.
In addition to determining trading limits, the Company actively manages the
credit exposure relating to its trading activities by entering into master
netting agreements when feasible; monitoring the creditworthiness of
counterparties and the related trading limits on an ongoing basis and
requesting additional collateral when deemed necessary; diversifying and
limiting exposure to individual counterparties and geographic locations; and
limiting the duration of exposure. In certain cases, the Company also may
close out transactions or assign them to other counterparties when deemed
necessary or appropriate to mitigate credit risks. The Company generally
covers its market risk associated with its options business by purchasing or
selling cash or other derivative financial instruments on a proprietary basis
to cover the options written. Such purchases and sales may include debt and
equity securities, futures and forward contracts and options. The Company
reviews the creditworthiness of the counterparties of such covering
transactions. Future cash requirements for options written is equal to the
fair value of the option. Option contracts are typically written for a
duration of less than thirteen months and are included in the balance sheets
at fair value.

The notional (contract) value of the written options was $4.6 billion,
$3.0 billion, $5.3 billion and $4.2 billion at December 31, 1993 and 1994 and
September 30, 1994 and 1995, respectively. Such options contracts are covered
by the following financial instruments which the Company has purchased or
sold on a proprietary basis and are reflected in the table below at either
the underlying contract (notional) amounts for derivative instruments or at
market value for cash instruments:

F-14

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------ ------------------
1993 1994 1994 1995
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. government and mortgage-backed
securities and options thereon .... $1,400 $ 882 $1,279 $1,618
Foreign sovereign debt securities .. 1,116 622 1,289 468
Currency forward contracts .......... 479 285 592 --
Forward rate agreements and options 943 82 465 43
Equity swaps ........................ -- -- 145 398
Futures contracts ................... 65 329 735 630
Equities and other .................. 597 820 836 1,028
-------- -------- -------- --------
Total .............................. $4,600 $3,020 $5,341 $4,185
======== ======== ======== ========
</TABLE>

The trading revenues from option writing activity (net of related interest
expense) were approximately $76.4 million, $100.3 million, $82.8 million and
$65.7 million for the years ended December 31, 1993 and 1994 and the nine
months ended September 30, 1994 and 1995, respectively. The average fair
value of the options was approximately $102.9 million, $137.0 million, $146.8
million and $110.5 million for the years ended December 31, 1993 and 1994 and
the nine months ended September 30, 1994 and 1995, respectively. The fair
values of options were approximately $149.9 million, $104 .0 million, $146.2
million and $147.9 million at December 31, 1993 and 1994 and September 30,
1994 and 1995, respectively, and were included as liabilities in the
accompanying consolidated statements of financial condition.

FORWARDS AND FUTURES

As part of its trading activities, the Company also enters into forward
purchases and sales contracts for mortgage-backed securities and foreign
currencies. The Company also enters into futures contracts on equity-based
indices, foreign currencies and other financial instruments. Forward and
futures contracts are treated as off-balance sheet items. Changes in
unrealized gains and losses on forward and futures contracts are included in
the consolidated statements of income with corresponding offsetting amounts
reflected as assets or liabilities. Market risk for a forward and future is
the movement of price on the notional value of the contracts. Cash
requirements at inception equal the original margin on futures contracts.
Generally, no cash is required at inception for forward contracts. The cash
requirement at settlement is equal to the notional value on the contract for
a forward contract and the daily changes in market value for a futures
contract. The performance of forward contracts is dependent on the financial
reliability of the counterparty and exposes the Company to credit risk. The
Company monitors credit exposure of forward contracts by limiting
transactions with specific counterparties, reviewing credit limits and
adhering to internally established credit extension policies. Futures
contracts are exchange-traded financial instruments that generally do not
represent exposure to credit risk due to daily cash settlements of the change
in market value with the exchanges. The credit risk with the futures exchange
is limited to the net positive change in the market value for a single day.
The following is a summary of the values of these contracts at December 31,
1993, 1994 and September 30, 1995:

F-15

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------- --------------------
1993 1994 1994 1995
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C>
Forward Contracts:
Purchased at notional (contract) value $34,592 $11,295 $20,643 $15,104
Sold at notional (contract) value ..... 37,272 13,548 21,869 14,944
Futures Contracts:
Purchased at market value .............. $ 99 $ 31 $ 153 $ 272
Sold at market value ................... 534 1,654 2,108 1,004
</TABLE>

The following is a summary of the values of these contracts included in
the consolidated financial statements at December 31, 1993, 1994 and
September 30, 1995:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------- -----------------
1993 1994 1994 1995
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C>
Forward Contracts:
Net trading gains (losses) ................... $(46) $(157) $(105) $126
Average fair values during the period ........ 0.2 16 15 (5)
Unrealized gains included in total assets
at end of period ........................... 6 12 101 27
Unrealized losses included in total
liabilities at end of period ............... -- 18 76 26
Futures Contracts:
Net trading gains (losses) ................... $ (9) $ 59 $ 50 $(53)
Average fair values during the period ........ 0.4 11 15 (7)
Unrealized gains included in total assets
at end of period ........................... 1 5 13 --
Unrealized losses included in total
liabilities at end of period ............... -- -- (4) 16
</TABLE>

Average fair values during the period were computed using month end
averages. The fair values of futures contracts are measured by reference to
quoted market prices. Fair values of forward contracts are estimated on the
basis of dealer quotes, pricing models or quoted prices for financial
instruments with similar characteristics. The fair value of options is
measured by the unamortized premiums and the intrinsic value determined from
various pricing services. The Company generally enters into futures, forward
and option transactions for periods of 90 days or less. The remaining
maturities for all options, forwards and futures are less than 13 months.

8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

In the normal course of business, the Company's customer, trading and
correspondent clearance activities involve the execution, settlement and
financing of various securities and financial instrument transactions. The
execution of these transactions includes the purchase and sale (including
"short sales") of securities, the writing of options, and the purchase and
sale of financial futures contracts and forward purchase and sales contracts
for mortgage-backed securities and foreign currencies. These activities may
expose the Company to off-balance sheet risk in the event the customer or
counterparty to the transaction is unable to fulfill its contractual
obligations and margin requirements are not sufficient to fully cover losses.
In these situations, the Company may be required to purchase or sell
financial instruments at prevailing market prices which may not fully cover
the obligations of its customers or counterparties. The Company limits this
risk by requiring customers and counterparties to maintain margin collateral
that is

F-16

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

in compliance with regulatory and internal guidelines. Additionally, with
respect to the Company's correspondent clearance activities, introducing
correspondent brokers are required to guarantee the performance of their
customers in meeting contractual obligations.

The Company's financing and securities settlement activities involve the
Company using securities as collateral in support of various secured
financing sources. In the event the counterparty does not meet its contracted
obligation to return securities used as collateral, the Company may be
exposed to the risk of reacquiring the securities at prevailing market prices
in order to satisfy its obligations. The Company controls this risk by
monitoring the market value of securities pledged on a daily basis and by
requiring adjustments of collateral levels in the event of excess market
exposure.

The Company's activities include entering into forward contracts which
provide for the future delivery or receipt of securities at a specified price
or yield. Risk arises from the potential inability of counterparties to
perform under the terms of the contracts and from changes in securities value
and interest rates. The Company controls the risk by monitoring the market
value of the securities contracted on a daily basis and reviewing the
creditworthiness of the counterparties. The Company reflects the changes in
the market value of these instruments in the consolidated statement of
income. The settlement of these transactions is not expected to have a
material adverse effect on the Company's consolidated financial statements.

Risks associated with letters of credit, guarantees or underwriting
commitments are not significant.

9. CONCENTRATIONS OF CREDIT RISK

As a securities broker and dealer, the Company is engaged in various
securities trading and brokerage activities servicing a diverse group of
domestic and foreign corporations, governments, institutional and individual
investors. A substantial portion of the Company's transactions are executed
with and on behalf of institutional investors including other brokers and
dealers, mortgage brokers, commercial banks, U.S. governmental agencies,
mutual funds and other financial institutions and are generally
collateralized. The Company's exposure to credit risk associated with the
nonperformance of these customers in fulfilling their contractual obligations
pursuant to securities transactions, can be directly impacted by volatile
securities markets, credit markets and regulatory changes. Credit risk is the
amount of accounting loss the Company would incur if a counterparty failed to
perform its obligations under contractual terms and the collateral held, if
any, was deemed insufficient.

The Company's customer securities activities are transacted on either a
cash or margin basis. In margin transactions, the Company extends credit to
the customer, subject to various regulatory and internal margin requirements,
collateralized by cash and securities in the customer's account. The Company
seeks to control the risks associated with its customer activities by
requiring customers to maintain margin collateral in compliance with various
regulatory and internal guidelines. The Company monitors required margin
levels daily and, pursuant to such guidelines, requires the customers to
deposit additional collateral, or reduce positions, when necessary.

