Jones Financial Companies LLLP 10Q 2008 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

(Mark One)

[ X ]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2008

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission file number 0-16633

THE JONES FINANCIAL COMPANIES, L.L.L.P.

____________________________________________________________________________

(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)

12555 Manchester Road

Des Peres, Missouri 63131

____________________________________________________________________________

(Address of principal executive office)

(Zip Code)

(314) 515-2000

____________________________________________________________________________

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ X ]	Smaller reporting company [ ]

(do not check if a smaller reporting company)

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

THE JONES FINANCIAL COMPANIES, L.L.L.P.

INDEX

	Page
	Number

Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements


	Consolidated Statements of Financial Condition	3
	Consolidated Statements of Income	5
	Consolidated Statements of Changes in Partnership Capital Subject to
	Mandatory Redemption	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8

PART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

ASSETS

	(Unaudited)
	September 26,		December 31,
(Dollars in thousands)	2008		2007

Cash and cash equivalents	$	384,145	$	378,141

Cash segregated under federal regulations		1,644,000		1,620,129

Securities purchased under agreements to resell		729,000		595,000

Receivable from:
Customers		2,264,950		1,989,962
Brokers, dealers and clearing organizations		462,304		439,378
Mutual funds, insurance companies, and other		177,010		173,610

Securities owned, at fair value
Inventory securities		174,568		87,524
Investment securities		104,575		136,628

Equipment, property and improvements, at cost,
net of accumulated depreciation		459,318		328,668

Other assets		69,979		75,338

TOTAL ASSETS	$	6,469,849	$	5,824,378

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

LIABILITIES

	(Unaudited)
	September 26,		December 31,
(Dollars in thousands)	2008		2007


Payable to:
Customers	$	4,068,815	$	3,326,854
Brokers, dealers and clearing organizations		100,898		66,469

Securities sold, not yet purchased, at fair value		12,322		5,410

Accrued compensation and employee benefits		362,548		497,135

Accounts payable and accrued expenses		189,498		191,596

Long-term debt		9,284		10,834
		4,743,365		4,098,298

Liabilities subordinated to claims of general creditors		261,100		275,300

Commitments and contingencies (See Notes)

Partnership capital subject to mandatory redemption,
net of reserve for anticipated withdrawals		1,409,266		1,328,342

Reserve for anticipated withdrawals		56,118		122,438
Total partnership capital subject to mandatory redemption		1,465,384		1,450,780

TOTAL LIABILITIES	$	6,469,849	$	5,824,378

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended					Nine Months Ended
(Dollars in thousands,	September 26,			September 28,		September 26,			September 28,
except per unit information)	2008			2007		2008			2007

Revenue:
Trade Revenue
Commissions	$	373,088		$	444,875	$	1,246,889		$	1,417,631
Principal transactions		129,936			117,228		381,166			281,219
Investment banking		11,210			10,736		36,095			21,280
Fee Revenue
Asset fees		275,917			282,495		845,189			807,444
Account and activity fees		119,544			112,313		354,057			326,522
Interest and dividends		47,423			78,637		154,228			235,273
Other revenue		(9,138	)		5,693		(10,286	)		19,100
Total revenue		947,980			1,051,977		3,007,338			3,108,469
Interest expense		17,607			19,954		55,616			60,185
Net revenue		930,373			1,032,023		2,951,722			3,048,284
Operating expenses:
Compensation and benefits		575,661			637,530		1,822,399			1,855,975
Communications and data processing		81,694			78,007		239,556			223,391
Occupancy and equipment		80,081			72,718		233,566			227,077
Payroll and other taxes		34,302			33,622		115,756			107,933
Advertising		14,624			15,735		52,369			45,079
Postage and shipping		15,698			14,301		43,510			42,451
Floor brokerage and clearance fees		5,028			4,735		13,715			13,228
Other operating expenses		50,461			47,226		156,163			131,387
Total operating expenses		857,549			903,874		2,677,034			2,646,521

Income before allocations to partners		72,824			128,149		274,688			401,763

Allocations to partners:
Limited partners		9,819			20,792		37,267			65,440
Subordinated limited partners		6,770			10,946		26,254			35,566
General partners		56,235			96,411		211,167			300,757

Net Income	$	-		$	-	$	-		$	-

Income before allocations to partners
per weighted average $1,000
equivalent limited partnership unit outstanding	$	20.14		$	41.84	$	75.95		$	131.17

Weighted average $1,000 equivalent
limited partnership units outstanding		487,537			496,968		490,678			498,903

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERSHIP CAPITAL

SUBJECT TO MANDATORY REDEMPTION

NINE MONTHS ENDED SEPTEMBER 26, 2008 AND SEPTEMBER 28, 2007

(Unaudited)

(Dollars in thousands)	Limited Partnership Capital			Subordinated Limited Partnership Capital			General Partnership Capital			Total

TOTAL PARTNERSHIP CAPITAL
SUBJECT TO MANDATORY
REDEMPTION, DECEMBER 31, 2006	$	229,270		$	137,503		$	636,606		$	1,003,379
Reserve for anticipated withdrawals		(20,938	)		(12,372	)		(62,683	)		(95,993	)
Partnership capital subject to mandatory
redemption, net of reserve for anticipated
withdrawals, December 31, 2006		208,332			125,131			573,923			907,386
Issuance of partnership interests		293,562			22,408			8,038			324,008
Redemption of partnership interests		(5,587	)		(612	)		-			(6,199	)
Income allocated to partners		65,440			35,566			300,757			401,763
Withdrawals and distributions		(1,985	)		(32,556	)		(186,756	)		(221,297	)
TOTAL PARTNERSHIP CAPITAL
SUBJECT TO MANDATORY
REDEMPTION, SEPTEMBER 28, 2007		559,762			149,937			695,962			1,405,661
Reserve for anticipated withdrawals		(63,454	)		(3,010	)		(30,990	)		(97,454	)
Partnership capital subject to mandatory
redemption, net of reserve for anticipated
withdrawals, September 28, 2007	$	496,308		$	146,927		$	664,972		$	1,308,207
TOTAL PARTNERSHIP CAPITAL
SUBJECT TO MANDATORY
REDEMPTION, DECEMBER 31, 2007	$	545,199		$	158,133		$	747,448		$	1,450,780
Reserve for anticipated withdrawals		(50,713	)		(11,456	)		(60,269	)		(122,438	)
Partnership capital subject to mandatory
redemption, net of reserve for anticipated
withdrawals, December 31, 2007		494,486			146,677			687,179			1,328,342
Issuance of partnership interests		-			31,438			-			31,438
Redemption of partnership interests		(7,664	)		(1,132	)		-			(8,796	)
Income allocated to partners		37,267			26,254			211,167			274,688
Withdrawals and distributions		(3,477	)		(24,175	)		(132,636	)		(160,288	)
TOTAL PARTNERSHIP CAPITAL
SUBJECT TO MANDATORY
REDEMPTION, SEPTEMBER 26, 2008		520,612			179,062			765,710			1,465,384
Reserve for anticipated withdrawals		(33,790	)		(2,079	)		(20,249	)		(56,118	)
Partnership capital subject to mandatory
redemption, net of reserve for anticipated
withdrawals, September 26, 2008	$	486,822		$	176,983		$	745,461		$	1,409,266

