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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1993
Commission file number 0-16633
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
______________________________________________________________________
(Exact name of registrant as specified in its Partnership Agreement)
MISSOURI 43-1450818
________________________________________________________________________
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
201 Progress Parkway
Maryland Heights, Missouri 63043
________________________________________________________________________
(Address and principal executive office) (Zip Code)
Registrant's telephone number, including area code (314) 851-2000
Securities registered pursuant to Section 12(b) of the act:
Name of each exchange
Title of each class on which registered
NONE
_________________________________ __________________________________
Securities registered pursuant to Section 12(g) of the Act:
NONE
________________________________________________________________________
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be file 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 March 26, 1994 there were no voting securities held by non-
affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part 1
None
ITEM 1. BUSINESS
The Jones Financial Companies, a Limited Partnership (the "Registrant"
and also referred to herein as the "Partnership") is organized under
the Revised Uniform Limited Partnership Act of the State of Missouri.
The terms "Registrant" and "Partnership" used throughout, refer to The
Jones Financial Companies, a Limited Partnership and any or all of its
consolidated subsidiaries. The Partnership is the successor to
Whitaker & Co., which was established in 1871 and dissolved on October
1, 1943, said date representing the organization date of Edward D.
Jones & Co., L.P. ("EDJ"), the Partnership's principal subsidiary.
EDJ was reorganized on August 28, 1987, which date represents the
organization date of The Jones Financial Companies, a Limited
Partnership.
The Partnership is engaged in business as a broker/dealer in listed
and unlisted securities, including governmental issues, acts as an
investment banker, and is a distributor of mutual fund shares. In
addition, the Partnership engages in sales of various insurance
products and renders investment advisory services. The Partnership is
heavily oriented towards serving individual retail customers.
The Partnership is a member firm of the New York, American and Midwest
exchanges, and is a registered broker/dealer with the National
Association of Securities Dealers, Inc.
As of February 25, 1994, the Partnership was comprised of 111 general
partners, 2,000 limited partners and 54 subordinated limited partners.
The Partnership employed 8,086 persons, including 2,013 part-time
employees. As of said date, the Partnership employed 2,776 full-time
investment representatives actively engaged in sales in 2,704 offices
in 48 states. The Partnership anticipates opening its first offices
in Hawaii and Ontario, Canada in 1994.
The Partnership owns 100 percent of the outstanding common stock of
EDJ Holding Company, Inc., a Missouri corporation and 100 percent of
the outstanding common stock of LHC, Inc., a Missouri corporation.
The Partnership also holds all of the partnership equity of Edward D.
Jones & Co., L.P., a Missouri limited partnership and EDJ Leasing Co.,
L.P. a Missouri limited partnership. EDJ Holding Company, Inc. and
LHC, Inc. are the general partners of Edward D. Jones & Co., L.P. and
EDJ Leasing Co., L.P., respectively. In addition, the Partnership
owns 100 percent of the outstanding common stock of Conestoga
Securities, Inc., a Missouri corporation and also owns, as a limited
partner, 49.5 percent of Passport Research Ltd., a Pennsylvania
limited partnership, which acts as an investment advisor to a money
market mutual fund. The Partnership owns 100% of the equity of Edward
D. Jones & Co., an Ontario limited partnership and the general partner
is Edward D. Jones & Co. Canada Holding Co. Inc., which is wholly
owned by the Partnership. The Partnership has an equity position in
several entities formed to act as general partners of various direct
participation programs sponsored by the Nooney Corporation as follows:
Nooney Capital Corp. (a Missouri corporation), 66-2/3% of outstanding
Class B non-voting stock; Nooney-Five Capital Corp. (a Missouri Corporation),
100% of outstanding Class B non-voting stock; Nooney-Six Capital Corp.
(a Missouri corporation), 100% of outstanding Class B non-voting stock;
Nooney-Seven Capital Corp. (a Missouri corporation), 100% of outstanding
Class B non-voting stock; Nooney Income Investments, Inc. (a Missouri
corporation), 100% of outstanding Class B non-voting stock; Nooney Income
Investments Two, Inc. (a Missouri corporation), 100% of outstanding Class B
non-voting stock; Nooney Income Investment Three, Inc., (a Missouri
corporation), 100% of outstanding Class B non-voting stock. The
Partnership holds all of the partnership equity in a Missouri limited
partnership, EDJ Ventures, Ltd., which acts as a partner and renders
advisory and other management services to direct participation program
partnerships. Conestoga Securities, Inc. is the general partner of EDJ
Ventures, Ltd. The Partnership is the sole shareholder of Tempus
Corporation, a Missouri corporation, which was formed strictly to
facilitate the issuance of certain debt securities of the Partnership
in a private transaction.
The Partnership is a limited partner of EDJ Insurance Agency of New
Jersey, L.P., a New Jersey limited partnership; EDJ Insurance Agency
of Arkansas, an Arkansas limited partnership; EDJ Insurance Agency of
Montana, a Montana limited partnership; EDJ Insurance Agency of New
Mexico, a New Mexico limited partnership; EDJ Insurance Agency of
Utah, a Utah limited partnership; and is a general partner in EDJ
Insurance Agency of California, a California general partnership; each
of which engage in general insurance brokerage activities. The
Partnership owns all of the outstanding stock of EDJ Insurance Agency
of Ohio, Inc., which is also engaged in insurance brokerage
activities. Affiliates of the partner include EDJ Insurance Agency of
Nevada, EDJ Insurance Agency of Texas, EDJ Insurance Agency of
Alabama, EDJ Insurance Agency of Florida, EDJ Insurance Agency of
Wyoming, EDJ Insurance Agency of Arizona and EDJ Insurance Agency of
Massachusetts. The Partnership holds all of the Partnership equity of
Unison Investment Trusts, L.P., d/b/a Unison Investment Trusts, Ltd.,
a Missouri limited partnership, which sponsors unit investment trust
programs. The general partner of Unison Investment Trusts, L.P. is
Unison Capital Corp., Inc., a Missouri corporation wholly owned by the
Partnership. The Partnership owns 100% of the outstanding common
stock of Edward D. Jones Homeowners, Inc., a Missouri corporation
which, in turn, serves as the general partner of EDJ Residential
Mortgage Services, a Missouri limited partnership wholly owned by the
Partnership, which formerly provided mortgage brokerage and ancillary
services. The Partnership owns 100% of the outstanding common stock
of Cornerstone Mortgage Investment Group, Inc., a Delaware limited
purpose corporation which has issued and sold collateralized mortgage
obligation bonds, and Cornerstone Mortgage Investment Group II, Inc.,
a Delaware limited purpose corporation which has structured and sold
secured mortgage bonds. The Partnership owns 100% of the outstanding
stock of CIP Management, Inc., which is the managing general partner
of CIP Management, L.P. CIP Management, L.P. is the managing general
partner of Community Investment Partners, L.P. and Community
Investment Partners II, L.P., business development companies.
Other affiliates of the Partnership include Patronus, Inc. and EDJ
Investment Advisory Services. Neither has conducted an active
business.
The Partnership owns as a general partner, 1/3 of Commonwealth Pacific
Limited Partnership, a Washington limited partnership, which formerly
operated as a syndicator of various real estate limited partnership
programs, for which the Partnership had served as an underwriter and
distributor.
Revenues by Source. The following table sets forth, for the past
three years the sources of the Partnership's revenues by dollar
amounts, (all amounts in thousands):
1993 1992 1991
Commissions
Listed $ 70,634 $ 59,256 $ 44,115
Mutual Funds 272,020 187,411 110,499
O-T-C 20,786 14,424 10,136
Insurance 64,424 42,585 34,964
Other 596 274 60
Principal Transactions 92,471 131,366 104,426
Investment Banking 45,001 60,635 67,376
Interest & Dividends 38,084 30,520 25,533
Money-Market Fees 10,048 10,751 9,320
IRA Custodial Service Fees 4,387 3,310 999
Other Revenues 13,001 9,080 4,160
_________ _________ _________
Total Revenue $ 631,452 $ 549,612 $411,588
Because of the interdependence of the activities and departments of
the Partnership's investment business and the arbitrary assumptions
involved in allocating overhead, it is impractical to identify and
specify expenses applicable to each aspect of the Partnership's
operations. Furthermore, the net income of firms principally engaged
in the securities business, including the Partnership's, is effected
by interest savings as a result of customer and other credit balances
and interest earned on customer margin accounts.
Listed Brokerage Transactions. A large portion of the Partnership's
revenue is derived from customers' transactions in which the
Partnership acts as agent in the purchase and sale of listed corporate
securities. These securities include common and preferred stocks and
corporate debt securities traded on and off the securities exchanges.
Revenue from brokerage transactions is highly influenced by the volume
of business and securities prices.
Customers' transactions in securities are effected on either a cash or
a margin basis. In a margin account, the Partnership lends the
customer a portion of the purchase price up to the limits imposed by
the margin regulations of the Federal Reserve Board (Regulation T),
New York Stock Exchange (NYSE) margin requirements, or the
Partnership's internal policies, which may be more stringent than the
regulatory minimum requirements. Such loans are secured by the
securities held in customers' margin accounts. These loans provide a
source of income to the Partnership since it is able to lend to
customers at rates which are higher than the rates at which it is able
to borrow on a secured basis. The Partnership is permitted to use as
collateral for the borrowings, securities owned by margin customers
having an aggregate market value generally up to 140 percent of the
debit balance in margin accounts. The Partnership may also use the
interest-free funds provided by free credit balances in customers'
accounts to finance customers' margin account borrowings.
In permitting customers to purchase securities on margin, the
Partnership assumes the risk of a market decline which could reduce
the value of its collateral below a customer's indebtedness before the
collateral is sold. Under the NYSE rules, the Partnership is required
in the event of a decline in the market value of the securities in a
margin account to require the customer to deposit additional
securities or cash so that at all times the loan to the customer is no
greater than 75 percent of the value of the securities in the account
( or to sell a sufficient amount of securities in order to maintain
this percentage). The Partnership, however, imposes a more stringent
maintenance requirement.
Variations in revenues from listed brokerage commissions between
periods is largely a function of market conditions; however, some
portion of the overall increases in recent years is due to the growth
in the number of registered representatives over these periods.