10. PREFERRED STOCK

In 1993, the Company authorized and issued 2,250,000 shares of Cumulative
Exchangeable $8.83 Preferred Stock (the "Preferred Stock") for $225 million,
all of which were outstanding at December 31, 1993, 1994 and September 30,
1995. All shares of the Preferred Stock must be redeemed by the Company on
October 15, 2003 at a redemption price of $100 per share plus unpaid
dividends, if any. The shares may be redeemable earlier, upon the occurrence
of certain events. The Preferred Stock is exchangeable at the Company's
option after October 15, 1996 into Subordinated Exchangeable Notes bearing
interest at a rate of 9.58% per annum maturing October 15, 2003. Dividends on
the Preferred Stock are payable as declared by the Board of Directors.
Holders of the Preferred Stock do not have voting rights except in the event
of default or as required by law.

F-17

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. STOCKHOLDERS' EQUITY

In 1993, the Board of Directors declared a stock split in the form of a
dividend of 99 shares of the Company's common stock for each share owned. In
addition, the number of authorized shares of common stock was increased from
100,000 to 12,500,000 shares.

In 1993, a $100 million subordinated promissory note payable to Equitable
due in 1997 was converted to equity as an additional capital contribution in
addition to a $50 million cash contribution.

In August, 1995, the Company amended its Certificate of Incorporation
whereby the amount of total authorized shares of Common Stock was increased
to 150.0 million shares and the Company declared a 5-to-1 stock split ("the
1995 Stock Split"). All share, per share and dividend per share amounts have
been retroactively restated to reflect this split.

12. EMPLOYEE PLANS

The Company has two long-term incentive compensation plans ("1991 LTI
Plan" and "1994 LTI Plan"). (Certain members of management agreed with the
Company in 1993 not to participate in the 1994 LTI Plan but instead to extend
the performance period under which units in the 1991 LTI Plan are valued from
three to six years.) Units in the plans are awarded to participants at the
discretion of senior management. Participants generally vest in their unit
awards at the rate of 33% per annum, with 100% vesting at the end of each
three-year period. The 1994 LTI Plan ends December 31, 1996. The value of the
participants' units is based upon the Company's cumulative average
performance, as defined, over the three-year vesting period. Such value shall
be paid 50% within 120 days of the later of the final vesting date or the end
of the performance period with the remaining 50% payable within one year
thereafter. Amounts charged to expense for the 1991 LTI Plan and 1994 LTI
Plan were $119.5 million, $151.0 million, $92.6 million, $66.3 million and
$93.8 million for the years ended December 31, 1992, 1993 1994 and the nine
months ended September 30, 1994 and 1995, respectively.

The Company has a defined contribution employee benefit plan covering
substantially all of the Company's full-time and certain qualified part-time
employees. Company contributions to this plan are determined by the Board of
Directors of the Company annually and were $3.9 million, $5.0 million and
$4.9 million for 1992, 1993 and 1994, respectively.

Certain key employees of the Company participate in various other deferred
compensation arrangements which include equity investments in selected
merchant banking activities of the Company paid for by such employees and
other non-qualified plans which are funded by insurance contracts.

13. LEASES, COMMITMENTS AND CONTINGENT LIABILITIES

The Company leases office space and equipment under cancelable and
non-cancelable lease agreements which expire on various dates through the
year 2016. Rent expense for the years ended December 31, 1992, 1993, 1994 and
the nine months ended September 30, 1994 and 1995, aggregated $41.7 million,
$46.3 million, $55.7 million, $38.4 million and $55.9 million, respectively.
Sublease revenue for the years ended December 31, 1992, 1993, 1994 and the
nine months ended September, 1994 and 1995, aggregated $1.9 million, $1.2
million, $1.0 million, $0.8 million and $0.7 million, respectively.

F-18

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At December 31, 1994 minimum rental commitments, exclusive of sublease
revenue, escalation and renewal options, on all non-cancelable leases in
excess of one year, are as follows:

<TABLE>
<CAPTION>
TOTAL LEASE
COMMITMENTS
PERIOD (IN THOUSANDS)
<S> <C>
1995 ........ $ 43,276
1996 ........ 63,314
1997 ........ 56,306
1998 ........ 39,545
1999 ........ 39,331
2000-2016 .. 578,708
--------------
Total ...... $ 820,480
==============
</TABLE>

In the normal course of business, the Company issues letters of credit for
which it is contingently liable for $203 million at September 30, 1995.

14. LEGAL PROCEEDINGS

The Company has been named as a defendant in a number of actions relating
to its various businesses including various civil actions and arbitrations
arising out of its activities as a broker-dealer in securities, as an
underwriter and as an employer and arising out of alleged employee
misconduct. The Company is also involved, from time to time, in proceedings
with, and investigations by, governmental agencies and self regulatory
organizations. Some of the actions have been brought on behalf of various
classes of claimants and seek damages of material or indeterminate amounts.
While the ultimate outcome of litigation involving the Company cannot be
predicted with certainty, management, having reviewed these actions with its
counsel, believes it has meritorious defenses to all such actions and intends
to defend each of these vigorously.

Although there can be no assurance that such actions, proceedings,
investigations and litigation will not have a material adverse effect on the
results of operations of the Company in any future period, depending in part
on the results for such period, in the opinion of management of the Company,
based upon advice of counsel, the ultimate resolution of any such actions,
proceedings, investigations and litigation against the Company will not have
a material adverse effect on the consolidated financial condition and results
of operations of the Company.

On June 12, 1995, a purported purchaser of certain securities issued by
Spectravision, Inc. ("Spectravision") filed a class action complaint for
unspecified damages in the U.S. District Court for the Northern District of
Texas against DLJSC and certain other defendants. The complaint alleges
violations of the Federal securities laws, violations of the Texas Securities
Act, common law fraud and negligent misrepresentation. The allegations arise
out of certain public offerings in 1993 aggregating approximately $290
million of securities of Spectravision, a provider of in-room television
programming in hotels, for which DLJSC acted as the managing underwriter.
DLJSC is also being sued as a seller of certain notes of Spectravision
acquired and resold by DLJSC. The complaint seeks to hold DLJSC liable for
various alleged misstatements and omissions contained in prospectuses and
other materials issued between July 1992 and June 1994. DLJSC has consented
to service of process, but no other proceedings have taken place. DLJSC
intends to defend itself vigorously against all of the allegations contained
in the complaint. Although there can be no assurance, the Company does not
believe that the ultimate outcome of this litigation will have a material
adverse effect on its financial condition. Due to the early stage of such
litigation, based upon the information currently available to it, management
cannot make an estimate of loss or predict whether or not such litigation
will have a material adverse effect on the Company's results of operations in
any particular period.

F-19

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In October 1995, DLJSC was named as a defendant in a class action filed
in a Texas State Court and in a proceeding before the Bankruptcy Court for
the Northern District of Texas on behalf of the holders of $550 million
principal amount of subordinated redeemable discount debentures of National
Gypsum Corporation ("NGC") cancelled in connection with a Chapter 11 plan of
reorganization for NGC consummated in July 1993. Subsequent to the
consummation of NGC's plan of reorganization, NGC's shares traded for values
substantially in excess of, and in 1995 NGC was acquired for a value
substantially in excess of, the values upon which NGC's plan of
reorganization was based. The action arises out of DLJSC's activities as
financial advisor to NGC in the course of NGC's Chapter 11 reorganization
proceedings. The complaint alleges that the plan of reorganization submitted
by NGC was based upon projections by NGC and DLJSC which intentionally
understated forecasts, and provided misleading and incorrect information in
order to hide NGC's true value and that defendants breached their fiduciary
duties by, among other things, providing false, misleading or incomplete
information to deliberately understate the value of NGC. The complaint seeks
compensatory and punitive damages sustained by the class. DLJSC intends to
defend itself vigorously against all of the allegations contained in the
complaint. Although there can be no assurance, the Company does not believe
that the ultimate outcome of this litigation will have a material adverse
effect on its financial condition. Due to the early stage of such litigation,
based upon the information currently available to it, management cannot make
an estimate of loss or predict whether or not such litigation will have a
material adverse effect on the Company's results of operations in any
particular period.

15. PRO FORMA EARNINGS PER SHARE

Pro forma earnings per share is computed by dividing net income applicable
to common shares by the weighted average number of shares of common stock and
common stock equivalents (adjusted for the 1995 Stock Split) outstanding
during each period presented and after deducting the dividends on preferred
stock requirements. Historical earnings per share have not been presented for
periods other than December 31, 1994 and September 30, 1995 as they would not
be meaningful. See Note 17, "Subsequent Events" for the effect of the
Restricted Stock Units on the Company's earnings per share.

