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JONES FINANCIAL COMPANIES LLLP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 1, 2014

The following Management's Discussion and Analysis is intended to help the reader understand the results of operations and the financial condition of the Partnership. Management's Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in Item 1, Financial Statements of this Quarterly Report on Form 10-Q and Item 8, Financial Statements and Supplementary Data of the Partnership's Annual Report.



Basis of Presentation

The Partnership broadly categorizes its net revenues into four categories: fee revenue, trade revenue (revenue from client buy or sell transactions of securities), net interest and dividends revenue (net of interest expense) and other revenue. In the Consolidated Statements of Income, fee revenue is composed of asset-based fees and account and activity fees. Trade revenue is composed of commissions, principal transactions and investment banking. These sources of revenue are affected by a number of factors. Asset-based fees are generally a percentage of the total value of specific assets in client accounts. These fees are impacted by client dollars invested in and divested from the accounts which generate asset-based fees and change in market values of the assets. Account and activity fees and other revenue are impacted by the number of client accounts and the variety of services provided to those accounts, among other factors. Trade revenue is impacted by the number of financial advisors, trading volume (client dollars invested), mix of the products in which clients invest, margins earned on the transactions and market volatility. Net interest and dividends revenue is impacted by the amount of cash and investments, receivables from and payables to clients, the variability of interest rates earned and paid on such balances, the number of Interests, and the balances of partnership loans, long-term debt and liabilities subordinated to claims of general creditors. 18



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

OVERVIEW The following table sets forth the change in major categories of the Consolidated Statements of Income as well as several key related metrics for the three and six month periods ended June 27, 2014 and June 28, 2013. Management of the Partnership relies on this financial information and the related metrics to evaluate the Partnership's operating performance and financial condition. All amounts are presented in millions, except the number of financial advisors and as otherwise noted. Three Months Ended Six Months Ended June 27, June 28, June 27, June 28, 2014 2013 % Change 2014 2013 % Change Revenue: Fee revenue: Asset-based $ 765$ 617 24% $ 1,480$ 1,187 25% Account and activity 147 140 5% 291 279 4% Total fee revenue 912 757 20% 1,771 1,466 21% % of net revenue 58% 53% 58% 53% Trade revenue: Commissions 544 566 -4% 1,077 1,106 -3% Principal transactions 33 33 0% 74 60 23% Investment banking 39 31 26% 75 58 29% Total trade revenue 616 630 -2% 1,226 1,224 0% % of net revenue 39% 44% 40% 44% Net interest and dividends 18 19 -5% 35 36 -3% Other revenue 18 10 80% 22 26 -15% Net revenue 1,564 1,416 10% 3,054 2,752 11% Operating expenses 1,370 1,244 10% 2,674 2,431 10% Income before allocations to partners $ 194$ 172 13% $ 380$ 321 18% Related metrics: Client dollars invested(1): Trade ($ billions) $ 28.1$ 28.1 0% $ 55.6$ 54.2 3% Advisory programs ($ billions) $ 5.3$ 5.1 4% $ 10.7$ 10.1 6% Client households at period end (millions) 4.68 4.56 3% 4.68 4.56 3%



Net new assets for the period end ($ billions) $ 12.8$ 9.7

32% $ 26.7$ 21.2 26% Client assets under care: Total: At period end ($ billions) $ 846.3$ 711.5 19% $ 846.3$ 711.5 19% Average ($ billions) $ 824.2$ 715.4 15% $ 809.0$ 701.6 15% Advisory programs: At period end ($ billions) $ 130.2$ 98.3 32% $ 130.2$ 98.3 32% Average ($ billions) $ 125.6$ 97.7 29% $ 121.8$ 94.3 29% Financial advisors: At period end 13,534 12,786 6% 13,534 12,786 6% Average 13,450 12,687 6% 13,337 12,602 6% Attrition % 8.9% 9.3% n/a 8.5% 9.5% n/a Dow Jones Industrial Average: At period end 16,852 14,910 13% 16,852 14,910 13% Average for period 16,600 14,959 11% 16,390 14,492 13% S&P 500 Index: At period end 1,961 1,606 22% 1,961 1,606 22% Average for period 1,899 1,609 18% 1,867 1,563 19% (1) Client dollars invested related to trade revenue represent the principal amount of clients' buy and sell transactions resulting in commissions, principal transactions and investment banking revenues. Client dollars invested related to advisory programs revenue represent the net inflows of client dollars into the programs. 19



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Second Quarter 2014 versus 2013 Overview

The Partnership experienced strong results during the second quarter of 2014 compared to 2013, including record net revenue, income before allocations to partners and client assets under care. Results benefitted from rising market conditions, including increases of 18% in the average S&P 500 Index and 11% in the average Dow Jones Industrial Average. The Partnership's key performance measures were strong during the second quarter of 2014 and financial advisors attracted $12.8 billion in net new assets. Average client assets under care grew 15% to $824.2 billion, which included a 29% increase in the advisory programs' average assets under care to $125.6 billion. Net revenue increased 10% to $1.6 billion for the second quarter of 2014. This increase was led by a 20% increase in total fee revenue, which consists of asset-based fees and account and activity fees, primarily due to higher levels of asset values on which fees were earned, driven by the continued investment of client dollars into advisory programs and the overall rise in equity markets. These results were partially offset by a 2% decrease in trade revenue. Operating expenses increased 10% for the second quarter of 2014 compared to 2013, primarily due to increased compensation expense driven by higher revenues on which financial advisors are paid and higher variable compensation due to the increase in the Partnership's profitability. Overall, the 10% increase in net revenue, partially offset by the 10% increase in operating expenses, generated income before allocations to partners of $194 million, a 13% increase over the second quarter of 2013.



