<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 27, 1998 Commission file number 0-16633
THE JONES FINANCIAL COMPANIES, L.L.L.P.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MISSOURI 43-1450818
- -------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12555 Manchester Road
St. Louis, Missouri 63131
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 515-2000
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports, and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
--- ---
As of the filing date, there are no voting
securities held by non-affiliates of the Registrant.
<PAGE> 2
THE JONES FINANCIAL COMPANIES, L.L.L.P.
<TABLE>
INDEX
<CAPTION>
Page
Number
<S> <C>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Financial Condition 3
Consolidated Statement of Income 5
Consolidated Statement of Cash Flows 6
Consolidated Statement of Changes in Partnership Capital 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Signatures 15
</TABLE>
2
<PAGE> 3
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
THE JONES FINANCIAL COMPANIES, L.L.L.P.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS
(Unaudited)
<CAPTION>
March 27, December 31,
(Amounts in thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 62,466 $ 61,738
Securities purchased under agreements to resell 8,500 1,450
Receivable from:
Customers 932,468 894,509
Brokers or dealers and clearing
organizations 29,138 26,449
Mortgages and loans 72,574 70,545
Securities owned, at market value:
Inventory securities 68,055 63,407
Investment securities 179,347 171,087
Equipment, property and improvements 187,022 187,540
Other assets 81,072 78,073
---------- ----------
$1,620,642 $1,554,798
=============================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE> 4
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
THE JONES FINANCIAL COMPANIES, L.L.L.P.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
LIABILITIES AND PARTNERSHIP CAPITAL
(Unaudited)
<CAPTION>
March 27, December 31,
(Amounts in thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank loans $ 4,000 $ 19,000
Payable to:
Customers 722,699 664,874
Brokers or dealers and clearing organizations 41,536 34,100
Depositors 68,199 67,588
Securities sold but not yet purchased, at market value 14,862 17,198
Accounts payable and accrued expenses 72,578 59,472
Accrued compensation and employee benefits 118,202 117,565
Long-term debt 47,903 53,350
---------- ----------
1,089,979 1,033,147
Liabilities subordinated to claims of general creditors 216,500 216,500
Partnership capital 289,620 277,228
Partner's capital reserved for anticipated withdrawals 24,543 27,923
---------- ----------
314,163 305,151
---------- ----------
$1,620,642 $1,554,798
=============================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE> 5
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
THE JONES FINANCIAL COMPANIES, L.L.L.P.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
(Amounts in thousands, March 28, March 29,
except per unit information) 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Commissions $227,433 $170,477
Principal transactions 29,556 48,579
Investment banking 11,374 3,337
Interest and dividends 23,579 18,735
Other 26,531 20,727
-------- --------
318,473 261,855
-------- --------
Expenses:
Compensation and benefits 184,291 149,751
Occupancy and equipment 35,496 30,603
Communications and data processing 18,642 17,100
Interest 10,798 10,273
Payroll and other taxes 13,462 10,741
Floor brokerage and clearance fees 2,013 1,916
Other operating expenses 21,813 17,725
-------- --------
286,515 238,109
-------- --------
Net income $ 31,958 $ 23,746
======== ========
Net income allocated to:
Limited partners $ 3,822 $ 3,488
Subordinated limited partners 3,610 2,632
General partners 24,526 17,626
-------- --------
$ 31,958 $ 23,746
======== ========
Net income per weighted average $1,000
equivalent partnership unit outstanding:
Limited partners $ 41.35 $ 36.65
======== ========
Subordinated limited partners $ 82.29 $ 70.67
======== ========
Weighted average $1,000 equivalent
partnership units outstanding:
Limited partners 92,426 95,161
======== ========
Subordinated limited partners 43,866 37,239
======== ========
- ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<PAGE> 6
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
THE JONES FINANCIAL COMPANIES, L.L.L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 28, March 29,
(Amounts in thousands) 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows Provided by Operating Activities:
Net income $ 31,958 $ 23,746
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,143 9,077