16. INDUSTRY SEGMENT AND GEOGRAPHIC AREA DATA

The Company is primarily engaged in a single line of business as a
securities broker dealer, which comprises several types of services, such as
principal and agency transactions, underwriting and investment banking and
correspondent clearing. These activities constitute a single business
segment.

The assets and revenues related to the Company's foreign operations are
not significant.

17. SUBSEQUENT EVENTS (UNAUDITED)

In October 1995, Equitable made a capital contribution to the Company of a
portion of its investment in a New York Stock Exchange listed company valued
at $55.0 million at the time of the contribution. Such shares were recorded
at Equitable's carrying value immediately prior to the contribution, or $55.0
million, and will be subsequently marked to market as appropriate.

On October 30, 1995, the Company completed an initial public offering (the
"Initial Public Offering"). Of the 10.6 million shares of Common Stock sold
in the Initial Public Offering, 7.3 million

F-20

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

shares were sold by Equitable and 3.3 million shares were sold by the
Company, at $27.00 per share. This transaction had the effect of reducing
Equitable's ownership in the Company from 100 percent to 80.2 percent.
Equitable's ownership will be further reduced upon the vesting of forfeitable
restricted stock units ("RSU's") acquired by, and/or the exercise of certain
options granted to, certain of the Company's employees in connection with the
Initial Public Offering. (See below for RSU's and options issued in
connection with the Initial Public Offering.) Proceeds to the Company from
the Initial Public Offering amounted to approximately $81.2 million, net of
related expenses.

Concurrent with the Initial Public Offering, the Company completed the
Senior Debt Offering of $500 million aggregate principal amount of 6 7/8%
Senior Notes due November 1, 2005. Proceeds from the Senior Debt Offering
amounted to approximately $492.3 million net of related expenses and along
with the proceeds from the Initial Public Offering are primarily being used
to repay certain outstanding indebtedness.

In October 1995, the secured term loan agreement of $242.5 million, which
was collateralized by bonds secured by real estate and due in 1999, was
repaid in full with proceeds from the Initial Public Offering and Senior Debt
Offering.

1995 RESTRICTED STOCK UNIT PLAN

In October 1995, the Company adopted the 1995 Restricted Stock Unit Plan
(the "Plan"). Each RSU granted under the Plan represents the right under
certain circumstances to receive a share of Common Stock. Certain of the
Company's employees received RSU's in exchange for a reduction in their
interests in certain cash compensation arrangements maintained by the Company
aggregating $100.0 million. These units are subject to forfeiture in certain
circumstances and will vest annually in specified proportions from February
1997 through February 2000. Units that are forfeited under the Plan will
become eligible for subsequent grants. The number of units granted under the
Plan was 5,179,147 units.

Compensation expense for such awards, determined based on the difference
between the fair value of the RSU's and the amount of cash compensation
exchanged therefor, amounts to approximately $6.2 million and will be
reflected in the statement of income in the fourth quarter of 1995.

STOCK OPTION PLANS

In October 1995, the Company adopted the 1995 and 1996 Stock Option Plans.
Under the Company's 1995 Stock Option Plan options to purchase an aggregate
of 9,168,678 shares of Common Stock (the maximum allowable under the 1995
Stock Option Plan) with an exercise price of $27.00 were granted to certain
employees. Such options were granted to such employees in exchange for
foregoing future interests under certain cash compensation arrangements
aggregating $55.7 million. The options are subject to forfeiture in certain
circumstances and will vest in two equal installments in February 1997 and
February 1998 and are exercisable for a period of up to ten years from the
date of the grant. Options that are forfeited under the 1995 Stock Option
Plan will become eligible for subsequent grant under the 1996 Stock Option
Plan.

F-21

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The 1996 Stock Option Plan (the "1996 Plan") provides for the granting of
options to key employees, consultants or other service providers of the
Company after the Initial Public Offering. Any options granted under the 1996
Plan will have an exercise price of not less than the fair market value on
the date of the grant. Options to purchase a maximum of approximately 8.8
million shares of Common Stock, exclusive of forfeitures from the 1995 Plan,
will be available under the 1996 Plan. There are currently no options
outstanding under the 1996 Plan. The options will be exercisable for up to
ten years from the date of grant, will be subject to forfeiture in certain
circumstances and will vest in four equal installments commencing one year
after the date of grant. No options will become exercisable prior to February
1997. Options that are forfeited under the 1996 Plan become eligible for
subsequent grant under that plan.

F-22

<PAGE>

SCHEDULE I

DONALDSON, LUFKIN & JENRETTE, INC.
(PARENT COMPANY ONLY)

CONDENSED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1995
---------------------------- (UNAUDITED)
1993 1994
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents ............................. $ 83,455 $ 23,534 $ 3,604
Receivables from brokers, dealers and other .......... 30,161 2,048 4,404
Securities owned, at value ............................ 812,067 85,801 49,164
Intercompany receivables .............................. 2,115,501 1,674,720 1,899,183
Investment in subsidiaries, at equity ................. 771,170 927,671 1,019,052
Other assets .......................................... 124,229 147,780 129,720
------------- ------------- ---------------
Total Assets ...................................... $3,936,583 $2,861,554 $3,105,127
============= ============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings ................................. $ 1,195,777 $ 792,678 $ 838,077
Securities sold under agreements to repurchase ....... 778,844 -- --
Accounts payable and accrued expenses ................. 257,868 565,795 642,014
Due to Equitable ...................................... 158,556 94,984 156,944
Other liabilities and deferred amounts ................ 332,504 142,084 136,294
------------- ------------- ---------------
2,723,549 1,595,541 1,773,329
------------- ------------- ---------------
Long-term borrowings .................................. 237,740 220,722 196,388
------------- ------------- ---------------
Total liabilities ................................. 2,961,289 1,816,263 1,969,717
------------- ------------- ---------------
Cumulative Exchangeable $8.83 Preferred Stock, at
redemption value ..................................... 225,000 225,000 225,000
------------- ------------- ---------------
Stockholders' Equity:
Common stock ($0.10 par value; 150,000,000 shares
authorized; 50,000,000 shares issued and
outstanding) ...................................... 1,000 1,000 5,000
Paid-in capital ..................................... 232,080 232,080 228,080
Retained earnings ................................... 518,049 587,555 677,888
Cumulative translation adjustment ................... (835) (344) (558)
------------- ------------- ---------------
Total stockholders' equity ....................... 750,294 820,291 910,410
------------- ------------- ---------------
Total Liabilities and Stockholders' Equity ............ $ 3,936,583 $ 2,861,554 $3,105,127
============= ============= ===============
</TABLE>

See accompanying notes to condensed financial statements.

F-23

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC.
(PARENT COMPANY ONLY)

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

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- -----------------------
1992 1993 1994 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Dividends from affiliates ........... $ 98,993 $ 45,219 $ 25,000 $ 25,000 $ 60,000
Interest from affiliates ............ 30,143 56,559 111,483 80,251 81,086
Allocations to affiliates ........... 12,869 13,188 14,097 10,546 10,951
Other ............................... (893) 54,514 37,344 16,843 5,495
----------- ----------- ----------- ---------- -----------
Total revenues ................. 141,112 169,480 187,924 132,640 157,532
----------- ----------- ----------- ---------- -----------
Costs and Expenses:
Compensation and benefits ........... 92,839 146,633 75,017 70,235 101,545
Interest and operating expenses .... 59,047 93,171 69,409 39,230 41,142
----------- ----------- ----------- ---------- -----------
Total costs and expenses ....... 151,886 239,804 144,426 109,465 142,687
----------- ----------- ----------- ---------- -----------
Income (loss) before income tax
benefit and equity in undistributed
net income of subsidiaries .......... (10,774) (70,324) 43,498 23,175 14,845
----------- ----------- ----------- ---------- -----------
Income tax benefit ................... 63,911 66,030 2,170 5,424 26,133
----------- ----------- ----------- ---------- -----------
Income (loss) before equity in
undistributed net income of
subsidiaries ........................ 53,137 (4,294) 45,668 28,599 40,978
----------- ----------- ----------- ---------- -----------
Equity in undistributed net income of
subsidiaries ........................ 93,863 190,394 77,332 56,901 80,522
----------- ----------- ----------- ---------- -----------
Net income ........................... $ 147,000 $ 186,100 $ 123,000 $ 85,500 $ 121,500
=========== =========== =========== ========== ===========
Dividends on preferred stock ......... $ 0 $ 0 $ 20,970 $ 16,005 $ 14,901
=========== =========== =========== ========== ===========
Earnings applicable to common shares $ 147,000 $ 186,100 $ 102,030 $ 69,495 $ 106,599
=========== =========== =========== ========== ===========
Pro forma weighted average common
shares outstanding .................. 51,475 51,475
=========== ===========
Pro forma earnings per common share .. $ 1.98 $ 2.07
=========== ===========
</TABLE>