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	September 26,			September 28,
(Dollars in thousands)	2008			2007

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	-		$	-
Adjustments to reconcile net income to net
cash provided by operating activities:
Income before allocations to partners		274,688			401,763
Depreciation		65,555			70,940

Changes in assets and liabilities:
Cash segregated under federal regulations		(23,871	)		87,806
Securities purchased under agreements to resell		(134,000	)		(537,000	)
Net payable to customers		466,973			55,747
Net receivable from brokers, dealers and
clearing organizations		11,503			(25,337	)
Receivable from mutual funds, insurance companies
and other		(3,400	)		(17,444	)
Securities owned, net		(48,079	)		46,925
Other assets		5,359			8,809
Accrued compensation and employee benefits		(134,587	)		41,720
Accounts payable and accrued expenses		(26,029	)		(19,869	)
Net cash provided by operating activities		454,112			114,060

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment, property and improvements, net		(172,274	)		(81,134	)
Net cash used in investing activities		(172,274	)		(81,134	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt		(1,550	)		(2,643	)
Repayment of subordinated debt		(14,200	)		(23,200	)
Issuance of partnership interests		31,438			324,008
Redemption of partnership interests		(8,796	)		(6,199	)
Withdrawals and distributions from partnership capital		(282,726	)		(317,290	)
Net cash used in financing activities		(275,834	)		(25,324	)

Net increase in cash and cash equivalents		6,004			7,602

CASH AND CASH EQUIVALENTS,
Beginning of period		378,141			311,992
End of period	$	384,145		$	319,594

Cash paid for interest	$	51,811		$	56,295

NON-CASH ACTIVITIES
Additions of equipment, property and improvements in accounts payable and accrued expenses	$	23,931		$	-

The accompanying notes are an integral part of these consolidated financial statements.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

THE JONES FINANCIAL COMPANIES, L.L.L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except per unit information)

BASIS OF PRESENTATION

The Partnership's Business and Basis of Accounting. The accompanying consolidated financial statements include the accounts of The Jones Financial Companies, L.L.L.P. and all wholly-owned subsidiaries (collectively, the "Partnership"). All material intercompany balances and transactions have been eliminated in consolidation. Non-controlling minority interests owned are accounted for under the equity method. The results of the Partnership's subsidiary in Canada for the nine months ended August 31, 2008 and 2007 are included in the Partnership's consolidated financial statements because of the timing of the Partnership's financial reporting process.

The Partnership operates as a single business segment. The Partnership's principal operating subsidiary, Edward D. Jones & Co., L.P. ("Edward Jones"), is comprised of three registered broker-dealers serving individual investors. Edward Jones primarily derives its revenues from the retail brokerage business through the sale of listed and unlisted securities, insurance products, investment banking and principal transactions, as a distributor of mutual fund shares, and from revenue related to assets held by and account services provided to its customers. Edward Jones conducts business throughout the United States of America, Canada and the United Kingdom with its customers, various brokers, dealers, clearing organizations, depositories and banks. Edward Jones Trust Company ("EJTC"), a wholly-owned subsidiary of the Partnership, offers trust services to Edward Jones customers.

The consolidated financial statements have been prepared under the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ("GAAP") which require the use of certain estimates by management in determining the Partnership's assets, liabilities, revenues and expenses. Actual results could differ from these estimates.

Substantially all of the Partnership's short-term financial assets and liabilities are carried at fair value or contracted amounts which approximate fair value.

Under the terms of the Partnership Agreement, a partner’s capital will be redeemed by the Partnership in the event of the partner’s death, resignation or termination. In the event of the partner’s death, the Partnership must redeem the partner’s capital within six months. Limited partners withdrawing from the Partnership due to termination or resignation are repaid their capital in three equal annual installments beginning the month after their resignation or termination. The capital of general partners resigning or terminated from the Partnership is converted to subordinated limited partnership capital. Subordinated limited partners are repaid their capital in four equal annual installments beginning the month after their request for withdrawal of contributed capital. The Partnership’s Managing Partner has the discretion to waive these withdrawal restrictions. All current and future partnership capital is subordinate to all current and future liabilities of the Partnership, including the liabilities subordinated to claims of general creditors.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

The interim financial information included herein is unaudited. However, in the opinion of management, such information includes all adjustments, consisting primarily of normal recurring accruals, which are necessary for a fair presentation of the results of interim operations. Certain prior period amounts have been reclassified to conform to the current year presentation.

The results of operations for the nine months ended September 26, 2008 and September 28, 2007 are not necessarily indicative of the results to be expected for the full year. These consolidated financial statements should be read in conjunction with the Partnership's Annual Report on Form 10-K for the year ended December 31, 2007.

Revenue Recognition. Customer transactions are recorded on a settlement date basis, and the related commissions, principal transactions, and investment banking revenues are recorded on a trade date basis. All other forms of revenue are recorded on an accrual basis in the period earned.

Commissions consist of charges to customers for the purchase or sale of securities, insurance products and mutual fund shares.

Principal transactions revenue is the result of the Partnership's participation in market making activities in over-the-counter corporate securities, municipal obligations, U.S. Government obligations, including general obligations and revenue bonds, unit investment trusts, mortgage-backed securities and certificates of deposit.

Investment banking revenues are derived from the Partnership's underwriting and distribution of securities on behalf of issuers.

Asset fees revenue consists primarily of service fees and other revenues received under agreements with mutual fund and insurance companies based on the underlying value of the Partnership’s customers’ assets invested in those companies’ products. Asset-based revenues related to the Partnership’s interest in the advisor to the Edward Jones Money Market Fund are included in asset fees revenue.

Account and activity fees revenue includes fees received from mutual fund companies for sub-transfer agent accounting services performed by the Partnership and self-directed IRA custodian account fees. It also includes other activity based revenues from customers, mutual fund companies and insurance companies.