Year to Date 2014 versus 2013 Overview

The Partnership experienced strong results during the first half of 2014 compared to 2013, including record net revenue, income before allocations to partners and client assets under care. Results benefitted from rising market conditions, including increases of 19% in the average S&P 500 Index and 13% in the average Dow Jones Industrial Average. The Partnership's key performance measures were strong during the first half of 2014 and financial advisors attracted $26.7 billion in net new assets. Average client assets under care grew 15% to $809.0 billion, which included a 29% increase in the advisory programs' average assets under care to $121.8 billion. In addition, client dollars invested related to trade revenue were up 3% to $55.6 billion.



Net revenue increased 11% to $3.1 billion for the first half of 2014. This increase was led by a 21% increase in total fee revenue, primarily due to higher levels of asset values on which fees were earned, driven by the continued investment of client dollars into advisory programs and the overall rise in equity markets.

Operating expenses increased 10% for the first six months of 2014 compared to 2013, primarily due to increased compensation expense driven by higher revenues on which financial advisors are paid and higher variable compensation due to the increase in the Partnership's profitability. Overall, the 11% increase in net revenue, partially offset by the 10% increase in operating expenses, generated income before allocations to partners of $380 million, an 18% increase over the first half of 2013. 20



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 27, 2014 AND JUNE 28, 2013

The discussion below details the significant fluctuations and drivers for the major categories of the Partnership's Consolidated Statements of Income.

Fee Revenue

Fee revenue, which consists of asset-based fees and account and activity fees, increased 20% to $912 million and 21% to $1,771 million in the second quarter and first six months of 2014 compared to the same periods in 2013, respectively. The increase in fee revenue for the second quarter and first six months of 2014 was primarily due to higher asset values and continued client investment in advisory programs. A discussion of fee revenue components follows. Asset-based Three Months Ended Six Months Ended June 27, June 28, June 27, June 28, 2014 2013 % Change 2014 2013 % Change Asset-based fee revenue ($ millions): Advisory programs fees $ 425$ 330 29% $ 820$ 633 30% Service fees 279 237 18% 544 457 19% Revenue sharing 49 40 23% 94 76 24% Trust fees 10 8 25% 19 16 19% Cash solutions 2 2 0% 3 5 -40% Total asset-based fee revenue $ 765$ 617 24% $ 1,480$ 1,187 25% Related metrics ($ billions): Average U.S. client asset values(1): Mutual fund assets held outside of advisory programs(2) $ 359.4$ 306.8 17% $ 353.3$ 299.3 18% Advisory programs 124.8 97.4 28% 121.1 94.0 29% Insurance 69.9 62.5 12% 69.1 60.0 15% Cash solutions 20.0 19.7 2% 20.1 19.8 2% Total client asset values $ 574.1$ 486.4 18% $ 563.6$ 473.1 19% (1) Assets on which the Partnership earns asset-based fee revenue. The U.S. portion of consolidated asset-based fee revenue was 98% for the three and six month periods ended June 27, 2014 and for the three and six month periods ended June 28, 2013. (2) The amounts previously reported for the second quarter and first six months of June 28, 2013 of $384.6 and $378.3 billion, respectively, have been corrected to exclude $77.8 and $79.0 billion, respectively, in mutual fund assets held in advisory programs which had been previously included. The amounts previously reported for the same periods for total client asset values were also corrected by the same amounts. Similar prior period adjustments will be made upon filing the third quarter and 2014 annual results. 21



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

For the three months ended June 27, 2014, asset-based fee revenue increased 24% to $765 million compared to the three months ended June 28, 2013. The increase is primarily due to greater advisory programs fees and service fees. The growth in advisory programs fees was primarily due to increased investment of client assets into advisory programs and increases in the market value of the underlying assets. Service fees increased in the second quarter of 2014 due to increases in the market value of the underlying assets as well as continued client investment into mutual fund products, which includes new client assets. A majority of client assets held in advisory programs were converted from other client investments previously held with the Partnership. For the six months ended June 27, 2014, asset-based fee revenue increased 25% to $1,480 million compared to the six months ended June 28, 2013. The increase is primarily due to greater advisory programs fees and service fees. The growth in advisory programs fees was primarily due to increased investment of client assets into advisory programs and increases in the market value of the underlying assets. Service fees increased in the first half of 2014 due to increases in the market value of the underlying assets as well as continued client investment into mutual fund products, which includes new client assets. A majority of client assets held in advisory programs were converted from other client investments previously held with the Partnership. Account and Activity Three Months Ended Six Months Ended June 27, June 28, June 27, June 28, 2014 2013 % Change 2014 2013 % Change Account and activity fee revenue ($ millions): Sub-transfer agent services $ 95$ 89 7% $ 187$ 171 9% Retirement account fees 29 30 -3% 59 60 -2% Other account and activity fees 23 21 10% 45 48 -6%



Total account and activity fee revenue $ 147$ 140

5% $ 291$ 279 4% Related metrics (millions): Average client: Sub-transfer agent holdings serviced 21.6 19.6 10% 21.3 19.4 10% Retirement accounts 4.5 4.1 10% 4.5 4.1 10% For the three months ended June 27, 2014, account and activity fee revenue increased 5% to $147 million compared to the three months ended June 28, 2013. Revenue growth was led by sub-transfer agent service fees due to the increase in the number of average client mutual fund holdings serviced. For the six months ended June 27, 2014, account and activity fee revenue increased 4% to $291 million compared to the six months ended June 28, 2013. Revenue growth was led by sub-transfer agent service fees due to the increase in the average number of client mutual fund holdings serviced. 22