See accompanying notes to condensed financial statements

F-24

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- --------------------------
1992 1993 1994 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities ................................ $ 267,477 $ (644,532) $ 822,766 $ 627,799 $ 169,785
----------- ------------- ------------- ------------- -----------
Cash flows from investing activities:
Net proceeds from (payments for):
Purchases of long-term corporate
development investments ............... (52,066) (6,904) (3,435) (2,231) (4,189)
Sales of long-term corporate development
investments ........................... 46,910 2,428 802 800 2,292
Purchases of property, equipment and
leasehold improvements ................ (1,812) (2,665) 4,329 287 11,918
Dividends from affiliates ............... 98,993 45,219 25,000 25,000 60,000
Investment in subsidiaries .............. (1,527) (22,145) (78,678) (70,161) (9,957)
Other assets ............................ 13,362 (23,886) (18,049) (14,066) 14,124
----------- ------------- ------------- ------------- -----------
Net cash provided by (used in) investing
activities ............................. 103,860 (7,953) (70,031) (60,371) 74,188
----------- ------------- ------------- ------------- -----------

Cash flows from financing activities:
Net proceeds from (payments for):
Short-term financings ................... 94,618 1,340,272 (1,181,943) (1,197,286) 17,355
Subordinated promissory note payable to
Equitable ............................. 100,000 (100,000) -- -- --
Note payable ............................ -- -- -- 13,620 --
Other long-term debt .................... 130,000 (18,000) (18,000) (25,070)
Senior notes payable .................... -- -- (18,000) -- --
Additional capital contribution ......... -- 150,000 -- -- --
Issuance of preferred stock ............. -- 225,000 -- -- --
Dividends paid .......................... (31,638) (40,375) (53,494) (40,404) (31,167)
Intercompany receivables ................ (657,508) (827,814) 440,781 615,335 (225,021)
----------- ------------- ------------- ------------- -----------
Net cash provided by (used for) financing
activities ............................ (364,528) 729,083 (812,656) (626,735) (263,903)
----------- ------------- ------------- ------------- -----------
Increase (decrease) in cash and cash
equivalents ............................... 6,809 76,598 (59,921) (59,307) (19,930)
Cash and cash equivalents at beginning of
period .................................... 48 6,857 83,455 83,455 23,534
----------- ------------- ------------- ------------- -----------
Cash and cash equivalents at end of period $ 6,857 $ 83,455 $ 23,534 $ 24,148 $ 3,604
=========== ============= ============= ============= ===========
</TABLE>

See accompanying notes to condensed financial statements.

F-25

<PAGE>

DONALDSON, LUFKIN & JENRETTE, INC.
(PARENT COMPANY ONLY)

NOTES TO CONDENSED FINANCIAL STATEMENTS
INFORMATION AS OF SEPTEMBER 30, 1995 IS UNAUDITED

1. BASIS OF PRESENTATION

The condensed financial statements of Donaldson, Lufkin & Jenrette, Inc.
("Parent Company Only") should be read in conjunction with the consolidated
financial statements of Donaldson, Lufkin & Jenrette, Inc. and subsidiaries
("DLJ" or the "Company") and the notes thereto. Investments in subsidiaries
are accounted for under the equity method.

2. RELATED PARTY TRANSACTIONS

Intercompany receivables include $966.9 million, $848.9 million and $818.6
million loaned to subsidiaries under master note agreements at December 31,
1993, 1994 and September 30, 1995, respectively. The loans provide for
interest based on the Federal funds rate.

The amount of cash dividends paid to the Company by consolidated
subsidiaries of the Company amounted to $99.0 million, $45.2 million, $25.0
million, $25.0 million and $60.0 million for the years ended December 31,
1992, 1993, 1994, and the nine months ended September 30, 1994 and 1995,
respectively. There are no restrictions on the payment of dividends, except
for those stipulated in certain debt agreements and in the Uniform Net
Capital Rules applicable to brokers and dealers and futures commission
merchants, which provide for certain minimum amounts of capital to be
maintained to satisfy regulatory requirements in the Company's principal
broker dealer subsidiary, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJSC") and under certain circumstances limits the amount of excess capital
that can be withdrawn. The regulatory requirements, including the Uniform Net
Capital rules, are designed to measure the general financial integrity and
liquidity of registered broker-dealers and futures commission merchants and
provide minimum acceptable net capital levels to satisfy commitments to
customers. Unless the defined minimum regulated capital is maintained,
regulated broker-dealer subsidiaries would be prohibited from paying
dividends to the Company.

3. LONG-TERM BORROWINGS

Long-term borrowings from banks of $237.7 million, $220.7 million, and
$196.4 million include current maturities of $18.0 million, $27.0 million and
$105.3 million at December 31, 1993, 1994 and September 30, 1995,
respectively. The following table sets forth the maturity of long term
borrowings at December 31, 1993, 1994 and September 30, 1995:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------- 1995
PERIOD ENDED 1993 1994
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
1994 .......... $ 18,000 $ -- $ --
1995 .......... 27,026 27,026 --
1996 .......... 103,550 104,532 105,268
1997 .......... 89,164 89,164 91,120
1998 .......... -- -- --
---------- ---------- ---------------
$237,740 $220,722 $196,388
========== ========== ===============
</TABLE>

During 1994, the Parent Company entered into a committed credit facility
which enables it to borrow up to $340 million on an unsecured basis. There
were no borrowings outstanding at December 31, 1994 and September 30, 1995
under this agreement.

4. CONTINGENT LIABILITIES

From time to time the Parent Company issues guarantees of the obligations
of certain subsidiaries. The amounts of such items in the aggregate are not
considered excessive in relation to the normal operating levels of the
Company and management does not anticipate, as of September 30, 1995, losses
as a result of these transactions.

F-26

<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY
UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY PREFERRED 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.

TABLE OF CONTENTS

PAGE
--------
PROSPECTUS SUPPLEMENT
Use of Proceeds ............................ S-3
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends ............. S-3
Description of Series A Preferred Stock ... S-3
Recent Tax Proposals ....................... S-10
Underwriting ............................... S-10
PROSPECTUS
Available Information ...................... 2
Incorporation of Certain Information by
Reference ................................. 2
Prospectus Summary ......................... 3
Risk Factors ............................... 7
Use of Proceeds ............................ 13
Capitalization ............................. 14
The Company ................................ 15
Selected Consolidated Financial Data ...... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 19
Business ................................... 33
Regulation ................................. 48
Net Capital Requirements ................... 50
Management ................................. 52
Ownership of Common Stock of the Company by
Equitable and Directors and Officers of
the Company ............................... 64
Certain Transactions ....................... 66
Description of Capital Stock ............... 73
Description of Senior Debt Securities ..... 76
Plan of Distribution ....................... 86
Legal Matters .............................. 86
Experts .................................... 87
Glossary ................................... 88
Index to Consolidated Financial Statements F-1

4,000,000 SHARES

DONALDSON, LUFKIN &
JENRETTE, INC.

FIXED/ADJUSTABLE RATE
CUMULATIVE PREFERRED
STOCK, SERIES A

PROSPECTUS SUPPLEMENT

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
DEAN WITTER REYNOLDS INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY INC.

NOVEMBER 19, 1996

<PAGE>

PROSPECTUS SUPPLEMENT
NOVEMBER 19, 1996
(TO PROSPECTUS DATED FEBRUARY 6, 1996)

4,000,000 SHARES

DONALDSON, LUFKIN & JENRETTE, INC.

FIXED/ADJUSTABLE RATE CUMULATIVE

PREFERRED STOCK, SERIES A

The Series A Preferred Stock has been approved for listing on the New York
Stock Exchange, Inc.

This Prospectus Supplement has been prepared for use by Donaldson, Lufkin
& Jenrette Securities Corporation ("DLJSC") in connection with offers and
sales of the Series A Preferred Stock which may be made by it from time to
time in market-making transactions at negotiated prices relating to
prevailing market prices at the time of sale. The Company has been advised by
DLJSC that it currently intends to make a market in the Series A Preferred
Stock; however, it is not obligated to do so. Any such market-making may be
discontinued at any time, and there is no assurance as to the liquidity of,
or trading market for, the Series A Preferred Stock. DLJSC may act as
principal or agent in such transactions. See "Plan of Distribution."

<PAGE>

USE OF PROCEEDS

Donaldson, Lufkin & Jenrette, Inc. will not receive any proceeds from the
sale of the Series A Preferred Stock in any market-making transaction with
which this Prospectus Supplement may be delivered.

RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends for the Company for the periods
indicated.

(1) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.

DESCRIPTION OF SERIES A PREFERRED STOCK

GENERAL

DIVIDENDS

S-2

<PAGE>

The initial dividend for the dividend period commencing on November 22,
1996 to (but excluding) February 28, 1997 will be $1.617 per share and will
be payable on February 28, 1997. Thereafter, dividends on the Series A
Preferred Stock will be payable quarterly, as, if and when declared by the
Board of Directors of the Company on February 28, May 30, August 30 and
November 30 of each year (each a "Dividend Payment Date") at the annual rate
of 5.94% or $2.97 per share through November 30, 2001. After November 30,
2001, dividends on the Series A Preferred Stock will be payable on each
Dividend Payment Date, as, if and when declared by the Board of Directors of
the Company at the Applicable Rate from time to time in effect. The
Applicable Rate per annum for each dividend period beginning November 30,
2001 will be equal to 0.50% plus the highest of the Treasury Bill Rate, the
Ten Year Constant Maturity Rate and the Thirty Year Constant Maturity Rate
(each as defined below under "Adjustable Rate Dividends"), as determined in
advance of such dividend period. The Applicable Rate per annum for each
dividend period beginning November 30, 2001, will not be less than 6.44% nor
greater than 12.44% (without taking into account any adjustments as described
below under "Changes in the Dividends Received Percentage").

S-3

<PAGE>

that a per annum market discount rate for three-month U.S. Treasury bills is
not published by the Federal Reserve Board or by any Federal Reserve Bank or
by any U.S. Government department or agency during such Calendar Period, then
the Treasury Bill Rate for such dividend period will be the arithmetic
average of the two most recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one such rate is published
during the relevant Calendar Period) for all of the U.S. Treasury bills then
having remaining maturities of not less than 80 nor more than 100 days, as
published during such Calendar Period by the Federal Reserve Board, or if the
Federal Reserve Board does not publish such rates, by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company.
In the event that the Company determines in good faith that for any reason no
such U.S. Treasury Bill Rates are published as provided above during such
Calendar Period, then the Treasury Bill Rate for such dividend period will be
the arithmetic average of the per annum market discount rates based upon the
closing bids during such Calendar Period for each of the issues of marketable
non-interest-bearing U.S. Treasury securities with a remaining maturity of
not less than 80 nor more than 100 days from the date of each such quotation,
as chosen and quoted daily for each business day in New York City (or less
frequently if daily quotations are not generally available) to the Company by
at least three recognized dealers in U.S. Government securities selected by
the Company. In the event that the Company determines in good faith that for
any reason the Company cannot determine the Treasury Bill Rate for any
dividend period as provided above in this paragraph, the Treasury Bill Rate
for such dividend period will be the arithmetic average of the per annum
market discount rates based upon the closing bids during such Calendar Period
for each of the issues of marketable interest-bearing U.S. Treasury
securities with a remaining maturity of not less than 80 nor more than 100
days, as chosen and quoted daily for each business day in New York City (or
less frequently if daily quotations are not generally available) to the
Company by at least three recognized dealers in U.S. Government securities
selected by the Company.

S-4

<PAGE>

The Treasury Bill Rate, the Ten Year Constant Maturity Rate and the Thirty
Year Constant Maturity Rate will each be rounded to the nearest five
hundredths of a percent.

S-5

<PAGE>

1-[.35 (1-.70)]
-------------------
1-[.35 (1-DRP)]

S-6

<PAGE>

LIQUIDATION PREFERENCE

VOTING RIGHTS

The holders of shares of Series A Preferred Stock will not be entitled to
vote, except as set forth below or as expressly required by applicable law.

REDEMPTION

S-7

<PAGE>

<TABLE>
<CAPTION>
REDEMPTION
PRICE PER
REDEMPTION PERIOD SHARE
------------------ ------------
<S> <C>
November 22, 1996 to November 29, 1997 $52.50
November 30, 1997 to November 29, 1998 52.00
November 30, 1998 to November 29, 1999 51.50
November 30, 1999 to November 29, 2000 51.00
November 30, 2000 to November 29, 2001 50.50
On or after November 30, 2001 .......... 50.00
</TABLE>

Holders of Series A Preferred Stock will have no right to require
redemption of the Series A Preferred Stock.

The Series A Preferred Stock is not subject to any mandatory redemption,
sinking fund or other similar provisions.

Transfer Agent and Registrar. The Bank of New York will be the transfer
agent, registrar, dividend disbursing agent and redemption agent for the
Series A Preferred Stock.

S-8

<PAGE>

RECENT TAX PROPOSALS

PLAN OF DISTRIBUTION

This Prospectus Supplement has been prepared for use by DLJSC in
connection with offers and sales of the Series A Preferred Stock in
market-making transactions at negotiated prices related to prevailing market
prices at the time of the sale. DLJSC may act as principal or agent in such
transactions. DLJSC has advised the Company that it currently intends to make
a market in the Series A Preferred Stock, but it is not obligated to do so
and may discontinue any such market-making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of, or the trading
market for, the Series A Preferred Stock.

DLJSC served as an underwriter in the offering of the Series A Preferred
Stock and received underwriting compensation in connection therewith.

S-9

<PAGE>

PROSPECTUS
FEBRUARY 6, 1996
$500,000,000

DONALDSON, LUFKIN & JENRETTE, INC.

SENIOR DEBT SECURITIES AND PREFERRED STOCK

The Securities may be issued in one or more series or issuances in U.S.
dollars or in one or more foreign currencies, currency units or composite
currencies and will be limited to an aggregate public offering price of
$500,000,000 (or its equivalent in one or more foreign currencies, currency
units or composite currencies). Specific terms of the securities in respect
of which this Prospectus is being delivered (the "Offered Securities") will
be set forth in an accompanying Prospectus Supplement (a "Prospectus
Supplement"). The Prospectus Supplement will set forth with regard to the
particular Offered Securities, without limitation, the following: (i) in the
case of Senior Debt Securities, the specific designation, aggregate principal
amount, authorized denomination, maturity, rate (which may be fixed or
variable) or method of calculation of interest and dates for payment thereof,
and any exchangeability, conversion, redemption, prepayment or sinking fund
provisions and any listing on a securities exchange and (ii) in the case of
Preferred Stock, the specific designation, number of shares, purchase price
and the rights, preferences and privileges thereof and any qualifications or
restrictions thereon (including dividends, liquidation value, voting rights,
terms for the redemption, conversion or exchange thereof and any other
specific terms of the Preferred Stock) and any listing on a securities
exchange. Unless otherwise indicated in the Prospectus Supplement, the
Company does not intend to list any of the Securities on a national
securities exchange.

The Senior Debt Securities, when issued, will be unsecured and will rank
equally with all other unsecured and unsubordinated indebtedness of the
Company.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.

This Prospectus has been prepared for use by Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJSC") in connection with offers and sales of the
Offered Securities which may be made by it from time to time in market-making
transactions at negotiated prices relating to prevailing market prices at the
time of sale. The Company has been advised by DLJSC that it currently intends
to make a market in the Offered Securities; however, it is not obligated to
do so. Any such market-making may be discontinued at any time, and there is
no assurance as to the liquidity of, or trading market for, the Offered
Securities. DLJSC may act as principal or agent in such transactions. See
"Plan of Distribution." This Prospectus may not be used to consummate sales
of Offered Securities unless accompanied by a Prospectus Supplement.

<PAGE>

AVAILABLE INFORMATION

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, previously filed by the Company with the Commission, is
incorporated by reference in this Prospectus.

<PAGE>

PROSPECTUS SUMMARY

THE COMPANY

<PAGE>

DESCRIPTION OF SECURITIES

RISK FACTORS

Prospective investors should carefully consider the factors discussed in
detail elsewhere in this Prospectus under the caption "Risk Factors."

INITIAL PUBLIC OFFERING AND SENIOR DEBT OFFERING

<PAGE>

EQUITY PARTICIPATION OF EMPLOYEES

RELATIONSHIP WITH EQUITABLE

<PAGE>

Summary Financial Data

- ------------

(1) Net assets excludes securities purchased under agreements to resell and
securities borrowed.

(2) Long-term borrowings and total capitalization (the sum of long-term
borrowings, preferred stock and stockholders' equity) exclude current
maturities of long-term borrowings.

<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered in evaluating the Company and its business
before purchasing the Securities offered hereby.