(Increase) decrease in securities purchased under
agreements to resell (7,050) 75,000
Decrease (increase) in net receivable from customers 19,866 (89,319)
Decrease in net receivable from
brokers or dealers and clearing organizations 4,747 2,675
Increase in receivable from mortgages and loans (2,029) (1,767)
(Increase) decrease in securities owned, net (15,244) 12,442
Increase in payable to depositors 611 247
Increase (decrease) in accounts payable and
accrued expenses 13,743 (6,109)
Other assets (2,999) 1,016
-------- --------
Net cash provided by operating activities 53,746 27,008
-------- --------
Cash Flows Used by Investing Activities:
Purchase of equipment, property and improvements (9,625) (10,920)
-------- --------
Net cash used by investing activities (9,625) (10,920)
-------- --------
Cash Flows Used by Financing Activities:
Decrease (increase) in bank loans (15,000) 1,050
Repayment of long-term debt (5,447) (2,165)
Issuance of partnership interests 6,553 8,082
Redemption of partnership interests (723) (1,106)
Withdrawals and distributions from
partnership capital (28,776) (22,498)
-------- --------
Net cash used by financing activities (43,393) (16,637)
-------- --------
Net increase (decrease) in cash and cash equivalents 728 (549)
Cash and Cash Equivalents, beginning of period 61,738 64,858
-------- --------
Cash and Cash Equivalents, end of period $ 62,466 $ 64,309
======== ========
Cash paid for interest $ 9,937 $ 9,579
===================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
6
<PAGE> 7
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
THE JONES FINANCIAL COMPANIES, L.L.L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL
THREE MONTHS ENDED MARCH 27, 1998, AND MARCH 28, 1997
(Unaudited)
<CAPTION>
Subordinated
Limited limited General
partnership partnership partnership
(Amounts in thousands) capital capital capital Total
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $95,807 $29,178 $123,172 $248,157
Issuance of partnership interests - 8,082 - 8,082
Redemption of partnership interests (1,042) (64) - (1,106)
Net income 3,488 2,632 17,626 23,746
Withdrawals and distributions (19) (56) (463) (538)
Reserved for anticipated withdrawals (3,469) (2,576) (12,299) (18,344)
------- ------- -------- --------
Balance, March 28, 1997 $94,765 $37,196 $128,036 $259,997
========================================================================================================================
Balance, December 31, 1997 $92,965 $37,446 $146,817 $277,228
Issuance of partnership interests - 6,553 - 6,553
Redemption of partnership interests (590) (133) - (723)
Net income 3,822 3,610 24,526 31,958
Withdrawals and distributions (216) (73) (564) (853)
Reserved for anticipated withdrawals (3,813) (3,537) (17,193) (24,543)
------- ------- -------- --------
Balance, March 27, 1998 $92,168 $43,866 $153,586 $289,620
========================================================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
7
<PAGE> 8
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE JONES FINANCIAL COMPANIES, A MISSOURI
LIMITED LIABILITY PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands)
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of The Jones Financial Companies, L.L.L.P. and all wholly owned subsidiaries
(The "Partnership"). All material intercompany balances and transactions
have been eliminated. Investments in nonconsolidated companies which are at
least 20% owned are accounted for under the equity method.
The Partnership's principal operating subsidiary, Edward D. Jones &
Co., L.P. ("EDJ"), is engaged in business as a registered broker/dealer
primarily serving individual investors. The Partnership derives its revenues
from the sale of listed and unlisted securities and insurance products,
investment banking and principal transactions, and is a distributor of mutual
fund shares. The Partnership conducts business throughout the United States,
Canada, and the United Kingdom with its customers, various brokers and
dealers, clearing organizations, depositories and banks.
The financial statements have been prepared under the accrual basis of
accounting which requires the use of certain estimates by management in
determining the Partnership's assets, liabilities, revenues and expenses.
The financial information included herein is unaudited. However, in
the opinion of management, such information includes all adjustments,
consisting solely of normal recurring accruals, which are necessary for a
fair presentation of the results of interim operations.
The results of operations for the three months ended March 27, 1998,
are not necessarily indicative of the results to be expected for the full
year.