Mutual Funds. The Partnership distributes mutual fund shares in
continuous offerings and new underwritings. As a dealer in mutual
fund shares, the Partnership receives a dealers' discount which
generally ranges from 1 percent to 5 3/4 percent of the purchase price
of the shares, depending on the terms of the dealer agreement and the
amount of the purchase. The Partnership also earns service fees which
are generally based on 15 to 25 basis points of its customers' assets
which are held by the mutual funds. The Partnership does not manage
any mutual fund, although it is a limited partner of Passport
Research, Ltd., an advisor to a money market mutual fund.
Over-the-Counter and Principal Transactions. Partnership activities
in unlisted (over-the-counter) transactions are essentially similar to
its activities as a broker in listed securities. In connection with
customers' orders to buy or sell securities on an agency basis, the
Partnership charges a commission. In dealing on a principal basis,
the Partnership charges its customers a net price approximately equal
to the current inter-dealer market price plus or minus a mark-up or
mark-down from such market price. The National Association of
Securities Dealers (NASD) Rules of Fair Practice require that such
mark-up (or mark-down) be fair and reasonable.
The Partnership has executed several agency agreements with various
national insurance companies. Through its approximately 2,056
investment representatives who hold insurance sales licenses, EDJ is
able to offer term life insurance, health insurance, and fixed and
variable annuities to its customers. The sale of annuities is the
primary product. Revenues from the sale of insurance products
approximated 10% of total revenues in 1993, and this area has
experienced growth in recent years largely as a result of the growth
in the number of representatives licensed to engage in insurance
sales.
The Partnership makes a market in over-the-counter corporate
securities, municipal obligations, including general obligations and
revenue bonds, unit investment trusts and mortgage-backed securities.
The Partnership's market-making activities are conducted with other
dealers in the "wholesale" market and "retail" market wherein the
Partnership acts as a dealer buying from and selling to its customers.
In making markets in over-the-counter securities, the Partnership
exposes its capital to the risk of fluctuation in the market value of
its security positions. It is the Partnership's policy not to trade
for its own account.
As in the case of listed brokerage transactions, revenue from over-
the-counter and principal transactions is highly influenced by the
volume of business and securities prices, as well as by the varying
number of registered representatives employed by the Partnership over
the periods indicated.
Investment Banking. The Partnership's investment banking activities
are carried on through its Syndicate and Underwriting Departments.
The principal service which the Partnership renders as an investment
banker is the underwriting and distribution of securities either in a
primary distribution on behalf of the issuer of such securities or in
a secondary distribution on behalf of a holder of such securities.
The distributions of corporate and municipal securities are, in most
cases, underwritten by a group or syndicate of underwriters. Each
underwriter has a participation in the offering.
Unlike many larger firms against which the Partnership competes, the
Partnership does not presently engage in other investment banking
activities such as assisting in mergers and acquisitions, arranging
private placement of securities issues with institutions or providing
consulting and financial advisory services to corporations.
The Syndicate and Underwriting Departments are responsible for the
largest portion of the Partnership's investment banking business. In
the case of an underwritten offering managed by the Partnership, the
Departments may form underwriting syndicates and work closely with the
branch office system for sales of the Partnership's own participation
and with other members of the syndicate in the pricing and negotiation
of other terms. In offerings managed by others in which the
Partnership participates as a syndicate member, the Departments serve
as active coordinators between the managing underwriter and the
Partnership's branch office system.
The underwriting activity of the Partnership involves substantial
risks. An underwriter may incur losses if it is unable to resell the
securities it is committed to purchase or if it is forced to liquidate
all or part of its commitment at less than the agreed purchase price.
Furthermore, the commitment of capital to underwriting may adversely
affect the Partnership's capital position and, as such, its
participation in an underwriting may be limited by the requirement
that it must at all times be in compliance with the net capital rule.
The Securities Act of 1933 and other applicable laws and regulations
impose substantial potential liabilities on underwriters for material
misstatements or omissions in the prospectus used to describe the
offered securities. In addition, there exists a potential for
possible conflict of interest between an underwriter's desire to sell
its securities and its obligation to its customers not to recommend
unsuitable securities. In recent years there has been an increasing
incidence of litigation in these areas. These lawsuits are frequently
brought for the benefit of large classes of purchasers of underwritten
securities. Such lawsuits often name underwriters as defendants and
typically seek substantial amounts in damages.
Interest and dividend income is earned on securities held and margin
account balances.
Other revenue sources include money market management fees and IRA
custodial services fees, accommodation transfer fees, gains from sales
of certain assets, and other product and service fees. The
Partnership has an interest in the investment advisor to its money
market fund, Daily Passport Cash Trust. Revenue from this source has
increased over the periods due to growth in the fund, both in dollars
invested and number of accounts. In 1991 EDJ became the trustee for
its IRA accounts. Each account is charged an annual service fee for
services rendered to it by the Partnership.
The Partnership has registered an investment advisory program with the
SEC under the Investment Advisors Act of 1940. This service is
offered firmwide and involves income and estate tax planning and
analysis for clients. Revenues from this source are insignificant and
included under "Other Revenues."
Also included in the category "Other Revenues" are accommodation
transfer fees, gains from sales of certain assets, other non-recurring
gains and revenue from management fees charged by mutual funds.
Research Department. The Partnership maintains a Research Department
to provide specific investment recommendations and market information
for retail customers. The Department supplements its own research
with the services of various independent research services. The
Partnership competes with many other securities firms with
substantially larger research staffs in its research activities.
Customer Account Administration and Operations. Operations employees
are responsible for activities relating to customers' securities and
the processing of transactions with other broker/dealers. These
activities include receipt, identification, and delivery of funds and
securities, internal financial controls, accounting and personnel
functions, office services, storage of customer securities and the
handling of margin accounts. The Partnership processes substantially
all of its own transactions. It is important that the Partnership
maintains current and accurate books and records from both a profit
viewpoint as well as for regulatory compliance.
To expedite the processing of orders, the Partnership's branch office
system is linked to the St. Louis headquarters office through an
extensive communications network. Orders for all securities are
centralized in St. Louis and executed there. The Partnership's
processing of paperwork following the execution of a security
transaction is automated, and operations are generally on a current
basis.
There is considerable fluctuation during any one year and from year to
year in the volume of transactions the Partnership processes. The
Partnership records transactions and posts its books on a daily basis.
Operations' personnel monitor day-to-day operations to determine
compliance with applicable laws, rules and regulations. Failure to
keep current and accurate books and records can render the Partnership
liable to disciplinary action by governmental and self-regulatory
organizations.
The Partnership has a computerized branch office communication system
which is principally utilized for entry of security orders,
quotations, messages between offices and cash receipts functions.
The Partnership clears and settles virtually all of its listed
transactions through the National Securities Clearing Corporation
("NSCC"), New York, New York. NSCC effects clearing of securities on
the New York, American and Midwest Stock Exchanges.
In conjunction with clearing and settling transactions with NSCC the
Partnership holds customers' securities on deposit with Depository
Trust Company ("DTC") in lieu of maintaining physical custody of the
certificates.
The Partnership is substantially dependent upon the operational
capacity and ability of NSCC/DTC. Any serious delays in the
processing of securities transactions encountered by NSCC/DTC may
result in delays of delivery of cash or securities to the
Partnership's customers. These services are performed for the
Partnership under contracts which may be changed or terminated at will
by either party.
Automated Data Processing, Inc., ("ADP") provides automated data
processing services for customer account activity and records.
The Partnership does not employ its own floor broker for transactions
on exchanges. The Partnership has arrangements with other brokers to
execute the Partnership's transactions in return for a commission
based on the size and type of trade. If for any reason any of the
Partnership's clearing, settling or executing agents were to fail, the
Partnership and its customers would be subject to possible loss.
While the coverages provided by the Securities Investors Protection
Corporation (SIPC) and protection in excess of SIPC limits would be
available to customers of the Partnership, to the extent that the
Partnership would not be able to meet the obligations of the
customers, such customers might experience delays in obtaining the
protections afforded them by the SIPC and the Partnership's insurance
carrier.
The Partnership believes that its internal controls and safeguards
concerning the risks of securities thefts are adequate. Although the
possibility of securities thefts is a risk of the industry, the
Partnership has not had, to date, a significant problem with such
thefts. The Partnership maintains fidelity bonding insurance which,
in the opinion of management, provides adequate coverage.
Employees. Including its general partners, the Partnership has
approximately 8,086 full and part-time employees, including 2,776 who
are registered salespeople as of February 25, 1994. The Partnership's
salespersons are compensated on a commission basis and may, in
addition, be entitled to bonus compensation based on their respective
branch office profitability and the profitability of the Partnership.
The Partnership has no formal bonus plan for its non-registered
employees. The Partnership has, however, in the past paid bonuses to
its non-registered employees on an informal basis, but there can be no
assurance that such bonuses will be paid for any given period or will
be within any specific range of amounts.
Employees of the Partnership are bonded under a blanket policy as
required by NYSE rules. The annual aggregate amount of coverage is
$30,000,000 subject to a $2,000,000 deductible provision, per
occurrence.
The Partnership maintains a training program for prospective
salespeople which includes eight weeks of concentrated instruction and
on-the-job training in a branch office. The first phase of training
is spent reviewing Series 7 examination materials and preparing for
and taking the examination. The first week of the training after
passing the examination is spent in a comprehensive training program
in St. Louis. The next five weeks include on-the-job training in
branch locations reviewing products, office procedures and sales
techniques. The broker is then sent to a designated location to
establish the EDJ office, conduct market research and prepare for
opening the office. After the salesperson has opened a branch office,
one final week is spent in a central location to complete the initial
training program. Three and nine months later, the investment
representative attends additional training classes in St. Louis, and
subsequently, EDJ offers periodic continuing training mechanisms to
its seasoned sales force. Although the Partnership pays the broker
during the transition period, the broker must fulfill special tasks
before being awarded full branch status. EDJ's basic brokerage payout
is similar to its competitors. A bonus may also be paid based on the
profitability of the branch and the profitability of the Partnership.