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Trade Revenue Trade revenue, which consists of commissions, principal transactions and investment banking revenue, decreased 2% to $616 million in the second quarter of 2014 and increased slightly to $1,226 million in the first six months of 2014 compared to the same periods in 2013. The decrease in trade revenue for the second quarter of 2014 was primarily due to the impact of a decrease in the margin earned, partially offset by increased client dollars invested. The slight increase in trade revenue for the first six months of 2014 was primarily due to the impact of increased client dollars invested, offset by a decrease in the margin earned. A discussion of trade revenue components follows. Commissions Three Months Ended Six Months Ended June 27, June 28, June 27, June 28, 2014 2013 % Change 2014 2013 % Change Commissions revenue ($ millions): Mutual funds $ 291$ 315 -8% $ 584$ 627 -7% Equities 157 156 1% 310 298 4% Insurance 96 95 1% 183 181 1% Total commissions revenue $ 544$ 566 -4% $ 1,077$ 1,106 -3% Related metrics: Client dollars invested ($ billions) $ 22.9$ 23.3 -2% $ 45.2$ 45.4 0% Margin per $1,000 invested $ 23.8$ 24.3 -2% $ 23.8$ 24.3 -2% U.S. business days 63 64 -2% 123 124 -1% For the three months ended June 27, 2014, commissions revenue decreased 4% to $544 million compared to the three months ended June 28, 2013. The decrease was primarily due to a 2% decrease in the margin earned per $1,000 invested. Margin earned decreased due to a lower proportion of revenue from mutual funds which have a higher margin than revenue from equities. Results also reflect the negative impact of one less business day in 2014 compared to 2013. For the six months ended June 27, 2014, commissions revenue decreased 3% to $1,077 million compared to the six months ended June 28, 2013. The decrease was primarily due to a 2% decrease in the margin earned per $1,000 invested. Margin earned decreased due to a lower proportion of revenue from mutual funds which have a higher margin than revenue from equities.



Principal Transactions

For the three months ended June 27, 2014, principal transactions revenue was flat at $33 million compared to the three months ended June 28, 2013. Results reflect a 13% decrease in the margin earned per $1,000 invested in the second quarter of 2014 compared to the second quarter of 2013 as client investments shifted towards products with shorter maturities which have lower margins. This decline was offset by a net inventory loss of $4 million in the second quarter of 2013, while there was an immaterial loss in the second quarter of 2014. 23



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

For the six months ended June 27, 2014, principal transactions revenue increased 23% to $74 million compared to the six months ended June 28, 2013. Growth was primarily due to an 11% increase in client dollars invested, including reinvestment in certificates of deposit and unit investment trusts. In addition, 2014 included a $1 million net inventory gain, while 2013 included a $5 million net inventory loss. Investment Banking For the three months ended June 27, 2014, investment banking revenue increased 26% to $39 million compared to the three months ended June 28, 2013. The growth in investment banking revenue reflects a 31% increase in client dollars invested, primarily due to improved market conditions which have led to increased investment in equity unit investment trusts. For the six months ended June 27, 2014, investment banking revenue increased 29% to $75 million compared to the six months ended June 28, 2013. The growth in investment banking revenue reflects a 32% increase in client dollars invested, primarily due to improved market conditions which have led to increased investment in equity unit investment trusts. Net Interest and Dividends Three Months Ended Six Months Ended June 27, June 28, June 27, June 28, 2014 2013 % Change 2014 2013 % Change Net interest and dividends revenue ($ millions): Client loan interest $ 26$ 27 -4% $ 51$ 53 -4% Short-term investing interest 4 4 0% 7 7 0% Other interest and dividends 2 3 -33% 5 6 -17% Limited partnership interest expense (12) (12) 0% (24) (24) 0% Other interest expense (2) (3) -33% (4) (6) -33% Total net interest and dividends revenue $ 18$ 19 -5% $ 35$ 36 -3% Related metrics ($ millions): Average aggregate client loan balance $ 2,254.8$ 2,099.5 7% $ 2,205.5$ 2,102.3 5% Average rate earned 4.71% 5.14% -8% 4.75% 5.12% -7% Average funds invested $ 9,188.2$ 8,474.9 8% $ 9,335.3$ 8,449.6 10% Average rate earned 0.15% 0.16% -6% 0.15% 0.17% -12% Weighted average $1,000 equivalent limited partnership units outstanding 637,894 646,022 -1% 638,552 647,363 -1% For the three month period ended June 27, 2014, net interest and dividends revenue decreased 5% to $18 million compared to the three month period ended June 28, 2013. Results reflect a 4% decrease in client loan interest primarily due to a change in pricing structure, partially offset by an increase in the average aggregate client loan balance. This decrease was mostly offset by a decrease in other interest expense primarily due to lower average debt balances during the current period as a result of debt repayments. For the six month period ended June 27, 2014, net interest and dividends revenue decreased 3% to $35 million compared to the six month period ended June 28, 2013. Results reflect a 4% decrease in client loan interest primarily due to a decrease in the average rate earned, partially offset by an increase in the average aggregate client loan balance. This decrease was mostly offset by a decrease in other interest expense primarily due to lower average debt balances during the current period as a result of debt repayments. 24



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Other Revenue Other revenue increased 80% to $18 million in the second quarter of 2014 and decreased 15% to $22 million in the first six months of 2014 compared to the same periods in 2013. The increase for the second quarter of 2014 is primarily attributable to a current period increase in value of the investments held related to the Partnership's nonqualified deferred compensation plan. The Partnership has chosen to hedge the future liability for the plan by purchasing investments in an amount similar to the future expected liability. As the market value of these investments fluctuates, the gains or losses are recorded in other revenue with an offset in compensation and fringe benefits expense, resulting in minimal net impact to the Partnership's income before allocations to partners. The decrease in other revenue during the first half of 2014 is primarily attributable to $4 million the Partnership received in the first quarter of 2013 related to the mortgage joint venture dissolution. 25