NET CAPITAL REQUIREMENTS
As a result of its activities as a broker/dealer, EDJ is subject to the
Net Capital provisions of Rule 15c3-1 of the Securities Exchange Act of 1934
and the capital rules of the New York Stock Exchange. Under the alternative
method permitted by the rules, EDJ must maintain minimum Net Capital, as
defined, equal to the greater of $250 or 2% of aggregate debit items
8
<PAGE> 9
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
arising from customer transactions. The Net Capital rule also provides that
partnership capital may not be withdrawn if resulting Net Capital would be less
than 5% of aggregate debit items. Additionally, certain withdrawals require the
consent of the SEC to the extent they exceed defined levels even though such
withdrawals would not cause Net Capital to be less than 5% of aggregate debit
items.
At March 27, 1998, EDJ's Net Capital of $247,892 was 27% of aggregate
debit items and its Net Capital in excess of the minimum required was
$229,737. Net Capital as a percentage of aggregate debits after anticipated
withdrawals was 26%. Net Capital and the related capital percentage may
fluctuate on a daily basis.
Boone National Savings and Loan Association, F.A. ("Boone"), a wholly
owned subsidiary of the Partnership, is required under federal regulation to
maintain specified levels of liquidity and capital standards. Boone has been
in compliance with these regulations at all times.
9
<PAGE> 10
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
THE JONES FINANCIAL COMPANIES, L.L.L.P.
MANAGEMENT'S FINANCIAL DISCUSSION
OPERATIONS
QUARTER ENDED MARCH 27, 1998, VERSUS
QUARTER ENDED MARCH 28, 1997
The Partnership experienced a record quarter in terms of both revenue
and net income. Strong securities markets, growth in the salesforce and
expansion of products and services contributed to an increase of 22% ($56.6
million) in revenue to $318.5 million for the first quarter of 1998. Growth
in revenues and growth in Investment Representatives led to an increase of
20% ($48.4 million) in expenses to $286.5 million. The resulting net income
increased 35% ($8.2 million) to $32.0 million for the first quarter of 1998.
In the first quarter of 1998, the Partnership continued its long term
strategy of growing the salesforce and expanding its products and services
offered. The Partnership added 4% more Investment Representatives (142) to
its salesforce, ending the first quarter with 4,096 IRs. Also, the
Partnership received regulatory approval and commenced brokerage operations
in the United Kingdom. The Partnership now has operations in the United
States, Canada, and the United Kingdom. Progress was also made on expanding
the products and services offered. The Partnership added a four state pilot
small business loan program during the first quarter, to further meet the
needs of small business owners and is currently awaiting regulatory approval
to offer mortgage loans through its branch network.
The Partnership segments its revenues between Trade Revenues and Fee
Revenues. Trade revenues (which are included in Commission, Principal
Transaction, and Investment Banking revenues) of $229.1 million accounted
for 78% of the Partnership's revenue and increased 18% ($35.6 million) over
the 1st quarter of 1997. This increase in Trade revenue was driven by a 21%
increase in Customer Dollars invested, to $9.1 billion in the 1st quarter of
1998. Strong securities markets and growth in the total number of IRs
contributed to the increase in customer dollars invested. During the first
Quarter of 1998, customers trended toward equity products. Mutual funds and
Equities accounted for 69% of the product mix in the first quarter of 1998,
up from 60% in the first quarter of 1997. In addition, the Partnership
managed or participated in more underwritings during the first quarter of
1998, which resulted in the significant increase in Investment Banking
revenues. The positive impact of increased customer
10
<PAGE> 11
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
dollars was offset by a slight decline on the margin earned of each customer
dollar invested. The Partnership's gross margin declined from $25.70 for every
$1,000 invested in 1997 to $25.20 for every $1,000 invested in the 1st quarter
of 1998.
Fee Revenues of $89.4 million, comprised primarily of Service Fees
received from mutual fund and insurance companies, Interest Income, and
other miscellaneous revenue sources accounted for 22% of the Partnership's
revenue and increased 31% ($21.0 million) over the 1st quarter of 1997.