Interest and dividend income is earned primarily on margin account balances, cash equivalents, cash segregated under federal regulations, securities purchased under agreement to resell, inventory securities and investment securities.

FAIR VALUE OF SECURITIES

Inventory and investment securities owned and securities sold, not yet purchased are presented at fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. When observable prices are not available, the Partnership either uses

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

implied pricing from similar instruments or valuation models based on net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

The Partnership adopted Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements ("SFAS 157"), effective for the fiscal year beginning January 1, 2008. The adoption of SFAS 157 had no financial impact on the Partnership's consolidated financial condition, results of operations, or cash flows. Beginning January 1, 2008, assets and liabilities recorded at fair value in the Consolidated Statement of Financial Condition are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by SFAS 157 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level I – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

The types of assets and liabilities categorized as Level I generally are government and agency securities, equities listed in active markets, unit investment trusts and investments in publicly traded mutual funds with quoted market prices.

Level II – Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with related market data at the measurement date and for the duration of the instrument’s anticipated life.

The types of assets and liabilities categorized as Level II generally are municipal bonds, mortgage and asset backed securities and corporate debt.

Level III – Inputs are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The Partnership does not have any assets or liabilities categorized as Level III.

On October 10, 2008 the Financial Accounting Standards Board issued FSP FAS No. 157-3, "Fair Value Measurements" (FSP FAS 157-3), which clarifies the application of SFAS No. 157 in an inactive market and provides an example to demonstrate how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The adoption of this standard as of September 26, 2008 did not have any impact on the Partnership's results of operations, cash flows or financial positions.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

	Assets at Fair Value as of September 26, 2008
In thousands	Level I		Level II		Level III		Total

Securities purchased under agreements to resell	$	729,000	$	-	$	-	$	729,000
Securities Owned:
Inventory Securities:
Certificate of Deposit	$	-	$	41,897	$	-	$	41,897
U.S. and Canadian Government and U.S.
Agency Obligations		5,329		-		-		5,329
State and Municipal Obligations		-		81,775		-		81,775
Corporate Bonds and Notes		-		25,435		-		25,435
Collateralized Mortgage Obligations		-		2,437		-		2,437
Equities		17,440		-		-		17,440
Unit Investment Trusts		255		-		-		255
Total Inventory Securities	$	23,024	$	151,544	$	-	$	174,568
Investment Securities
U.S. government and agency obligations held
by U.S. broker-dealer	$	21,405	$	-	$	-	$	21,405
U.S. and Canadian Government and U.S.
agency obligations held by foreign
broker-dealers		14,182		-		-		14,182
Mutual Funds		67,935		-		-		67,935
Equities		-		1,053		-		1,053
Total Investment Securities	$	103,522	$	1,053	$	-	$	104,575



	Liabilities at Fair Value as of September 26, 2008
In thousands	Level I		Level II		Level III		Total

Certificate of Deposit	$	-	$	2,462	$	-	$	2,462
U.S. and Canadian Government and U.S.
Agency Obligations		53		-		-		53
State and Municipal Obligations		-		81		-		81
Corporate Bonds and Notes		-		5,665		-		5,665
Collateralized Mortgage Obligations		-		11		-		11
Equities		3,753		-		-		3,753
Unit Investment Trusts		297		-		-		297
Total Inventory Securities	$	4,103	$	8,219	$	-	$	12,322

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

PARTNERSHIP CAPITAL SUBJECT TO MANDATORY REDEMPTION

SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” established standards for classifying and measuring certain financial instruments with characteristics of both liabilities and equity.

Since the Partnership is obligated to redeem a partner’s capital after a partner’s death, SFAS No. 150 requires all of the Partnership’s equity capital to be classified as a liability. Income before allocations to partners prior to the issuance of SFAS No. 150 was classified on the Partnership's consolidated statements of income as net income. These allocations are now classified as a reduction of income before allocations to partners, which results in a presentation of $0 net income for the nine month periods ended September 26, 2008 and September 28, 2007. The financial statement presentations required to comply with GAAP do not alter the Partnership’s treatment of income, income allocations or equity capital for any other purposes. In addition, SFAS No. 150 does not have any effect on, nor is it applicable to, the Partnership’s subsidiaries’ financial statements.

Net income, as defined in the Partnership Agreement, is now equivalent to income before allocations to partners in the consolidated statements of income. Such income, if any, for each calendar year is allocated to the Partnership’s three classes of capital in accordance with the formulas prescribed in the Partnership Agreement. First, limited partners are allocated net income in accordance with the prescribed formula for their share of net income. Thereafter, subordinated limited partners and general partners are allocated any remaining net income based on formulas in the Partnership Agreement. Limited partners do not share in the net loss in any year in which there is net loss and the Partnership is not dissolved or liquidated.

Partnership capital subject to mandatory redemption, net of reserve for anticipated withdrawals, of $1,409,266 consists of $486,822 of limited partnership capital issued in $1,000 units, $176,983 of subordinated limited partnership capital and $745,461 of general partnership capital as of September 26, 2008. The reserve for anticipated withdrawals consists of current year profits to be withdrawn within the next 12 months or less.

Limited partnership capital is held by current and former employees, subordinated limited partners and general partners of the Partnership. Limited partners are guaranteed a minimum 7.5% return on the face amount of their capital. Expense related to the 7.5% return was $27,583 and $28,072 for the nine months ended September 26, 2008 and September 28, 2007, respectively, and is included as a component of interest expense. The 7.5% return is paid to limited partners regardless of the Partnership’s earnings.

Subordinated limited partnership capital is held by current and former general partners of the Partnership. Subordinated limited partners receive a varying percentage of the net income of the Partnership based on their capital invested. Subordinated limited partner capital is subordinated to the limited partnership capital.

NET CAPITAL REQUIREMENTS

As a result of its activities as a broker-dealer, Edward Jones 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, Inc. ("NYSE"). Under the alternative method permitted by the rules, Edward Jones must maintain minimum Net Capital equal to the greater of $0.250 million or 2%

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

of aggregate debit items arising from customer transactions. The Net Capital rules also provide 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 Securities and Exchange Commission ("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 September 26, 2008, Edward Jones' Net Capital of $789.1 million was 37.6% of aggregate debit items and its Net Capital in excess of the minimum required was $684.2 million. Net capital and the related capital percentages may fluctuate on a daily basis.

At September 26, 2008, the Partnership’s foreign broker-dealer subsidiaries and EJTC were in compliance with regulatory capital requirements in the jurisdictions in which they operate.