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PART I. FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued Operating Expenses Three Months Ended Six Months Ended June 27, June 28, June 27, June 28, 2014 2013 % Change 2014 2013 % Change Operating expenses ($ millions): Compensation and benefits: Financial advisor $ 546$ 506 8% $ 1,066$ 981 9% Home office and branch 250 237 5% 487 470 4% Variable compensation 195 153 27% 373 288 30% Financial advisor salary and subsidy 59 47 26% 116 91 27% Total compensation and benefits 1,050 943 11% 2,042 1,830 12% Occupancy and equipment 91 89 2% 183 179 2% Communications and data processing 72 73 -1% 143 146 -2% Payroll and other taxes 55 53 4% 118 111 6% Advertising 18 13 38% 37 30 23% Postage and shipping 12 14 -14% 25 27 -7% Professional and consulting fees 15 12 25% 28 21 33% Other operating expenses 57 47 21% 98 87 13% Total operating expenses $ 1,370$ 1,244 10% $ 2,674$ 2,431 10% Related metrics: Number of branches: At period end 11,798 11,512 2% 11,798 11,512 2% Average 11,757 11,470 3% 11,714 11,445 2% Financial advisors: At period end 13,534 12,786 6% 13,534 12,786 6% Average 13,450 12,687 6% 13,337 12,602 6% Branch employees(1)(3): At period end 13,735 13,393 3% 13,735 13,393 3% Average 13,674 13,261 3% 13,537 13,179 3% Home office employees(1)(3): At period end 5,662 5,492 3% 5,662 5,492 3% Average 5,525 5,401 2% 5,505 5,401 2% Home office employees(1) per 100 financial advisors (average) 41.1 42.6 -4% 41.3 42.9 -4% Branch employees(1) per 100 financial advisors (average) 101.7 104.5 -3% 101.5 104.6 -3% Average operating expenses per financial advisor(2) (actual) $ 46,766$ 46,181 1% $ 92,600$ 92,216 0%



(1) Counted on a full-time equivalent basis.

(2) Operating expenses used in calculation represent total operating expenses less financial advisor and variable compensation.

(3) The methodology used to calculate FTEs was revised in 2014. Prior period metrics were updated to conform to the new methodology.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

For the three month period ended June 27, 2014, operating expenses increased 10% to $1.4 billion compared to the three month period ended June 28, 2013 primarily due to an 11% increase in compensation and benefits (described below). The remaining operating expenses increased 6% ($19 million) primarily due to a $10 million increase in other operating expenses and a $5 million planned increase in advertising costs.



Financial advisor compensation increased 8% ($40 million) in the second quarter of 2014 primarily due to increases in asset-based fee and trade revenues on which financial advisor commissions are paid. Financial advisor salary and subsidy increased 26% ($12 million) primarily due to growth in financial advisors and new compensation initiatives.

Home office and branch salary and fringe benefit expense increased 5% ($13 million) in the second quarter of 2014 primarily due to higher wages and more personnel to support increased client activity and growth of the Partnership's financial advisor network. The average number of the Partnership's home office and branch employees increased 2% and 3%, respectively. Variable compensation expands and contracts in relation to revenues, income before allocations to partners and the Partnership's related profit margin. As the Partnership's financial results and profit margin improve, a significant portion is allocated to variable compensation and paid to employees in the form of increased bonuses and profit sharing. As a result, variable compensation increased 27% ($42 million) in the second quarter of 2014 to $195 million. The Partnership uses the ratios of both the number of home office and the number of branch employees per 100 financial advisors and the average operating expenses per financial advisor as key metrics in managing its costs. In the second quarter of 2014, the average number of home office employees per 100 financial advisors decreased 4% and the number of branch employees per 100 financial advisors decreased 3%. These ratios reflect the Partnership's longer term cost management strategy to grow its financial advisor network at a faster pace than its home office and branch support staff. The average operating expense per financial advisor increased 1% primarily due to increases in home office employees' salary and fringe benefit expenses and branch operating expenses to support the Partnership's financial advisor network, partially offset by the impact of spreading those expenses over more financial advisors. For the six month period ended June 27, 2014, operating expenses increased 10% to $2.7 billion compared to the six month period ended June 28, 2013 primarily due to a 12% increase in compensation and benefits (described below). The remaining operating expenses increased 5% ($31 million) primarily due to an $11 million increase in other operating expenses and a $7 million planned increase in advertising costs. Financial advisor compensation increased 9% ($85 million) in the first half of 2014 primarily due to increases in asset-based fee and trade revenues on which financial advisor commissions are paid. Financial advisor salary and subsidy increased 27% ($25 million) primarily due to growth in financial advisors and new compensation initiatives. Home office and branch salary and fringe benefit expense increased 4% ($17 million) in the first half of 2014 primarily due to higher wages and more personnel to support increased client activity and growth of the Partnership's financial advisor network. The average number of the Partnership's home office and branch employees increased 2% and 3%, respectively. Variable compensation increased 30% ($85 million) in the first half of 2014 to $373 million, reflecting strong financial results and profit margin. 27



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

In the first half of 2014, the average number of home office employees per 100 financial advisors decreased 4% and the number of branch employees per 100 financial advisors decreased 3%, reflecting growth in the number of financial advisors at a faster pace than growth in the number of home office and branch support staff. The average operating expense per financial advisor increased slightly, primarily due to increases in home office employees' salary and fringe benefit expenses and branch operating expenses to support the Partnership's financial advisor network, partially offset by the impact of spreading those expenses over more financial advisors.