Service Fees from mutual funds and insurance products (reported in Commission
revenue) increased 37% ($10.6 million) to $39.3 million. Other revenue
sharing arrangements from mutual funds and insurance products increased 27%
($5.6 million) to $26.5 million for the 1st quarter of 1998. The base for
these revenues is customers' assets, which increased 36% ($42 billion) to
$159 billion at the end of the 1st quarter of 1998. Strong securities
markets helped increase the value of existing customers' assets and new
customer dollars invested through securities transactions also added to the
increase. Interest income increased 26% ($4.8 million) to $23.6 million as a
direct result of increased loans to customers, which increased 45% to $910
million at the end of the 1st quarter of 1998.
Expenses increased 20% ($48.4 million) to $286.5 million for the 1st
quarter of 1998. Increased Compensation (including Payroll taxes) accounted
for 77% ($37.3 million) of increased expenses. IR compensation increased
20% ($18.0 million) as a direct result of increased Trade Revenue. The
Partnership has a variable compensation structure which expands with
increased profitability. Variable compensation, which is primarily comprised
of IR bonuses and profit sharing contributions, increased 33% ($6.6 million)
to $26.6 for the 1st quarter of 1998. The remaining increase in Compensation
is due to an increase in the number of trainees and support personnel
required to support a larger organization.
Occupancy and Equipment expenses increased 16% ($4.9 million) due to
expansion of the branch office network and full implementation of client
server technology. The Partnership expanded its branch office network by 11%
(402 offices), ending the first quarter of 1998 with 3,965 branch office
locations. In addition, the Partnership completed its conversion to client
server technology in mid-1997. This added $2.6 million in increased
depreciation and lease expense, as the Partnership had a full quarter of
expense in the 1st quarter of 1998.
Other operating expenses increased 23% ($4.1 million) to $21.8 million
in the 1st quarter of 1998. The most significant increase ($1.4 million in
expense) related to expansion of the
11
<PAGE> 12
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Partnership's national advertising program. The remaining increase is related
to growing the salesforce and expanding internationally.
LIQUIDITY AND CAPITAL ADEQUACY
The Partnership's equity capital at March 27, 1998, after reserves for
anticipated withdrawals was $289.6 million compared to $260.0 million as of
March 28, 1997. Equity capital increased primarily due to retention of
earnings and contributions of subordinated limited partnership capital, net
of redemptions of subordinated limited partnership and limited partnership
capital.
At March 27, 1998, the Partnership had $62.5 million in cash and cash
equivalents. Lines of credit are in place at ten banks aggregating $575
million ($500 million of which are through uncommitted lines of credit).
Actual borrowing availability is primarily based on securities owned and
customers' margin securities which serve as collateral for the loans.
A substantial portion of the Partnership's assets are primarily liquid,
consisting mainly of cash and assets readily convertible into cash. These
assets are financed primarily by customer credit balances, equity capital,
bank lines of credit and other payables. The Partnership believes that the
liquidity provided by existing cash balances and borrowing arrangements will
be sufficient to meet the Partnership capital and liquidity requirements.
The Partnership's growth in recent years has been financed through
sales of limited partnership interests to its employees, retention of
earnings, and private placements of long-term and subordinated debt.
The Partnership's principal subsidiary, Edward D. Jones & Co., L.P.,
("EDJ") as a securities broker/dealer, is subject to the Securities and
Exchange Commission regulations requiring EDJ to maintain certain liquidity
and capital standards. EDJ has been in compliance with these regulations.
CASH FLOWS
For the quarter ended March 27, 1998, cash and cash equivalents
increased $.7 million. Cash flows from operating activities provided $53.7
million. Net income adjusted for depreciation provided $42.0 million.
Receivables from customers, net of payables to customers, decreased $19.9
million. Investing activities used $9.6 million for the purchase of fixed
assets. Cash flows from financing activities used $43.4 million primarily
for withdrawals and distributions
12
<PAGE> 13
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
from partnership capital, net of issuance of partnership interests. Excess cash
balances were used to pay down long-term debt and bank loans.