CONTINGENCIES

In the normal course of business, the Partnership has been named as a defendant in various legal actions, including arbitrations, class actions and other litigation. Certain of these legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. The Partnership also is involved, from time to time, in investigations and proceedings by governmental and self-regulatory agencies, certain of which may result in adverse judgments, fines or penalties.

In view of the inherent difficulty of predicting the outcome of such matters, particularly in cases in which claimants seek substantial or indeterminate damages, or actions which are in very preliminary stages, the Partnership cannot predict with certainty the eventual loss or range of loss related to such matters. The Partnership has determined that it is likely that ultimate resolution in favor of the plaintiffs will result in losses to the Partnership on some of these matters, and, as a result, has established appropriate accruals for potential litigation losses. Based on current knowledge and after consultation with counsel, the Partnership believes that the outcome of these actions will not have a material adverse effect on the consolidated financial condition of the Partnership, although the outcome could be material to the Partnership’s future operating results for a particular period or periods. For additional discussions, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and "Legal Proceedings" in Part II, Item I of this Form 10-Q.

Also, in the normal course of business, the Partnership enters into contracts which contain indemnification provisions, such as purchase contracts, service agreements, escrow agreements, sales of assets, outsourcing agreements and leasing arrangements. Under the provisions of these contracts, the Partnership may indemnify counterparties to the contracts for certain aspects of the Partnership's past conduct if other parties fail to perform, or if certain events occur. These indemnification provisions will vary based upon the contract. The Partnership may in turn obtain indemnifications from other parties in certain contracts. These indemnification provisions are not expected to have a material impact on the Partnership's consolidated results of operations or financial condition.

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements, continued

COMMITMENTS

The Partnership has executed construction agreements for the construction of two office buildings totaling 575,000 square feet and related parking garages on land the Partnership owns at its St. Louis, Missouri, North Campus location, a 225,000 square foot addition and parking garage at an existing building at its St. Louis, Missouri, South Campus location and a parking garage at its Tempe, Arizona, Campus.

One of the buildings and related garage at the North Campus location was substantially completed in October 2008. The Partnership estimates that the total cost of the construction as well as the furniture, fixtures and equipment and information systems costs related to this building and garage to be $84.5 million. The Partnership has executed $74.9 million in general, subcontractor and other vendor commitments related to this building and garage, of which $49.5 million has been paid as of September 26, 2008.

The Partnership estimates that the total cost of the construction agreements as well as the related furniture, fixtures and equipment and information systems costs for the other two buildings and three parking garages to be $299.1 million, with estimated completion dates occurring through 2010. The Partnership has executed $231.2 million in general, subcontractor and other vendor commitments related to the construction of these facilities, of which $70.8 million has been paid as of September 26, 2008.

PART I. FINANCIAL INFORMATION

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

BASIS OF PRESENTATION

For internal analysis, the Partnership broadly categorizes its revenues as trade revenue (revenue from buy or sell transactions on securities) and net fee revenue (sources other than trade revenue). In the Partnership’s Consolidated Statements of Income, trade revenue is comprised of commissions, principal transactions and investment banking. Net fee revenue is comprised of asset fees, account and activity fees, interest and dividends net of interest expense and other revenues.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 26, 2008 AND SEPTEMBER 28, 2007

For the third quarter of 2008, net revenue decreased 10% ($101.7 million) to $930.4 million, while income before allocations to partners decreased 43% ($55.3 million) to $72.8 million. The Partnership’s profit margin based on income before allocations to partners decreased to 7.7% in the third quarter of 2008, from 12.2% in the third quarter of 2007.

The primary factors contributing to the decline in the Partnership’s net revenues were reduced trade revenue and net interest income in addition to decreases in asset fees and other revenue. Trade revenues were negatively impacted by a shift in customer dollars invested (the principal amount of customers’ buy and sell transactions which generate commission revenue) to products with lower margins while net interest income was reduced due primarily to the interest rate reductions that have occurred starting in September 2007. These reductions were partially offset by increased revenues from account and activity fees. Operating expenses increased due primarily to costs associated with the continued expansion and enhancement of the Partnership's branch office network, as well as increases in advertising, travel and legal expenses. The Partnership added 981 financial advisors during the twelve months ended September 26, 2008, ending the quarter with 11,900 financial advisors, an increase of 9% from 10,919 as of September 28, 2007.

Trade Revenue

Trade revenue comprised 55% of net revenue for the third quarter of 2008, down from 56% for the third quarter of 2007. Conversely, net fee revenue comprised 45% for the third quarter of 2008, up from 44% in the third quarter of 2007.

Trade revenue of $514.2 million decreased 10% ($58.6 million) during the third quarter of 2008 compared to the same period in the prior year. Trade revenue decreased primarily due to a decrease in margin earned on customer dollars invested when compared to the third quarter of 2007. Partially offsetting the decline in margin was an increase in customer dollars invested. The Partnership's margin earned on each $1,000 invested decreased to $17.80 for the third quarter of 2008 from $20.40 in 2007, primarily due to a shift from higher margin mutual funds to lower margin municipal bonds and certificates of deposit. Total customer dollars invested were $29.0 billion during the third quarter of 2008, a 4% ($1.0 billion) increase from the third quarter of 2007.

PART I. FINANCIAL INFORMATION

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

Commissions revenue decreased 16% ($71.8 million) for the third quarter of 2008 to $373.1 million. Customers invested $15.0 billion in commission generating transactions in the third quarter of 2008 compared to $17.1 billion in the third quarter of 2007, a 12% decrease. Revenue from mutual fund commissions decreased 25% ($71.5 million) and represented virtually all of the decrease in commissions revenue. The following table summarizes commissions revenue quarter over quarter:

Quarter ended (in millions)

	September 26,		September 28,		%
	2008		2007		Change
Mutual funds	$	219.2	$	290.7		(25	)
Equities		77.1		79.6		(3	)
Insurance		76.7		74.5		3
Corporate bonds		0.1		0.1		-
	$	373.1	$	444.9		(16	)

Principal transactions revenue increased 11% ($12.7 million) to $129.9 million during the third quarter of 2008 due primarily to an increase in customer dollars invested. Customers invested $13.6 billion in principal transactions in the third quarter of 2008 compared to $10.5 billion in the third quarter of 2007, an increase of 30%. The Partnership’s margin earned on principal transactions decreased to $9.70 per $1,000 invested during the third quarter of 2008 from $11.10 during the third quarter of 2007 primarily due to a shift from higher margin taxable fixed income products to lower margin municipal bonds and certificates of deposit. Revenue from municipal bonds increased 50% ($21.9 million) and certificates of deposit increased 83% ($10.4 million). Revenue from corporate bonds decreased 33% ($14.6 million), government bonds decreased 47% ($4.4 million), unit investment trust decreased 10% ($.4 million), and collateralized mortgage obligations decreased 5% ($.2 million). The increase in municipal bond revenue was due to the attractive yields on municipal bonds versus their historic yields relative to treasury securities.