VOLATILE NATURE OF SECURITIES BUSINESS

SIGNIFICANT COMPETITION

<PAGE>

BUSINESS SUBJECT TO EXTENSIVE FEDERAL, STATE AND FOREIGN REGULATION

MARKET, CREDIT AND LIQUIDITY RISKS ASSOCIATED WITH UNDERWRITING AND TRADING
ACTIVITIES

<PAGE>

CAPITAL INTENSIVE NATURE OF AND POTENTIAL LOSSES RESULTING FROM MERCHANT
BANKING ACTIVITIES

POTENTIALLY GREATER RISKS ASSOCIATED WITH USE OF DERIVATIVE FINANCIAL
INSTRUMENTS

<PAGE>
effect on its results of operations or financial condition in any period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Derivative Financial Instruments."

HOLDING COMPANY STRUCTURE

DEPENDENCE UPON AVAILABILITY OF CAPITAL AND FUNDING

POTENTIAL RESTRICTIONS ON BUSINESS OF, AND WITHDRAWAL OF CAPITAL FROM,
REGULATED SUBSIDIARIES RESULTING FROM NET CAPITAL REQUIREMENTS

<PAGE>

POTENTIAL SECURITIES LAWS LIABILITY

DEPENDENCE ON PERSONNEL

CONTROL OF THE COMPANY

POTENTIAL CONFLICTS OF INTEREST

<PAGE>

TRADING MARKET FOR THE OFFERED SECURITIES

Unless otherwise specified in the Prospectus Supplement, the Offered
Securities will not be listed for trading on any securities exchange or on
any automated dealer quotation system. DLJSC currently makes a market in the
Offered Securities. However, it is not obligated to do so and may discontinue
or suspend such market-making at any time without notice. Accordingly, no
assurance can be given as to the liquidity of, or trading market for, the
Offered Securities. The liquidity of and trading market for the Offered
Securities may be adversely affected by any changes in the Company's
financial performance or prospects.

<PAGE>

USE OF PROCEEDS

Donaldson, Lufkin & Jenrette, Inc. will not receive any proceeds from the
sale of the Offered Securities in any market-making transaction with which
this Prospectus may be delivered.

<PAGE>

CAPITALIZATION

- ------------

(1) Long-term borrowings include current maturities of long-term
borrowings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Developments."

<PAGE>

THE COMPANY

The Company's principal strategy is to focus its resources on certain core
businesses where management believes the Company can compete profitably and
be among the leading participants in each targeted market. Over the past
several years, the Company has significantly expanded the scope of its
business activities and its customer base, both in the U.S. and
internationally. It has established strong positions in selected high-margin
activities, including equity and high-yield corporate securities underwriting
as well as merchant banking, and has increased its market share in a broad
range of businesses. Key elements of this expansion have been the Company's
recruitment of experienced professionals during periods of turmoil in the
securities industry, the continued development and retention of the Company's
existing personnel at all levels and the continuity of senior management. In
addition, the Company has historically emphasized economic and investment
research in the development of its business and believes that its commitment
to research has been an important contributor to its success.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

<PAGE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995
(IN MILLIONS, EXCEPT FINANCIAL RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Commissions .......................... $ 228.9 $ 257.9 $ 289.7 $ 358.8 $ 376.1 $ 281.0 $ 343.1
Underwritings ........................ 150.3 170.9 350.3 574.6 261.1 179.7 317.5
Fees ................................. 88.9 166.2 158.1 211.3 281.3 176.6 264.0
Interest-net (1) ..................... 362.3 323.0 381.7 657.3 791.9 592.9 638.4
Principal transactions-net:
Trading .............................. 98.9 264.2 272.0 381.5 165.7 141.1 265.7
Investment ........................... 37.9 17.3 195.9 79.9 97.6 58.5 92.2
Other ................................. 16.9 15.1 16.4 21.9 35.0 24.5 40.4
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues .................... 984.1 1,214.6 1,664.1 2,285.3 2,008.7 1,454.3 1,961.3
---------- ----------- ----------- ----------- ----------- ----------- -----------
Costs and Expenses:
Compensation and benefits ............ 413.1 567.9 886.6 1,200.4 897.8 675.2 924.9
Interest ............................. 302.3 236.4 212.3 381.7 503.8 357.3 464.5
Other expenses ....................... 254.2 321.3 320.2 401.2 402.1 279.3 369.4
---------- ----------- ----------- ----------- ----------- ----------- -----------
Total costs and expenses .......... 969.6 1,125.6 1,419.1 1,983.3 1,803.7 1,311.8 1,758.8
---------- ----------- ----------- ----------- ----------- ----------- -----------
Income before provision for income
taxes ................................ 14.5 89.0 245.0 302.0 205.0 142.5 202.5
Provision for income taxes ............ 1.5 31.2 98.0 115.9 82.0 57.0 81.0
---------- ----------- ----------- ----------- ----------- ----------- -----------
Net income ............................ $ 13.0 $ 57.8 $ 147.0 $ 186.1 $ 123.0 $ 85.5 $ 121.5
========== =========== =========== =========== =========== =========== ===========
Dividends on preferred stock .......... -- -- -- -- $ 21.0 $ 16.0 $ 14.9
---------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings applicable to common stock .. $ 13.0 $ 57.8 $ 147.0 $ 186.1 $ 102.0 $ 69.5 $ 106.6
========== =========== =========== =========== =========== =========== ===========
BALANCE SHEET DATA (AT END OF PERIOD):
Securities purchased under agreements
to resell and securities borrowed ... $ 6,405.3 $10,942.5 $14,378.4 $21,575.2 $19,166.9 $24,578.2 $25,640.4
Total assets .......................... 13,997.1 18,721.7 24,436.2 38,766.7 33,116.1 42,116.6 40,778.3
Securities sold under agreements to
repurchase and securities loaned .... 7,619.0 11,200.8 14,732.4 24,116.7 20,385.4 24,296.3 25,577.7
Long-term borrowings .................. 270.5 268.1 478.6 549.0 539.9 539.6 704.3
Preferred stock ....................... -- -- -- 225.0 225.0 225.0 225.0
Stockholders' equity .................. 294.1 340.3 454.6 750.3 820.3 792.6 910.4
OTHER FINANCIAL DATA (AT END OF PERIOD):
Ratio of net assets to stockholders'
equity (2) ........................... 25.81x 22.86x 22.12x 22.91x 17.01x 22.13x 16.63x

- ------------

(1) Interest is net of interest expense to finance U.S. government and
agency instruments of $901.3 million, $1,008.0 million, $918.4 million,
$1,083.6 million, $1,612.8 million, $1,181.9 million and $1,499.6
million, respectively.

(2) Net assets excludes securities purchased under agreements to resell and
securities borrowed.

(3) Long-term borrowings and total capitalization (the sum of long-term
borrowings, preferred stock and stockholders' equity) exclude current
maturities of long-term borrowings.

(4) For the purpose of calculating the ratio of earnings to fixed charges
(i) earnings consist of income before provision for income taxes and
fixed charges and (ii) fixed charges consist of interest expense and
one-third of rental expense which is deemed representative of an
interest factor.

(5) For the purpose of calculating the ratio of earnings to combined fixed
charges and preferred stock dividends (i) earnings consist of income
before provision for income taxes and fixed charges and (ii) fixed
charges consist of interest expense and one-third of rental expense
which is deemed representative of an interest factor. No preferred
dividends were paid until 1994.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS ENVIRONMENT

<PAGE>

RECENT DEVELOPMENTS

EQUITY PARTICIPATION OF EMPLOYEES

In order to continue to foster a culture that encourages strong employee
performance and provides ownership incentives to the Company's employees, the
Company has taken certain steps to provide

<PAGE>

Reflecting the equity participation afforded to Company employees through
the LTI Restricted Stock Unit Exchange, the LTI Option Exchange and the 1996
Stock Option Plan, the Company also intends to reduce amounts to be paid
under the successor plan to its 1994 long-term compensation plan, commencing
in 1997, by one-third.

RESULTS OF OPERATIONS

QUARTER ENDED SEPTEMBER 30, 1995 COMPARED TO QUARTER ENDED SEPTEMBER 30,
1994

<PAGE>

Underwriting revenues increased by $106.1 million or 263.5% to $146.3
million. The Company experienced increases in all areas of underwriting in
the third quarter of 1995.

Fee revenues increased by $26.8 million or 42.2% to $90.5 million due
primarily to record levels of M&A activity and other advisory fees in the
Investment Banking group.

Total costs and expenses for the third quarter of 1995 were approximately
$617.5 million, an increase of $187.0 million or 43.4% over the third quarter
of 1994.

Interest expense increased $19.4 million or 14.2% to $155.6 million. Most
of this increase was related to higher financing costs on receivables from
brokers, dealers and customers at Pershing.

Other expenses, as noted below, increased by $38.8 million or 40.3% to
$135.1 million for the third quarter of 1995.

The Company's income tax provision for the third quarter of 1995 and 1994
was $28.0 million and $17.0 million, respectively, which represented a 40%
effective tax rate for both periods.