The Partnership considers its employee relations to be good and
believes that its compensation and employee benefits which include
medical, life, and disability insurance plans and profit sharing and
deferred compensation retirement plans, are competitive with those
offered by other firms principally engaged in the securities business.
Competition. The Partnership is subject to intensive competition in
all phases of its business from other securities firms, many of which
are substantially larger than the Partnership in terms of capital,
brokerage volume and underwriting activities. In addition, the
Partnership encounters competition from other financially oriented
organizations such as banks, insurance companies, and others offering
financial services and advice. In recent periods, many regulatory
requirements prohibiting non-securities firms from engaging in certain
aspects of brokerage firms' business have been eliminated and further
removal of such prohibitions is anticipated. With minor exceptions,
customers are free to transfer their business to competing
organizations at any time.
There is intense competition among securities firms for salespeople
with good sales production records. In recent periods, the
Partnership has experienced increasing efforts by competing firms to
hire away its registered representatives although the Partnership
believes that its rate of turnover of investment representatives is
not higher than that of other firms comparable to the Partnership.
Regulation. The securities industry in the United States is subject
to extensive regulation under both federal and state laws. The SEC is
the federal agency responsible for the administration of the federal
securities laws. The Partnership's principal subsidiary is registered
as a broker-dealer and investment advisor with the SEC. Much of the
regulation of broker-dealers has been delegated to self-regulatory
organizations, principally the NASD and national securities exchanges
such as the NYSE, which has been designated by the SEC as the
Partnership's primary regulator. These self-regulatory organizations
adopt rules (which are subject to approval by the SEC) that govern the
industry and conduct periodic examinations of the Partnership's
operations. Securities firms are also subject to regulation by state
securities administrators in those states in which they conduct
business. The Partnership is registered as a broker-dealer in 50
states and Puerto Rico.
Broker-dealers are subject to regulations which cover all aspects of
the securities business, including sales methods, trade practices
among broker-dealers, use and safekeeping of customers' funds and
securities, capital structure of securities firms, record-keeping and
the conduct of directors, officers and employees. Additional
legislation, changes in rules promulgated by the SEC and self-
regulatory organizations, or changes in the interpretation or
enforcement of existing laws and rules, may directly affect the mode
of operation and profitability of broker-dealers. The SEC, self-
regulatory organizations and state securities commissions may conduct
administrative proceedings which can result in censure, fine,
suspension or expulsion of a broker-dealer, its officers or employees.
The principal purpose of regulation and discipline of broker-dealers
is the protection of customers and the securities markets, rather than
protection of the creditors and stockholders of broker-dealers.
Uniform Net Capital Rule. As a broker-dealer and a member firm of the
NYSE, the Partnership is subject to the Uniform Net Capital Rule
(Rule) promulgated by the SEC. The Rule is designed to measure the
general financial integrity and liquidity of a broker-dealer and the
minimum net capital deemed necessary to meet the broker-dealer's
continuing commitments to its customers. The Rule provides for two
methods of computing net capital and the Partnership has adopted what
is generally referred to as the alternative method. Minimum required
net capital under the alternative method is equal to 2% of the
customer debit balances, as defined. The Rule prohibits withdrawal of
equity capital whether by payment of dividends, repurchase of stock or
other means, if net capital would thereafter be less than 5% of
customer debit balances. 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. In computing net capital, various
adjustments are made to exclude assets which are not readily
convertible into cash and to provide a conservative statement of other
assets such as a company's inventories. Failure to maintain the
required net capital may subject a firm to suspension or expulsion by
the NYSE, the SEC and other regulatory bodies and may ultimately
require its liquidation. The Partnership has, at all times, been in
compliance with the net capital rules.
ITEM 2. PROPERTIES
All of its headquarter offices are owned by the Partnership. The
Partnership conducts its headquarters operations from St. Louis
County, Missouri. The headquarters facilities are comprised of 17
separate buildings containing approximately 822,000 usable square
feet. One additional building on the campus is leased. The
Partnership acquired an existing 397,000 square foot building in St.
Louis County in December, 1992, of which 170,000 square feet is
occupied at December 31, 1993. This building was substantially
renovated in 1993. The Partnership plans to use the unoccupied space
for growth in future headquarters personnel which is planned to
parallel the growth of the salesforce. The Partnership also maintains
facilities in 2,655 branch locations which (as of December 31, 1993)
are predominantly rented under cancellable leases.
Further information concerning leased computer equipment, branch
satellite equipment and other obligations of the Partnership is given
in the Notes to the Consolidated Financial Statements appearing
elsewhere herein.
ITEM 3. LEGAL PROCEEDINGS
In recent years there has been an increasing incidence of litigation
involving the securities industry. Such suits often seek to benefit
large classes of industry customers; many name securities dealers as
defendants along with exchanges in which they hold membership and seek
large sums as damages under federal and state securities laws, anti-
trust laws, and common law.
There are various actions pending against the Partnership which have
arisen in the normal course of business. In view of the number and
diversity of claims against the Partnership, the number of
jurisdictions in which litigation is pending and the inherent
difficulty of predicting the outcome of litigation and other claims,
the Partnership cannot definitely state what the eventual outcome of
these pending claims will be. However, in the opinion of management,
after consultation with legal counsel, the impact of this litigation
will not have a material adverse affect on the Partnership's financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no market for the Limited or Subordinated Limited Partnership
interests and their assignment is prohibited.
ITEM 6. SELECTED FINANCIAL DATA
The following information sets forth, for the past five years,
selected financial data. (All amounts in thousands, except per unit
information.)
Summary Income Statement Data:
1993 1992 1991 1990 1989
Revenues $631,452 $549,612 $411,588 $316,503 $280,429
Net income 66,211 62,282 40,875 22,553 15,703
Net income per
weighted average
$1,000 equivalent
limited partnership
unit outstanding $194.62 $238.41 $185.92 $130.52 $82.50
Weighted average
$1,000 equivalent
limited partnership
units outstanding 50,381 41,160 42,616 25,874 27,274
Net income per
weighted average
$1,000 equivalent
subordinated limited
partnership unit
outstanding $350.32 $418.21 $322.38 $212.86 $154.82
Weighted average
$1,000 equivalent
subordinated limited
partnership units
outstanding 16,936 12,941 10,624 10,190 9,779
Summary Balance Sheet Data:
1993 1992 1991 1990 1989
Total assets $800,478 $653,253 $513,730 $422,257 $387,618
======= ======= ======= ======= =======
Long-term debt $ 33,317 $ 23,847 $ 24,769 $ 19,977 $ 20,075
Other liabilities,
exclusive of
subordinated
liabilities 514,386 414,110 326,229 250,772 234,732
Subordinated liabilities 73,000 78,000 48,000 50,400 52,800
Total partnership
capital 179,775 137,296 114,732 101,108 80,011
________ ________ ________ ________ ________
Total liabilities and
partnership capital $800,478 $653,253 $513,730 $422,257 $387,618
======== ======== ======== ======== ========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table summarizes the changes in major categories of
revenues and expenses for the last two years (Dollar amounts in
thousands.)
1993 vs. 1992 1992 vs. 1991
Increase - (Decrease)
Amount % Amount %
Revenues
Commissions $ 124,510 41 $ 104,176 52%
Principal transactions (38,895) (30) 26,940 26
Investment banking (15,634) (26) (6,741) (10)
Interest and dividends 7,564 25 4,987 20
Other 4,295 19 8,662 60
_________ ___ _________ ___
81,840 15 138,024 34
_________ ___ _________ ___
Expenses
Employee and partner
compensation and benefits 53,859 16 88,142 37
Occupancy and equipment 10,069 20 3,867 8
Communications and data
processing 4,898 17 3,556 14
Interest 3,632 23 2,155 16
Payroll and other taxes 1,767 11 3,192 24
Floor brokerage and
clearance fees 781 15 691 15
Other operating expenses 2,905 7 15,014 53
________ ___ ________ ___
77,911 16 116,617 31
________ ___ ________ ___
Net income $ 3,929 6% $ 21,407 52%
======== === ======== ===
RESULTS OF OPERATIONS (1993 VERSUS 1992)
Revenues increased 15% ($82 million) over 1992 to $631 million.
Expenses increased by 16% ($78 million) resulting in net income of $66
million, an increase of 6% ($4 million) over 1992. These results were
significantly influenced by the Partnership's activities in connection
with the expansion of its salesforce. The number of investment
representatives increased 24% in 1993 to 2,745. By comparison, 1992's
growth in investment representatives was 22%. The vast majority of
these new investment representatives are beginners in the industry who
generally achieve profitability after about 30 months. In the
interim, the Partnership incurs significant training, salary and
support costs. The net impact of these direct expenses amounted to
nearly $21 million during 1993 ($14 million in 1992). Additionally,
the Partnership made significant increases in home office overhead to
support the increased salesforce.
Commission revenues increased $125 million fueled by a $85 million
(45%) increase in mutual fund commissions and service fees. Listed
and over-the-counter agency commissions increased $18 million or 24%
over 1992. Insurance commissions increased 51%, with variable annuity
commissions increasing $20.6 million and fixed annuities decreasing by
$5 million. The increasing level of securities prices along with
lower interest rates turned individual investors to equity markets and
equity based investments in search of more attractive returns. The
continued strength of the securities markets led to solid increases in
commission generated from the sales of securities products.
Principal transaction revenues decreased 30% ($39 million).
Collateralized mortgage obligations (CMOs) revenues decreased $11.3
million, government and municipal bond revenues decreased by $9.7
million and $3.7 million, respectively. Prior to 1993, municipal bond
syndicate revenues were included in principal transaction revenues.
In 1993, these revenues, totalling $10.3 million, were included in
investment banking revenues. The majority of the principal
transaction revenue decreases largely resulted from historically low
interest rates and the resulting popularity of equity based
investments.
Investment banking revenues declined $15.6 million resulting from
decreases in certificate of deposit revenues ($8 million), CMO
revenues ($11 million), and equity and debt originations.
Interest and dividend revenues increased 25% or $7.6 million.
Customers' margin loan balances increased 36% in 1993 ($120 million)
ending the year at $451 million. The increase in customers' loan
balances was attributable to higher securities prices, continuation of
marketing efforts targeting individuals to view their securities as
access to a personal line of credit and lower interest rates. The
increase in loan balances more than offset the decline in short term
interest rates during the year resulting in increased interest
earnings.