PART I. FINANCIAL INFORMATION

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

The following table summarizes principal transaction revenue quarter over quarter:

Quarter ended (in millions)

	September 26,		September 28,		%
	2008		2007		Change
Municipal bonds	$	65.3	$	43.4		50
Corporate bonds		29.0		43.6		(33	)
Certificates of deposit		23.0		12.6		83
Government bonds		5.0		9.4		(47	)
Collateralized mortgage obligations		4.1		4.3		(5	)
Unit investment trusts		3.5		3.9		(10	)
	$	129.9	$	117.2		11

Investment banking revenue increased 5% ($0.5 million) during the third quarter of 2008 to $11.2 million, due primarily to an increase in municipal offerings.

Net Fee Revenue

Net fee revenue, which is fee revenue net of interest expense, decreased 9% ($43.0 million) to $416.1 million during the third quarter of 2008.

Asset fees decreased 2% ($6.6 million) to $275.9 million due primarily to decreases in customers' mutual fund and insurance assets, partially offset by increases in money market revenue due to increases in those assets. Average customer mutual fund and insurance assets decreased $25.9 billion or 8% to $305.0 billion in the third quarter of 2008 compared to $330.9 billion in the third quarter of 2007. Average customer money market assets increased $1.4 billion or 7% to $22.7 billion in the third quarter of 2008, compared to $21.3 billion in the third quarter of 2007.

Account and activity fees of $119.5 million increased 6% ($7.2 million) quarter over quarter. Revenue received from sub-transfer agent services performed for mutual fund companies increased 10% ($6.1 million) to $67.1 million, due to a 12% increase in the number of customer accounts for which the Partnership provides mutual fund sub-transfer agent services. In addition, retirement account fees increased 10% ($2.9 million) to $30.8 million during the third quarter of 2008, due primarily to a 9% increase in the number of retirement accounts.

Other revenue decreased 261% ($14.8 million) quarter over quarter primarily due to two factors. The Partnership recognized an unrealized loss of $6.1 million due to declines in the market value of investments related to a non-qualified deferred compensation plan in the current quarter compared to a $2.8 million gain in 2007's third quarter. As a result of the investments declining in value the Partnership's third quarter compensation and benefits expense was also reduced by an offsetting $6.1 million and similarly was increased by $2.8 million in last year's third quarter due to the investments increasing in market value. The market value gains or losses from the investments related to the non-qualified deferred compensation plan have no net impact on the Partnership's financial performance due the dollar-for-dollar offsetting increase or decrease in compensation and benefits expense.

PART I. FINANCIAL INFORMATION

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

Net interest and dividend income decreased 49% ($28.9 million) to $29.8 million during the third quarter of 2008 due primarily to a decrease in interest rates. Interest income from cash segregated under federal regulations and securities purchased under agreements to resell decreased 60% ($17.6 million). The average funds invested in cash segregated under federal regulations and securities purchased under agreements to resell during the third quarter of 2008 was $2.1 billion, compared to $2.2 billion in the third quarter of 2007. The average rate earned on these investments decreased to 1.94% during the third quarter of 2008 from 5.08% during the third quarter of 2007. Additionally, while average customer loan balances increased 12% ($225.2 million) to $2.1 billion during the third quarter of 2008, interest income from customer loans decreased 28% ($12.1 million). The decrease was due to reduced interest rates. The average rate earned on customer loan balances decreased to approximately 5.86% during the third quarter of 2008 from approximately 9.06% during the third quarter of 2007. Generally, the average interest rate earned on the Partnership's interest bearing assets was negatively impacted by the Federal Reserve's reduction in its target Federal Funds Rate from 5.25% in the third quarter of 2007, to 2.00% at the end of the third quarter 2008. In addition, interest expense decreased 12% ($2.3 million) to $17.6 million during the third quarter of 2008 due to lower subordinated and long-term debt balances.

Operating expenses decreased 5% ($46.3 million) to $857.5 million during the third quarter of 2008. Compensation and benefits costs decreased 10% ($61.9 million) to $575.7 million. Within compensation and benefits costs, financial advisor compensation decreased 8% ($27.9 million) due to decreased revenues, while salary and subsidy increased 27% ($9.3 million) due to new financial advisor compensation programs as well as increased numbers of financial advisors participating in those programs. Variable compensation, including bonuses and profit sharing paid to financial advisors, branch office assistants and headquarters associates, which expands and contracts in relation to revenues, income before allocations to partners and the Partnership’s related profit margin, decreased 62% ($61.3 million). Headquarters and branch payroll expense increased 9% ($6.9 million) due to increased salary and benefit costs for existing and additional personnel support as the Partnership grows its financial advisor network. On a full time equivalent basis, the Partnership had 5,253 headquarters associates and 11,929 branch staff associates as of September 26, 2008, compared to 4,659 headquarters associates and 11,165 branch staff associates as of September 28, 2007.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 26, 2008 AND SEPTEMBER 28, 2007

For the first nine months of 2008, net revenue decreased 3% ($96.6 million) to $3.0 billion, and income before allocations to partners decreased 32% ($127.1 million) to $274.7 million. The Partnership’s profit margin based on income before allocations to partners decreased to 9.1% for the first nine months of 2008, from 12.9% in the first nine months of 2007. The Partnership’s decrease in net revenues was primarily due to reduced trade revenue, net interest income and other revenue, partially offset by increases in asset fee revenue and account and activity fee revenue. Operating expenses increased due primarily to growth in new financial advisor compensation, costs associated with the continued expansion and enhancement of the Partnership's branch office network, as well as increases in advertising, travel and legal expenses.

PART I. FINANCIAL INFORMATION

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

Trade Revenue

Trade revenue comprised 56% of net revenue for both the first nine months of 2008 and 2007. Conversely, net fee revenue comprised 44% for both the first nine months of 2008 and 2007.