NINE MONTHS SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1994

<PAGE>

Underwriting revenues increased by $137.8 million or 76.7% to $317.5
million. The Company experienced increases in all areas of underwriting in
the first nine months of 1995.

Fee revenues increased by $87.5 million or 49.5% to $264.0 million due
primarily to increased M&A and other advisory fees in the Investment Banking
group.

Total costs and expenses for the first nine months of 1995 were
approximately $1.8 billion, an increase of $447.0 million or 34.1% over the
first nine months of 1994.

Other expenses, as noted below, increased by $90.1 million or 32.3% to
$369.4 million for the first nine months of 1995.

The Company's income tax provision for the first nine months of 1995 and
1994 was $81.0 million and $57.0 million, respectively, which represented a
40% effective tax rate for both periods.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

<PAGE>

Commission revenues increased by $17.3 million or 4.8% to $376.1 million
due principally to an increase in commissions in the Institutional Equities
division.

Fee revenues increased by $70.0 million or 33.1% to $281.3 million due
primarily to increased M&A and other advisory fees in the Investment Banking
group.

Total costs and expenses for 1994 were approximately $1.8 billion, a
decrease of $179.6 million or 9.1% from 1993.

Other expenses, as noted below, increased by $0.9 million or 0.2% to
$402.1 million in 1994.

<PAGE>

Net income for 1994 was $123.0 million, a decrease of $63.1 million or
33.9% compared to 1993.

YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992

Total revenues for 1993 were approximately $2.3 billion, an increase of
$621.2 million or 37.3% over 1992.

Fee income increased by $53.2 million or 33.6% to $211.3 million, due
primarily to increased M&A and other advisory fees in the Investment Banking
group.

Total costs and expenses were approximately $2.0 billion, an increase of
$564.2 million or 39.8% in 1993.

Other expenses, as noted below, increased by $81.0 million or 25.3% to
$401.2 million in 1993.

<PAGE>

Net income for 1993 was $186.1 million, an increase of $39.1 million or
26.6% compared to 1992.

LIQUIDITY AND CAPITAL RESOURCES

<PAGE>

CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

<PAGE>

YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992

DERIVATIVE FINANCIAL INSTRUMENTS

<PAGE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER
30,
------------------
1994 1995
(IN MILLIONS)
<S> <C> <C>
U.S. government, and mortgage-backed securities
and options thereon ........................... $1,279 $1,618
Foreign sovereign debt securities .............. 1,289 468
Currency forward contracts ..................... 592 --
Forward rate agreements and options ............ 465 43
Equity swaps ................................... 145 398
Futures contracts .............................. 735 630
Equities and other ............................. 836 1,028
-------- --------
Total ........................................ $5,341 $4,185
======== ========
</TABLE>

Forward and Futures Trading. As part of its trading activities, including
trading activities in the related cash market instruments, the Company enters
into forward and futures contracts primarily

<PAGE>

See Note 7 of Notes to Consolidated Financial Statements for additional
information on the Company's derivative activities.

MERCHANT BANKING TRANSACTIONS

<PAGE>

HIGH-YIELD TRANSACTIONS

RISK MANAGEMENT

<PAGE>

BUSINESS

The Company conducts its business through three principal operating
groups, each of which is an important contributor to revenues and earnings:
the Banking Group, which includes the Company's Investment Banking, Merchant
Banking and recently formed Emerging Markets groups; the Capital Markets
Group, consisting of the Company's Taxable Fixed-Income, Institutional
Equities and Equity Derivatives divisions, as well as Sprout, its venture
capital affiliate; and the Financial Services Group, comprised of Pershing,
the Investment Services Group and Wood Struthers & Winthrop.

<PAGE>

NET REVENUES BY OPERATING GROUP

BANKING GROUP

INVESTMENT BANKING

<PAGE>
creativity and resources of the entire Company are available to its clients.
The group's success is reflected in the Company's growth in volume of
business and market share in M&A, as indicated in the following table:

<PAGE>

MERCHANT BANKING

From May 1992 through September 30, 1995, DLJMBP invested $580 million in
20 portfolio companies and has realized $610 million (or $560 million net of
the General Partner's carried interest) in

<PAGE>

EMERGING MARKETS

CAPITAL MARKETS GROUP

The Capital Markets Group encompasses a broad range of activities
including trading, research, origination and distribution of equity and
fixed-income securities, private equity investments and venture capital
through its Taxable Fixed-Income division, Institutional Equities division,
Equity Derivatives division and Sprout. The Company's focus is primarily
client-driven, in contrast to that of many other securities firms which
emphasize proprietary trading. The Capital Markets Group has approximately
830 professionals.

TAXABLE FIXED-INCOME

<PAGE>

INSTITUTIONAL EQUITIES

<PAGE>

EQUITY RESEARCH (1)

- ------------

(1) Source: Institutional Investor.

(3) The Company's rank based on the ratio of the number of "All-America"
positions held by the Company's analysts to the total number of the
Company's analysts.

EQUITY DERIVATIVES

The Equity Derivatives division provides institutional clients with
research, trading and sales services in a broad range of equity options
products and in convertible securities.

See also "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Derivative Financial Instruments."

SPROUT

Sprout's professionals comprise an experienced group of investment
managers with particular expertise in business services, computer graphics,
computer peripherals, health care, leveraged transac-

<PAGE>

FINANCIAL SERVICES GROUP

PERSHING DIVISION

SELECTED PERFORMANCE MEASURES FOR PERSHING

<PAGE>

INVESTMENT SERVICES GROUP

INVESTMENT SERVICES GROUP STATISTICS

YEARS ENDED DECEMBER 31, NINE MONTHS
------------------------------------------- ENDED SEPTEMBER 30,
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Number of account executives .............. 127 137 170 190 233 242
Assets in customer accounts (in billions) $ 2.5 $ 3.2 $ 4.5 $ 6.0 $ 8.0 $11.1
</TABLE>

WOOD, STRUTHERS & WINTHROP

AUTRANET

COMPETITION

<PAGE>

EMPLOYEES

PROPERTIES

Pershing also leases approximately 393,000 square feet in Jersey City, New
Jersey, under leases which expire at various dates through 2009.

The Company believes that its present facilities, including its new
facilities at 277 Park Avenue, are adequate for its current needs.

LEGAL PROCEEDINGS

<PAGE>

REGULATION

<PAGE>

NET CAPITAL REQUIREMENTS

<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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 S. Chalsty ...... 62 President, Chief Executive Officer and Director
Joe L. Roby .......... 56 Chief Operating Officer and Director
Richard H. Jenrette . 66 Chairman and Director
Carl B. Menges ....... 65 Vice Chairman and Director
Anthony F. Daddino .. 55 Executive Vice President, Chief Financial Officer and
Director
Hamilton E. James ... 44 Chairman, Banking Group
Richard S. Pechter .. 50 Chairman, Financial Services Group and Director
Theodore P. Shen .... 50 Chairman, Capital Markets Group and Director
Michael M. Bendik ... 47 Senior Vice President and Chief Accounting Officer
Michael A. Boyd ...... 58 Senior Vice President and General Counsel
Gerald B. Rigg ....... 59 Senior Vice President and Director of Human Resources
Henri de Castries ... 41 Director
Jerry M. de St. Paer 53 Director
Kevin C. Dolan ....... 42 Director
Louis Harris ......... 74 Director
Henri G. Hottinguer . 60 Director
Francis Jungers ...... 69 Director
W. Edwin Jarmain .... 57 Director
Joseph J. Melone .... 64 Director
W. J. Sanders ........ 59 Director
John C. West ......... 73 Director
</TABLE>

<PAGE>

There are no family relationships among the directors and executive
officers.

The audit committee of the Board of Directors of the Company is comprised
of Messrs. Jungers and Jarmain.

DIRECTOR COMPENSATION

EXECUTIVE COMPENSATION

<PAGE>

The following table sets forth the compensation earned by the Named
Executive Officers for the year ended December 31, 1994.

SUMMARY COMPENSATION TABLE

Carl B. Menges .............. 190,000 2,000,000 33,386 (4) 0
Vice Chairman

Anthony F. Daddino .......... 175,000 3,600,000 27,971 (5) 0
Executive Vice President &
Chief Financial Officer

Michael A. Boyd ............. 150,000 600,000 15,963 (6) 0
Senior Vice President &
General Counsel

Michael M. Bendik ........... 140,000 900,000 10,734 (7) 0
Senior Vice President &
Chief Accounting Officer
</TABLE>

- ------------

(1) Includes amounts contributed by each of the Named Executive Officers
under various deferred compensation plans maintained by the Company.