Other revenues increased $4 million (19%) over 1992. Revenues from
non-bank custodian IRA accounts resulted in an increase of $1 million
in 1993.
Overall expenses increased 16% ($78 million). The Partnership's
compensation structure for its investment representatives is designed
to expand or contract substantially as a result of changes in
revenues, net income and profit margins. Similarly, non-sales
personnel compensation from bonuses and profit sharing contributions
expands and contracts in relation to net income. The Partnership's
non-compensation related expenses are less responsive to changes in
revenues and net income. Rather, these expenses are influenced by the
number of salespeople, growth of the salesforce, the number of
customer accounts and, to a lesser extent, the volume of transactions.
As a result of its expense structure, the Partnership's compensation
expense increase of 16% matched the overall increase in expenses of
16%. The Partnership's expenses other than compensation increased
15%. The increase in other expenses resulted from several items.
Increased expense levels related to supporting a larger number of
investment representatives and branch offices were primarily
responsible for the increase in operating expenses.
RESULTS OF OPERATIONS (1992 VERSUS 1991)
Revenues increased 34% ($138 million) over 1991 to $550 million.
Expenses increased by 31% ($117 million) resulting in net income of
$62 million, an increase of 52% ($21 million) over 1991. The number
of investment representatives increased 22% in 1992 to 2,216. By
comparison, 1991's growth in investment representatives was 9%. The
increased size of the salesforce and higher securities prices along
with a very steeply sloped yield curve were significant factors
contributing to 1992's financial results.
Commission revenues increased $104 million fueled by a $77 million
(70%) increase in mutual fund commissions and service fees. Listed
and over-the-counter agency commissions increased $19 million or 36%
over 1991. Insurance commissions increased 22%, with variable annuity
commissions increasing $10 million and fixed annuities decreasing by
$4 million. The increasing level of securities prices along with
lower interest rates turned individual investors to equity markets and
equity based investments in search of more attractive returns.
Principal transaction revenues increased 26% ($27 million) with
taxable and tax free fixed income securities increasing $21 million.
At the same time, O-T-C principal stock sales increased by $3 million.
Individual investors were attracted to longer term fixed income
products to increase or maintain their returns compared to other
shorter term alternatives. Additionally, tax free bonds experienced
relatively high yields during the year when compared to treasury
securities with similar maturities. The increase in O-T-C stock sales
resulted from higher equity prices and investors directing their
investment dollars into smaller capitalization companies. The returns
experienced during the year from investing in smaller capitalization
companies was higher than the investment returns of larger exchange
listed securities.
Investment banking revenues declined $6.7 million from substantial
decreases in certificate of deposit revenues ($6 million) and CMOs
revenues ($4 million). These decreases were partially offset by
equity originations and syndicate equity participation increases of $3
million. Initial public offerings continued to be popular during the
year along with investor interest in utility unit investment trust
underwritings. The decrease in investment banking CMO revenues was
partially offset by increased sales of CMOs on a principal basis.
Interest and dividend revenues increased 20% or $5 million.
Customers' margin loan balances increased 66% in 1992 ($132 million)
ending the year at $331 million. The increase in customers' loan
balances was attributable to higher securities prices, continuation of
marketing efforts targeting individuals to view their securities as
access to a personal line of credit and lower interest rates. The
increase in loan balances more than offsets the decline in short term
interest rates during the year resulting in increased interest
earnings.
Other revenues increased $9 million (60%) over 1991. During the last
quarter of 1991, the Partnership qualified as a non-bank custodian for
its IRA accounts resulting in an increase of $2.3 million in 1992 from
IRA service fee revenues. Revenues for fees and services received
from the Edward D. Jones & Co. Daily Passport Cash Trust money market
account and a related tax free money market account offered through
Edward D. Jones & Co. increased $1.4 million over 1991.
Overall expenses increased 31% ($117 million). The Partnership's
compensation structure for its investment representatives is designed
to expand or contract substantially as a result of changes in
revenues, net income and profit margins. Similarly, non-sales
personnel compensation from bonuses and profit sharing contributions
expands and contracts in relation to net income. The Partnership's
non-compensation related expenses tend to be less responsive to
changes in revenues and net income. Rather, these expenses tend to be
more influenced by the number of salespeople, growth of the
salesforce, the number of customer accounts and, to a lesser extent,
the volume of transactions. As a result of its expense structure, the
Partnership's compensation expense increase of 37% exceeded the
overall increase in expenses of 31%. The Partnership's expenses other
than compensation increased 22%. Other operating expenses increased
53% or $15 million over 1991. The increase in other operating
expenses resulted from several items. Increased expense levels
related to supporting a larger number of investment representatives
and branch offices were primarily responsible for the increase in
operating expenses.
THE EFFECTS OF INFLATION
The Partnership's net assets are primarily monetary, consisting of
cash, securities inventories and receivables less liabilities.
Monetary net assets are primarily liquid in nature and would not be
significantly affected by inflation. Inflation and future
expectations of inflation influence securities prices, as well as
activity levels in the securities markets. As a result, profitability
and capital may be impacted by inflation and inflationary
expectations. Additionally, inflation's impact on the Partnership's
operating expenses may affect profitability to the extent that
additional costs are not recoverable through increased prices of
services offered by the Partnership.
LIQUIDITY AND CAPITAL ADEQUACY
The Partnership's equity capital at December 31, 1993, was $179.8
million compared to $137.3 million at December 31, 1992. Overall,
equity capital increased 31%, primarily due to the retention of
earnings and issuance of partnership interests. The Partnership
issued additional limited partnership interests in August 1993 of
$24.8 million and additional subordinated limited partnership interest
of $4.4 million in January 1993.
At December 31, 1993, the Partnership had a $28.8 million balance of
cash and cash equivalents. Lines of credit are in place at nine banks
aggregating $445 million ($420 million of which are through
uncommitted lines of credit), of which $310 million was available at
December 31, 1993.
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.
As a result of its activities as a broker/dealer, EDJ, the
Partnership's principal subsidiary, 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 $150,000 or 2% of
aggregate debit items arising from customer transactions. The Net
Capital rule also provides the 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 December 31, 1993, EDJ's Net Capital of
$89,790,000 was 20% of aggregate debit items and its net capital in
excess of the minimum required was $80,681,000. Net Capital and the
related capital percentage may fluctuate on a daily basis.
CASH FLOWS
Cash and cash equivalents decreased $8,932,000 from December 31, 1992,
to December 31, 1993. Cash flows were primarily provided from net
income, decreases in securities owned, short and long term bank loans
and the issuance of partnership interests. Cash flows were primarily
used to increase net receivables from customers and brokers, purchase
equipment, property and improvements, and fund withdrawals and
distributions.
Cash and cash equivalents increased $5,308,000 from December 31, 1991,
to December 31, 1992. Cash flows were primarily provided from net
income, short term bank loans and the issuance of subordinated debt.
Cash flows were primarily used to increase net receivables from
customers, increase securities owned, purchase equipment, property and
improvements, and fund withdrawals and distributions.
Cash and cash equivalents increased $5,078,000 from December 31, 1990,
to December 31, 1991. Cash flows were primarily provided from net
income, an increase in accounts payable and accrued expenses, short
term bank loans and the issuance of long term debt. Cash flows were
primarily used to increase net receivables from customers, increase
securities owned, purchase equipment, property and improvements, and
fund withdrawals and distributions.
There were no material changes in the Partnership's overall financial
condition during the year ended December 31, 1993, compared with the
year ended December 31, 1992. The Partnership's consolidated
statement of financial condition is comprised primarily of cash and
assets readily convertible into cash. Securities inventories are
carried at market value and are readily marketable. The firm carried
lower trading inventory levels in 1993 as compared to 1992. 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 amounts payable to customers, checks and accounts payable
and accrued expenses are non-interest bearing 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.
The Partnership's growth in recent years has been financed through
sales of limited partnership interest to its employees, retention of
earnings and private placements of long-term and subordinated debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements Included in this Item
Page No.