Segment Information

The Partnership has determined it has two operating and reportable segments based upon geographic location, the U.S. and Canada. Canada segment information is based upon the Consolidated Financial Statements of the Partnership's Canada operations without eliminating intercompany items, such as management fees paid to affiliated entities. The U.S. segment information is derived from the Consolidated Financial Statements less the Canada segment information as presented. This is consistent with how management reviews the segments in order to assess performance. 28



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

The following table shows financial information for the Partnership's reportable segments. All amounts are presented in millions, except the number of financial advisors and as otherwise noted. Three Months Ended Six Months Ended June 27, June 28, June 27, June 28, 2014 2013 % Change 2014 2013 % Change Net revenue: U.S. $ 1,513$ 1,366 11% $ 2,951$ 2,650 11% Canada 51 50 2% 103 102 1% Total net revenue 1,564 1,416 10% 3,054 2,752 11% Operating expenses (excluding variable compensation): U.S. 1,126 1,043 8% 2,205 2,046 8% Canada 49 48 2% 96 97 -1% Total operating expenses 1,175 1,091 8% 2,301 2,143 7% Pre-variable income: U.S. 387 323 20% 746 604 24% Canada 2 2 0% 7 5 40% Total pre-variable income 389 325 20% 753 609 24% Variable compensation: U.S. 189 148 28% 362 279 30% Canada 6 5 20% 11 9 22% Total variable compensation 195 153 27% 373 288 30% Income (loss) before allocations to partners: U.S. 198 175 13% 384 325 18% Canada (4) (3) -33% (4) (4) 0% Total income before allocations to partners $ 194$ 172 13% $ 380$ 321 18% Client assets under care ($ billions): U.S. At period end $ 826.2$ 694.7 19% $ 826.2$ 694.7 19% Average $ 804.9$ 698.1 15% $ 790.2$ 684.5 15% Canada At period end $ 20.1$ 16.8 20% $ 20.1$ 16.8 20% Average $ 19.3$ 17.3 12% $ 18.8$ 17.1 10% Financial advisors: U.S. At period end 12,836 12,135 6% 12,836 12,135 6% Average 12,754 12,041 6% 12,646 11,957 6% Canada At period end 698 651 7% 698 651 7% Average 696 646 8% 691 645 7% 29



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

U.S. For the three month period ended June 27, 2014, net revenue increased 11% compared to the three month period ended June 28, 2014. Revenue growth reflected a 24% ($143 million) increase in asset-based fee revenue primarily due to increases in advisory programs fees revenue of 28% ($94 million) and service fees revenue of 18% ($41 million). The growth reflects an increase in client assets under care resulting from continued investment of client dollars as well as market increases. These results were slightly offset by a decrease in trade revenue of 2% ($11 million) primarily due to a decrease in the margin earned on client dollars invested. Operating expenses (excluding variable compensation) increased 8% in the second quarter of 2014 primarily due to increases in financial advisor compensation and salary and fringe benefits. Higher financial advisor compensation was due to increases in asset-based fee and trade revenues on which financial advisor commissions are paid. Salary and fringe benefits expense increased due to wage increases and more personnel to support increased client activity and growth of the Partnership's financial advisor network. For the six month period ended June 27, 2014, net revenue increased 11% compared to the six month period ended June 28, 2013. Revenue growth reflected a 25% ($286 million) increase in asset-based fee revenue primarily due to increases in advisory programs fees revenue of 29% ($185 million) and service fees revenue of 19% ($83 million). The growth reflects an increase in client assets under care resulting from continued investment of client dollars as well as market increases. In addition, trade revenue increased 1% ($6 million) primarily due to the impact of increased client dollars invested, partially offset by a decrease in the margin earned on client dollars invested. Operating expenses (excluding variable compensation) increased 8% in the first half of 2014 primarily due to increases in financial advisor compensation and salary and fringe benefits. Higher financial advisor compensation was due to increases in asset-based fee and trade revenues on which financial advisor commissions are paid. Salary and fringe benefits expense increased due to wage increases and more personnel to support increased client activity and growth of the Partnership's financial advisor network.



Canada

For the three month period ended June 27, 2014, net revenue increased 2% compared to the second quarter of 2013. Asset-based fee revenue increased 23% ($4 million) primarily due to growth in service fee revenue of 17% ($2 million), reflecting an increase in client assets under care resulting from the investment of client dollars and higher market values of the underlying assets. Trade revenue decreased 7% ($3 million) primarily due to decreases in the margin earned and the amount of client dollars invested. Operating expenses (excluding variable compensation) remained at a consistent level in the second quarter of 2014 compared to the second quarter of 2013. As a result, pre-variable income was flat in the second quarter of 2014. For the six month period ended June 27, 2014, net revenue increased 1% compared to the six month period ended June 28, 2013. Asset-based fee revenue increased 21% ($6 million) primarily due to growth in service fee revenue of 16% ($4 million), reflecting an increase in client assets under care resulting from the investment of client dollars and higher market values of the underlying assets. Trade revenue decreased 7% ($4 million) primarily due to decreases in the margin earned and the amount of client dollars invested. 30



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Operating expenses (excluding variable compensation) remained at a consistent level in the first half of 2014 compared to the first half of 2013.

As a result, pre-variable income improved 40% ($2 million) in the first half of 2014. Improvement in Canada is due in part to the continued focus to achieve profitability. This includes several initiatives to increase revenue and control expenses. Revenue initiatives include the plan to grow the number of financial advisors, client assets under care and the depth of financial solutions provided to clients, and the roll out of additional advisory and fee-based programs.



LEGISLATIVE AND REGULATORY REFORM

As discussed more fully in the "Legislative and Regulatory Initiatives" risk factor in Part I, Item 1A - Risk Factors of the Partnership's Annual Report, the Partnership continues to monitor several regulatory initiatives and proposed or potential rules ("Regulatory Initiatives"), including the possibility of a universal fiduciary standard of care applicable to both broker-dealers and investment advisers under the Dodd-Frank Act, limits on fees paid by mutual funds (often called 12b-1 fees), and reforms to the regulation of money market funds. The regulatory activities that occurred during the first six months of 2014 have not materially changed the Partnership's view of the potential impact to the Partnership of these Regulatory Initiatives.



The Partnership's Annual Report included a discussion of the SEC's proposed rules to reform money market funds. On July 23, 2014, the SEC adopted amendments to the rules that govern money market mutual funds. At this time, the Partnership is evaluating the new rules.