There were no material changes in the partnership's overall financial
condition during the three months ended March 27, 1998, compared with the
three months ended March 28, 1997. The Partnership's balance sheet is
comprised primarily of cash and assets readily convertible into cash.
Securities inventories are carried at market values and are readily
marketable. Customer margin accounts are collateralized by marketable
securities. Other customer receivables and receivables and payables with
other broker/dealers normally settle on a current basis. Liabilities,
including certain amounts payable to customers, checks, accounts payable and
accrued expenses are sources of funds to the Partnership. These liabilities,
to the extent not utilized to finance assets, are available to meet liquidity
needs and provide funds for short term investments, which favorably impacts
profitability.
13
<PAGE> 14
Part II. OTHER INFORMATION
THE JONES FINANCIAL COMPANIES, L.L.L.P.
Item 1: Legal Proceedings
There have been no material changes in the legal proceedings previously
reported.
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Reference is made to the Exhibit Index contained hereinafter.
(b) Reports on Form 8-K
On March 12, 1998, the Ninth Amended and Restated Agreement of
Registered Limited Liability Limited Partnership of The Jones Financial
Companies, L.L.L.P., dated as of April 1, 1998, was filed stating a
name change for The Jones Financial Companies.
14
<PAGE> 15
Part II. OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE JONES FINANCIAL COMPANIES, L.L.L.P.
(Registrant)
Dated: May 1, 1998 /s/ John W. Bachmann
--------------------------
John W. Bachmann
Managing Partner
Dated: May 1, 1998 /s/ Steven Novik
--------------------------
Steven Novik
Chief Financial Officer
15
<PAGE> 16
Part II. OTHER INFORMATION
<TABLE>
EXHIBIT INDEX
THE JONES FINANCIAL COMPANIES, L.L.L.P.
For the quarter ended March 27, 1998
<CAPTION>
Exhibit No. Description Page
- ----------------------------------------------------------------------------------
<S> <C> <C>
27.0 Financial Data Schedule (provided for the Securities
and Exchange Commission only)
3.1 Ninth Amended and Restated Agreement of Limited
Liability Limited Partnership of The Jones Financial
Companies, L.L.L.P. dated as of April 1, 1998
incorporated by reference herein to Exhibit 3 to Form
8-K filed on March 12, 1998.
3.2 Articles of organization of EJ Mortgage, L.L.C. and
Operating Agreement of EJ Mortgage, L.L.C. dated
September 30, 1997.
</TABLE>
16
<PAGE> 1
ARTICLES OF ORGANIZATION
OF
EJ MORTGAGE, L.L.C.
The undersigned hereby forms and establishes a limited liability
company under the laws of the State of Missouri.
ARTICLE I
The name of the limited liability company is EJ Mortgage, L.L.C.
ARTICLE II
The purposes for which the limited liability company is organized
are the transaction of any lawful business for which a limited liability
company may be organized under the Missouri Limited Liability Company Act.
ARTICLE III
The address of the limited liability company's registered agent
in Missouri is 12555 Manchester Road, St. Louis, Missouri 63131-3729, and the
registered agent in charge thereof at such address is Lawrence R. Sobol.
ARTICLE IV
The management of the limited liability company is vested in its
members.
ARTICLE V
The latest date on which the limited liability company shall
dissolve is December 31, 2050.
ARTICLE VI
The name and address of the organizer is Connie B. Walsh, 211 N.
Broadway, Suite 3600, St. Louis, Missouri 63102.
ARTICLE VII
For tax purposes, the limited liability company will be operating
as a partnership.
IN AFFIRMATION THEREOF, the undersigned, does hereby declare
that the facts herein stated are true, and accordingly has signed these
Articles this 30th day of September, 1997.
------------------------------
Connie B. Walsh, Organizer
<PAGE> 2
OPERATING AGREEMENT
OF
EJ MORTGAGE, L.L.C.