Report of Independent Public Accountants
Consolidated Statements of Financial Condition as of
December 31, 1993 and 1992
Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Changes in Partnership Capital
for the years ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Jones Financial Companies, a Limited Partnership:
We have audited the accompanying consolidated statements of financial
condition of The Jones Financial Companies, a Limited Partnership (a
Missouri limited partnership) and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of income, cash
flows and changes in partnership capital for each of the three years
in the period ended December 31, 1993. These financial statements are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The Jones
Financial Companies, a Limited Partnership and subsidiaries as of
December 31, 1993 and 1992, and the results of their operations, their
cash flows and the changes in their partnership capital for each of
the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
St. Louis, Missouri,
February 22, 1994
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
ASSETS
December 31, December 31,
(Amounts in thousands) 1993 1992
Cash and cash equivalents $ 28,798 $ 37,730
Receivable from:
Customers (Note 2) 464,760 352,686
Brokers or dealers and clearing
organizations (Note 3) 32,550 13,880
Securities owned, at market value (Note 4):
Inventory securities 60,371 67,873
Investment securities 73,575 78,797
Office equipment, property and improvements,
at cost, net of accumulated depreciation and
amortization of $79,903 and $69,989,
respectively 102,434 72,125
Other assets 37,990 30,162
__________ __________
$ 800,478 $ 653,253
========== ==========
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
LIABILITIES AND PARTNERSHIP CAPITAL
December 31, December 31,
(Amounts in thousands) 1993 1992
Bank loans (Note 5) $ 139,261 $ 123,000
Payable to:
Customers (Note 2) 242,584 167,884
Brokers or dealers and clearing
organizations (Note 3) 8,092 13,915
Securities sold but not yet purchased, at
market value
(Note 4) 17,766 9,588
Accounts payable and accrued expenses 37,419 37,600
Accrued compensation and employee benefits 69,264 62,123
Long-term debt (Note 6) 33,317 23,847
____________ __________
547,703 437,957
Liabilities subordinated to claims
of general creditors (Note 7) 73,000 78,000
Partnership capital (Notes 8 and 9):
Limited partners 71,222 47,328
Subordinated limited partners 19,163 14,716
General partners 89,390 75,252
____________ __________
179,775 137,296
____________ __________
$ 800,478 $ 653,253
========== ==========
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF INCOME
Years Ended
(Amounts in thousands, Dec. 31, Dec. 31, Dec. 31,
except per unit information) 1993 1992 1991
Revenues:
Commissions $ 428,460 $ 303,950 $199,774
Principal transactions 92,471 131,366 104,426
Investment banking 45,001 60,635 67,376
Interest and dividends 38,084 30,520 25,533
Other 27,436 23,141 14,479
_________ _________ _________
631,452 549,612 411,588
_________ _________ _________
Expenses:
Employee and partner
compensation and benefits
(Note 10) 381,805 327,946 239,804
Occupancy and equipment (Note 11) 59,549 49,480 45,613
Communications and data processing 34,167 29,269 25,713
Interest (Notes 5, 6 and 7) 19,128 15,496 13,341
Payroll and other taxes 18,180 16,413 13,221
Floor brokerage and clearance fees 6,141 5,360 4,669
Other operating expenses 46,271 43,366 28,352
_________ _________ _________
565,241 487,330 370,713
_________ _________ _________
Net income $ 66,211 $ 62,282 $ 40,875
======== ======== ========
Net income allocated to:
Limited partners $ 9,805 $ 9,813 $ 7,923
Subordinated limited partners 5,933 5,412 3,425
General partners 50,473 47,057 29,527
_________ _________ _________
66,211 $ 62,282 $ 40,875
======== ======== ========
Net income per weighted average
$1,000 equivalent partnership
units outstanding:
Limited partners $ 194.62 $ 238.41 $ 185.92
======== ======== ========
Subordinated limited partners $ 350.32 $ 418.21 $ 322.38
======== ======== ========
Weighted average $1,000
equivalent partnership units
outstanding:
Limited partners 50,381 41,160 42,616
======== ======== ========
Subordinated limited partners 16,936 12,941 10,624
======== ======== ========
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
Dec. 31, Dec. 31, Dec. 31,
(Amounts in thousands) 1993 1992 1991
CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES:
Net income $ 66,211 $ 62,282 $ 40,875
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 16,800 14,728 11,203
Increase in net receivable
from/payable to customers (37,374) (90,526) (82,200)
(Increase) decrease in net
receivable from/payable to
brokers or dealers and clearing
organizations (24,493) 13,401 9,939
Decrease (increase) in securities
owned, net 20,902 2,573 (27,365)
Increase in accounts payable
and other accrued expenses 6,960 106 37,069
Increase in other assets (7,828) (7,744) (2,700)
_________ _________ _________
Net cash provided (used) by
operating activities 41,178 (5,180) (13,179)
_________ _________ _________
CASH FLOWS USED BY INVESTING
ACTIVITIES:
Purchase of office equipment,
property and improvements (47,109) (28,872) (20,284)
_________ _________ _________
CASH FLOWS (USED) PROVIDED BY
FINANCING ACTIVITIES:
Increase in bank loans, net 16,261 50,000 63,400
Issuance of long-term debt 11,700 - 13,300
Repayment of long-term debt (2,230) (922) (8,508)
(Repayment) issuance of subordinated
liabilities (5,000) 30,000 (2,400)
Issuance of partnership interests 29,195 2,396 802
Redemption of partnership interests (1,193) (1,326) (2,176)
Withdrawals and distributions from
partnership capital (51,734) (40,788) (25,877)
_________ _________ _________
Net cash (used) provided by
financing activities (3,001) 39,360 38,541
Net (decrease) increase in cash _________ _________ _________
and cash equivalents (8,932) 5,308 5,078
CASH AND CASH EQUIVALENTS,
beginning of year 37,730 32,422 27,344
_________ _________ _________
end of year $ 28,798 $ 37,730 $ 32,422
======== ======== ========
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL
YEARS ENDED DECEMBER 31, 1993, 1992 and 1991
Subordinated
Limited Limited General
Partnership Partnership Partnership
(Amounts in thousands) Capital Capital Capital Total
Balance, December 31, 1990 $ 46,173 $ 10,635 $ 44,300 $101,108
Issuance of partnership
interests - 802 - 802
Redemption of partnership
interests (2,044) (132) - (2,176)
Net income 7,923 3,425 29,527 40,875
Withdrawals and distributions (5,365) (2,942) (17,570) (25,877)
_________ _________ _________ _________
Balance, December 31, 1991 $ 46,687 $ 11,788 $ 56,257 $114,732
Issuance of partnership
interests - 2,396 - 2,396
Redemption of partnership
interests (1,175) (151) - (1,326)
Net income 9,813 5,412 47,057 62,282
Withdrawals and distributions (7,997) (4,729) (28,062) (40,788)
_________ _________ _________ _________
Balance, December 31, 1992 $ 47,328 $ 14,716 $ 75,252 $137,296
Issuance of partnership
interests 24,763 4,432 - 29,195
Redemption of partnership
interests (1,193) - - (1,193)
Net income 9,805 5,933 50,473 66,211
Withdrawals and distributions (9,481) (5,918) (36,335) (51,734)
_________ _________ _________ _________
Balance, December 31, 1993 $ 71,222 $ 19,163 $ 89,390 $179,775
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
The Partnership's Business and Basis of Accounting. The accompanying
consolidated financial statements include the accounts of The Jones
Financial Companies, a Limited Partnership, and all wholly owned
subsidiaries (the "Partnership"). All material intercompany balances
and transactions have been eliminated.
The Partnership conducts business throughout the United States with
its customers, various brokers and dealers, clearing organizations,
depositories and banks. The Partnership's principal operating
subsidiary is Edward D. Jones & Co., L.P. (EDJ), a registered
broker/dealer.
Cash and Cash Equivalents. The Partnership considers all short-term
investments with original maturities of three months or less, which
are not held for sale to customers, to be cash equivalents.
Securities Transactions. The Partnership's securities activities
involve execution, settlement and financing of various securities
transactions for customers. These transactions (and related revenue
and expense) are recorded on a settlement date basis, generally
representing the fifth business day following the transaction date,
which is not materially different than a trade date basis. They may
expose the Partnership to risk in the event customers, other brokers
and dealers, banks, depositories or clearing organizations are unable
to fulfill contractual obligations. For transactions in which it
extends credit to customers, the Partnership seeks to control the
risks associated with these activities by requiring customers to
maintain margin collateral in compliance with various regulatory and
internal guidelines.
Securities Owned. Securities owned are valued at current market
prices. Unrealized gains or losses are reflected in revenues as
"principal transactions."
Office Equipment, Property and Improvements. Office equipment is
depreciated using straight-line and accelerated methods over estimated
useful lives of five to eight years. Buildings are depreciated using
the straight-line method over estimated useful lives approximating
thirty to forty years. Amortization of property improvements is
computed based on the remaining life of the property or economic
useful life of the improvement, whichever is less. When assets are
retired or otherwise disposed of, the cost and related accumulated
depreciation or amortization are removed from the accounts, and any
resulting gain or loss is reflected in income for the period. The
cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and betterments are capitalized.
Segregated Cash Equivalents and Securities Owned. Rule 15c3-3 of the
Securities and Exchange Commission requires deposits of cash or
securities to a special reserve bank account for the benefit of
customers if total customer related credits exceed total customer
related debits, as defined. No deposits of cash or securities were
required as of December 31, 1993 or 1992.
Income Taxes. Income taxes have not been provided for in the
consolidated financial statements since the Partnership is organized
as a partnership, and each partner is liable for its own tax payments.
Reclassifications. Certain 1992 and 1991 amounts have been
reclassified to conform to the 1993 financial statement presentation.
Fiscal Year End Change. The Partnership changed its year end from the
last Friday in September to December 31, effective December 31, 1992,
for various reporting purposes. The 1991 amounts have been restated
on a calendar year basis.
NOTE 2 - RECEIVABLE FROM AND PAYABLE TO CUSTOMERS
Accounts receivable from and payable to customers include margin
balances and amounts due on uncompleted transactions. Values of
securities owned by customers and held as collateral for these
receivables are not reflected in the financial statements.
Substantially all amounts payable to customers are subject to
withdrawal upon customer request.
NOTE 3 - RECEIVABLE FROM AND PAYABLE TO BROKERS OR DEALERS AND
CLEARING ORGANIZATIONS
The components of receivable from and payable to brokers or dealers
and clearing organizations are as follows:
(Amounts in thousands) 1993 1992
Securities failed to deliver $ 7,030 $ 2,485
Deposits paid for securities borrowed 22,048 9,255
Deposits with clearing organizations 2,446 1,971
Other 1,026 169
__________ __________
Total receivable from brokers or dealers
and clearing organizations $ 32,550 $ 13,880
========== ==========
Securities failed to receive $ 6,580 $ 10,434
Deposits received for securities loaned 1,239 3,481
Other 273 -
__________ __________
Total payable to brokers or dealers and
clearing organizations $ 8,092 $ 13,915
========== ==========
"Fails" represent the contract value of securities which have not been
received or delivered by settlement date.
NOTE 4 - SECURITIES OWNED
Security positions are summarized as follows (at market value):
1993 1992
____________________ ___________________
Securities Securities
Sold but Sold but
Securities not yet Securities not yet
Owned Purchased Owned Purchased
Inventory Securities:
Certificates of deposit $ 3,691 $ 49 $ 2,498 $ 86
U.S. government and agency
obligations 4,123 15,070 5,702 7,299
State and municipal
obligations 34,306 839 45,708 284
Corporate bonds and notes 10,045 818 11,108 566
Corporate stocks 8,206 990 2,857 1,353
_________ _________ _________ _________
$ 60,371 $ 17,766 $ 67,873 $ 9,588
======== ======== ======== ========
Investment Securities:
U.S. government and agency
obligations $ 73,575 $ 78,797
======== ========
NOTE 5 - BANK LOANS
The Partnership borrows from banks primarily to finance customer
margin balances and firm trading securities. Interest is at a
fluctuating rate (weighted average rate of 4.17%, 4.35% and 4.97%at
December 31, 1993, 1992 and 1991, respectively) based on short-term
lending rates.