These Regulatory Initiatives may impact the manner in which the Partnership markets its products and services, manages its business and operations, and interacts with clients and regulators, any or all of which could materially impact the Partnership's results of operations, financial condition, and liquidity. However, the Partnership cannot presently predict when or if any Regulatory Initiatives will be enacted or the impact that any Regulatory Initiatives will have on the Partnership.

MUTUAL FUNDS AND ANNUITIES

The Partnership derived 77% of its total revenue from sales and services related to mutual fund and annuity products in both the three and six month periods ended June 27, 2014, and 76% in both the three and six month periods ended June 28, 2013. In addition, the Partnership derived from one mutual fund company 20% of its total revenue for both the three and six month periods ended June 27, 2014 and June 28, 2013, respectively. The revenue generated from this company relates to business conducted with the Partnership's U.S. segment.



Significant reductions in these revenues due to regulatory reform or other changes to the Partnership's relationship with mutual fund companies could have a material adverse effect on the Partnership's results of operations.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

LIQUIDITY AND CAPITAL RESOURCES

The Partnership requires liquidity to cover its operating expenses, net capital requirements, capital expenditures, debt repayment obligations, distributions to partners and redemptions of partnership interests. The principal sources for meeting the Partnership's liquidity requirements include existing liquidity and capital resources of the Partnership, discussed further below, and funds generated from operations. The Partnership believes that the liquidity provided by these sources will be sufficient to meet its capital and liquidity requirements for the next twelve months. Depending on conditions in the capital markets and other factors, the Partnership will, from time to time, consider the issuance of debt and additional partnership capital, the proceeds of which could be used to meet growth needs or for other purposes.



Partnership Capital

The Partnership's growth in capital has historically been through the sale of limited partnership interests to its employees and existing limited partners, the sale of subordinated limited partnership interests to its current or retiring general partners and retention of general partner earnings. The Partnership filed a Registration Statement on Form S-8 with the SEC on January 17, 2014 to register $350 million in securities in preparation for its anticipated 2014 Limited Partnership offering. The Partnership intends to offer approximately $300 million in Interests to eligible financial advisors, branch office administrators and home office associates. The remaining $50 million may be issued at the discretion of the Managing Partner and Executive Committee, which may include issuances to financial advisors who complete a retirement transition plan in future years and who may be considered for additional limited partnership interest. The 2014 Limited Partnership offering is expected to close in early 2015. The issuance of limited partnership interests will reduce the percentage of participation in net income by general partners and subordinated limited partners. Proceeds from the 2014 Limited Partnership offering are expected to be used toward working capital and general corporate purposes and to ensure there is adequate general liquidity of the Partnership for future needs. Any issuance of new Interests will decrease the Partnership's net interest income by the 7.5% Payment for any such additional Interests, and holders of existing Interests may suffer decreased returns on their investment because the amount of the Partnership's net income they participate in may be reduced as a consequence. Accordingly, the issuance of Interests will reduce the Partnership's net interest income and profitability beginning in 2015. The Partnership's capital subject to mandatory redemption, net of reserve for anticipated withdrawals, at June 27, 2014 was $1,929 million, an increase of $71 million from December 31, 2013. This increase in the Partnership's capital subject to mandatory redemption was primarily due to the retention of general partner earnings ($41 million) and additional capital contributions related to subordinated limited partner and general partner interests ($46 million and $92 million, respectively), partially offset by the redemption of limited partner, subordinated limited partner and general partner interests ($3 million, $14 million and $90 million, respectively) and the net increase in partnership loans outstanding ($1 million). During the six month periods ended June 27, 2014 and June 28, 2013, the Partnership retained 13.8% of income allocated to general partners. 32



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

As discussed in the Form 8-K filed on June 9, 2014, which is incorporated by reference, in June 2014 the Partnership entered into the Nineteenth Amended and Restated Agreement of Registered Limited Liability Limited Partnership (the "Partnership Agreement"). Under the terms of the Partnership Agreement, a partner's capital is required to be redeemed by the Partnership in the event of the partner's death or withdrawal from the Partnership, subject to compliance with ongoing regulatory capital requirements. In the event of a partner's death, the Partnership must generally redeem the partner's capital within six months. The Partnership has restrictions in place which govern the withdrawal of capital. Under the terms of the Partnership Agreement, limited partners withdrawing from the Partnership are to be repaid their capital in three equal annual installments beginning no earlier than 90 days after their withdrawal notice is received by the Managing Partner. The capital of general partners withdrawing from the Partnership is converted to subordinated limited partnership capital or, at the discretion of the Managing Partner, redeemed by the Partnership. Subordinated limited partners are repaid their capital in six equal annual installments beginning no earlier than 90 days after their request for withdrawal of contributed capital is received by the Managing Partner. The Partnership's Managing Partner has discretion to waive or modify these withdrawal restrictions and to accelerate the return of capital. The Partnership Agreement includes additional terms. Refer to Exhibit 3.1 for the complete Partnership Agreement. The Partnership makes loans available to those general partners (other than members of the Executive Committee, which consists of the executive officers of the Partnership) who require financing for some or all of their partnership capital contributions. It is anticipated that a majority of future general and subordinated limited partnership capital contributions (other than for Executive Committee members) requiring financing will be financed through partnership loans. In limited circumstances a general partner may withdraw from the Partnership and become a subordinated limited partner while he or she still has an outstanding partnership loan. Loans made by the Partnership to partners are generally for a period of one year but are expected to be renewed and bear interest at the prime rate, as defined in the loan documents. The Partnership recognizes interest income for the interest received related to these loans. Partners borrowing from the Partnership will be required to repay such loans by applying the earnings received from the Partnership to such loans, net of amounts retained by the Partnership and amounts distributed for income taxes. The Partnership has full recourse against any partner that defaults on loan obligations to the Partnership. The Partnership does not anticipate that partner loans will have an adverse impact on the Partnership's short-term liquidity or capital resources. The Partnership has not and will not provide loans to members of the Executive Committee. Executive Committee members who require financing for some or all of their partnership capital contributions will continue to borrow directly from banks willing to provide such financing on an individual basis. Other partners may also choose to have individual banking arrangements for their partnership capital contributions. Any bank financing of capital contributions is in the form of unsecured bank loan agreements and are between the individual and the bank. The Partnership does not guarantee these bank loans, nor can the partner pledge his or her partnership interest as collateral for the bank loan. The Partnership performs certain administrative functions in connection with its limited partners who have elected to finance a portion of their partnership capital contributions through individual unsecured bank loan agreements from banks with whom the Partnership has other banking relationships. For all limited partner capital contributions financed through such bank loan agreements, each agreement instructs the Partnership to apply the proceeds from the liquidation of that individual's capital account to the repayment of their bank loan prior to any funds being released to the partner. In addition, the partner is required to apply partnership earnings, net of any distributions to pay taxes, to service the interest and principal on the bank loan. Should a partner's individual bank loan not be renewed upon maturity for any reason, the Partnership could experience increased requests for capital liquidations, which could adversely impact the Partnership's liquidity. In addition, partners who finance all or a portion of their capital contributions with bank financing may be more likely to request the withdrawal of capital to meet bank financing requirements should the partners experience a period of reduced earnings. As a partnership, any withdrawals by general partners, subordinated limited partners or limited partners would reduce the Partnership's available liquidity and capital. 33