THIS OPERATING AGREEMENT is made and entered into as of the 30th
day of September, 1997, by Edward D. Jones & Co., L.P. a Missouri limited
partnership, the sole Member.
1. The Member has caused EJ Mortgage, L.L.C. (the "Company") to
be formed on September 30, 1997, as a limited liability company under the
Missouri Limited Liability Company Act and, as required thereunder, do hereby
adopt this Operating Agreement as the operating agreement of the Company.
2. The vote, action, decision or consent of the sole Member
shall constitute a valid decision of the Member and the Company.
3. The decisions and actions of the Member shall be carried out
by the individuals (the "Individuals") granted authority to act on behalf of
the sole Member, pursuant to Resolutions adopted, from time to time, by the
Member.
4. The latest date certain on which the Company is to dissolve
is December 31, 2050.
5. The Member's initial capital contribution to the capital of
the Company for its interest in the Company shall be $200,000 and hereafter
shall be reflected on the books and records of the Company.
6. (a) The Individuals and the Member and its respective
partners, affiliates, stockholders, members, managers, directors, officers,
employees, agents and representatives (individually, an "Indemnitee") shall
be indemnified and held harmless by the Company from and against any and all
losses, claims, damages, liabilities, expenses (including legal fees and
expenses), judgments, fines, settlements and other amounts arising from any
and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise by reason of such
Indemnitee's status as an Individual or a Member, an affiliate of a Member
or a partner, stockholder, member, manager, director, officer, employee,
agent or representative thereof, which relates to or arises out of the
Company, its assets, business or affairs, if in each of the foregoing cases
(i) the Indemnitee acted in good faith and in a manner such Indemnitee
believed to be in, or not opposed to, the best interests of the Company, and,
with respect to any criminal proceeding, had no reasonable cause to believe
such Indemnitee's conduct was unlawful, and (ii) the Indemnitee's conduct did
not constitute gross negligence or willful or wanton misconduct. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or
<PAGE> 3
upon a plea of nolo contendere, or its equivalent, shall not, of itself, create
a presumption that the Indemnitee acted in a manner contrary to that specified
in (i) or (ii) above. Any indemnification pursuant to this provision shall be
made only out of the assets of the Company and the Member shall not have any
personal liability on account thereof.
(b) Expenses (including reasonable legal fees) incurred by an
Indemnitee in defending any claim, demand, action, suit or proceeding
described in the foregoing SECTION 6(A) may, from time to time, be advanced
by the Company prior to the final disposition of such claim, demand, action,
suit or proceeding, in the discretion of the Member, upon receipt by the
Company of an undertaking by or on behalf of the Indemnitee to repay such
amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this SECTION 6.
(c) The indemnification and advancement of expenses set forth
in this SECTION 6 Shall not be exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
statute, the Company's articles of organization, this Agreement, any other
agreement, a vote of Member, a policy of insurance or otherwise, and shall
not limit in any way any right which the Company may have to make additional
indemnifications with respect to the same or different persons or classes of
persons, as determined by the Member. The indemnification and advancement of
expenses set forth in this SECTION 6 shall continue as to a person or
entity who has ceased to be Member and shall inure to the benefit of the
heirs, executors, administrators, successors and assigns of such a person or
entity.
(d) The Company may purchase and maintain insurance on behalf of
the Member against any liability asserted against it and incurred by it in
such capacity, or arising out of its status as a Member, whether or not the
Company would have the power to indemnify it against such liability under
this SECTION 6.
7. Pursuant to existing law, the Company will be disregarded for
federal and state income tax purposes. The admission of one or more
additional Members, however, will cause the Company to be recognized for tax
purposes, and to be taxed, as a partnership.
IN WITNESS WHEREOF, the Member has caused this Operating
Agreement to be duly executed as of the date first written above.
SOLE MEMBER
EDWARD D. JONES & CO., L. P., a Missouri
limited partnership
By: EDJ Holdings Company, Inc.
By:
--------------------------------
President
2
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for The Jones Financial Companies for the 3 months ended
March 27, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
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<PERIOD-END> MAR-27-1998
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0
0
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</TABLE>