The average of the aggregate short-term bank loans outstanding was
$99,100,000, $57,794,000, and $23,257,000 and the average interest
rate (computed on the basis of the average aggregate loans
outstanding) was 4.04%, 4.40%, and 6.35% for the years ended December
31, 1993, 1992 and 1991, respectively. The highest month-end
borrowing was $154,500,000, $142,000,000 and $96,200,000 during the
years ended December 31, 1993, 1992 and 1991, respectively.
Short-term bank loans outstanding at December 31, 1993, 1992 and 1991,
consist of $139,261,000, $109,000,000 and $73,000,000 of loans
collateralized by securities owned by the Partnership and customers'
margin securities with a market value of $363,740,000, $197,514,000
and $140,000,000, respectively. At December 31, 1992, the Partnership
had a $14,000,000 short term loan secured by property with a carrying
value of $16,198,000.
Cash paid during the year for interest on bank loans, capital notes
and other liabilities was $14,059,000, $10,956,000, and $8,956,000 for
the years ended December 31, 1993, 1992 and 1991, respectively.
NOTE 6 - LONG-TERM DEBT
Long-term debt is comprised of the following:
(Amounts in thousands) 1993 1992
Note payable, secured by property, interest at
9.0% per annum, interest due in monthly
installments, principal due on June 1, 1994. $ 9,600 $ 9,600
Note payable, secured by property, interest at
9.875% per annum, principal and interest due
in monthly installments of $141,907 with a
final installment of $6,840,192 due on
August 5, 2001. 12,282 12,747
Note payable, secured by property, interest at
8.5% per annum, principal and interest due
in monthly installments of $115,215 through
April 5, 2008. 11,435 -
Note payable, secured by property, interest
at prime rate per annum, interest due in
monthly installments. - 1,500
__________ __________
$ 33,317 $ 23,847
========== ==========
Required annual principal payments, as of December 31, 1993, are as
follows:
Principal Payment
Year (Amounts in thousands)
_____ ___________________
1994 $ 10,540
1995 1,031
1996 1,130
1997 1,239
1998 1,359
Thereafter 18,018
__________
$ 33,317
==========
The Partnership has land and buildings with a carrying value of
$45,971,000 at December 31, 1993, which are subject to security
agreements that collateralize various real estate related notes
payable. The Partnership has estimated the fair value of the long-
term debt to be approximately $36,493,000 and $25,368,000 as of
December 31, 1993 and 1992, respectively.
Subsequent to December 31, 1993, the Partnership arranged to refinance
its long-term debt. After the refinancing is complete, the
Partnership will have a $21,759,000 8.72% note due in monthly
installments of approximately $290,000 through May 5, 2003, and a
$14,900,000 8.23% note due in monthly installments of $150,000 through
April 5, 2008. These notes replace all long-term debt which existed
as of December 31, 1993, and will have the same underlying collateral.
NOTE 7 - LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL CREDITORS
Liabilities subordinated to the claims of general creditors consist
of:
(Amounts in thousands) 1993 1992
Capital notes, 10.6%, due in annual
installments of $7,000,000 commencing on
March 15, 1994, with a final installment on
March 15, 1997 $ 28,000 $ 28,000
Capital notes, 9.375%, due in annual
installments of $5,000,000 commencing on
July 1, 1993, with a final installment on
April 1, 1996 15,000 20,000
Capital notes, 8.96%, due in annual
installments of $6,000,000 commencing on
May 1, 1998, with a final installment on
May 1, 2002 30,000 30,000
__________ __________
$ 73,000 $ 78,000
========== ==========
The capital note agreements contain restrictions which, among other
things, require maintenance of certain financial ratios, restrict
encumbrance of assets and creation of indebtedness and limit the
withdrawal of partnership capital. As of December 31, 1993, the
Partnership was required, under the note agreements, to maintain
minimum partnership capital of $65,000,000 and Net Capital as computed
in accordance with the uniform Net Capital rule of 7.5% of aggregate
debit items (See Note 9).
The subordinated liabilities are subject to cash subordination
agreements approved by the New York Stock Exchange and, therefore, are
included in the Partnership's computation of Net Capital under the
Securities and Exchange Commission's uniform Net Capital rule. The
Partnership has estimated the fair value of the subordinated capital
notes to be approximately $76,726,000 and $81,300,000 as of December
31, 1993 and 1992, respectively. Subsequent to year end the
Partnership intends to exercise its right to repay $17,000,000 of the
capital notes prior to maturity.
NOTE 8 - PARTNERSHIP CAPITAL
The limited partnership capital, consisting of 64,280 and 40,710
$1,000 units at December 31, 1993 and 1992, respectively, is held by
current and former employees and general partners. Each limited
partner receives interest at seven and one-half percent on the
principal amount of capital contributed and a varying percentage of
the net income of the Partnership. Interest expense includes $
3,781,000, $3,090,000, and $3,198,000 for the years ended December
31, 1993, 1992 and 1991, respectively, paid to limited partners on
capital contributed.
The subordinated limited partnership capital, consisting of 17,290 and
12,858 $1,000 units at December 31, 1993 and 1992, respectively, is
held by current and former general partners. Each subordinated
limited partner receives a varying percentage of the net income of the
Partnership. The subordinated limited partner capital is subordinated
to the limited partnership capital.
Included in partnership capital at December 31, 1993 and 1992, are
undistributed profits of $17,964,000 and $18,438,000, respectively,
that will be withdrawn by the partners.
NOTE 9 - 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 $150,000 or
2% of aggregate debit items 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 December 31, 1993, EDJ's Net Capital of
$89,790,000 was 20% of aggregate debit items and its Net Capital in
excess of the minimum required was $80,681,000. Net Capital as a
percentage of aggregate debits after anticipated capital withdrawals
was 17%. Net Capital and the related capital percentage may fluctuate
on a daily basis. EDJ's Net Capital excludes $19,782,000 of
undistributed profits which will be withdrawn by the partners and
$27,254,000 of cash capital contributions that were pending New York
Stock Exchange approval.
Subsequent to December 31, 1993, EDJ received approval from the New
York Stock Exchange to add $27,254,000 of cash capital contributions
that were made during 1993 as allowable Net Capital. EDJ also
received permission to prepay in advance of its scheduled maturity
$17,000,000 of subordinated debt. The effect of these approvals would
have been to increase Net Capital to $117,044,000 and excess Net
Capital to $107,935,000 as of December 31, 1993. The percentage of
Net Capital to aggregate debits and the percentage of Net Capital to
aggregate debits after anticipated capital withdrawals, would have
been 26% and 19%, respectively. Net Capital in excess of 5% of
aggregate debit items would have been $94,272,000.
NOTE 10 - EMPLOYEE BENEFIT PLAN
The Partnership maintains a profit sharing plan covering all eligible
employees. Contributions to the plan are at the discretion of the
Partnership. However, participants may contribute on a voluntary
basis. Approximately $16,716,000, $15,625,000, and $10,347,000 were
provided by the Partnership for its contributions to the plan for the
years ended December 31, 1993, 1992 and 1991, respectively. No post
retirement benefits are provided.
NOTE 11 - COMMITMENTS
Branch office facilities, computer system equipment and branch
satellite equipment are rented under various operating leases.
Additionally, branch offices are leased on a three to five year basis,
and are cancellable at the option of the Partnership. The
Partnership's computer system equipment and branch satellite equipment
lease commitments are $10,823,000 in 1994, $5,321,000 in 1995,
$3,661,000 in 1996, and $2,770,000 in 1997 and $1,221,000 in 1998 and
thereafter.
Rent expense was $28,385,000, $24,837,000, and $24,703,000 for the
years ended December 31, 1993, 1992 and 1991, respectively.
NOTE 12 - CONTINGENCIES
Various legal actions, primarily relating to the distribution of
securities, are pending against the Partnership. Certain cases are
class actions (or purported class actions) claiming substantial
damages. These actions are in various stages and the results of such
actions cannot be predicted with certainty. In the opinion of
management, after consultation with legal counsel, the ultimate
resolution of these actions will not have a material adverse impact on
the Partnership's financial condition.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Jones Financial Companies, a Limited Partnership, being organized
as a partnership, does not have individuals associated with it
designated as officers or directors. Presently, the Partnership is
comprised of 111 general partners, 2,000 limited partners and 54
subordinated limited partners. Under the terms of the Partnership
Agreement, John W. Bachmann is designated Managing Partner and in said
capacity has primary responsibility for administering its business,
determining its policies, controlling the management and conduct of
the Partnership's business and has the power to appoint and dismiss
general partners of the Partnership and to fix the proportion of their
respective interests in the Partnership. Subject to the foregoing,
the Partnership is managed by its 111 general partners.
The Executive Committee of the Partnership is comprised of John W.
Bachmann, James W. Harrod, Douglas E. Hill, Charles R. Larimore,
Richie L. Malone, Darryl L. Pope, Ray L. Robbins, Jr., Edward Soule
and James D. Weddle. The purpose of the Executive Committee is to
provide counsel and advice to the Managing Partner in discharging his
functions. Furthermore, in the event the position of Managing Partner
is vacant, the Executive Committee shall succeed to all of the powers
and duties of the managing partner.
None of the general partners are appointed for any specific term nor
are there any special arrangements or understandings pursuant to their
appointment other than as contained in the Partnership Agreement.
No general partner is or has been individually, nor in association
with any prior business, the subject of any action under any
insolvency law or criminal proceeding or has ever been enjoined
temporarily or permanently from engaging in any business or business
practice.