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Many of the same banks that provide financing to limited partners also provide various forms of financing to the Partnership. To the extent these banks increase credit available to the partners, financing available to the Partnership may be reduced.

The Partnership, while not a party to any partner unsecured bank loan agreements, does facilitate making payments of allocated income to certain banks on behalf of the limited partner. The following table represents amounts related to partnership loans as well as limited partner bank loans (for which the Partnership facilitates certain administrative functions). Partners may have arranged their own bank loans to finance their partnership capital for which the Partnership does not facilitate certain administrative functions and therefore any such loans are not included in the table. As of June 27, 2014 Subordinated Limited Limited General Total Partnership Partnership Partnership Partnership ($ in millions) Interests Interests Interests Capital Partnership capital(1): Total partnership capital $ 637 $ 337$ 1,171$ 2,145 Partnership capital owned by partners with individual loans $ 74 $



5 $ 612 $ 691

Partnership capital owned by partners with individual loans as a percent of total partnership capital 11.6% 1.5% 52.3% 32.2% Partner loans $ 15 $ 2 $ 214 $ 231 Partner loans as a percent of total partnership capital 2.4% 0.6% 18.3% 10.8% Partner loans as a percent of partnership capital owned by partners with loans 20.3% 40.0% 35.0% 33.4%



(1) Partnership capital, as defined for this table, is before the reduction of

partnership loans and is net of reserve for anticipated withdrawals.

Historically, neither the amount of partnership capital financed with individual loans as indicated in the table above, nor the amount of partner capital withdrawal requests has had a significant impact on the Partnership's liquidity or capital resources. 34



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Lines of Credit and Debt



The following table shows the composition of the Partnership's aggregate bank lines of credit in place as of:

June 27, December 31, ($ millions) 2014 2013 2013 Credit Facility $ 400 $ 400 Uncommitted secured credit facilities 415 415 Total bank lines of credit $ 815 $ 815 In November 2013, the Partnership entered into the 2013 Credit Facility, which has an expiration date of November 15, 2018 and replaced a similarly termed credit facility. The 2013 Credit Facility is intended to provide short-term liquidity to the Partnership should the need arise. In addition, the Partnership has uncommitted lines of credit that are subject to change at the discretion of the banks. Based on credit market conditions and the uncommitted nature of these credit facilities, it is possible that these lines of credit could decrease or not be available in the future. Actual borrowing availability on the uncommitted secured lines is based on client margin securities and partnership securities, which would serve as collateral on loans in the event the Partnership borrowed against these lines. There were no amounts outstanding on the 2013 Credit Facility and the uncommitted lines of credit as of June 27, 2014 and December 31, 2013. In addition, the Partnership did not have any draws against these lines of credit during the six and twelve month periods ended June 27, 2014 and December 31, 2013, respectively. The Partnership was in compliance with all covenants related to its outstanding debt agreements as of June 27, 2014. For details on covenants related to lines of credit, see the discussion in Note 3 to the Consolidated Financial Statements.



In June 2014, the Partnership paid the final scheduled installment on the liabilities subordinated to claims of general creditors of $50 million.

Cash Activity

As of June 27, 2014, the Partnership had $536 million in cash and cash equivalents and $583 million in securities purchased under agreements to resell, which have maturities of less than one week. This totals $1,119 million of Partnership liquidity as of June 27, 2014, a 31% ($507 million) decrease from $1,626 million at December 31, 2013. This decrease is primarily due to timing of client cash activity and the resulting requirement for segregation. The Partnership had $8,058 million and $8,435 million in cash and investments segregated under federal regulations as of June 27, 2014 and December 31, 2013, respectively, which was not available for general use. 35



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

Regulatory Requirements As a result of its activities as a U.S. broker-dealer, Edward Jones is subject to the net capital provisions of Rule 15c3-1 of the Exchange Act and capital compliance rules of the FINRA Rule 4110. Under the alternative method permitted by the rules, Edward Jones must maintain minimum net capital, as defined, equal to the greater of $0.25 million or 2% of aggregate debit items arising from client transactions. The net capital rules also provide that Edward Jones' partnership capital may not be withdrawn if the resulting net capital would be less than minimum requirements. Additionally, certain withdrawals require the approval of the SEC and FINRA to the extent they exceed defined levels, even though such withdrawals would not cause net capital to be less than minimum requirements.



The Partnership's Canada broker-dealer is a registered securities dealer regulated by IIROC. Under the regulations prescribed by IIROC, the Partnership is required to maintain minimum levels of risk adjusted capital, which are dependent on the nature of the Partnership's assets and operations.