Trade revenue of $1.7 billion decreased 3% ($56.0 million) during the first nine months of 2008 compared to the same period in the prior year. The decrease in trade revenue was due to a decline in the margin earned on overall customer dollars invested, which was partially offset by an increase in customer dollars invested. Total customer dollars invested were $86.5 billion during the first nine months of 2008, a 4% ($3.1 billion) increase from the first nine months of 2007. The Partnership's margin earned on each $1,000 invested decreased to $19.30 for the first nine months of 2008 from $20.60 in 2007.

Commissions revenue decreased 12% ($170.7 million) for the first nine months of 2008 to $1.2 billion. Commissions revenue decreased year over year due primarily to a 9% ($4.9 billion) decrease in customer dollars invested in commission generating transactions to $49.7 billion. Underlying the decrease in commissions revenues, mutual fund commissions decreased 18% ($173.8 million) and equity commissions decreased 5% ($12.5 million). Partially offsetting the decline in commission revenue were increased insurance commissions of 8% ($15.8 million).

The following table summarizes commissions revenue year over year:

Nine Months ended (in millions)

	September 26,		September 28,		%
	2008		2007		Change
Mutual funds	$	799.2	$	973.0		(18	)
Equities		229.9		242.4		(5	)
Insurance		217.5		201.7		8
Corporate bonds		0.3		0.5		(40	)
	$	1,246.9	$	1,417.6		(12	)

Principal transactions revenue increased 36% ($100.0 million) to $381.2 million during the first nine months of 2008 due primarily to an increase in customer dollars invested. Customers invested $35.5 billion in principal transactions in the first nine months of 2008 compared to $28.0 billion in the first nine months of 2007. The Partnership’s margin earned on principal transactions on each $1,000 invested increased to $10.80 during the first nine months of 2008 from $10.00 during the first nine months of 2007 primarily due to a shift into higher margin tax-free fixed income products from lower margin taxable fixed income products. Revenue from municipal bonds increased 96% ($93.6 million), certificates of deposit increased 33% ($11.4 million), and corporate bonds increased 1% ($.8 million), while government bonds decreased 26% ($5.5 million). The increase in municipal bond revenue is due to the attractive yields on municipal bonds versus their historic yields relative to treasury securities.

PART I. FINANCIAL INFORMATION

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

The following table summarizes principal transaction revenue year over year:

Nine Months ended (in millions)

	September 26,		September 28,		%
	2008		2007		Change
Municipal bonds	$	191.1	$	97.5		96
Corporate bonds		105.3		104.5		1
Certificates of deposit		45.7		34.3		33
Government bonds		15.5		21.0		(26	)
Unit investment trusts		12.0		12.0		-
Collateralized mortgage obligations		11.6		11.9		(3	)
	$	381.2	$	281.2		36

Investment banking revenue increased 70% ($14.8 million) during the first nine months of 2008 to $36.1 million, due primarily to an increase in municipal bond offerings.

Net Fee Revenue

Net fee revenue, which is fee revenue net of interest expense, decreased 3% ($40.6 million) to $1.3 billion during the first nine months of 2008.

Asset fees increased 5% ($37.7 million) to $845.2 million due primarily to increases in customers' mutual fund and money market assets, partially offset by decreases in insurance assets. Average customer mutual fund assets increased 1% ($2.5 billion) to $276.8 billion in the first nine months of 2008 compared to $274.3 billion in the first nine months of 2007. Average customer money market assets increased 15% ($3.1 billion) to $23.2 billion in the first nine months of 2008 compared to $20.1 billion in the first nine months of 2007. Insurance assets decreased 2% ($0.7 billion) to $40.4 billion in the first nine months of 2008 compared to $41.0 billion in the first nine months of 2007.

Account and activity fees of $354.1 million increased 8% ($27.5 million) year over year. Revenue received from sub-transfer agent services performed for mutual fund companies increased 12% ($20.4 million) to $197.5 million. The number of customer accounts for which the Partnership provides mutual fund sub-transfer agent services increased by 14%. In addition, retirement account fees increased 12% ($9.4 million) to $90.1 million during the first nine months of 2008, due primarily to a 10% increase in the number of retirement accounts.

Other revenue decreased 154% ($29.4 million) year over year. The decrease between years is primarily attributable to the decrease in value in the investments related to the non-qualified deferred compensation plan and foreign currency translation losses. The investments related to the non-qualified deferred compensation plan had a loss in the market value of $13.7 million through September 2008, versus a gain of $9.6 million in the same period last year, resulting in a $23.3 million decrease in revenue. As the market value of the investments related to the non-qualified compensation plan fluctuate, the gains or losses are reflected in other revenue. There is an offsetting decrease in compensation and benefits expense in the first nine months of 2008. Each period, the net impact of the market value fluctuations on the investments supporting the

PART I. FINANCIAL INFORMATION

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

non-qualified plan to the Partnership's financial performance is zero. The translation of the foreign subsidiary financial statements from local currencies to dollars resulted in a $5.2 million loss during the first nine months of 2008 compared to a $1.9 million gain in the first nine months of 2007.

Net interest and dividend income decreased 44% ($76.5 million) to $98.6 million during the first nine months of 2008 due primarily to a decrease in interest rates. Interest income from cash segregated under federal regulations and securities purchased under agreements to resell decreased 50% ($44.1 million). The average funds invested in cash segregated under federal regulations and securities purchased under agreements to resell during the first nine months of 2008 was $2.3 billion, compared to $2.2 billion in the first nine months of 2007. The average rate earned on these investments decreased to 2.50% during the first nine months of 2008 from 5.16% during the first nine months of 2007. Additionally, interest income from customer loans decreased 28% ($36.1 million) to $94.6 million. While average customer loan balances in the third quarter increased 5% ($102.6 million) to $2.0 billion, the average rate earned on customer loan balances decreased due to the decrease in short-term interest rates during the past year to approximately 6.31% during the first nine months of 2008 from approximately 9.11% during the first nine months of 2007. In addition, interest expense decreased 8% ($4.6 million) to $55.6 million during the first nine months of 2008 due to lower subordinated and long-term debt balances.

Operating expenses increased 1% ($30.5 million) to $2.7 billion during the first nine months of 2008. Compensation and benefits costs decreased 2% ($33.6 million) to $1.8 billion. Within compensation and benefits costs, sales compensation decreased 2% ($15.3 million) due to decreased trade revenues, while financial advisor salary and subsidy increased 33% ($30.5 million) due to new financial advisor compensation programs as well as increased numbers of financial advisors participating in those programs. Variable compensation, including bonuses and profit sharing paid to financial advisors, branch office assistants and headquarters' associates, which expands and contracts in relation to revenues, income before allocations to partners and the Partnership’s related profit margin decreased 39% ($110.6 million). Headquarters salary and benefit expense increased 12% ($26.0 million) to $244.4 million in the first nine months of 2008. Branch salary and benefit expense increased 13% ($36.7 million) to $311.0 million. Salary and benefit costs for existing and additional personnel increased as the Partnership grows its financial advisor network. On a full time equivalent basis, the Partnership had 5,253 headquarters associates and 11,929 branch staff associates as of September 26, 2008, compared to 4,659 headquarters associates and 11,165 branch staff associates as of September 28, 2007.