A listing of the names, ages, dates of becoming a general partner and
area of responsibility for each general partner follows:
BECAME
NAME AGE G.P. AREA OF RESPONSIBILITY
Warren K. Akerson 51 1974 Sales
Allan J. Anderson 51 1992 Sales Management
John W. Bachmann 55 1970 Managing Partner
Thomas M. Bartow 44 1989 Sales Training
James D. Bashor 39 1990 Regional Sales Leader
Robert J. Beck 39 1983 Municipal Trading
John D. Beuerlein 40 1979 Sales Management
John S. Borota 53 1978 Sales Hiring
William H. Broderick, III 41 1986 Syndicate
Morton L. Brown 47 1978 Managed Investments
Alan J. Bubalo 40 1984 Regional Sales Leader
Spencer B. Burke 45 1987 Investment Banking
Daniel A. Burkhardt 46 1979 Investment Banking
Jack L. Cahill 44 1980 Sales Management
Brett A. Campbell 35 1993 Marketing
Donald H. Carter 50 1994 Regional Sales Leader
John J. Caruso 47 1988 Data Processing
Guy R. Cascella 36 1992 Regional Sales Leader
Craig E. Christell 37 1994 Regional Sales Leader
Richard A. Christensen, Jr.46 1978 Mutual Funds Processing
Robert J. Ciapciak 38 1988 Market Research
David W. Clapp 44 1978 Sales Management
Stephen P. Clement 44 1990 Video Communications
Loyola A. Cronin 36 1987 Branch Staff Training
Harry J. Daily, Jr. 47 1985 Regional Sales Leader
A. Randal Dickinson 42 1984 Regional Sales Leader
Terry A. Doyle 44 1992 Regional Sales Leader
William T. Dwyer, Jr. 38 1994 Regional Sales Leader
Abe W. Dye 49 1984 Sales Management
Allen R. Eaker 47 1989 Regional Sales Leader
Norman L. Eaker 37 1984 Securities Processing
Kevin Eberle 43 1993 Regional Sales Leader
Michael J. Esser 45 1983 Advanced Sales Training
Kevin N. Flatt 45 1989 Fixed Income/Equity Trading
John A. Fowler 46 1979 Customer Tax Support
Steve Fraser 38 1993 Securities Processing
Chris A. Gilkison 40 1994 Branch Locations
Barbara G. Gilman 55 1988 Trust Marketing
Steven L. Goldberg 35 1987 Central Services
James R. Gonso 38 1986 Regional Sales Leader
Ronald Gorgen 44 1993 Field Services
Robert L. Gregory 51 1974 Sales Hiring
Patricia F. Hannum 33 1988 Financial Services
Stephen P. Harrison 45 1990 Regional Sales Leader
James W. Harrod 58 1974 Sales Training
David L. Hayes 38 1994 Regional Sales Leader
Randy K. Haynes 38 1994 Operations
John M. Hess 46 1992 Regional Sales Leader
Mary Beth Heying 36 1994 Communications
Douglas E. Hill 49 1974 Product Management
Stephen M. Hull 49 1994 Regional Sales Leader
Earl H. Hull, Jr. 48 1990 Regional Sales Leader
Glennon D. Hunn 51 1984 Data Processing
Gary R. Hunziker 53 1994 Regional Sales Leader
Paul C. Husted 40 1990 Regional Sales Leader
Thomas G. Iorio 33 1994 Regional Sales Leader
Mellany F. Isom 40 1984 Sales Hiring
Myles P. Kelly 40 1989 Accounting
Loren G. Kolpin 48 1985 Regional Sales Leader
Charles R. Larimore 53 1981 Branch Administration
Ronald E. Lemonds 57 1972 Equity Marketing
Michele Liebman 37 1994 Data Processing
Steven F. Litchfield 38 1983 Regional Sales Leader
Richie L. Malone 45 1979 Data Processing
Richard G. McCarty 54 1990 Regional Sales Leader
James A. McKenzie 49 1977 Regional Sales Leader
Thomas Migneron 33 1993 Internal Audit
Richard G. Miller, Jr. 38 1991 Regional Sales Leader
Thomas W. Miltenberger 46 1985 Mutual Funds Marketing
Merry L. Mosbacher 35 1986 Investment Banking
Joseph M. Mott, III 36 1989 Insurance/Annuities Marketing
William D. Murphy 53 1980 Regional Sales Leader
Matt B. Myre 37 1988 Regional Sales Leader
Rodger W. Naugle 52 1992 Regional Sales Leader
Steven Novik 44 1983 Accounting
Cynthia Paquette 33 1993 Data Processing
Robert K. Pearce 44 1989 Human Resources
Darryl L. Pope 54 1971 Operations
Gary D. Reamey 38 1984 Canada Division
James L. Regnier 36 1994 Sales Training
Ray L. Robbins, Jr. 49 1975 Research
Stephen T. Roberts 41 1981 Compliance
Wann V. Robinson 43 1992 Regional Sales Leader
Douglas Rosen 33 1993 Regional Sales Leader
Harry John Sauer, III 36 1988 Dividend Processing
Philip R. Schwab 45 1978 Syndicate
Darrell G. Seibel 59 1985 Regional Sales Leader
Robert D. Seibel 59 1974 Regional Sales Leader
Festus W. Shaughnessy, III 38 1988 Sales Training
Connie M. Silverstein 38 1988 Sales Hiring
Alan F. Skrainka 32 1989 Research
John S. Sloop 45 1990 Sales Management
Ronald H. Smith 54 1984 Regional Sales Leader
Lawrence R. Sobol 43 1977 General Counsel
Edward Soule 41 1986 Accounting
Lawrence E. Thomas 38 1983 Government Bond Trading
Terry R. Tucker 39 1988 Data Processing
Richard G. Unnerstall 38 1989 Data Processing
Robert Virgil, Jr. 59 1994 Headquarters Administration
JoAnn Von Bergen 44 1986 Cash Processing
John R. Wagner 46 1987 Regional Sales Leader
Donald E. Walter 48 1983 Compliance Director
Bradley T. Wastler 41 1989 Sales Management
James D. Weddle 40 1984 Sales Management
Vicki Westall 34 1993 Product Review
Thomas J. Westphal 35 1989 Customer Statements
Heidi Whitfield 33 1993 Product Review
Robert D. Williams 32 1994 Regional Sales Leader
A. Thomas Woodward 47 1985 Sales Management
Price P. Woodward 31 1993 Regional Sales Leader
Alan T. Wright 47 1994 Investment Banking
Except as indicated below, each of the General Partners has been a
general partner of the Partnership for more than the preceding five
years.
Allan J. Anderson, joined the Partnership in 1984 as a registered
representative and became a general partner in 1992.
James D. Bashor, joined the Partnership in 1983 as a registered
representative and became a general partner in 1990.
Brett A. Campbell, joined the Partnership in 1984 as a registered
representative and became a general partner in January 1993.
Donald H. Carter, joined the Partnership in 1982 as a registered
representative and became a general partner in January 1994.
Guy Cascella, joined the Partnership in 1983 as a registered
representative and became a general partner in 1992.
Stephen P. Clement, joined the Partnership in 1987 as Video manager
and became a general partner in 1990. Prior to this, he was a news
director for an ABC affiliate television station.
Craig E. Christell, joined the Partnership in 1982 as a registered
representative and became a general partner in January 1994.
Terry Doyle, joined the Partnership in 1981 as a registered
representative and became a general partner in 1992.
William T. Dwyer, joined the Partnership in 1982 as a registered
representative and became a general partner in January 1994.
Kevin Eberle, joined the Partnership in 1985 as a registered
representative and became a general partner in 1993.
Steve Fraser, joined the Partnership in 1985 in the Operations
Department and became a general partner in January, 1993. Prior to
this, he was employed by Automated Data Processing Inc.
Chris A. Gilkison, joined the Partnership in 1987 as a registered
representative and became a general partner in January 1994.
Ron Gorgen, joined the Partnership in 1980 as a registered
representative and became a general partner in January 1993.
David L. Hayes, joined the Partnership in 1977 active in hiring and
training and became a general partner in January 1994.
Stephen P. Harrison, joined the Partnership in 1978 as a registered
representative and became a general partner in 1990.
Randy K. Haynes, joined the Partnership in 1984 as a registered
representative and became a general partner in January 1994.
John Hess, joined the Partnership in 1982 as a registered
representative and became a general partner in 1992.
Mary Beth Heying, joined the Partnership in 1984 in the Communications
Department and became a general partner in January 1994.
Earl H. Hull, Jr., joined the Partnership in 1975 as a registered
representative and became a general partner in 1990.
Steven M. Hull, joined the Partnership in 1973 as a registered
representative and became a general partner in 1994.
Gary R. Hunziker, joined the Partnership in 1986 as a registered
representative and became a general partner in January 1994.
Paul C. Husted, joined the Partnership in 1982 as a registered
representative and became a general partner in 1990.
Thomas G. Iorio, joined the Partnership in 1982 as a registered
representative and became a general partner in January 1994.
Michele M. Liebman, joined the Partnership in 1985 in the Data
Processing Department and became a general partner in January 1994.
Richard G. McCarty, joined the Partnership in 1980 as a registered
representative and became a general partner in 1990.
Thomas Migneron, joined the Partnership in 1985 as an internal auditor
and became a general partner in January, 1993.
Richard G. Miller, Jr., joined the Partnership in 1981 as a registered
representative and became a general partner in 1991.
Rodger Naugle, joined the Partnership in 1981 as a registered
representative and became a general partner in 1992.
Cynthia Paquette, joined the Partnership in 1985 in the Data
Processing Department and became a general partner in January 1993.
James L. Regnier, joined the Partnership in 1983 as a registered
representative and became a general partner in January 1994.
Wann V. Robinson, joined the Partnership in 1985 as a registered
representative and became a general partner in 1992.
Douglas Rosen, joined the Partnership in 1982 as a registered
representative and became a general partner in January 1993.
John S. Sloop, joined the Partnership in 1983 as a registered
representative and became a general partner in 1990.
Robert Virgil, Jr., joined the Partnership in 1993 as a general
partner. Prior to this, he served as dean of the John M. Olin School
of Business at Washington University.
Vicki Westall, joined the Partnership in 1984 in the Product Review
Department and became a general partner in January, 1993. Prior to
this, she was an accountant with Peat, Marwick, Mitchell & Co.
Heidi Whitfield, joined the Partnership in 1982 as an equity analyst
and became a general partner in January 1993.
Robert D. Williams, joined the Partnership in 1986 as a registered
representative and became a general partner in 1994.
Price P. Woodward, joined the Partnership in 1984 as a registered
representative and became a general partner in January 1993.
Alan T. Wright, joined the Partnership in 1985 in Investment Banking
Department and became a general partner in January 1994.