<PAGE>

DEFERRED COMPENSATION PLANS

<TABLE>
<CAPTION>
ESTIMATED ANNUAL
NAME BENEFITS
<S> <C>
John S. Chalsty ... $ 47,053
Carl B. Menges ..... 33,047
Anthony F. Daddino.. 107,313
Michael A. Boyd ... 75,369
Michael M. Bendik . 91,781
</TABLE>

1994 LTI PLAN

<PAGE>

LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR

</TABLE>
- ------------

(1) The estimated future payout in the table is projected assuming the
Company's cumulative net income before taxes in each of 1995 and 1996
is equal to its cumulative net income in 1994. The estimated payout
does not reflect the reduction in value of Mr. Bendik's 1994 LTI Plan
award as a result of his exchange of a portion of the award in return
for restricted stock units and options to purchase Common Stock, as
described above.

1995 RESTRICTED STOCK UNIT PLAN

Each restricted stock unit represents the right to receive a share of
Common Stock, subject to certain conditions described below.

<PAGE>

1995 RESTRICTED STOCK UNIT PLAN

Executive officer group 30,726,400 1,591,358

Non-executive officer
employee group ......... 69,273,451 3,587,789
</TABLE>

1995 STOCK OPTION PLAN

The exercise price of options granted under the 1995 Stock Option Plan, as
well as any amounts required to be withheld upon exercise, may be paid in
cash, stock or a combination of the two. Shares

<PAGE>

The Named Executive Officers, executive officers as a group, and all other
employees as a group, acquired options under the 1995 Stock Option Plan as
follows:

1995 STOCK OPTION PLAN

Executive officer group 2,817,206

Non-executive officer
employee group ......... 6,351,472
</TABLE>

1996 STOCK OPTION PLAN

<PAGE>

1997 LTI PLAN

Reflecting the equity participation afforded to Company employees through
the LTI Restricted Stock Unit Exchange, the LTI Option Exchange and the 1996
Stock Option Plan, the Company intends to reduce amounts paid under the
successor to the 1994 LTI Plan, commencing in 1997, by one-third.

<PAGE>

TAX TREATMENT

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

<PAGE>

OWNERSHIP OF COMMON STOCK OF THE COMPANY BY EQUITABLE
AND DIRECTORS AND OFFICERS OF THE COMPANY

The following table provides certain information regarding the beneficial
ownership of the Company's Common Stock:

</TABLE>

- ------------

(1) AXA is EQ's largest stockholder, beneficially owning $392.2 million of
EQ's Series E convertible preferred stock and approximately 60.6% of
EQ's outstanding common stock (without giving effect to the conversion
of the Series E convertible preferred stock owned by AXA). As of
January 1, 1995, a group of five French mutual insurance companies (the
"Mutuelles AXA") owned directly or indirectly, through various holding
companies, a majority of the issued shares and voting power of AXA. For
insurance regulatory purposes the shares of capital stock of EQ
beneficially owned by AXA and its subsidiaries have been deposited into
a voting trust to ensure that certain of the indirect minority
shareholders of AXA do not exercise control over EQ or certain of its
insurance subsidiaries.

(2) Includes shares of Common Stock beneficially owned by EQ's wholly-owned
subsidiary, Equitable Life.

(3) Held indirectly through its wholly-owned subsidiary, Equitable Holding
Corporation.

<PAGE>

CERTAIN TRANSACTIONS

THE BURLINGTON CONTRIBUTION

REGISTRATION RIGHTS AND INDEMNIFICATION AGREEMENT

TAX SHARING AGREEMENTS

<PAGE>

EMPLOYEES' SECURITIES COMPANIES

<PAGE>

Amounts invested in the ESC, or in predecessor arrangements, by each of
the Company's executive officers in 1992, 1993, 1994 and the nine months
ended September 30, 1995 are set forth below:

YEARS ENDED DECEMBER 31, NINE MONTHS
---------------------------- ENDED SEPTEMBER 30,
NAME 1992 1993 1994 1995
<S> <C> <C> <C> <C>
Michael M. Bendik . $0 $ 14,334 $ 8,000 $0
Michael A. Boyd ... 0 16,103 10,000 0
John S. Chalsty ... 0 375,883 240,000 0
Anthony F. Daddino 0 114,370 80,000 0
Hamilton E. James . 0 216,312 140,402 0
Carl B. Menges ..... 0 68,113 40,000 0
Richard S. Pechter 0 143,469 80,000 0
Gerald B. Rigg ..... 0 16,103 10,000 0
Joe L. Roby ........ 0 286,943 160,000 0
Theodore P. Shen .. 0 143,469 90,000 0
</TABLE>

YEARS ENDED DECEMBER 31, NINE MONTHS
---------------------------- ENDED SEPTEMBER 30,
NAME 1992 1993 1994 1995
<S> <C> <C> <C> <C>
Michael M. Bendik . $0 $ 36,811 $ 27,246 $ 35,774
Michael A. Boyd ... 0 38,762 34,023 43,039
John S. Chalsty ... 0 887,854 817,051 1,018,240
Anthony F. Daddino 0 252,258 272,351 330,327
Hamilton E. James . 0 783,606 599,341 835,265
Carl B. Menges ..... 0 169,828 136,180 175,526
Richard S. Pechter 0 368,657 272,337 357,912
Gerald B. Rigg ..... 0 38,762 34,023 43,039
Joe L. Roby ........ 0 737,320 544,679 715,754
Theodore P. Shen .. 0 368,657 294,952 376,865
</TABLE>

DLJ FUND INVESTMENT PARTNERS, L.P.

<PAGE>

Amounts committed to FIP by each of the Company's executive officers are
set forth below:

<TABLE>
<CAPTION>
NAME AMOUNT
<S> <C>
Michael M. Bendik ........ $ 0
Michael A. Boyd ............ 0
John S. Chalsty............. 2,000,000
Anthony F. Daddino ........ 500,000
Hamilton E. James ......... 2,000,000
Carl B. Menges ............. 1,000,000
Richard S. Pechter ........ 750,000
Gerald B. Rigg ............. 0
Joe L. Roby ............... 2,000,000
Theodore P. Shen .......... 1,000,000
</TABLE>

The amounts of preferred contributions made to FIP by the Company on
behalf of each of the Company's executive officers in 1994 and the first nine
months of 1995 are set forth below:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, NINE MONTHS ENDED
NAME 1994 SEPTEMBER 30, 1995
<S> <C> <C>
Michael M. Bendik . $ 0 $ 0
Michael A. Boyd ... 0 0
John S. Chalsty ... 158,601 157,936
Anthony F. Daddino 39,650 39,484
Hamilton E. James . 158,601 157,936
Carl B. Menges ..... 79,300 78,968
Richard S. Pechter 59,475 59,226
Gerald B. Rigg ..... 0 0
Joe L. Roby ........ 158,601 157,936
Theodore P. Shen .. 79,300 78,969
</TABLE>

OTHER AFFILIATED TRANSACTIONS

FINANCIAL SERVICES PROVIDED BY OR TO THE COMPANY

<PAGE>

INSURANCE COVERAGE OBTAINED FROM EQUITABLE

<PAGE>

FINANCIAL SERVICES OBTAINED FROM AFFILIATES

LOANS AND ADVANCES

OTHER TRANSACTIONS WITH EQUITABLE

<PAGE>

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Common Stock is listed on the NYSE under the symbol "DLJ."

The transfer agent for the Common Stock is First Chicago Trust Company of
New York.

PREFERRED STOCK

CUMULATIVE EXCHANGEABLE PREFERRED STOCK

<PAGE>

DESCRIPTION OF SENIOR DEBT SECURITIES

GENERAL

<PAGE>

BOOK-ENTRY SYSTEM

<PAGE>

NEGATIVE PLEDGE

CERTAIN DEFINITIONS

<PAGE>

RESTRICTIONS ON MERGERS AND SALES OF ASSETS

EVENTS OF DEFAULT

<PAGE>

DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE

<PAGE>

MODIFICATION OF THE INDENTURE

<PAGE>

GOVERNING LAW

The Indenture and the Senior Debt Securities will be governed by the laws
of the State of New York. (Section 10.8)

CONCERNING THE TRUSTEE

The Issuer and its subsidiaries maintain ordinary banking relationships
with The Bank of New York and its affiliates.

<PAGE>

PLAN OF DISTRIBUTION

This Prospectus has been prepared for use by DLJSC in connection with
offers and sales of the Offered Securities in market-making transactions at
negotiated prices related to prevailing market prices at the time of the
sale. DLJSC may act as principal or agent in such transactions. DLJSC has
advised the Company that it currently intends to make a market in the Offered
Securities, but it is not obligated to do so and may discontinue any such
market-making at any time without notice. Accordingly, no assurance can be
given as to the liquidity of, or the trading market for, the Offered
Securities.