The following table shows the Partnership's net capital figures for its U.S. and Canada broker-dealers as of ($ in millions):

June 27, December 31, 2014 2013 % Change U.S.: Net capital $ 913$ 873 5%



Net capital in excess of the minimum required $ 866 $

830 4% Net capital as a percentage of aggregate debit items 39.0% 41.4% -6%



Net capital after anticipated capital withdrawals, as a percentage of aggregate debit items

26.2% 24.8% 6%



Canada:

Regulatory risk adjusted capital $ 29$ 34 -15% Regulatory risk adjusted capital in excess of the minimum required to be held by IIROC $ 21$ 27 -22%



Net capital and the related capital percentages may fluctuate on a daily basis. In addition, EJTC was in compliance with its regulatory capital requirements.

The Partnership and its subsidiaries are subject to examination by the Internal Revenue Service ("IRS") and by various state and foreign taxing authorities in the jurisdictions in which the Partnership and its subsidiaries conduct business. In 2012, the IRS began an examination of Edward Jones' income tax returns for the years ended 2009 and 2010. This examination is ongoing and is not expected to have a material impact to the Partnership.



OFF BALANCE SHEET ARRANGEMENTS

The Partnership does not have any significant off-balance-sheet arrangements.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

CRITICAL ACCOUNTING POLICIES The Partnership's financial statements are prepared in accordance with GAAP, which may require judgment and involve estimation processes to determine its assets, liabilities, revenues and expenses which affect its results of operations.



The Partnership believes that of its significant accounting policies, the following critical policies require estimates that involve a higher degree of judgment and complexity.

Asset-Based Fees. Due to the timing of receipt of information, the Partnership must use estimates in recording the accruals related to certain asset-based fees. These accruals are based on historical trends and are adjusted to reflect market conditions for the period covered. Additional adjustments, if needed, are recorded in subsequent periods. Legal Reserves. The Partnership provides for potential losses that may arise out of litigation, regulatory proceedings and other contingencies to the extent that such losses can be estimated, in accordance with ASC No. 450, Contingencies. See Note 6 to the Consolidated Financial Statements and Part II, Item 1 - Legal Proceedings for further discussion of these items. The Partnership regularly monitors its exposures for potential losses. The Partnership's total liability with respect to litigation and regulatory proceedings represents the best estimate of probable losses after considering, among other factors, the progress of each case, the Partnership's experience and discussions with legal counsel. Included in Item 3 - Quantitative and Qualitative Disclosures about Market Risk and in Note 1 of the Partnership's Annual Report are additional discussions of the Partnership's accounting policies.



THE EFFECTS OF INFLATION

The Partnership's net assets are primarily monetary, consisting of cash and cash equivalents, cash and investments segregated under federal regulations, securities owned 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.



RECENTLY ISSUED ACCOUNTING STANDARDS

In May 2014, the FASB and the International Accounting Standards Board ("IASB") jointly issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance. The objective of ASU 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will be effective for the first quarter of 2017. An entity can elect to adopt ASU 2014-09 using one of two methods, either full retrospective adoption to each prior reporting period, or recognizing the cumulative effect of adoption at the date of initial application. The Partnership is in the process of evaluating the new standard and does not know the effect, if any, ASU 2014-09 will have on the Consolidated Financial Statements or which adoption method will be used. 37



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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued

EXECUTIVE AND AUDIT COMMITTEE CHANGES

After 31 years of service to Edward Jones and its clients, on July 7, 2014, Brett Campbell, 55, general partner, member of the Partnership's Executive, Management, and Audit Committees, and principal responsible for Edward Jones'Client Strategies Group, announced his intention to retire effective December 31, 2014, and Mr. Campbell will no longer be a member of the Partnership's Executive, Management and Audit Committees as of that date. In light of Mr. Campbell's pending retirement, effective July 7, 2014, the Managing Partner, Jim Weddle, appointed general partner Penny Pennington, 50, as a member of the firm's Executive Committee, and she will transition over the second half of 2014 into Mr. Campbell's current role as principal of Edward Jones'Client Strategies Group. As of September 1, 2014, Ms. Pennington will also be a member of the Audit Committee. The Managing Partner also appointed general partner Ken Cella, 45, as a member of the firm's Executive Committee effective July 7, 2014, and he will serve as principal with overall responsibility for Financial Advisor Talent Acquisition, Financial Advisor Training, BOA Talent Acquisition & Performance, and Financial Advisor Career Development.



Effective July 1, 2014, Mark Wuller was added to the Audit Committee as an independent member.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and in particular Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of the federal securities laws. You can identify forward-looking statements by the use of the words "believe," "expect," "anticipate," "intend," "estimate," "project," "will," "should," and other expressions which predict or indicate future events and trends and which do not relate to historical matters. You should not rely on forward-looking statements, because they involve known and unknown risks, uncertainties and other factors, some of which are beyond the control of the Partnership. These risks, uncertainties and other factors may cause the actual results, performance or achievements of the Partnership to be materially different from the anticipated future results, performance or achievements expressed or implied by the forward-looking statements. Some of the factors that might cause differences between forward-looking statements and actual events include, but are not limited to, the following: (1) general economic conditions; (2) regulatory actions; (3) changes in legislation or regulation, including new regulations under the Dodd-Frank Act; (4) actions of competitors; (5) litigation; (6) the ability of clients, other broker-dealers, banks, depositories and clearing organizations to fulfill contractual obligations; (7) changes in interest rates; (8) changes in technology; (9) a fluctuation in the fair value of securities; and (10) the risks discussed under the caption "Risk Factors" in the Partnership's Annual Report and subsequent Quarterly Reports on Form 10-Q. These forward-looking statements were based on information, plans, and estimates at the date of this report, and the Partnership does not undertake to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes. 38



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