Daniel A. Burkhardt is a director of Essex County Gas Company,
Amsebury, Massachusetts; Galaxy Cablevision Management, Inc.,
Sikeston, Missouri; Dial Reit, Omaha, Nebraska; Met Life Farm & Ranch
Properties, Kansas City, Missouri; Southeastern MI Gas Enterprises,
Port Huron, Michigan; and Community Investment Partners, L.P. John C.
Heisler, Philip R. Schwab and John D. Beuerlein are directors of
Cornerstone Mortgage Investment Group, Inc. and Cornerstone Mortgage
Investment Group II, Inc. Ray L. Robbins, Jr. is a director of
Community Investment Partners, L.P. Robert Virgil, Jr. is a director
of CPI Corp., St. Louis, Missouri; Angelica Corp., St. Louis,
Missouri; and Allied Healthcare Products, Inc., St. Louis, Missouri.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid by the
Partnership during the three most recent years to the five general
partners receiving the greatest compensation (including respective
shares of profit participation).
Returns to General
Partner Capital
_____________________
(1) (2) (3) & (4)
General
Net income Partner
Deferred allocated invested Total
Compen-to General Capital at (1) (2)
Year Salaries sation Partners 12/31/93 (3)
John W. Bachmann1993 120,000 10,707 2,350,562 3,213,597 2,481,269
1992 120,000 11,306 2,298,834 3,408,360 2,430,140
1991 120,000 10,111 1,556,853 2,752,555 1,686,964
Douglas E. Hill 1993 118,000 10,707 1,994,416 2,726,688 2,123,123
1992 118,000 11,306 1,948,536 2,888,991 2,077,842
1991 115,000 10,111 1,318,416 2,330,993 1,443,527
Ron Larimore 1993 118,000 10,707 1,994,416 2,726,688 2,123,123
1992 118,000 11,306 1,992,323 2,953,912 2,121,629
1991 115,000 10,111 1,346,468 2,380,588 1,471,579
Richie L. Malone1993 118,000 10,707 1,899,444 2,596,846 2,028,151
1992 118,000 11,306 1,810,493 2,596,846 1,939,799
1991 115,000 10,111 1,122,057 1,983,823 1,247,168
Darryl W. Pope 1993 118,000 10,707 1,994,416 2,726,688 2,123,123
1992 118,000 11,306 1,926,642 2,856,530 2,055,948
1991 115,000 10,111 1,304,391 2,306,195 1,429,502
(1) Each non-selling general partner receives a salary presently
ranging from $78,000 - $120,000 annually. Selling general partners do
not receive a specified salary, rather, they receive the net sales
commissions earned by them (none of the five individuals listed above
earned any such commissions). Additionally, general partners who are
principally engaged in sales are entitled to office bonuses based on
the profitability of their respective branch office, on the same basis
as the office bonus program established for all investment
representative employees.
(2) Each general partner is a participant in the Partnership's profit
sharing plan which covers all eligible employees. Contributions to
the plan, which are within the discretion of the Partnership, are made
annually and have historically been determined based on approximately
twenty-four percent of the Partnership's net income. Allocation of
the Partnership's contribution among participants is determined by
each participant's relative level of eligible earnings, including in
the case of general partners, their profit participation.
(3) Each general partner is entitled to participate in the annual net
income of the Partnership based upon the respective percentage
interest in the Partnership of each partner. These interests in the
Partnership held by each general partner currently range from 1/10 of
1% to 4.95% in 1993. (1/10 of 1% to 5.25% in 1992 and 1/10 of 1% to
5.55% in 1991). At the discretion of the Managing Partner, the
partnership agreement provides that, generally, the first five percent
of net income allocable to general partners be distributed on the
basis of individual merit as determined by the Managing Partner.
Thereafter, the remaining net income allocable to general partners is
distributed based upon each individual's percentage interest in the
Partnership. In 1993, 6% of net income was distributed on the basis
of individual merit.
(4) Net income allocable to general partners is the amount remaining
after payment of interest and earnings on capital invested to limited
partners and subordinated limited partners.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Being organized as a limited partnership, management is vested in the
general partners thereof and there are no other outstanding "voting"
or "equity" securities. It is the opinion of the Partnership that the
general partnership interests are not securities within the meaning of
federal and state securities laws primarily because each of the
general partners participates in the management and conduct of the
business.
In connection with outstanding limited and subordinated limited
partnership interests (non-voting securities), 82 of the general
partners also own limited partnership interests and 37 of the general
partners also own subordinated limited partnership interests, as noted
in the table below.
As of February 25, 1994:
Name of Amount of
Beneficial Beneficial Percent of
Title of Class Owner Ownership Class
Limited Partnership All General
Interests Partners as
a Group $ 5,448,000 8%
Subordinated All General
Limited Partnership Partners as
Interests a Group $13,715,000 64%
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of its business the Partnership has extended
credit to certain of its partners and employees in connection with
their purchase of securities. Such extensions of credit have been
made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with non-affiliated persons, and did not involve more
than the normal risk of collectibility or present other unfavorable
features. The Partnership 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 partners or employees and members of
their immediate families, as principal. Such purchases and sales of
securities on a principal basis are effected on substantially the same
terms as similar transactions with unaffiliated third parties.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
INDEX
(a) (1) The following financial statements are included in Part II,
Item 8:
Page No.
Report of Independent Public Accountants
Consolidated Statements of Financial Condition as of
December 31, 1993 and 1992
Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the years
ended December 31, 1993, 1992 and 1991
Consolidated Statements of Changes in Partnership Capital
for the years ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
All schedules are omitted because they are not
required, inapplicable, or the information is otherwise
shown in the financial statements or notes thereto.
(b) Report on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of
1993.
(c) Exhibits
Reference is made to the Exhibit Index hereinafter contained.
EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1993
Exhibit Number Page Description
3.1 * Amended and Restated Agreement and Certificate
of Limited Partnership of Registrant dated
October 1, 1993.
3.2 * Form of Limited Partnership Agreement of
Edward D. Jones & Co., L.P., dated November 1,
1993
10.1 * Form of Cash Subordination Agreement between
the Registrant and Edward D. Jones & Co.,
incorporated herein by reference to Exhibit
10.1 to the Company's registration statement
of Form S-1 (Reg. No. 33-14955).
10.2(a) * Note Purchase Agreement between Tempus
Corporation and Edward D. Jones & Co. dated
as of April 15, 1986, incorporated herein by
reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarter
ended March 28, 1986.
10.2(b) * Note Purchase Agreement between Tempus
Corporation and Edward D. Jones & Co., L.P.
dated as of March 15, 1988, incorporated herein
by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended March 25, 1988.
10.3 * Complaint for Permanent Injunction and Other
Equitable Relief and Final Judgment of
Permanent Injunction in re: SEC v. Edward D.
Jones & Co. (U.S. Dist. Ct. for Dist. of Columbia;
Civil Action No. 85-3078), incorporated herein by
reference to Exhibit 10(i) to the Company's current
report on Form 8-K dated September 24, 1985.
10.4 * Volume Discount Agreement dated May 27, 1987,
between Digital Equipment Corporation and
Edward D. Jones & Co., incorporated herein by
reference to Exhibit 10.13(c) to the Company's
registration statement on Form S-1
(Reg. No. 33-14955).
10.5 * Master Lease Agreement dated as of May 29,
1987, between Digital Equipment Corporation
and Edward D. Jones & Co., incorporated herein
by reference to Exhibit 10.13(b) to the Company's
registration statement on Form S-1
(Reg. No. 33-14955).
10.6 * Master Lease Agreement dated as of October 17,
1988, between Edward D. Jones & Co., L.P., and
BancBoston Leasing, incorporated herein
by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the year ended
September 30, 1988.
10.7 * Satellite Communications Agreement dated as
of September 12, 1988, between Hughes
Network Systems and Edward D. Jones & Co., L.P.,
incorporated herein by reference to Exhibit
10.1 to the Company's Annual Report on Form
10-K for the year ended September 30, 1988.
10.8 * Agreements of Lease between EDJ Leasing
Company and Edward D. Jones & Co., L.P.,
dated August 1, 1991, incorporated herein by
reference to Exhibit 10.18 to the Company's
Annual Report or Form 10-K for the year ended
September 27, 1991.
10.9 * Loan Agreement between EDJ Leasing Co., L.P.
and Nationwide Insurance Company dated August
2, 1991, incorporated herein by reference to
Exhibit 10.19 to the Company's Annual Report
or Form 10-K for the year ended September 27,
1991.
10.10 * Edward D. Jones & Co., L.P. Note Purchase
Agreement dated as of May 8, 1992,
incorporated herein by reference to Exhibit
10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 26, 1992.
10.11 * Purchase and Sale Agreement by and between
EDJ Leasing Co., L.P. and the Resolution
Trust Corporation incorporated herein by
reference to Exhibit 10.21 to the Company's Annual
Report or Form 10-K for the year ended
December 31, 1992.
10.12 Master Lease Agreement between EDJ Leasing
Company and Edward D. Jones & Co., L.P.,
dated March 9, 1993, and First Amendment
to Lease dated March 9, 1994.
10.13 Purchase Agreement by and between Edward D.
Jones & Co., L.P. and Genicom Corporation
dated November 25, 1992.
10.14 Mortgage Note and Deed of Trust and Security
Agreement between EDJ Leasing Co., L.P. and
Nationwide Insurance Company dated March 9,
1993.
10.15 Mortgage Note and Amendment to Deed of Trust
between EDJ Leasing Co., L.P. and Nationwide
Insurance Company dated March 9, 1994.
24.1 Consent of Independent Public Accountants
25 * Delegation of Power of Attorney to Managing
Partner contained within Exhibit 3.1.
________________________________________________________________________
* - Incorporated by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized:
(Registrant) THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
___________________________________________________
By (Signature and Title) /s/ John W. Bachmann
__________________________________
John W. Bachmann, Managing Partner
Date March 28, 1994
__________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person on behalf of
the registrant and in the capacity and on the date indicated.
(Registrant) THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
___________________________________________________
By (Signature and Title) /s/ John W. Bachmann
__________________________________
John W. Bachmann, Managing Partner
Date March 28, 1994
__________________________________
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
There have been no annual reports sent to security holders covering
the registrant's last fiscal year nor have there been any proxy
statements, form of proxy or other proxy soliciting material sent to
any of registrant's security holders.