Communications and data processing expense increased 7% ($16.2 million) to $239.6 million in the first nine months of 2008 due to increased costs related to the continued expansion and enhancement of the Partnership's branch office network, including the Partnership's conversion to a terrestrial communications network for its branches from a satellite network (which was completed in the fall of 2007).

Other operating expenses increased 19% ($24.8 million) primarily due to increased legal expense, travel and entertainment, and Managed Account Program ("MAP") money manager expense due to increased MAP assets and related MAP revenues. Legal expenses increased 149% ($6.6 million) during the first nine months of 2008 due to the reversal of legal expense accruals during the first nine months of 2007 pertaining to the mutual fund Net Asset Value

PART I. FINANCIAL INFORMATION

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

transfer programs. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and Part II, Item 1 "Legal Proceedings" in this Form 10-Q for additional discussions on legal matters and regulatory settlements.

Mutual Funds and Annuities

There are regulatory proposals being considered that could significantly impact the disclosure and potentially the amount of compensation that broker-dealers derive from mutual funds and annuity products. The Partnership believes it is likely in the future that broker-dealers will be required to provide more disclosure to their clients with respect to payments received by them from the sales of these products. It is also possible that such payments may be restricted by law or regulation. For additional discussion, refer to "Item 1A-Risk Factors, Regulatory Initiatives" included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

The Partnership derived 64% of its total revenue from sales and services related to mutual fund and annuity products in the first nine months of 2008 and 66% in the first nine months of 2007. The Partnership derived 35% of its total revenue for the first nine months of 2008 and 29% of its total revenue for the first nine months of 2007 from one mutual fund vendor. Significant reductions in the revenues from these mutual fund sources could have a material impact on the Partnership's results of operations.

LIQUIDITY AND CAPITAL RESOURCES

The Partnership's capital subject to mandatory redemption at September 26, 2008, excluding the reserve for anticipated withdrawals, was $1.4 billion, compared to $1.3 billion at December 31, 2007. The increase is primarily due to the retention of general partner earnings ($58.3 million) and the issuance of subordinated limited partner interests ($31.4 million), offset by redemption of limited partner and subordinated limited partner interests ($7.7 million and $1.1 million, respectively).

At September 26, 2008, the Partnership had $384.1 million in cash and cash equivalents. In addition, the Partnership had $729.0 million in securities purchased under agreements to resell, which have maturities of less than one week. The Partnership also had $1.6 billion in cash segregated under federal regulations, which was not available for general use. Lines of credit are in place aggregating $1.2 billion ($1.1 billion of which is through secured uncommitted lines of credit and $0.1 billion of unsecured lines of credit). Actual borrowing availability on the secured lines is based on customers' margin securities which serve as collateral on loans. During the first nine months of 2008, the Partnership borrowed an average of $1.0 million for twelve days and $26.0 million for one day. No amounts were outstanding under these lines of credit at September 26, 2008 or September 28, 2007. In the third quarter of 2008, the Partnership entered into a $120 million revolving unsecured line of credit which the Partnership plans to use primarily for funding the construction of the new buildings and parking garages. The revolving unsecured line of credit has a final maturity date of August 22, 2010. To the extent that the Partnership obtains permanent financing on its South Campus facility currently under construction, such proceeds must be applied towards the amounts outstanding on the unsecured revolving line of credit if prior to the final maturity date. Subsequent to September 26, 2008, there were two draws on the revolving unsecured line of credit totaling $19.0 million to fund the construction projects.

PART I. FINANCIAL INFORMATION

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

The Partnership believes that the liquidity provided by existing cash balances and securities purchased under agreements to resell and borrowing arrangements will be sufficient to meet the Partnership's capital and liquidity requirements. Depending on conditions in the capital markets and other factors, the Partnership will, from time to time, consider the issuance of debt, the proceeds of which could be used to meet growth needs or for other purposes.

The Partnership's growth has been financed through sales of limited partnership interests to its employees and existing limited partners, subordinated limited partnership interests to its current or retiring general partners, retention of general partner earnings, private placements of subordinated debt, long-term secured debt and operating leases under which the Partnership rents facilities.

As of September 2008, the Partnership has paid a total of $120.3 million in connection with the construction projects discussed above. The Partnership plans to ultimately finance a portion of the buildings subsequent to completion with permanent financing. Until permanent financing is obtained, the Partnership will continue to use existing financial resources including the $120 million revolving line of credit to fund the construction as needed.

For the nine months ended September 26, 2008, cash and cash equivalents increased $6.0 million to $384.1 million. Cash provided by operating activities was $454.1 million. The primary sources of cash provided by operating activities include income before allocations to partners adjusted for depreciation expense, net payable to customers, net receivables from brokers, dealers and clearing organizations, and other assets. These increases to cash and cash equivalents were partially offset by increases in cash segregated under federal regulations, increases in securities purchased under agreements to resell, securities owned, receivables from mutual funds, insurance companies and other along with decreases in accrued compensations and employee benefits and accounts payable and accrued expenses. Cash

PART I. FINANCIAL INFORMATION

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

used in investing activities was $172.3 million consisting of capital expenditures supporting the growth of the Partnership’s operations and for construction of new office space as noted above. Cash used in financing activities was $275.8 million, consisting primarily of partnership withdrawals and distributions ($282.7 million), redemption of partnership interests ($8.8 million) and repayment of subordinated debt ($14.2 million) and long-term debt ($1.6 million), offset by the issuance of partnership interests ($31.4 million).

As a result of its activities as a broker-dealer, Edward Jones, 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 NYSE. Under the alternative method permitted by the rules, Edward Jones must maintain minimum Net Capital, as defined, equal to the greater of $0.250 million or 2% of aggregate debit items arising from customer transactions. The Net Capital rules also provide 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 September 26, 2008, Edward Jones' Net Capital of $789.1 million was 37.6% of aggregate debit items and its Net Capital in excess of the minimum required was $684.2 million. Net capital and the related capital percentage may fluctuate on a daily basis.

CRITICAL ACCOUNTING POLICIES

The Partnership's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require judgment and involve estimation processes to determine its assets, liabilities, revenues and expenses which may affect its results of operations.

Customers' transactions are recorded on a settlement date basis with the related revenue and expenses recorded on a trade date basis. The Partnership may be exposed to risk of loss 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 and sold, not yet purchased, including inventory securities and investment securities, are valued at fair value which is determined by using quoted market or dealer prices.

The Partnership provides for potential losses that may arise out of litigation, regulatory proceedings and other contingencies to the extent that such losses are probable and can be estimated, in accordance with SFAS No. 5, “Accounting for Contingencies”. 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.

The Partnership’s periodic evaluation of the estimated useful lives of equipment, property and improvements is based on the original life determined at the time of purchase and any events or changes in circumstances that would result in a change in the useful life.

PART I. FINANCIAL INFORMATION

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

The Partnership enters into lease agreements for certain headquarters facilities as well as branch office locations. The associated lease expense is recognized on a straight-line basis over the minimum lease terms.

For additional discussions of the Partnership’s accounting policies, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies” included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

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.

FORWARD-LOOKING STATEMENTS

This 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 include, but are not limited to, the following: (1) regulatory actions; (2) litigation; (3) changes in legislation; (4) actions of competitors; (5) changes in technology; (6) a fluctuation or decline in the fair value of securities; (7) changes in interest rates; (8) securities theft; (9) the ability of customers, other broker-dealers, banks, depositories and clearing organizations to fulfill contractual obligations; and (10) general economic conditions. These forward-looking statements were based on information, plans and estimates at the date of this report, and we do not undertake to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes.

PART I. FINANCIAL INFORMATION

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The SEC issued market risk disclosure requirements to enhance disclosures of accounting policies for derivatives and other financial instruments and to provide quantitative and qualitative disclosures about market risk inherent in derivatives and other financial instruments. Various levels of management within the Partnership manage the Partnership’s risk exposure. Position limits in trading and inventory accounts are established and monitored on an ongoing basis. Credit risk related to various financing activities is reduced by the industry practice of obtaining and maintaining collateral. The Partnership monitors its exposure to counterparty risk through the use of credit exposure information, the monitoring of collateral values and the establishment of credit limits.

The Partnership is exposed to market risk from changes in interest rates. Such changes in interest rates impact the income from interest earning assets, primarily receivables from customers on margin balances, and may have an impact on the expense from liabilities that finance these assets. At September 26, 2008, amounts receivable from customers on margin balances were $2.1 billion. Liabilities include amounts payable to customers and other interest and non-interest bearing liabilities.

Under current market conditions and based on current levels of interest earning assets and the liabilities that finance these assets, the Partnership estimates that a 100 basis point increase in short-term interest rates could increase its annual net interest income by approximately $21 million. Conversely, the Partnership estimates that a 100 basis point decrease in short-term interest rates could decrease the Partnership’s annual net interest income by up to $45 million. A decrease in short-term interest rates has a more significant impact on net interest income because under the current low interest rate environment, the Partnership’s interest bearing liabilities are less sensitive to changes in short-term interest rates compared to its interest earning assets.

Events over the past several months including the frozen credit markets and recent failures of a number of large financial services companies have made the capital markets increasingly volatile. The Partnership has not been immune to the continued weakening economic conditions and market turmoil as evidenced by the Partnership's weaker financial results during the current year.

ITEM 4.

CONTROLS AND PROCEDURES

Based upon an evaluation performed as of the end of the period covered by this report, the Partnership's certifying officers, the Chief Executive Officer and the Chief Financial Officer, have concluded that the Partnership's disclosure controls and procedures were effective.

There have been no changes in the Partnership's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Wage and Hour Class Actions. On June 5, 2008, the U.S. District Court for the Northern District of Ohio, Eastern Division granted preliminary approval of the settlements in both national class action cases. In June 2008, the Partnership transferred $19 million to an escrow account for the national class settlement fund, and charged this expense against legal expense accruals that were established prior to 2008. Required forms have been mailed to potential class members, which provide for potential class members to consent to join the class or be excluded from the settlement. A final approval hearing is scheduled with the Court on January 5, 2009.

Financial Industry Regulatory Authority, Inc. ("FINRA") Official Statement Delivery Matter. FINRA has conducted an inquiry into certain deficiencies the Partnership experienced in the mailing of official statements in various secondary market transactions in municipal securities during the period in which delivery of official statements was required. The transactions in question, which were reported by the Partnership to the regulator, involved issues in which the Partnership was not a managing underwriter or a syndicate member. FINRA has indicated that it will seek a censure, fine and the institution of certain new procedures. The Partnership is currently in discussions to seek a prompt resolution of this matter.

The above-stated information supplements the discussion in Part I, Item 3 "Legal Proceedings" in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2007, the Partnership's Quarterly Report on Form 10-Q for the quarterly period ended June 27, 2008 and the Partnership's Current Report on Form 8-K filed on September 8, 2008.

For additional discussion, see also "Contingencies" in Part I, Item 1, "Financial Statements" of this Form 10-Q.

PART II. OTHER INFORMATION

ITEM 1A.

RISK FACTORS

There have been no material changes from the risk factors disclosed on Form 10-K for the fiscal year ended December 31, 2007.

ITEM 6.

EXHIBITS

Exhibit
Number	Description

3.1*		Sixteenth Amended and Restated Agreement of Registered Limited Liability Limited Partnership of The Jones Financial Companies, L.L.L.P., dated as of May 12, 2006, incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

3.2*		Sixteenth Restated Certificate of Limited Partnership of the Jones Financial Companies, L.L.L.P., dated as of July 21, 2008, as amended.

3.3*		Form of Limited Partnership Agreement of Edward D. Jones & Co., L.P., incorporated by reference to Exhibit 2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1993.

31.1**		Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley act of 2002.

31.2**		Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 302 of the Sarbanes-Oxley act of 2002.

32.1**		Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes -Oxley act of 2002.

32.2**		Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes -Oxley act of 2002.

* Incorporated by reference to previously filed exhibits.

** Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:

	THE JONES FINANCIAL COMPANIES, L.L.L.P.
	(Registrant)

Date: November 7, 2008	/s/ James D. Weddle
	James D. Weddle, Chief Executive Officer


Date: November 7, 2008	/s/ Steven Novik
	Steven Novik, Chief Financial Officer

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Jones Financial Companies LLLP (JNFC) 10-Q2008 Q3 Quarterly report

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